Do corporate credos mean anything?

Johnson & Johnson Credo. Source: Johnson & Johnson

At its best, a corporate credo can provide inspiration and direction to help management focus when times are hard. Johnson & Johnson’s credo is a great example. It was written over 70 years ago by Chairman Robert W. Johnson himself, just before the company went public, and it’s chiseled in granite in the entrance to the corporate headquarters. It lays out Johnson’s commitment to the firm’s customers, employees, communities, and shareholders.

J&J’s credo made a big difference during the Tylenol crisis. In 1982 I was living outside Chicago and the local news was filled with the story of how seven people had died after taking cyanide-laced Extra-Strength Tylenol capsules sold in several Chicago-area stores. At the time, Tylenol had 35% of the pain-reliever market. James Burke was the fairly new CEO of J&J, but he decided to pull every bottle of Tylenol from the shelves of every store across the country. They spent over $100 million on a recall that wasn’t their fault. The cyanide-laced capsules were part of a murder plot. Burke credits their corporate credo for giving him the ammunition he needed to persuade fellow managers and the Board to do whatever it took. The result was that after falling to 7%, Tylenol’s market share came roaring back. And Burke was later awarded the Presidential Medal of Freedom by President Bill Clinton.

Source: Wharton

But sometimes a credo is just a clever marketing ploy. Enron had a highly developed corporate code of ethics espousing high-minded beliefs. They assembled a compelling video that touted their good deeds in the community and the character of their leaders. But many of those leaders are still in jail, and the company’s name is now a byword for corporate corruption.

Credos only matter when leaders and managers take them seriously. If a credo is just a way to use “business ethics” as a marketing ploy, it’s worse than useless. Lofty words that contrast with self-serving actions will contribute to a cynical corporate culture. But if a firm’s core beliefs really make a difference – the way J&J’s did in 1982 – then those values become priceless.

A credo can be valuable, but only if changes our actions. When it comes to ethics – business or personal – actions speak louder than words.

Douglas R. Tengdin, CFA

By |2018-01-31T06:30:21-04:00January 31st, 2018|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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