Ethical Practice is the Basis for Business Success
Unethical decisions have led to the fall of some of the largest and wealthiest organizations, which originated from the systematic lies of individuals and the deception of others. The choice a person or organization makes is essentially what defines who they are. Establishing standards for a business should be the primary goal of executive management in an organization. It is important for companies to design an environment that encourages high ethical standards as well as produces ethically minded management and employees, while positively influencing suppliers nd customers (Hunter, 2008).
A company which proved such high standards can be effective in business is Johnson and Johnson. They have established strong ethical beliefs and due to their principled choices in many instances, Johnson and Johnson are well respected in the industry by not only their shareholders, but also their competition and customers. By certifying that an effective ethical culture exists in an organization, this aids in preventing losses brought about by corporate frauds which typically have costly and burdensome repercussions. Having this positive culture can nhance a company’s reputation, improve morale and increase sales (Hunter, 2008).
In 1982, Tylenol was faced with a horrible crisis where Tylenol bottles were tainted with cyanide. This was a massive problem that could have brought the entire company down. However, they reacted to this crisis in an ethical manner despite the short-term cost repercussions; putting forth an extremely positive image for the company. Their highly principled approach was also in line with Kantian moral reasoning. The essence of Kantian moral philosophy is that all human beings are oral agents with ability to demonstrate moral choice and autonomy and therefore can claim rights, observe duties and determine their own moral actions (Mendes, 2007).
By analyzing the case of the cyanide crisis, it can be proven that ethical practices or principled stances have been the basis for business success, and can be a model for other companies. Ethics is a term that is often defined in many different ways, with no universally accepted definition. According to the Oxford English Dictionary, ethics may be defined as “moral principles that govern a person’s behaviour or the conducting of an activity’ (Oxford, 2013). Johnson and Johnson Family of Companies is the world’s top manufacturer of health care products as well as related services including pharmaceutical and medical devises.
It was founded in 1886 and now operates in more than 57 countries around the world; it has been listed on the New York Stock Exchange since 1944 Oohnson and Johnson, 2013). In 1982, Johnson and Johnson was faced with an ethical dilemma when an outbreak of deaths had occurred in Chicago that was linked to one of their Tylenol products. “It’s Extra-Strength Tylenol capsules were found laced with cyanide” (Hunter, 2008). Tylenol was a national brand and leader of pain-relief medication sales.
This was Johnson and Johnson’s single largest brand, accounting for almost 18 percent of the corporation’s income; this crisis would pose to be a potential disaster for the company (Bayer, R). This leading pain-killer medication company was faced with a terrific predicament when seven customers were reported dead atter consuming Tylenol’s extra-strength capsules. It was discovered later that the bottles had been tampered with once the product reached the shelves and that the bottles were infected with cyanide poisoning.
Johnson and Johnson along with the Food and Drug Association took an ethical stance and immediately recalled 93,000 bottles of the product. In addition to the prompt recall, Johnson and Johnson cancelled all advertising for Tylenol as well as mass informing all doctors’ offices, hospitals and trade groups. They believed that the problem was solved; however, within a few days there was a related death in California. After this, Johnson and Johnson made the largest recall in history, removing 31 million bottles off American shelves; costing them $100 million dollars Oosephson, M. 012). Ethical decisions should be based on what is right and what is wrong; for a lot of corporations, with the pressure to produce higher and better returns, some individuals tend to ignore what is principally correct. For instance, top management may adapt unethical decisions if the financial cost is excessive for a total recall ofa product line. This shortcut may result in many lawsuits, or the competition’s claim of wrongdoing which could be avoided if instead, there was a strong ethical framework in place.
Through this process, there were many questions that could not be answered by executives. When the investigation started, there were speculations about where the Tylenol had been tampered with. Officials at McNeil Consumer Products, a subsidiary of Johnson and Johnson, stated that the Tylenol had not been tampered with in either of the plants. “A spokesman for Johnson & Johnson told the media of the company’s strict quality control and said that the poisonings could not have been performed in the plants.
Because the cyanide laced Tylenol had been discovered in shipments from both of the company’s plants and had only been found in the Chicago area, uthorities concluded that any tampering of the pills must have occurred once the Tylenol had reached Illinois,” (Kaplan, T. ). It is clear that Johnson and Johnson could have used unethical strategies of denying that they had been involved, or put blame on external practices involved in the production; however, Johnson and Johnson chose to accept responsibility and protect the safety and trust of their customers.
This quick recognition and action showed that James Burke (CEO of Johnson and Johnson) relied on the company’s ethical code to deal with the crisis promptly and esponsibly. Regardless of the price tag of his actions, he set that aside and did what he knew was right for consumers. “Marketers predicted that the Tylenol brand, which accounted for 17 percent of the company’s net income in 1981, would never recover from the sabotage,” (Rehak, J. 2002). Regardless of the percentage income for Johnson and Johnson, Tylenol was now completely out of the market.
Once a tamperproof bottle was created, their main concern was regaining market share in their competitive industry. It was Burke’s efforts and loyalty to the company’s ethical tandards which encouraged customers and the public to accept the precautions taken for public safety; nearly all market share was regained within Just one year. Although many had their doubts, Johnson and Johnson proved positive, by making difficult ethical choices, that they could maintain the honourable image of the company.
Over the years, numerous organizations have been scrutinized by their unethical behaviour which nas led to negative impacts on their public image as well as the effect it has on employees and sales. The media is so advanced in todays society, making it very easy for a scandal to go viral. To avoid such mishap, organizations are increasingly setting up and following the ethical guidelines of their business corporation. If they “play by the rules”, they are praised and awarded with a respected reputation, employee retention and most commonly an increase in sales due to costumer appreciation.
When Johnson and Johnson had to make a decision on how to proceed in regards to their current crisis, CEO James Burke turned to Johnson and Johnson’s credo: “We believe our first responsibility is to doctors, nurses, and patients, to mothers and fathers, and to all others who use our products and ervices”. Instead of focusing on the immediate short-term financial implications, he took into consideration the impact this crisis would have on their customers; he adhered to the attitude of “doing the right thing” (Bayer, R. 2012).
Johnson and Johnson executives had to weigh in the negative outcomes that would come with this recall, including a loss of up to $100 million, which would not be covered by insurance. Based on historical patterns, news ofa recall could do much damage to the Tylenol name. It was possible they may never be able to regain public confidence and its 37 percent of market share. Furthermore, the news and loss would surely result in a dramatic drop in the company’s stock and competition in the analgesic market would try to make Tylenol’s loss their gain (Bayer, R. 2012).
Although these possible results could hurt the company dramatically, Johnson and Johnson were unwilling to expose consumers to potential further risk (Hunter, 2008). The decision to recall the product and stop all advertisement of the product was largely due to Johnson and Johnson’s mission statement. Public announcements were made warning people about the consumption of the product and although the government ad not ordered the company to take any specific action, they chose the ethical path and did what was right for their buyers. This was one of the largest recalls in history; it was a step forward for ethical behaviour in the industry.