Woes for Johnson & Johnson

— -- Johnson & Johnson, the gold standard for American corporations, has been admired for its devotion to a simple business philosophy: Put your customers first, no matter the cost, and profits will follow.

That idea, found everywhere from giant tablets in the lobby of J&J's New Brunswick, N.J., headquarters to its annual report sent to shareholders, serves as a guiding light for its tens of thousands of employees around the globe.

Yet today, the largest health care company in the world finds itself fending off critics who say the company puts quality behind Wall Street's never-ending quest for higher quarterly profits.

As J&J's profits last year swelled to a record $13 billion, the company has been found liable or reached settlements totaling $751 million in taxpayer health care fraud claims; paid $70 million to settle foreign bribery charges; been sued by consumers who say J&J's hip replacement devices failed inside their bodies; and seen the shutdown of a major plant that produces Tylenol and other best-selling pain relievers because it failed to meet federal safety standards.

And that was just for the last two years.

The company also faces the prospect of paying millions or more to settle outstanding government fraud claims stemming from what the government says is J&J's questionable marketing of at least one brand-name drug.

Last week, facing pressure from a consumer group, J&J agreed to phase out the use of potentially harmful chemicals from its baby products, including the popular Baby Shampoo line.

"There are so many mistakes being made now, it is shocking," said Elliot Schreiber, a marketing professor at Drexel University's LeBow College of Business in Philadelphia, an expert in brands and corporate reputations.

J&J Chairman and Chief Executive Officer William Weldon, 62, through a spokeswoman, declined to comment for this story. But he told shareholders last spring in the company's annual report that, after facing severe tests in 2010, the 125-year-old company would restore quality and consumer confidence, and find new products to meet growing health needs.

"We are deeply committed to the people who use our products, to our employees, to the communities in which we live, and to you, our loyal shareholders," he wrote.

Company credo

In 1943, with the company set for a public offering, Robert Wood Johnson, son of one of the company's founders, wrote "Our Credo," a mission statement to guide the company in everything that it does.

At 308 words, the credo dictates that the company's first responsibility is to doctors, nurses, patients, mothers and fathers and everyone else who uses its products. And it says it is responsible to its stockholders, so it needs to make a sound profit, experiment with new ideas and invest in its facilities.

What makes the credo so admirable to observers, though, is that it wasn't an empty promise.

When seven people in Chicago died after taking cyanide-laced Tylenol in 1982, the company turned to the credo and removed the product from the shelves, even though it wasn't at fault. Johnson & Johnson eventually regained its market share, and its response became a standard part of the curriculum in business schools that teach crisis management.

Claims of pain and fraud