Johnson & Johnson - True To Its Credo

Monday, January 1, 2007 - 00:00

Editor: Please tell our readers about Johnson & Johnson's place in the global economy and the extent of its global operations.

Deyo: Johnson & Johnson, with over $50 billion in revenues, has over 116,000 employees in 57 countries around the world. Our products are sold in more than 175 countries. One of the keys to our success is that we are highly decentralized. Johnson & Johnson is made up of approximately 230 different operating companies, which manage their own operations. The best way for a large multinational company such as Johnson & Johnson to continue to grow and prosper is for the decision making to occur at the levels closest to the customers.

All of our companies are within the broad-based healthcare arena. Approximately forty-four percent of our portfolio is in medicines and nutritional products; medical device and diagnostic products account for about 38 percent of our business; and our consumer and personal care business, which includes some of the best-known products of Johnson & Johnson, constitutes around 18 percent of our business. What connects all of these businesses is the J&J Credo.

Editor: Why is it important for a corporation to function under a corporate credo?

Deyo: A credo or corporate vision is meaningless unless the words are taken off the wall and put into action. We have had the benefit of operating under our Credo for over 60 years. It is built into our organization and the DNA of our employees. Our Credo is a one-page document setting forth our responsibilities to our customers, our employees, the communities in which we live and work, and lastly to our shareholders. We believe that by focusing on our responsibilities to the first three groups of stakeholders, our shareholders will have a fair return.

The advantages for Johnson & Johnson and other companies that have a strong mission statement are quite clear. It allows us to attract and retain great people, including truly outstanding lawyers. People want to work in an environment that offers challenging and meaningful work and a culture where they are expected to do the right thing. They take pride in being part of a company that sets goals based on this principle.

Our Credo also creates a framework for decision-making. When making decisions, people will think about the quality of their decisions and their impacts. This encourages decision makers to focus on ethical considerations and long-term impact rather than merely short-term business results. This is important for a company like ours where so much accountability rests with the management boards of far-flung business units.

Editor: Did the Tylenol recall experience shape the way employees feel about the company?

Deyo: The Tylenol story is told frequently to new employees including new senior managers. It is a great example of how our Credo is used in making decisions. It also offers insight into crisis management.

When management made the decision to recall every bottle of Tylenol capsules from every home and store in the United States, it was a clear demonstration of putting the safety of customers first. But, there are other important lessons as well, including relating to crisis management. For example, it teaches the importance of being open and transparent in your response to a crisis. The crisis resulted from cyanide being placed in Tylenol capsules, and in an early announcement to the public the statement was made that cyanide was not used in the manufacture of the product. When it was discovered that cyanide was used in small amounts in release testing, the press was immediately notified of this correction. Some negative press followed on that day but the correction demonstrated the straightforward, candid approach the Company was following in providing information. This builds trust in the long term.

There is also a story of innovation here. A few months after the crisis, Tylenol was relaunched in triple-sealed, tamper-resistant packaging. We take this packaging for granted today, but it was an important innovation to provide consumer safety and confidence.

When discussing difficult business decisions, our people still like to refer to this incident as an example of how being true to our heritage and Credo results in decisions that pay dividends many times over.

Editor: Do the high health and safety standards expressed in the Credo extend outside the U.S.?

Deyo: Yes. In addition to complying with local laws and regulations, we have developed global standards that apply across all of our businesses. Depending on the nature of their business operations, local business units develop their own methods for implementation.

For example, for over a decade, we have had a fleet safety program because automobiles had become our most dangerous workplace, and with a worldwide fleet of approximately 35,000 vehicles, this was an area of real concern. Thanks to great work by our local business leaders working with our safety experts, our accident rate has been reduced by over 40%, even though the size of our fleet has grown about this same percentage. This same approach - global standards with local implementation and accountability - is applied in many areas of our business.

Editor: As a leader in the healthcare and pharmaceutical industry, what steps has Johnson & Johnson taken to address the AIDS epidemic throughout the world?

Deyo: This is a challenging arena because the pandemic is affecting so many people across the globe. We have an integrated strategy, which includes philanthropic activities, access to care, product development and support for our employees. Through these efforts we are able to help address community needs across the globe.

On the product development side, Prezista is an anti-retroviral drug developed by Tibotec, a Johnson & Johnson Company, to treat patients who have developed resistance to current treatments. Our dedicated scientists are working hard to bring additional anti-HIV compounds to market.

In terms of philanthropy, we are partnering with communities to prevent HIV/AIDS and to support women in caring for their families around the world by facilitating HIV/AIDS research focused on female-controlled prevention methods, expanding opportunities for mothers to prevent HIV/AIDS transmission to their babies, and strengthening the capacity of community caregivers and leaders to address the HIV/AIDS epidemic. We partner with organizations such as the International Partnership on Microbicides, the Elizabeth Glaser Pediatric AIDS Foundation, the African Medical and Research Foundation (AMREF), the UNAIDS/Global Coalition on Women and AIDS and many others. We have more than 100 philanthropic programs in over 40 countries that attempt to address the needs of those affected by HIV/AIDS around the world.

With respect to our own global workforce, we have a Global HIV/AIDS Workplace Policy. The policy ensures non-discrimination and confidentiality protection for all employees and their dependents living with HIV, voluntary counseling and testing programs, care, support and treatment for all employees and their dependents with HIV, and prevention, education and awareness programs.

Editor: Tell us about the Partnership For Prescription Assistance.

