Legal Issues in Business

Legal Issues in Business

LegalIssues in Business

Johnson&amp Johnson Tylenol Capsules Scandal

Legalissues in business constitute a high risk for the going concern ofthe survival of the business. Ethical scandals of a corporate reveala failure of integrity and fraudulent financial acts that eventuallyleads to loss of billions of dollars and the reputation of thebusiness. The fact that no any corporation that is immune to theseethical issues in business requires the management at all levelsbeing careful to such threats. Managers at strategic levels should becapable of predicting and identifying a catastrophe and come up withmitigation tactics before it is too late (Robert &amp Chandler,2005). Management should also make prudent decisions that cannotcompromise the integrity of their corporation. This is because whenthings got worse, they are held liable for the situation. Most seniormanagers have ended up prison due to various scandals.

Thinkingthat ethical scandals can never happen in your organization is asentiment that are associated with aftermath statement intrinsicallywhere most of us end up saying “ I never expected that such thingwould happen to us.” For example, in Johnson &amp Johnson TylenolCapsules scandal (1982), the senior managers could not expect suchtragedy could happen in their company. The reality is that ignoringintegrity continuity, and systematic factors have led to the rise ofethical disasters and scandals (Robert &amp Chandler, 2005).Managing integrity is vital for all businesses that require strategicplanning beyond hiring the so-called “moral people.” Hiringemployees with a high level of morals and ethics is not a guaranteedmeasure of preventing ethical scandals. Business legal issues arisefrom certain situations and therefore, one cannot be sure of avoidingthem by hiring only moral workers.

Ethicalmisconduct scandals

Ethicalmisconduct scandals are unexpected disasters that create numerousoperational disruption and tends to threaten the survival of thebusiness (Helbert &amp Ingulli, 2012). However, it is not allunethical issue that can result in a crisis in the organization. Somebusinesses that upheld integrity are capable of systematicallyabsorbing and reacting appropriately on the scandals faced by them.The key is only having a well-strategized means of mitigating anydetected legal issue and coming up with strategized means of handlingthe situation. Ethical issues lead to a disaster if there are noimmediate responsive measure that are undertaken to control them.

Ethicalbehavior is raising much concern across the organizations in general.In most of the time, one may believe that hiring employees with highperceived rigid commitment would lead to high understanding andethical conducts which are not obvious all the time. Furthermore,even the so-called moral people may be influenced by unseen pressuresand temptations that may compromise with their ethical decision-making process in some situations. Ethical scandals may also beencouraged by its benefits at first or even the personal gain of thedecision maker who does not care about the future of his or herorganization. Such people will tend to manipulate the situation toensure that their interests are served first.

Reallife corporate scandal

Itwas 1982 when managers of Johnson &amp Johnson (J&ampJ), a commonlyknown medical company faced an ethical crisis. Several people inChicago had died after consuming Tylenol Capsules with cyanide.Senior managers had no immediate answer to what to do, and theyperceived that withdrawing the drug from the market would cost thecompany millions of dollars. After the government intervened andthorough the investigation carried out by FBI, J&ampJ was ordered tosend it immediately back to the company. The move resulted in a totaladditional cost of over 200 million dollars (Markel, 2014).

Thetests proved that the drugs contained potassium cyanide that is toxicenough to provide fatal dose. The results were several reporteddeaths that came to be confirmed to be caused by the drug. The deathscreated a nationwide panic and the sellers rushed to remove the drugfrom their shelves. The scandal became serious when Chicago policemoved across the streets giving warnings and announcing to theresidents about the danger of taking Tylenol. In defending thecompany from the situation, the management argued that someone hadtampered with the drug in the store shelves. J&ampJ Company had noother option apart from incurring the high cost by calling back theproduct in their stores (Markel, 2014).

Johnson&amp Johnson claimed that the poisoning took place after the productleft the factory. One person by name James Lewis was noted to havewritten a ransom letter to Johnson and Johnson demanding $ 1 millionto stop the killing. However after a thorough investigation, it wasproven that Lewis lived in New York, and he had no any links to theChicago events. The tampering argument made U.S. Food and DrugAdministration (FDA) issue orders to the drugs company to seal theirproducts so as to ensure that they are tamper- resistant. Even thoughit was not clearly proven that Lewis committed the action, he wassentenced 20 years in prison after being charged with extortion.

Respondingto ethical scandals

Ifan ethical issue occurs, the parties involved must respond quickly tothe issue. This can be achieved by developing disaster managementstrategies and coming up with plans to mitigate the scandals. It isalso essential to handle the situation by following a fair procedurewith no selfish gain. Taking immediate action will help to minimizethe circulating rumors and hence protecting the reputation of thebusiness. For example, if J&ampJ Company had taken an immediateaction over the issue and not wait until the police issuance ofwarning to the residents, they could have avoided spoiling their goodreputation that they had previously created. J&ampJ Company was awell-known organization due to their superior products, but theirreputation was compromised by the 1982 Tylenol Capsules Scandal.

Bestways of handling legal and ethical issues

Thefollowing steps provide the best way of handling ethical and legalissues that J&ampJ could have followed.

Establishexplicit goals and ethical criteria- that is, corporates must developdetailed codes of conduct and enforce compliance with all theirexpectations. The standards that elaborate legal and ethical conductof the organization should be well-documented (Lazere, 2010).

Demonstratecommitment to ethical goals- senior management must show commitmentto integrity as a strategic goal of the business. It is essential tolead your corporation in valuing code of conduct (Lazere, 2010). Thisenables the employees in meeting the set standards. In addition tothis, performance appraisal and reward system is important inmanaging ethical issues. Managers should continually rewardintegrity.

Effectivecommunication- this is the way through which information flows withinand outside the organization. Every stakeholder of the organizationshould participate in integrity continuity management throughinvolvement. With effective communication managers will be able toforesee the consequences of the situation at hand and, therefore,take appropriate measures to handle it.

Monitoringand controlling the behavior of the employees- the main functions ofmanagement are planning, organizing, directing and coordinating. Itis, therefore, the duty of the top managers to ensure that theirsubordinates are conducting themselves in an ethical way. Thebehavior of employees should be in accordance with the code ofconduct set by the corporation.

Strategicmeans of handling a disaster- an organization should have asupportive ethical conduct of handling issues. It is also importantto develop an immediate plan of handling scandals at their discoverypoint. J&ampJ could have therefore come up with contingency measuresof handling the tragedy even before the product hand circulated inthe market. This could have avoided the huge loss incurred.


ExplorePharma Company had their strategies of avoiding such scandalshappening to their organization. The company used triple-seal toavoid tampering of their drugs. The company also take adequatemeasures to avoid drug poisoning during and after manufacturing. IfJ&ampJ had taken such measures, they could have helped to handle theissue more ethically and avoid the dilemma that they faced. It isalso important to take immediate actions to address any disaster thatmay arise within the operation of a business.

Inconclusion, the fact that disasters are inevitable in the businessenvironment remains. However, the persistence of the disaster willdepend on the strategic plans of the organization in handling them.It is therefore, the duty of top managers to come up with disastermitigation strategies.


Douglass G. (2014). Business Law 4th edition. Britain: Pearson Education.

Lazere C. (2010). Business ethics and Code of Conduct. London: Pearson Education.

Helbert, T., &amp Ingulli, E. (2012). Law and Ethics in business environment. Retrieved September 25, 2015, from

Markel, H. (2014). How the Tylenol murders of 1982 changed the way we consume medication. Retrieved September 26, 2015, from

Robert, C., &amp Chandler. (2005). Avoiding Ethical Misconduct Disasters. Retrieved September 26, 2015, from