Topic: Case Study on Efroze Chemical and Johnson & Johnson

Q no 1: Compare and contrast US per the incidents $uoted%

model !ith "a#istani model as

In Pakistani Model, The medicine named Isotab made by Efroze Chemical Industries caused 120 deaths. !ondon laboratory test and determined that Isotab had caused the reaction. ccordin" to a doctor familiar #ith in$esti"ation, one Isotab has Pyramenthamine e%ual to 10 tablets of &ansidar used as anti'malarial dru" and reduces the (roduction of blood. t (ress conference, )hahbaz )harif did not acce(t the res(onsibility and said that these faulty medicines are cons(iracy a"ainst Pun*ab and said that a hi"h rankin" (erson is res(onsible in Pun*ab. +n the other hand the ,o$ernor Pun*ab )ardar !atif -hosa said it is an e.treme form of criminal ne"li"ence and Pun*ab "o$ernment should acce(t their ne"li"ence instead of (ointin" their fin"er to#ards (resident house. The o#ner of Efroz Chemical Industries did admit but said that it is only #ith one batch #hich #as adulterated by a stolen material from factory so his factory should not be closed. &ederal In$esti"ation "ency closed the factory after ins(ectin" the (remises and cleared other factories from any criminal offence.

+n the other hand on )e(t 2/, 1/02 se$en (eo(le died in the Chica"o area after takin" cyanide' laced ca(sules of Tylenol #hich #as the best sellin" (roduct. Marketers (redicted that the Tylenol brand #ould ne$er reco$er from the sabota"e. 1ut only t#o months later Tylenol #as headed back to the market #ith tam(er'(roof (acka"in" and bolstered by an e.tensi$e media cam(ai"n. In a year 2ohnson and 2ohnson "ained 304 of their share back. fter the incident 2ohnson and 2ohnson recalled Tylenol and s(ent more than 5100 million on recall and relaunch. 2ames 1urke #as the com(any6s chairman and #idely admired for his leadershi(. fter a month and a half he "a$e full chronolo"y of #hat com(any had done. Their stocks reco$ered in only t#o months. Michael 7olland, mana"er of 7olland 1alanced &und said that the crisis #as the confirmation of 2ohnson and 2ohnson su(erior mana"ement and said 8It is one of the reasons it is lar"est holdin" in my fund9. :o# the 2ohnson and 2ohnson is a $ery different com(any.

Q no &: 'o! (oth issues )ot resol*ed and ho! lon) it too#+

The incident of Isotab in Pakistan #as not resol$ed as it should be. It has (ortrayed a bad e.am(le of mana"ement. :obody had admitted their fault and the com(any6s o#ner admitted but said the batch of material #as stolen and adulterated. In the end &ederal In$esti"ation "ency in$esti"ated and found Efroze faulty in the incident and closed their factory. Isotab is no# off the shel$es from Pakistan and all o$er the #orld. +n the other hand, 2ohnson and 2ohnson admitted their fault and started in$esti"ation in their cor(oration. Chairman of 2ohnson and 2ohnson coo(erated #ith media and told them about the e$ery ste( they ha$e taken a"ainst this incident. Then the relaunched their (roduct #ith tam(er (roof (acka"in" and bolstered it by an e.tensi$e media cam(ai"n. They had recalled all of their Tylenol stock and re(laced the safer tablets free of char"e. nd 2ohnson and 2ohnson s(ent more than 5100 million on recall and relaunch of (roduct. Their shareholders #ere also hurt only briefly the stock reco$ered to its hi"h (osition a"ain only in t#o months.

Q no ,: -hat !ere the measures ta#en (y (oth companies to handle those issues+

Efroze Chemical Industries did not mana"e it #ell. They *ust admitted that there #as a chemical in one of their batch but they claimed that their material #as stolen last year a"o and their batch #as adulterated instead of admitted and in$esti"atin" the matter inside the or"anization and takin" ste(s a"ainst the ne"li"ent and fraudulent (ersons. The result #as that their #hole factory #as closed by &I after ins(ection. fter the death of ; (ersons by their medicine Tylenol 2ohnson and 2ohnson mana"ement took the matter seriously and recalled their medicines from stores and re(lace them #ith safer medicine and im(ro$ed (acka"in". They coordinated #ith media and taken all the ste(s a"ainst the res(onsible (ersons and told e$erythin" about their ste(s a"ainst incident. 2ohnson and 2ohnson s(ent more than 5100 million on recall and relaunch of the (roduct.

Q no .: nalyze (oth articles in the li)ht of those corporate )o*ernance concepts/ models and theories !hich ha*e (een tau)ht to you till date%

Efroze Chemical 0ndustries:

The first article re(resents the bad cor(orate "o$ernance conce(t #here mana"ement #as #orkin" for o#n "oals instead of o#ners. The cor(orate "o$ernance "uidelines says that there should be (rotection of shareholders ri"ht, e%uitable treatment, role of stakeholder, disclosure and res(onsibilities of board but Efroz Chemicals a((arently #as not follo#in" those "uidelines. Mana"ement did not (rotect the ri"ht of shareholders and did not disclosure any such criminal offence acti$ities and it #as the res(onsibility of the board to tackle the situation and makes the res(onsible (erson accountable but nothin" ha((ed. If #e talk about models of cor(orate "o$ernance the Efroze chemical #as follo#in" control model. The o#nershi( #as concentrated as there #as only one o#ner, it #as a family o#ned business, they had insider board, incenti$es #ere ali"ned #ith o#ner, there #as limited disclosure of the facts, monitory (rotection #as inade%uate and markets #ere not efficient too. Efroze Chemical #as the case of a"ency theory. It e.(lains that mana"ement acts as the a"ent of the shareholders and there is conflict bet#een shareholders interest and their a"ent6s interest. This #as the same case of Efroze #here mana"ement #orked for o#n benefit.

Johnson and Johnson:

2ohnson and 2ohnson re(resented a "ood cor(orate "o$ernance conce(t and culture. The #ay mana"ement tackle the (roblem, it sho#s that mana"ement #as effecti$ely #orkin" for the ri"hts of shareholders, they #as also (rotectin" the ri"ht of other stakeholders, there #as as "ood system of accountability < disclosure and mana"ement #as fulfillin" his duties and res(onsibilities as they in$esti"ated their or"anization and did e$ery ste( to endure trans(arency and accountability. They #ere follo#in" the market model of cor(orate "o$ernance. They had dis(ersed and intuitional o#nershi( as one of the institution name mentioned in the article 87olland 1alanced &und9, the market of their country #as efficient and there #ere other com(etitors too #ho can take o$er and they also had full disclosure. 2ohnson and 2ohnson mana"ement and chairman sho#ed the %ualities of ste#ard and ste#ardshi( theory as their mana"ement #orked for the "oals of the com(any. Com(anies chairman 2ames 1urke conducted in$esti"ation inside the or"anization, recalled their all faulty

(roducts, taken all necessary ste(s to endure trans(arency and accountability and also told e$erythin" to media as #ell.