Deyo: The U.S. pharmaceutical and biotechnology companies of the Johnson & Johnson family of companies are part of this collaborative program to enhance access to health care. The PPA, sponsored by America's pharmaceutical research companies, is the largest private-sector effort connecting low-income, uninsured and underinsured patients to more than 475 public and private patient assistance programs, including more than 180 programs offered by pharmaceutical companies. Over 2,500 brand name and generic prescription medicines are available through the participating patient assistance programs. The PPA also provides information on free healthcare clinics.

To increase awareness and boost enrollment of those who are eligible, the PPA has an extensive grassroots outreach campaign. It's a true collaboration with more than 1,300 national and local organizations, including the American Academy of Family Physicians, American Academy of Physician Assistants, American College of Emergency Physicians, NAACP, National Alliance for Hispanic Health, National Alliance for the Mentally Ill, National Association of Chain Drug Stores, National Medical Association, National Urban League, Easter Seals and the United Way of America working with America's pharmaceutical companies to help spread the word about the program.

Editor: Has Johnson & Johnson extended help to victims of disasters like Katrina, the Tsunami and the Pakistan earthquake?

Deyo: We have provided both financial support and products in each of these disasters. We are fortunate as a company that we make products that matter in these difficult circumstances. We have long-term partnerships with many organizations such as MAP International, the Salvation Army, American Red Cross and others that deliver our products and other resources rapidly to where they are needed. When 9/11 happened, for example, one of the few helicopters authorized to be in the sky was one of our not-for-profit partners carrying modules of Johnson & Johnson products to the hospital closest to that disaster.

We also provide monetary support for these and other organizations so they can carry out their important work. We have generous employees and it is not infrequent that there is a match program for contributions made by our employees.

Editor: Johnson & Johnson's Credo expresses the company's commitment to protect the environment and natural resources. Please describe how Johnson & Johnson implements this?

Deyo: I take enormous pride in our environmental record, as do all our employees. Our employees understand and embrace this Credo responsibility to "maintain in good order the property we are privileged to use, protecting the environment and natural resources."

In 2005 we paid less than $6,000 in environmental fines across all of our global operations. That is an enormous achievement in mitigating and preventing risk. But, we were successful because our people viewed it as their duty to protect the environment, not simply a risk or loss avoidance exercise.

We have also been successful in reducing CO2 gas emissions. We set a global target in July 2003 to reduce actual CO2 emissions by seven percent by 2010. Johnson & Johnson has had tremendous growth in our operations since then, but we nonetheless achieved the goal by 2005 with an absolute reduction of 11.5 percent. This not only helps the environment, but also helps reduce operating costs.

We have received a number of awards and recognition from the EPA and others. The EPA recognizes that if you have a strong and sustained record, they do not have to inspect you as frequently. This is an additional benefit, along with, of course, an enhanced reputation.

Editor: How do the philanthropic contributions that Johnson & Johnson makes contribute to the well-being of communities in the U.S. and abroad?

Deyo: We have a successful philanthropic program, again based on our Credo responsibilities. In 2005 we contributed $600 million dollars in cash and products. Our program is effective globally because we have separate corporate contributions committees staffed by leaders of our local businesses in Asia, Europe and Latin America, as well as here in the U.S. This means that our contributions go toward supporting activities that are meaningful to their communities. And we tend to focus on healthcare because of our deep understanding of that space.

Editor: What is Johnson & Johnson's view on alternative dispute resolution? I understand that you are the recipient of CPR's Corporate Leadership Award.

Deyo: Our business is built in part upon sustained relationships with other companies, large and small, and with individuals as well. For example, we want to collaborate with small companies that are trying to develop exciting new medicines, technologies or break-through medical devices. These business relationships can get complicated, and sometimes disputes can develop. We find it is useful to have thoughtful dispute resolution mechanisms built into the contracts so that disputes can be resolved at an early stage without resorting to litigation, which can cause positions to harden and relationships to disintegrate. We like procedures that help the parties resolve disputes - hopefully before they become bitter - and without destroying the collaborative working relationships.

We support organizations like CPR, which have the global capacity and breadth to ensure that there are high quality arbitrators and mediators in different countries who can be engaged in confidential dispute resolution.

I also appreciate the effort CPR is pursuing to ensure that the arbitrators and mediators they provide are appropriately diverse.

Editor: Do you encourage your law firms throughout the world to reflect your company's ethical values? Does this include support for the rule of law?

Deyo: Absolutely. We expect the law firms with which we do business to reflect our ethics and values, and this has very much been our experience. On another important matter as it relates to our ethical values, when we select a law firm, diversity is taken into consideration. We expect that the lawyers assigned to our cases are not only diverse in terms of representation, but all possess an intellectual curiosity for diversity of thought, perspective and ideas.

We are, of course, also strong proponents of the power and value of the rule of law. Rather than be too abstract, let me focus on two specific areas important to our global businesses.

First is the protection of intellectual property. When you take into account how difficult and expensive it is to discover and develop new innovative medicines and medical products, there needs to be a period of marketplace exclusivity to recoup that investment. This is what allows companies like ours to continue to invest in R&D for future new products. IP protection is very important to our business, but it is also critical to the development of new medicines and devices which will improve the quality of health care in the future. Accordingly, we try to be a voice in shaping good public policy in this area - and a number of law firms assist us in these efforts.

Another issue we are trying to address in Europe is the issue of the attorney/client privilege for in-house counsel. In France and other countries, the attorney/client privilege we take for granted in the U.S. does not extend to in-house lawyers. We think this is bad public policy because without the privilege, you discourage the necessary level of trust and open communication between business people and lawyers that is necessary for good decision making.

I know a number of law firms and organizations, including the U.S. Council of International Business, have been working in this area and I applaud their efforts.