Wednesday, February 22, 2012

Seeking Alpha: J&J CEO Switch A Necessary Step Forward

For a few weeks I have been mulling a "How To Fix Johnson & Johnson" column, but events at this healthcare giant have already taken my number one item off the list. Johnson & Johnson (JNJ) announced Tuesday evening that CEO Bill Weldon will be stepping down in April and handing the reins to Alex Gorsky. While this move is more of a transition than a revolution, it may well be the turning point in this underperforming giant's fortunes.

A Not-So-Fond Farewell
Perhaps the stock market is not always the most impartial assessor of management skill or quality, but it is an inescapable fact that JNJ's stock lagged the market since Weldon became CEO in 2002. What investors may not appreciate, though, is that while JNJ's stock was fairly stagnant over that time (up around 10%), the stock outperformed those of Medtronic (MDT) and Abbott Labs (ABT). That said, returns on equity have been trending down and did fall below 20% during his time as CEO.

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J&J CEO Switch Is A Necessary Step Forward

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