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Dec 17, 2018

Johnson & Johnson’s Asbestos Problem: Do Companies Have Ethical Obligations?

By Team Stash

We explain why companies should be ethical.

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Consumer products company Johnson & Johnson (J&J) reportedly knew for decades that its baby powder sometimes contained trace amounts of asbestos, but hid that information from the public.

Now the company is being sued by nearly 12,000 plaintiffs, who say the company’s baby powder caused ovarian and other cancers.

What’s going on with Johnson & Johnson and asbestos?

The lawsuits have compelled J&J to share hundreds of pages of documents, some stretching back to the 1970s.

The documents, which include internal memos and reports, allegedly show that the company knew its baby powder contained asbestos, a known cancer-causing substance.

Asbestos sometimes occurs naturally in the mines where talc is found. Talc is a primary ingredient in J&J’s baby powder.

News of the product deficiency hit the company stock, which tumbled 10% last week, wiping out $40 billion in market value.

Here are details regarding the Johnson & Johnson asbestos scandal:

  • This summer, a jury awarded $4.7 billion to 22 women who claim they contracted ovarian cancer from J&J baby powder.
  • J&J executives, doctors, and attorneys knew that the raw talc in its baby powder sometimes contained asbestos, according to reports.
  • Company executives and other officials intentionally hid this information from the public, and misled investigators, according to lawyers suing the company
  • J&J also reportedly pressured the Food and Drug Administration (FDA) into repressing reports of asbestos in its baby powder, and successfully lobbied against regulation of asbestos in talc products.
  • J&J continues to claim its baby powder is free of asbestos and has appealed the legal decisions.

Ethics are important

The big lesson is that it’s probably a best practice for public companies to behave ethically, and they are vulnerable to news of investigations when they do not. Not only their stocks, but ultimately the value of the companies themselves, are determined by how responsible companies are to their customers and shareholders.

Further, the ethical values and actions of companies are something that investors might consider before making an investment.

How can you know if a company is doing the right thing?

It’s important to do research on any company you or fund in which you plan to invest.

One good place to start is the Securities and Exchange Commission (SEC), where you can read all of the public documents that companies file every quarter about their operations.

Companies can bow to pressure

Both private and public companies are frequently the subject of investigations, which can often prompt change for the better.

Walmart: In 2012 and 2013, fatalities from a factory fire and factory collapse at facilities that the giant retailer uses to manufacture garments in Bangladesh, put Walmart under the microscope for its safety standards overseas. (H&M and the Gap also used the factory that collapsed in Bangladesh.) Walmart refused to sign on to a legally binding agreement to improve standards, but set up an alliance to improve the safety of workers in that country.

Nike: In the 1990s, Nike was found to have maintained sweatshop working conditions in its overseas factories. News reports prompted improved conditions and now Nike is often viewed as a model for manufacturing standards in emerging markets.

Uber: After numerous scandals involving alleged sexual harassment, spying, false advertising, and other possible misdeeds, the ride-sharing company got rid of its chief executive officer and replaced him in 2017 with a new leader who hopes to rebuild relationships with customers and communities.

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