How management runs a company day to day affects how it will succeed or fail. Success or failure can be measured by profits alone, but there is more to it than that. It can also be measured by risk. Does management place the company at risk for a lawsuit? Does it put its consumers at risk? How management runs a company directly affects its success or failure, and shareholders are ones who are also directly affected by their actions and the success or failure of a company.

Shareholders have recently questioned the actions of Johnson & Johnson’s management. In a shareholders’ suit, the group has accused the management of a failure to fix several serious problems within the company for a number of years — serious problems that could affect the future of the company.

Some of those problems include management decisions to pay kickbacks to doctors and pharmacists in order to increase revenue. The shareholders also said that management allowed low manufacturing standards that led to recalls to continue while acting in such a way that they would have “plausible deniability” to say that they did not know what was going on since 1990.

It appears that the shareholders have reached a tentative settlement this month that would put a close to the litigation. The settlement would include a term that would establish a committee of independent board members. The committee would be tasked to review reports concerning quality issues and possible legal claims in order to prevent problems from occurring. The shareholders hope that the settlement would not only protect their own and other investors’ interests but also the interests of the consumers using the products.

Source: U-T San Diego, “J&J, shareholders reach tentative deal in lawsuit,” Linda A. Johnson, July 12, 2012