Robert Wood Johnson (1893–1968) and James Burke (1925–2012)
The makers of such familiar health-related products as Band-Aids and Tylenol might just as appropriately have been named Johnson&Johnson&Johnson&Johnson&Johnson. The company was founded in 1886 in New Brunswick, New Jersey, by the two brothers for whom it was eponymously named: James (Johnson number one), and Edward Mead (Johnson two). As things turned out, they were among the least significant Johnsons in the company’s long history. Their brother, Robert Wood (Johnson three), joined the firm shortly after its founding, infusing it with both a dose of needed capital and medical knowledge—the latter informed by the latest thinking in the then-fast-developing field of medical science. Johnson was one of the first American disciples of Joseph Lister, the British surgeon who, in developing the art of antiseptic surgery, successfully applied Louis Pasteur’s germ theory of disease to operating room practices. Johnson had become an advocate of antiseptics after attending a lecture given by Lister in 1876, at which the great scientist described the need for sterile surgical dressings to combat infection.1 One of the first products J&J introduced under Robert Wood’s leadership was sterile medicinal plasters (forerunner of Band-Aids), followed in subsequent years by ligatures, maternity and obstetric products, and the still-marketed Johnson’s Baby Powder.
Johnson also had an early understanding of the power of advertising, retaining the personal services of the young J. Walter Thompson, with whom he worked closely in developing the firm’s first marketing efforts. About that time, Johnson met a local pharmacist, Fred Kilmer, who for the next forty-five years would serve as J&J’s de facto head of research and development, in the process becoming “the most revered pharmaceutical chemist in the country,” according to the editors of Time.2 When Johnson met “Doc” Kilmer, the pharmacist was running a drugstore in New Brunswick frequented by Thomas Edison, whose laboratories were located in nearby Menlo Park. Over the years Kilmer would prove to be as prolific an inventor as his friend and customer Edison, starting with the creation of Johnson’s Baby Powder in 1890. Kilmer later developed the surgical products J&J made available, gratis, to the US military during the Spanish-American War, and to victims of the devastating 1900 Galveston hurricane and 1906 San Francisco earthquake and fire (within hours of learning of the latter disaster, the company was loading boxcars full of cotton gauze, bandages, and plaster to be sent west).3 In 1906 Kilmer played a significant role in shaping the landmark 1906 Pure Food and Drugs Act, setting a precedent for future J&J cooperation with government agencies.
Robert Wood Johnson II
With 2,500 employees, Johnson & Johnson was highly profitable and fast-growing when Robert Wood died unexpectedly of Bright’s disease in 1910. He was succeeded by his brother, James (Johnson one), who made his mark on the company’s history primarily by continuing with the precedents set by Robert Wood and depending on Doc Kilmer to develop new products. But the Johnson who created the giant global corporation known today as J&J was Robert Wood II, the son of Robert Wood, who had been sixteen at the time of his father’s death. Known as Bob, Johnson number four was born into a life of wealth and privilege in 1893; he and his two siblings would inherit a trust fund containing almost all of J&J’s stock, worth some $2 million, in 1910. He joined the family business on graduation from high school, then worked his way up from a manual job in the company’s power plant to the top of its hierarchy over a period of some two decades. He had been primed for a career in the company by his father, who often took him as a young boy to sit quietly and listen in on business meetings.
Bob Johnson was quite unlike the other corporate stewards profiled in these pages. He was not the entrepreneur-founder of the company he led, but a thrice-married playboy who enjoyed fast and expensive cars, planes, and boats. During his life he was both famous and widely respected, and after his death he has been remembered more for his philanthropy than his corporate leadership. Above all, he was a man of many contradictions: an archconservative Republican who championed much of Franklin Roosevelt’s New Deal legislation; a Protestant who spent numerous hours in the company of Roman Catholic clerics and based his ethical thinking on the teachings of the church; a patrician completely at home in the company of the working class; a leader in the advance of medical science whose greatest skill was advertising; a CEO who touted J&J as “a family of companies” with a “family of employees,” but who in his personal life was a poor and often absent husband and father; a demanding, hypercritical, micromanaging perfectionist who was also the foremost executive apostle of business decentralization and delegation; and a red-white-and-blue patriotic American whose proudest achievements included the internationalization of J&J to the extent that its foreign managers were allowed to run their national businesses with almost complete autonomy from the company’s US headquarters.
At age twenty-one, Bob Johnson was elected to the board of J&J, a role with no management responsibilities. He soon became a protégé of Doc Kilmer, whose own son, Joyce, had died in battle during World War I. (Joyce had been a highly successful writer, and his poem “Trees” is still recited—and frequently parodied—today.) While always remaining more than a bit the party animal, under Kilmer’s tutelage Bob gradually matured and became dedicated to his work at J&J, ultimately becoming expert in the latest medical developments, and a vocal advocate of better hospital management. With an eye toward eventually leading the company, Bob convinced his sister to sell him all her shares, leaving him and his younger brother as the company’s controlling shareholders. As he worked his way up the company ranks, he became known for his progressive business ideas and practices. In an era when American factories were dirty, dismal, and architecturally hideous, he built a state-of-the-art cotton mill in rural Georgia that was not only externally attractive to the eye but also a safe, clean, and comfortable place for those inside to work. The J&J workers were well paid by local standards, and the facility was the first in the region not to employ children.
Influenced by the recent example of William Lever, Johnson built a model company town near the mill, with modern, five-room brick houses for his workers and their families.4 Although he soon abandoned the outmoded practice of creating company towns, in subsequent years he would build over a hundred beautiful, safe, and antiseptically sterile factories. He located all J&J facilities in landscaped, parklike settings on which he challenged the finest architects to design buildings that didn’t look like factories. Typically, those buildings—constructed using a great deal of glass to bring in daylight—offered the then-unheard-of luxury of air conditioning and featured plush lobbies that production employees were urged to use as entrances on their way to work. Johnson said he wanted all J&J workers to feel they “owned” the handsome buildings: “We build not only structures . . . in which men and women will work, but also patterns of society in which they will work. We are building not only frameworks of stone and steel, but frameworks of ideas and ideals.”5 In 1924 Johnson supervised the opening of J&J’s first foreign plant in Slough, England, followed by many more overseas as he led the company’s rapid and successful international expansion. Unlike those of many global corporations, J&J’s foreign facilities were of the same high quality as its domestic ones.
