Less than a week after Johnson and Johnson CEO compared himself to Thomas Jefferson for writing the Business Roundable’s stakeholder first doctrine, his company is fined $572 billion in landmark opiod case.
Johnson and Johnson was fined $572 million yesterday in a landmark opioid case in Oklahoma.
A bit embarrassing, the timing, given J&J’s CEO, Alex Gorsky just compared himself to Thomas Jefferson for writing the Business Roundtable’s new stakeholder’s first doctrine.
The doctrine calls on businesses to focus on value creation for all stakeholders, putting an end to Milton Friedman’s responsibility to the shareholder only maxim.Between 2015 and 2018, 18 million opioid prescriptions were written in a state (Oklahoma) with a population of 3.9 million people. About 6,000 Oklahomans have died from opioid overdoes. Click To Tweet
Many corporate responsibility advocates waxed optimistic – some like hopeful cheerleaders – saying the announcement was a ‘positive step’, ‘a big opportunity’, ‘on the right track.’
I agree, but with the bruises of thirty years-worth of broken corporate promises to the same end. “It is hard,” I wrote yesterday, “to shake the image of a corporate vampire standing over its bloodless victim now offering to be a wellness guru.”Johnson and Johnson's CEO Alex Gorsky's 2018 compensation: $20.1 million Click To Tweet
Some might think Gorsky is trying to polish his apple in advance of the judgement or atone for selling baby powder that caused cancer in enough consumers that a St. Louis jury recently wanted to fine J&J $4.7 billion .
Major Corporations: out of their stakeholder depth?
My guess is that the Jefferson allusion demonstrates just how out of their depth corporate CEOs are with a broader stakeholder approach. More generously, Gorsky’s giddy feelings might have been nothing more than his very own Jerry McQuire ‘change the world’ memo moment: and we recall the famous economic moral of that story.
David Chandler, a Prof at the University of Colorado, says major corporations “fail to demonstrate that they understand how that process (stakeholder first) actually occurs and that it encompasses 100% of what the firm does.”
Chandler believes companies must necessarily takes a stakeholder approach to be successful, he finds the Roundtable announcement, “looks like business as usual to me. It seems as though the Business Roundtable felt like it needed to say this, but it is not quite sure why it is saying it and, by extension, what implications it will/should have for its members. In other words, it is an exercise in impression management, largely driven by growing societal criticism of CEOs/firms/capitalism (take your pick).”the world can hardly wait for yet another symbolic corporate nod to stakeholder interests. Click To Tweet
This leaves us where?
Perhaps yesterday’s judgement against J&J is just one more bad thing being flushed from a broken corporate accountability system.
This doesn’t mean corporations won’t begin to put stakeholders first, they probably will, but expect more floatsam like the J&J decision as they (hopefully) go up the learning curve.
The bigger question now is if the Business Roundtable’s announcement really is a declaration of independence from the shareholder. Many, including the Council of Institutional Investors (which shares some Roundable members), are already criticizing the announcement as it is seen to undercut “notions of managerial accountability to shareholders,” which is kind of the point isnt it?
Clearly, vigilence and pressure are required as companies have a long way to go, much muck to clean up, and some powerful forces to overcome before they will do anything terribly meaningful.
Lets not let this be just another show me the money moment.