[Desk Column] Tylenol and Optimus

[Asia Economy Reporter Jeon Pil-su] In October 1982, an incident occurred in Chicago, USA, where seven people died after taking Tylenol. Although it was an accident caused by someone injecting cyanide into Tylenol with a syringe, Tylenol suffered a fatal blow. Its market share, which was 35% as the number one product in the US, plummeted to 8%. Even though it was a crime not caused by the company itself, the manufacturer Johnson & Johnson ran large-scale advertisements warning people not to take Tylenol and conducted a nationwide recall. At that time, Tylenol accounted for 15% of Johnson & Johnson's revenue. Johnson & Johnson, having recalled all existing products, introduced triple-protected packaging to the market and launched aggressive promotions, regaining the number one market share within a few years. This is the overview of the 'Tylenol recall' incident, considered a textbook case of crisis management.

"Some outside directors expressed concerns such as 'What if we supply liquidity and later, when there is no legal responsibility, we cannot recover it?' Although it was not the main opinion, we were instructed to revise and resubmit it."

On the 27th of last month, at the full meeting of the National Assembly's Agriculture, Forestry, Livestock, Food, and Maritime Affairs Committee, NH Investment & Securities CEO Jung Young-chae explained the reason for withholding the support plan for Optimus fund subscribers as such. Regarding the difference with Korea Investment & Securities, which prepaid 70% of the principal, he pointed out that Korea Investment & Securities is an unlisted company wholly owned by a major shareholder, whereas NH Investment & Securities is a listed company, making decision-making more complex.

It has been 50 days since the Optimus fund suspended redemptions. It has also been about a month since the competitor Korea Investment & Securities announced a 70% prepayment. However, the investor support plan from NH Investment & Securities, the largest distributor, has yet to be released. NH Investment & Securities sold 432.7 billion KRW, accounting for 84% of the total 515.1 billion KRW set in the Optimus fund.

Since early last month, CEO Jung has emphasized, "We have no intention of avoiding the pain that the distributor must endure," but the reality is unfolding differently. On the 6th, he met with investors and said, "Based on understanding the customer's position, we will find a solution to supply liquidity as soon as possible," but inside NH Investment & Securities, there are frequent remarks that since this is not a case of incomplete sales but fraud, there is no basis for prepayment.

Of course, it is true that NH Investment & Securities' management finds it difficult to boldly decide on prepayment while risking breach of trust. Legally, NH Investment & Securities' responsibility may be very limited or even nonexistent.

The problem is that such cautiousness inevitably leads to distrust among investors. The Optimus fund was a fund that invested in public institution sales receivables, promising an annual return of 2.8%. Sales staff also explained this to customers when selling the product. Most of those who invested in the Optimus fund can be seen as having trusted the distributors such as NH Investment & Securities rather than Optimus itself.

From the perspective of the sales staff who sold the product, the current situation is uncomfortable. They also believed it was a verified product at the headquarters level and sold it to customers as a good product, sometimes amounting to hundreds of millions or billions of KRW, but since the company has not come up with a compensation plan, soothing angry customers has become their main task. As the company hesitates citing breach of trust issues, the trust deficit inevitably grows. Companies, especially financial companies, live on trust. This is why the 'Tylenol recall' incident must be reconsidered.