From an early age, Johnson was active in Republican politics, serving as an alternate delegate in the 1929 presidential convention that nominated Herbert Hoover. He would serve as mayor of the New Jersey town in which he lived, and remain a kingpin in that state’s Republican Party for the next five decades. During the Roaring Twenties, Bob was one of the loudest lions, making a reputation for himself as a spoiled rich boy, the first to buy the latest sports car in which he sped to his favorite Manhattan speakeasies. A member of the horsey set, he “rode with the Stoney Brook Hunt” when he wasn’t sailing in the Caribbean on one or another of the many yachts he would own during his long life.6
“Bob” in Charge
At the end of the 1920s, J&J’s top executive, James Johnson, was in ill health. Bob gradually found himself taking on more of his uncle’s leadership duties. In 1930, twenty years after the death of his father, J&J’s board of directors named Bob the company’s vice president and general manager. Two years later, they none-too-gently pushed James out of office, electing Robert Wood Johnson II as president.7 On assuming leadership of J&J, Bob promptly adopted a high public profile, urging president-elect Franklin Roosevelt in 1932 to advocate legislation reducing the workweek and increasing wages as first steps toward recovery from the Great Depression. Within J&J, Johnson dealt with the economic crisis by reducing workweeks, shortening shifts, and eliminating Saturday work. As a result, no J&J employees were laid off; indeed, a few hundred new jobs were created when countless other American workers were queuing up in breadlines. Moreover, Johnson gave a 5 percent wage increase to all J&J employees, hoping that act would encourage other industrialists to follow suit; at the same time he reduced the pay of J&J executives by 15 percent.8 A few years later, he would give his employees another raise when it became clear that the Depression wasn’t abating. He publicly called on all American employers to pay their workers a living wage, arguing that such measures were, in fact, conservative and in the self-interest of business. Like James Lincoln, Johnson firmly believed that it was better for “business and free enterprise to generate its own sense of public responsibility instead of being dictated to by the government.”9 He was sorely frustrated when his peers rejected his plea. During a congressional hearing, a senator asked Johnson if he was a member of the National Association of Manufacturers. Echoing Robert Owen, he offered this reply: “Senator, I have been unable to find a sympathetic group of colleagues in organized business and I’ve tried very hard.”10 Johnson then established himself as the nation’s leading business advocate of improved labor-management relations, shocking the business establishment by criticizing the National Association of Manufacturers for its rigid antilabor philosophy.
During the Depression, Johnson developed his philosophy of “corporate social responsibility.” Indeed, he may have coined that phrase; if not, he was the first major American industrialist to use it. At the height of the Great Depression, he penned an essay provocatively entitled “Try Reality,” addressed to his fellow capitalists:
Out of the suffering of the past few years has been born a public knowledge and conviction that industry has the right to succeed where it performs a real economic service and is a true social asset.
Such permanent success is possible only through the application of an industrial philosophy of enlightened self interest. It is to the enlightened self interest of modern industry to realize that its service to its customers comes first, its service to its employees and management second, and its service to stockholders last. It is to the enlightened self interest of industry to accept and fulfill its share of social responsibility.11
Johnson contended that it was in the self-interest of southern textile mill owners to adopt a forty-cents-an-hour minimum wage—if they didn’t, either the government would mandate it or workers would unionize to win it. In response, Georgia newspapers labeled him the “stormy petrel” of the textile industry, and “a wild-eyed maverick.” His biographer, Lawrence G. Foster, dubbed Johnson “the gentleman rebel.” Actually, he must have seemed like an anarchist bomb thrower to his peers in industry. In the middle of bitter Depression-era wrangling between FDR and the business community, Johnson called for the resignation of the Republican Party’s entire leadership.12 His words were incendiary: “American businessmen are probably the most efficient in the world, but I am afraid they are nevertheless political morons. I find we have as astute a group of politicians as we have anywhere, but I am afraid they are business morons. But there are more politicians who know something about business than there are businessmen who know something about politics.”13
While engaged in public battles, Johnson was also involved actively in the management of the company. He was, for all intents and purposes, J&J’s head of advertising, approving every major ad campaign and in the process driving creative types at ad agencies crazy with his constant quibbles, carping, and second-guessing. He was particularly incensed when ad men misrepresented or oversold a product. He had a strict, if not obviously clear, formula for advertising success: “Dramatics+Simplicity+Continuity+Brand Name Dominates+Brief and Legible Copy+Corporation Signature Strong”—and woe to the agency professional who dared deviate from it. In all his managerial actions he was a stickler for doing things the right way (which, invariably, was his way), and totally intolerant of efforts not resulting in perfect quality, absolute cleanliness, and sterility. He was highly opinionated, cutting in his criticisms, and “made many mistakes, but rarely admitted them.”14 He was also deeply concerned with new product development, especially products with high social utility. For example, he encouraged company efforts to create inexpensive, effective sanitary napkins for use by women in the undeveloped world, personally hiring a nurse and charging her with traveling around the globe to discover what poor women needed in that regard.
In 1936 Johnson contributed twelve thousand shares of his J&J stock to form the Johnson New Brunswick Foundation, dedicated to alleviating the effects of the Depression in the city where the company’s headquarters were located. Two years later, at age forty-five, he appointed himself J&J’s first chairman of the board, a title he would hold for the next twenty-five years. About that time, he threw a party for some five thousand J&J employees at which he out-Levered William Lever, personally dancing until the wee hours of the morning with a steady stream of the most timid ladies on the staff.15 Like Lever, Hershey, and Owen, Johnson prided himself on his abilities as a ballroom dancer, a pastime that would cause him great domestic difficulties: reports in the press that he was seen frequently on Manhattan dance floors in the arms of a woman to whom he was not married led to the second of his three divorces.
