CEO Gilmartin Will Survive Recall

And Gilmartin has faced the heat. Despite a year of headlines questioning Gilmartin's performance at the helm of the company, even Wall Street brokerages believe his job is safe -- for now.

Sena Lund of Cathay Financial, an investment research firm, called the Vioxx recall a "disaster" but ultimately doubts Gilmartin can be easily tossed aside. For starters, he's close to retiring. And picking a new CEO to helm one of the world's largest and best-known drug companies is a time-consuming process -- one that will be only more arduous now that Merck faces a massive scandal on top of the company's many problems.

Crisis managers note that investors and media who are looking for drastic action already have seen one.

Merck's recall of Vioxx, which had $2.5 billion in sales in 2003 and was widely prescribed, is the kind of move unseen since the 1980s, when a series of cyanide deaths forced Johnson & Johnson (JNJ Quote) to recall $100 million in Tylenol capsules. The company was lauded for its crisis management and has recovered nicely. As Dezenhall notes, strategic responses "don't get much more radical than this. The vast majority of the times when a company is faced with a decision like this -- they don't pull it."

How Merck handles this crisis in the months to come will likely determine and seal Gilmartin's fate. If, like Johnson & Johnson, Gilmartin can protect the company's brand, reassure a nervous public and establish confidence that Merck is in full control, he will be remembered as a hero. Naturally, Gilmartin has already cast the recall in an altruistic light, with the company moving to alert the Food and Drug Administration and issuing a recall for the good of patients -- profits be damned.

But the court of public opinion can be brutal -- just ask Arthur Andersen -- and Merck could be doomed if it botches the recall and rubs customers the wrong way. So far, the company has been good at stressing the need to serve patients over profits, but all of the talk about numbers appears a bit insensitive to Jonathan Bernstein, president of Bernstein Crisis Management and author of the Crisis Manager newsletter.