J&J puts Chinese businesses under local chairman

Johnson & Johnson said on Tuesday the business heads of its three Chinese operations would begin to report to one local chairman next month in an effort to increase sales and centralize corporate oversight.

The reorganization comes as pharmaceutical companies are in the spotlight in China after the government began investigating bribery accusations against British drugmaker GlaxoSmithKline .

The diversified healthcare company said Jesse Wu, worldwide chairman of its consumer business, will become chairman of J&J China, reporting directly to company Chairman and Chief Executive Alex Gorsky.

The three Chinese operations have been reporting to separate business heads in the United States.

Each of the three China units will still be responsible for determining its own business strategies, but each general manager and president in China will report to Wu, the company said.

Lynn Pendergrass, a Hewlett-Packard Co senior vice president overseeing the printing and personal systems businesses for the Americas, will join J&J, taking over Wu's job as head of the J&J's global consumer business.

J&J spokesman Ernie Knewitz said the changes in China will help increase sales and add oversight to the "whole enterprise" there.

"Now it is all segmented like the rest of the world," Knewitz said. "You report through steps to the worldwide chairman of your unit," based in the United States.

Wu will oversee an operation that includes 9,000 employees in China and $2.5 billion in sales last year.

Knewitz said J&J created a similar reporting structure in Vietnam last year and has been considering it for China over the past year in hopes of boosting profitability.

The changes come amid widening investigations in China of Western drugmakers for bribery and improper marketing of prescription drugs, including arrests of GlaxoSmithKline executives, and reported ongoing investigations of other industries.

J&J said its new structure in China was not prompted by concerns it would be targeted for probes by Chinese authorities.

Knewitz said he was unaware of any current investigations of J&J in China by authorities.

"It definitely adds additional, and centralized, oversight for our whole enterprise in China, but the emphasis is on growing our business," Knewitz said of the new structure.

J&J is one of the world's largest and most diversified healthcare companies, selling an array of prescription drugs, medical devices and consumer products. It gives wide latitude to the three primary business units and to various companies under its corporate umbrella.

But the decentralized approach has been blamed in large part for J&J's widespread quality control problems that sparked repeated U.S. recalls over the past three years of many consumer products, including painkillers Motrin and Tylenol.

To fix the quality-control failures, J&J is revamping large factories in Pennsylvania and Puerto Rico. But its reputation has been tarnished by the recalls as well as by recalls of artificial hips whose metal materials have dissolved or broken away and caused serious injuries, and other products.