“General” Johnson
While the Depression didn’t hamper the indefatigable Johnson’s efforts to remake American industry, World War II did. In 1942 he was commissioned as an army colonel and assigned to an ordnance division responsible for supplying the military with equipment needed in the Atlantic and Pacific theaters of combat. His specific charge was to ensure that the nation’s thousands of small businesses received their fair share of government contracts. He created a detailed plan to that end, but it met such a wall of resistance from the Pentagon that his friend President Roosevelt promoted him to the rank of brigadier general to increase his clout with the military. The promotion didn’t help. Every effort Johnson made to steer contracts to small businesses was rebuffed by one federal agency or another. Exhausted by his futile efforts, he resigned his commission some sixty-four days after receiving it. His parting words, as reported by Walter Winchell, were “Washington is a magnet for mediocrity.”16 He then devoted the rest of the war to leading the home-front manufacturing effort that was, in many ways, key to the ultimate Allied victory. During the war, J&J provided the military not just with medical supplies but also with gas masks, artillery shells, and aircraft parts, mostly without profit to the company. Although he was only a general for two months, for the rest of his life he would be referred to as “the General” by his friends and Johnson & Johnson colleagues. If he was uncomfortable with that honorific, he did nothing to discourage those who addressed him by it.
In 1944 Johnson & Johnson became a publicly traded company, a decision that Johnson later would claim to regret.17 His intent at the time had been to make it practical to grant large amounts of J&J stock to the company’s senior managers. Indeed, in subsequent years almost all J&J executives would become major shareholders in the company. At the time of the initial public offering, Johnson emphasized that the stock listing would not change the company’s managerial philosophy or practices. To that end, he continued to appoint only insiders to its board—managers who, like himself, had spent their entire careers in the unique J&J culture and were therefore committed to preserving it. In subsequent years the company would find itself subject to considerable criticism from the New York Stock Exchange, and others, for its failure to appoint outside board members. But Johnson held out until the end, never accepting a broader role for outsiders in the company’s governance, thus presaging decades of tension in publicly traded companies between managers wishing to sustain an organization’s enlightened practices and outside investors with no such commitment. Decades after his death, that tension would surface at J&J.
At the end of the war, Johnson returned to his interest in labor relations, penning a book in 1947 in which he laid out his philosophy of what a “just society” would look like in America, and the role business should play in creating it. The oddly named book, Or Forfeit Freedom, bore the supertitle “People Must Live—and Work Together.”18 It was, in many striking ways, an Owenite plea to Johnson’s fellow industrialists to provide living wages, good working conditions, and a modicum of job security to their employees. If they failed to do so, Johnson warned, the American public would lose confidence in corporate capitalism—thus paving the way for the introduction of either a Marxist or fascist system. To preserve the freedom in his book’s title, he contended, it was necessary for the country’s business leaders to accept the legitimacy of labor unions, learning how to work with them (and with the government)—if not as partners, at least fairly and respectfully. Much of the book is dated, focusing on the issues dominating the headlines in the immediate aftermath of the war: widespread unemployment, low wages, strikes, shortages of food and consumer goods, and the lingering government controls and high taxes that had been introduced as emergency measures during the conflict.
Setting aside such material, the book reads as a thoughtful work of political economy, albeit one written in informal, often jarringly colloquial language. Johnson had no formal education after high school, yet he was clearly well-read, comfortable quoting Adam Smith, Thomas Macaulay, two Roman Catholic pontiffs, Henry Luce, Elton Mayo, and Peter Drucker (then a young, little-known author). He began his book with an analysis of what was wrong with the American system of private enterprise, specifically the problems that had led to the 1929 stock market crash, the subsequent Great Depression, and the failure of the economy to recover after the war. He accused the business community of being in denial about the underlying weaknesses of the American system: “because a few business leaders both talked and practiced nonsense, private enterprise is in disgrace with one part of the public and on probation with the rest.”19 He called for a rethinking of the system in a fashion reminiscent of President Theodore Roosevelt’s Square Deal and Franklin Roosevelt’s Four Freedoms: “It [the new system] will have its creature comforts, of course, for people will buy no stock in a future that does not at least promise higher standards of living. But it will also involve fair dealings between business, employers, and public; mutual effort and understanding; freedom from privation, fear, and the threat of insecurity. Thus it will replace the weaknesses that now threaten the economic system that also is our way of life.”20
The book then outlines actions that each of the nation’s key players—government, business, trade unions, workers, consumers, and citizens—needed to take to bring about the transformation Johnson envisioned. Johnson had strong views, and rock-ribbed confidence that he was right in what he advocated; yet he was neither a utopian dreamer nor an ideologue. His proposals were in the main practical and pragmatic, and he made every effort to recognize and address the legitimate interests of both labor and capital. Central to his philosophy was the need for fair treatment of all the nation’s various constituencies—including business owners. Throughout his life he constantly called for lower taxes on income and wealth, reasoning that there was nothing morally wrong with becoming rich or inheriting great wealth. He even wrote an amusing article, “Dough Boy,” about how hard it was to be born with a silver spoon in one’s mouth! He also called for the end of unnecessary bureaucratic controls on business, while rejecting the laissez-faire doctrine that government should impose no regulations in the marketplace. In particular, he opposed the social Darwinist version of that philosophy elucidated by Herbert Spencer in Britain and William Graham Sumner in America, which, he wrote, “gave authority for competition as ruthless and impersonal as that waged by weeds and wild beasts. It also justified exploitation, made severity a prerequisite of progress, and dignified greed as part of the struggle for existence. Poverty was the normal result of weakness, while riches became evidence of fitness to survive.”21
Instead of cut-throat winner-take-all laissez-faire—the dominant ideology in the English-speaking world among business leaders—Johnson aligned himself with the sentiments expressed by Pope Leo XIII in his landmark 1891 encyclical Rerum Novarum, subtitled “On the Condition of the Working Classes.” The pope was no Marxist, yet he called on businesspeople to correct the economic and social wrongs of capitalism—principally, low wages and inhumane working conditions. Johnson was particularly drawn to the pope’s belief in the dignity of labor and the God-given right of all workers to be treated with respect. Ever one to balance his statements, Johnson duly noted that the Protestant Federal Council of Churches had echoed the pope’s themes in its Social Creed of 1908, which called on business to deal with the problems of poverty and to protect workers during the rapid technological changes occurring in the industrial order. Not to leave anyone out, he added that those “Christian leaders were joined by rabbinical bodies. Seeking modern application of Mosaic and Talmudic legislation, the rabbis supported bills guaranteeing workers the right to organize, outlawing child labor, establishing social security and old-age pensions, setting up fair employment practices, and so on.”22 Such religious appeals, he pointed out, had been largely rejected by business, and that was why, forty years after Leo XIII’s call for reform, Pius XI felt compelled to return to the same themes in his 1931 encyclical Quadragesimo anno, subtitled “On the Reconstruction of the Social Order.”
A Critic of Capital and Labor
While understanding the deep-seated reasons for union mistrust of management, Johnson nonetheless called the labor movement to task for “remaining indifferent to good government—in fact, they often allied themselves with the crookedest of local machines and the worst of racketeering bosses.”23 He scored organized labor for constantly demanding “more,” even in instances where higher wages were economically unsupportable by levels of productivity. Such demands, he warned, would lead to the pricing of American goods out of world markets, and subsequent unemployment for the very workers for whom unions had sought to win unrealistic raises. He was particularly critical of union leaders who refused to cooperate with such well-meaning employers as James Lincoln in joint efforts to improve productivity. He called labor unions out for such unproductive practices as working-to-rule, featherbedding, and limiting the number of apprentices to produce artificial scarcities of skilled labor. He chastised union bosses for engaging in violence against their own members who dared speak in opposition to their dictates. At the same time, he recognized the rights of working people to organize, and of trade unions to represent them in collective bargaining, acknowledging that millions of Americans were laboring for less than a living wage. In the tradition of the best political economists, he offered an economic analysis of why so many workers were unfairly paid, and why they needed a decent income.
In the same vein as Theodore Roosevelt’s famous 1910 “New Nationalism” speech, Johnson argued that millions of potentially productive but currently underemployed, undereducated workers were a drag on the American economy. It was therefore in the self-interest of business to employ those individuals more productively: if they were trained and put to work satisfying the pent-up material needs of consumers and repairing the nation’s neglected infrastructure, they would create demands for the products of industry. He thus used the same reasoning earlier advanced by Robert Owen and Henry Ford: well-paid workers were the best customers of the companies in which they were employed. Furthermore, according to Johnson, better-compensated employees were more productive. And because America was underproducing, he advocated greater industry investment in new plants and technology to increase future economic growth. As a fillip, he added the same conservationist proviso Teddy Roosevelt had earlier raised: economic growth needed to be environmentally sustainable, which required the judicious use of all the nation’s natural resources, including its air and water.
Much as J. C. Penney had, Johnson urged his business peers to pay attention to product quality, charge fair prices for the goods they made and sold, listen to the wishes of their consumers, engage in community-spirited activities, reduce air and water pollution, and accept all those concerns as part of their social responsibility.24 Citing the Roman pontiff as his moral authority, he called on business leaders to provide challenging jobs that engaged not only the hands of workers but also their minds. He noted that many Americans believed that owner-managers were more open to accepting those responsibilities than corporate professional managers, expressing his personal belief that there were individuals in both categories “who love their work as a way of life,” and that for such individuals to behave irresponsibly was “both a moral and commercial sacrilege.”25
Although Johnson often cast his arguments for change in moral terms, invariably he would realistically turn to an appeal to the self-interest of the business community. He was convinced that those individuals, for all their faults, were more capable, effective, and efficient than government and labor leaders when it came to managing the industrial order. With regard to the issue of fair wages, he asked his peers to take the initiative: “Or do you prefer to have government do the job, add a stiff service charge, and compel you to pay the bill in the form of income taxes?”26 He cited Lincoln Electric’s system of compensation as an example of a method managers should consider adopting to improve their companies’ productivity, and the economic well-being of their employees.27 In all, he claimed that assuming such social responsibility was the surest way for managers to provide a sound profit to their stockholders in the long term.28
His Managerial Philosophy
Johnson was not only a social reformer but equally dedicated to advancing managerial practices. He was an early advocate of organizational decentralization, arguing, in effect, that it was more efficient for a company to have ten separate operating units, each with five hundred workers, than one giant facility employing five thousand: “Big business has been making one of the very mistakes for which it bitterly criticizes government. Under different names it piles bureau on bureau. . . . Thus the central management builds up a bureaucracy that buries the actual man on the job, robs him of authority, and relies on time-consuming conferences instead of quick decisions.”29
“Business bureaucracy,” Johnson claimed, “can give greater offense than government, since it directly affects customers and employees.”30 Furthermore, it was in the self-interest of corporate leaders to decentralize and delegate authority because workers are more likely to understand how they fit into the system of a small organization than a giant one. In small-scale organizations, workers and managers were also more likely to know each other by name, and thus see themselves as part of a common enterprise: “Since management and employees know each other, every worker becomes a person. There is mutual respect, regardless of position, and a strong feeling of dignity.”31 Although Johnson failed to mention it in Or Forfeit Freedom, his own company was, at the time of its writing, pioneering the practice of industrial decentralization; over the next four decades, that structure would become one of the three pillars on which its culture would rest. In effect, Johnson was using J&J as “his laboratory for the development of his many creative ideas for making business more responsible.”32
Johnson also located J&J’s numerous independent mini operating units in small towns and rural communities for the sake of creating greater employee engagement and work satisfaction. He felt workplaces should be organized so that employees could participate in the decisions affecting their own work, particularly as members of self-managing teams that would create a sense of community on the job.33 As an integral part of that effort, Johnson believed that corporations had a responsibility to facilitate the personal development of workers, and that “training must go far beyond the job itself, to develop understanding, attitudes, and habits that will make the worker a better member of his plant community, his city, and his nation.”34 He encouraged employers to prepare workers with skills required to deal with emerging technologies, saying that training could occur in continuing education classes provided in workplaces, imagining at every workplace “an adult university keyed to the requirements of the changing business world.”35 In the spirit of Owen, Penney, and Lever, Johnson thus believed that employers had a responsibility for not only the training but also the education of their workforce.
In proper Jeffersonian fashion, Johnson wanted Americans to be not only productive workers but virtuous citizens as well, and he felt that the key to their moral and intellectual development was for managers to show them respect: “Dignity in employment is hard to define. It involves pride in the job one holds, pride in the work one produces, and pride in oneself as a worker and as a member of the community. It involves a subtle and complex personal relationship with employers and society as a whole. This relationship runs through the literature of the early American scene.”36
Johnson found cultural displays of respect for American workers in the iconic paintings of Grant Wood, the Richard Rodgers and Oscar Hammerstein musical Oklahoma!, and the myth of Paul Bunyan. The benefits of showing workers respect, he believed, were underscored by findings of modern psychology: “Actually, the whole matter of dignity in employment boils down to this: Every worker, from chairman of the board to office boy or sweeper, is a human being. As such, he is endowed with an ego, which one dictionary defines as the I who thinks, feels, and acts. Modern business has reduced the size of that I by ignoring or grossly violating the innate requirements of workers.”37
Taken as a whole, Johnson’s philosophy looks back to the unfulfilled social agenda of the Progressive Era, and forward to the managerial theories of such humanist scholars as Douglas McGregor and Abraham Maslow. Although Johnson was putting in place at J&J the practices he advocated in his book, he made no specific mention of his own company in its pages. For example, he wrote that business leaders needed to adopt an “industrial credo; a statement of responsibility in the strictly business realm,” a list of duties he claimed all companies had to their many constituencies. What he chose not to say was that the code outlined in his book was a generic version of a document that he had recently posted on the walls of his company’s highly decentralized units, a document that would become the second pillar of the company’s culture.
With the clear intent of creating a “moral business,” in 1943 Johnson wrote a statement that he first titled “An Industrial Credo” (later changed to “Our Credo”), a litany of the company’s responsibilities to its sundry constituencies: “the doctors, nurses, hospitals, mothers” who used its products; its employees and managers; its host communities; and finally its stockholders. To those who objected to putting owners last, he replied, “If we put our customers first and follow through on our other responsibilities, I assure you the stockholders will be well served.”38
By all accounts, Johnson dedicated his tenure at J&J’s helm to ensuring that the company bearing his name lived up to its credo. In 1957 he further elucidated its meaning in a single-page document entitled “Our Management Philosophy,” one of the first calls for what later would become known as servant leadership. “Our concept of modern management,” he wrote, “may be summarized by the expression ‘to serve.’ It is the duty of the leader to be a servant to those responsible to him.” In addition, he recorded forty-four short audio programs to be broadcast to all J&J facilities, in which he explicated J&J’s stewardship philosophy and explained its implications for employee behavior. For example, in the manner of Penney, he outlined each operating unit’s responsibilities to its host community. He encouraged every J&J employee to become involved in community affairs, to vote, and even to run for office, regardless of the party they chose to support. Such efforts often were seen as sermonizing, leading some labor leaders to accuse him of paternalism.39 In fact, he provided a constant flow of ideas and advice not only to his workers and managers but also to business, labor, military, medical, and government leaders.40 Some of those ideas were quirky and eccentric: in the 1950s he advocated the building of bomb shelters, penning an article entitled “Dig, Son, Dig.”41 As his biographer notes, he “was highly opinionated and a staunch advocate of his fresh ideas, even after some of them went sour on him.” Johnson himself admitted that even his own executives reacted negatively to one or more of his many notions.
As Johnson neared the end of his long reign as J&J’s chairman and chief executive officer, finding a worthy successor became a major issue. Many of the company’s executives favored the obvious candidate, his son, Robert “Bobby” Wood Johnson III. Sadly, Bobby (Johnson number five) had never been close to his father, having been raised from an early age by his mother after his parents divorced. Nonetheless, following two years of college Bobby joined the company, and like his father before him he spent his entire career working his way up the corporate hierarchy to become its president. He clearly had the qualifications—and the name—for the job, but when it came time to anoint him, his father balked. It seems that Johnson’s obsessive perfectionism extended to the evaluation of his own son, whom he criticized often and severely. Moreover, Bobby was much like his father: obstinate and opinionated. The two clashed in private and at business meetings, and when Bobby had the bad luck to be hospitalized for a lengthy period, his father took advantage of his absence to abolish the position of president of J&J. Bobby appealed to his father to reconsider, but Johnson remained adamant. At age forty-five Bobby left the company, never to return.
Johnson retired in 1963 and died four years later, bequeathing all his $1.2 billion in J&J stock to the renamed Robert Wood Johnson Foundation, which made it the second largest private foundation in America. The foundation, originally established to support New Brunswick during the Depression, was repurposed to fund “the advancement of medical knowledge.”
J&J After Johnson
Johnson’s successor at the company’s helm, Philip Hoffman, seems to have ignored “Our Credo,” treating it with benign neglect. When he in turn retired in 1973, J&J’s board of directors named Richard Sellars as the company’s CEO. Sellars, by his own account, was as dedicated to the credo as Johnson had been, and found it unacceptable that it had fallen into desuetude under Hoffman. His commitment to its principles was soon tested. Shortly after Sellars assumed J&J’s leadership, it was revealed that managers in its foreign divisions had engaged in bribery to secure overseas business. Sellars immediately put his foot down: and, citing the credo as his authority, fired those responsible. Shortly thereafter, the company’s commitment was again challenged by mounting pressure to move its headquarters from the rapidly decaying urban core of New Brunswick and join the “white flight” to the suburbs. Before deciding to abandon the city, Sellars said he had looked “at the Credo’s commitment to communities where we work and live” and then opted not only to keep J&J’s headquarters in New Brunswick but to erect a modern headquarters building to serve as the core of what would become the company’s ten-year revitalization of the city’s center. Ultimately, hundreds of millions of J&J funds were invested in that effort.42 Near the end of Sellars’s relatively short tenure as CEO, the company’s young president, James Burke, launched a program he called the Credo Challenge. In the years to come, that program would make Burke the first non-Johnson chief executive to leave an indelibly positive mark on the company.
James Burke
James Edward Burke is one of the few corporate stewards profiled in these pages who never explicated his business philosophy in a book, nor is he the subject of a published biography. Fortunately, he was featured in five informative videos and the subject of several in-depth Harvard Business School cases, and thus we can reconstruct his impressive career and discover the sources of the remarkably virtuous behavior he displayed as J&J’s leader.
Born in Rutland, Vermont, in 1925, Burke grew up in a small town near Albany, New York, where his father was a bond and insurance salesman. His mother “loved intellectual ferment,” Burke recalled; “She taught us to challenge everything. Our dinner table was constant arguing over anything and everything.”43 Years later, Burke’s J&J career would be marked by one after another round of fruitful “challenging” and “constant arguing.”
Burke attended a strict Catholic high school, where he was profoundly influenced by the ethical teachings of the Brothers of the Holy Cross of Notre Dame. He then enrolled at the College of the Holy Cross, but his higher education was interrupted by naval service in the South Pacific during World War II. After the war he returned to Holy Cross, graduating with a degree in economics, followed directly by a Harvard MBA. About that time, Harvard Business School published a new set of educational objectives for its students, a document that included two goals that, unfortunately, shortly thereafter disappeared from its mission: “Understanding of the useful generalizations of political economy and ability to develop at least the beginnings of an integrated social and economic philosophy”; and “Understanding of ethical considerations as an integral part of business administration and ability to develop a unified set of ethical concepts for personal guidance in administration.” As a student, Burke seems to have met those objectives—and met them in a way that later made him particularly amenable to the business philosophy of Robert Wood Johnson II. In the late 1980s, Burke recalled his time at Harvard:
The thing that amazed me, and was totally unexpected, is that in everything we did, we were reminded of the moral values—the importance of moral values in our decision making. We all spent a lot of time talking about it, and many had some doubts. . . . I guess partly because of the way I was brought up, I had a set of values that I knew I was going to have difficulty compromising ever. And whether we like it or not, in our educational system, even at a place like Holy Cross, there is an underlying doubt about the enterprise system.44
After a short stint as a brand manager at Procter & Gamble, Burke tried his hand at creating three entrepreneurial ventures, each of which failed. Now deeply in debt, he returned to corporate life in 1953, taking a job at J&J as Band-Aid product director while Johnson was still in command of the company and the credo he’d written was fresh on its walls. Burke was soon a rising star, given the opportunity to develop and market a new product line of aspirin substitutes for children. Unfortunately, the line failed, at considerable cost to the company. Shortly thereafter, Johnson called Burke into his office. Burke had never been alone with the General and, convinced he was about to be fired, was certain the visit would also be his last. To his great surprise, Johnson congratulated him on his enterprising attempt to create a new business: “What business is all about is making decisions, and you don’t make decisions without making mistakes. Now, don’t make that mistake again, but please make sure you make other mistakes.”45 As Burke explained years later to researchers from Harvard Business School, “That incident was extremely important to me, and the General became important to me—first of all because he was tougher than hell; he was egocentric, but he was very creative. He loved to argue, almost as much as I do. On anything. I don’t know that he was a mentor of mine, but he loved young people and he was very close to what was going on in the company.”46
Burke was subsequently promoted to vice president of product management—coincidentally, at about the time J&J acquired McNeil Pharmaceuticals, the eventual makers of Tylenol, the product that one day would bring Burke to the attention of the American public. In 1962 he was named president of J&J’s baby and proprietary products division, which he promptly reorganized, splitting its marketing and research functions. Subsequently, Johnson indicated his displeasure with the performance of the newly reshuffled division, letting it be known that he was considering replacing Burke. As Burke recalled, “I was furious.” He demanded a meeting with Johnson and J&J’s executive committee, at which he planned to make a formal presentation demonstrating that, in fact, his division was performing well. In the middle of that presentation, Johnson walked out of the room and didn’t return. Although the committee ended up giving Burke a vote of confidence, he was nonetheless upset by the General’s abrupt departure. Johnson later explained his behavior to another J&J executive: “It was perfectly obvious that the business was in complete control and well-managed. Why waste my time on it? You know, I don’t think it really hurt Burke, do you?” When the executive related that conversation to Burke, he noted that Johnson had “a twinkle in his eye” when he mentioned that he hadn’t hurt him. Burke recalled, “That made me start thinking. Not only didn’t it hurt us, the business was much better managed as the result of the General’s challenge. . . . We did a whole lot of things that never would have happened if the General hadn’t challenged us, and I never forgot it.”47
While Burke never became an intimate of the much older Johnson, he was supervised by Johnson’s son, Bobby, who, before he was fired, had recommended Burke for several key promotions, including, in 1965, as head of J&J’s domestic operations and member of the corporate executive committee. It was then that Burke had his first close view of what J&J’s credo meant in practice. At the time, Bobby was manager of development for a promising new product, Baby Liquid Cream, which was to be marketed for use by infants and their mothers. Bobby was anxious to make the product a success; if it was, he felt his father might then look more favorably on his possible succession. Burke recalled it as “a beautiful product, beautifully packaged,” and Bobby was eager to put it on the market. But just as he prepared to do so, clinical results arrived, showing that the lotion caused minor skin irritation in some 5 percent of adult users. The tests also revealed that the only women who experienced such irritation were those with preexisting skin problems and who, in addition, were extremely heavy users of the lotion. Given the routine practice of putting warnings about such potentially minor problems on product labels, some members of J&J’s executive committee were in favor of proceeding with marketing the cream. But Bobby demurred: “We are not going ahead. Dump it in the Raritan River if you have to.”48 “What he meant was get rid of it,” Burke explained, “and he did. He made the decision like that, and it cost the corporation a lot of money. I thought at the time that this was the kind of thing that made Johnson & Johnson different, and that thought returned many times over the years.”49
The Credo Challenge
A few years later—after both the General and Bobby had left the firm—Burke, now J&J’s president, decided to restore the credo’s centrality to the company’s culture. He was confident that his boss, Chairman Sellars, was a true believer in the document, but uncertain how deep support went down the ranks of J&J’s management—particularly among younger members who had not served under Johnson. In 1975 Burke initiated the Credo Challenge, inviting some twenty top J&J corporate executives, several of whom were also members of the company’s board of directors, to a two-day-long discussion to assess how useful they found the company’s credo in their decision making. Sellars chose not to attend the meeting; in his words, “I feel so strongly about the Credo that I think I would have challenged each of those individuals to believe as I do. I would have found myself selling [it].” The meeting was filmed, and it stands as one of the few unscrubbed views business scholars and students have of how the forces of idealism and realism conflict in high-level corporate meetings. As captured on film, here is a verbatim sample of what was said at that first Credo Challenge:50
BURKE: The Credo sits in somewhere between 150–200 of our locations—hangs on the walls, at least. If the Credo doesn’t mean anything, we really ought to come to that conclusion, and should rip it off the walls and get on with the job. If it is there as an act of pretention, it is not only useless, it has a negative effect. . . . You should all feel free to stir up some controversy. I don’t think we will get much out of this unless you do. [Burke then asked the committee to recommend whether the company should (a) get rid of the Credo; (b) change it; or (c) commit to live by it. If they chose to change it, they were asked to provide specific, alternative language. He then left the meeting.]
EXECUTIVE 1: . . . [Every] decision is either good or bad; but good or bad against what? If you have every manager interpreting for himself what [the Credo] means, it is like playing golf and everyone has his own par. That’s why I think it is meant as absolutes, and should be absolutes.
DAVID COLLINS (MCNEIL PHARMACEUTICALS DIVISION HEAD): I have trouble looking at the Credo as that kind of a regulation because I find the need to resolve inconsistencies between its principles when used to assess the performance of an individual in a job. Because he can rightly come back to you and say “Our Credo says to make a profit, and that is what I did. How can you possibly fire me for doing that?”
EXECUTIVE 2: Any guy who runs a business is, in our case, like a guy juggling five colored balls, four are white ones—the first four tenets of [the Credo]. The fifth is a bright red one, and it says “profit.” Everyone in this room knows he better not drop that red one or he is going to be in deep trouble. What he really doesn’t know is what it means in terms of the other four. Which one can I drop first? Can I fumble that one? Or where can I give a little? But he knows about that red one.
EXECUTIVE 3: Picking up [your] point, you can’t kid yourself: The purpose of a business is to make a profit. We are capitalists. This country was built on it. This business is built on it. We can’t let all this discussion degenerate into something that says fulfilling that objective [profit] is not very nice.
EXECUTIVE 4: I don’t know if anybody is really saying that . . .
EXECUTIVE 3: Oh, I don’t know . . . there’s an undercurrent . . .
EXECUTIVE 5: We are losing sight of what the General was trying to say. . . . Unless we meet the demands of society, someone—number one, the government—is going to force us to do it. . . . Should we not therefore do what is best for the business—not only what is morally and ethically correct—but what is best for the business by following the concept of the Credo so that we meet the needs of society, and therefore are able to do things better and cheaper than the government? And do things that are basically right and decent and human.
EXECUTIVE 6: That’s apple pie and motherhood. We are all in agreement about that. The question is, which of these things is a legitimate demand of society, and how many of these can we fulfill and stay in business?
EXECUTIVE 7: Making a profit all by itself is not the issue. What we are talking about is a set of principles that you can’t make a profit at the expense of. . . . We must meet all of those things.
EXECUTIVE 3: I am not suggesting [otherwise]. I just don’t want to see us unnecessarily diminish the importance of profit.
EXECUTIVE 8: We go around and around on this. We are not challenging whether the executive committee believes in [the Credo] or wants to practice it, but the question that Jim [Burke] put to us yesterday: “Do we sometimes get conflicting signals?” And I think we are saying “Yes, we do get some conflicting signals.”
A few months after the meeting, J&J invited distinguished television journalist Edwin Newman to visit the company’s headquarters, view the Credo Challenge video, and then critique it on camera in discussion with Sellars and Burke. When Newman expressed some cynicism about the credo’s placement of profit fifth, and last, in the order of J&J’s responsibilities, Sellars replied: “We learned long ago that if you can’t run a business profitably while paying for your social responsibilities, you better get out of the business.” Newman then noted that the credo would “be a pretension and self-serving if the company was not acting on it,” leading Burke to reply that some individuals who took part in the Credo Challenge had implied that the company was “not always living up to the high principles of the Credo,” suggesting that was because the document’s numerous “priorities are difficult to balance, and the priorities are sometimes in conflict.” Nonetheless, he said, the company’s managers had no choice but to resolve those conflicts to maintain the public’s trust. In light of the filmed exchange between McNeil head David Collins, in which he offered a subjective reading of the responsibilities enumerated in the credo, and the executive who interpreted it in absolute terms, Burke made it clear that he firmly believed that all five of the “balls” that managers juggled at J&J were red.
Sellars told Newman that the Credo Challenge had taught him that some J&J managers felt there was “insufficient understanding” of the document among the executive committee and members of the company’s board. As a consequence, he had a copy of the credo enlarged and posted on all four walls of J&J’s boardroom to serve “as a constant reminder that its principles are a part of our decision-making process.” Concluding that the Credo Challenge had been a success, Sellars and Burke decided that the process should be repeated, in cascading fashion, down through every level of the company’s hierarchy. Moreover, in order to institutionalize the practice, each unit in the company thenceforth would devote one day each year to a Credo Challenge. “I don’t really think you can impose convictions or beliefs on someone else,” Burke explained, but he believed that the Credo Challenge was not about forcing managers to accept the company’s stated values; instead, “what they really are doing is challenging their own beliefs.”51
“Beliefs,” “values,” and “corporate culture” were central concepts in Burke’s leadership philosophy. As he explained, “The company functions as it does because of its value system. . . . Our culture really is it.”52 Thus, when Burke was named CEO in 1976, he viewed his major leadership task at the highly decentralized J&J as sustaining its strong value system, and the primary tool at his disposal as the Credo Challenge.
The Tylenol Crisis
When Burke instituted the Credo Challenge, he had no idea how powerful a tool it would prove to be until, in 1982, a psychopath laced Tylenol capsules with cyanide and then placed the tampered bottles on store shelves. Seven people died as a result of ingesting the capsules. Almost from the moment it was clear to Burke and his leadership team that the poisoned capsules threatened the lives of J&J’s customers and its reputation as “a company that cares,” the record shows they behaved in an exemplary fashion. Even before they had confirmed that the company was not responsible for the poisonings, J&J’s executives ignored legal advice to remain silent and not say anything that might later be used against them in litigation. Burke even opened the doors of J&J’s crisis management meeting room to the investigative newsman Mike Wallace and his 60 Minutes television camera crew, at a time when the very name Mike Wallace struck terror in the hearts of managers who heard that he was at their office door requesting an interview. Wallace had never been known for never doing puff pieces; on the contrary, he was known for digging up dirt.
The crisis management process Wallace recorded was in many ways similar to the candid way in which the Credo Challenge had been conducted at J&J over the previous seven years. Burke assembled a cross-functional team of J&J executives who met twice a day for six weeks. In his words, “We let the debate rage.” Perhaps drawing on what he had learned from his mother at the dinner table and his spirited debates with the General, Burke declared “Let everybody say what they goddam believe.” In one exchange aired on 60 Minutes, Burke is seen in heated discussion with McNeil division head David Collins over when product advertising should begin as part of the process of restoring consumer trust in Tylenol. Collins’s beliefs about the lack of moral absolutes in the company credo appear unchanged from the subjective position he expressed seven years earlier in the Credo Challenge video: he is seen on camera disagreeing forcefully with Burke, suggesting that considerations of profit should not be set aside while the company addresses consumer safety issues. Significantly, Burke does not order Collins to deal first with safety and trust issues; instead, he engages with the McNeil head and the other assembled executives in a free-flowing debate among equals designed to surface—and thoroughly and logically analyze—all possible perspectives on how to deal with the aftermath of the crisis. Later, Burke credited the Credo Challenge for having prepared his managers to do “the right thing” when disaster struck. A postscript: in the years after the Tylenol crisis, skeptic Collins would become the company’s leading public advocate of J&J’s Credo Challenge.
The stakes involved in the Tylenol crisis were high in terms not only of loss of life but of financial impact on J&J. Tylenol had been the nation’s top selling analgesic and J&J’s most profitable product. Shortly after the news of the Tylenol deaths reached Wall Street, the company’s stock price plummeted by 20 percent, amounting to a $2 billion paper loss for its shareholders. Most experts predicted Tylenol was finished as a consumer product, even though J&J was blameless in the deaths. Madison Avenue advertising guru Jerry Della Femina predicted, “In a year it will be difficult to find a product with the name Tylenol on it.” Thus, after the immediate crisis had passed, Burke was faced with a dual task: meeting the needs of investors in the short term, and saving the Tylenol brand in the long run. In Burke’s view, the long run was what counted. As the General had often stated, long-term thinking was the third pillar of J&J’s culture, and events proved him right. A year after the poisonings, Tylenol was back on drugstore shelves, having regained its leadership position in the analgesic market. The reason was clear: with its admirable responses to the crisis, the company had been able to regain public trust. J&J had quickly recalled all Tylenol products from retailer shelves at a cost of some $100 million, earning high praise from the head of the FBI, who testified that the company had not only cooperated fully with the agency’s investigations but proactively recalled Tylenol much faster than the feds recommended. More than that, Burke had offered to repurchase from customers any bottles of the product, open or not, on the off chance that some had been bought before the recall.
In the months following the crisis, J&J engaged in a series of socially responsible, candid, and prompt actions, culminating with the introduction of new safety packaging, including the “neck seals” now standard on bottles in the pharmaceutical industry (the ones that make it so hard to open plastic jars of medicine). Throughout the crisis and its aftermath, Burke, who had not previously appeared on television in his seven years as J&J’s CEO, made himself readily available for on-air interviews. In each, he offered complete and factual answers to all questions asked, no matter how hostile or skeptical the interviewer. In the end, Burke and J&J won the admiration of even the congenitally negative Mike Wallace, who concluded: “Instead of stonewalling, they have been forthcoming.” J&J’s handling of the Tylenol incident still stands as a model for how corporations should deal with crises. Yet when later faced with major crises, executives at Exxon and Union Carbide in the 1990s, and at Volkswagen and Wells Fargo more recently, chose to reject J&J’s transparent and candid approach in favor of stonewalling and denial.
After the Tylenol crisis passed, Burke returned to the routine of leading a giant multinational corporation. Over the decade he served as J&J’s leader, he quadrupled its investment in research and development, doubled the number of its foreign divisions, and oversaw a threefold increase in sales, to $7 billion in 1986. Unfortunately, that year also witnessed another Tylenol-associated tragedy: a copycat poisoning of tampered capsules. After discussions with his staff, Burke concluded that there was no way to make capsules 100 percent safe, announcing that J&J would no longer offer over-the-counter capsule medications. At the cost of some $150 million, J&J recalled and destroyed all Tylenol capsules, replacing them with caplets, even though most consumers preferred the former form. In hindsight, Burke rued that the company had kept using capsules after the first incident.
If Robert Wood Johnson II was a man of many contradictions, James Burke stood as a model of consistency: he invariably practiced what Johnson had advocated. As he summed up the three pillars of J&J’s philosophy and culture, “We believe the consistency of our overall performance as a corporation is due to our unique form of decentralized management, our adherence to the ethical principles embodied in our Credo, and our emphasis on managing the business for the long term.”53
Burke retired from J&J in 1989, declining the offer of a seat on its board. With characteristic humility, he explained, “I wouldn’t want to have the burden of me around if I were the new management.”54 He remained active in public life as a member of several prominent boards, including IBM’s, where he convinced Louis Gerstner to become the company’s CEO when it was suffering financially. Gerstner is widely credited with saving IBM from being dismantled and sold off piecemeal, if not from bankruptcy, largely by following Burke’s example of focusing on revitalizing the company’s culture. In 2000 President Bill Clinton awarded Burke America’s highest civilian honor, the Presidential Medal of Freedom, citing his virtuous business record and chairmanship of the Partnership for a Drug-Free America. In 2003 Fortune placed him on its 10 Greatest CEOs of All Time list. He died in 2012 at the age of eighty-seven.
Yet Another Sad, Bad End
J&J’s handling of the Tylenol crisis became famous. Yet, paradoxically, Burke’s successor canceled the Credo Challenge, ostensibly to save the cost of the process. Finding that decision difficult to believe, in the 1990s I telephoned J&J’s public relations department, where I was told by an anonymous manager that the new CEO had wanted “to make his own mark.” When I asked if I could obtain a fresh copy of the company’s Our Credo video to replace my badly worn VHS tape, the manager told me, “No such video exists.” My conclusion was that the new CEO felt eclipsed by his eminent predecessor’s shadow, and was attempting to erase his legacy.
After Burke’s retirement, the emphasis of J&J’s top management shifted from quality to cost control in order to boost short-term profits. Indeed, the company became more profitable under Burke’s successors. However, those profits came at the loss of lives and, subsequently, the company’s ethical reputation. Since 2000, when J&J withdrew its heartburn drug Propulsid from the US market after it was linked to more than eighty deaths, the company has been on an ethical and legal roller-coaster ride, with intermittent displays of social responsibility, followed by periods of regulatory compliance violations and embarrassing product recalls. Incredibly, several of those recalls were at its McNeil division, including two in 2009–10, related to lax quality and sterility controls in the manufacture of Tylenol.
In December 2010, J&J’s directors were hit with a shareholder lawsuit citing a long list of “federal and state regulatory investigations, subpoenas and requests for documents, FDA warning letters, news articles, and the recall of products accounting for hundreds of millions of dollars of corporate losses.”55 The General would have been appalled.