Editors’ Note: The board of Johnson & Johnson was honored with the 2021 “Courage in the Boardroom” award by Corporate Board Member in its 3rd annual Board Leadership Awards, presented in partnership with Galt & Company. They are one of three honorees an independent committee of directors recognized for their work during a year of challenges and difficulties worldwide. The others include: Pamela Arway, Chair of DaVita, who was named “Independent Director of the Year” and the board of Xcel Energy, who received the “Greatest Impact on Corporate Boards” award. In addition, Corporate Board Member will honor Clint Allen, founder and president of the American College of Corporate Directors, with a special lifetime achievement award.
When Covid-19 emerged as a threat, Johnson & Johnson leaped into action. The company launched its vaccine development initiative within a week of the WHO identifying a new virus. Shortly afterward, it followed up with plans to join other drug makers and the U.S. Department of Health and Human Services in a pledge to supply one billion vaccine doses for emergency use worldwide.
The goal was to draw on decades of investment in adenovirus vector vaccination and PER.C6 manufacturing technology to create a single-shot vaccine that could be mass-produced and rapidly distributed around the world—while also ensuring the safety of 130,000-plus employees around the globe. Through it all, J&J’s board met multiple times a week, working to support management “in every way possible,” Anne Mulcahy, lead director of J&J’s board, told CBM in a recent interview. Excerpts of that conversation, edited for clarity and length, follow.
J&J devoted significant resources to Covid-19 vaccine research and opted to do so on a nonprofit basis. What was the board’s role in the company’s pandemic response?
The J&J credo, our guidebook in terms of corporate values and responsibility, influences so much of what we do at J&J. Believing that you do not trade off the long-term for short-term priorities is definitely part of that. In pharma, you’re often investing in R&D that you may never even see come to fruition. So, I don’t think we ever had the conversation of tradeoffs as it relates to R&D versus other aspects of the business.
From the beginning, J&J said they would be doing this on a nonprofit basis, which wasn’t necessarily the case with all of the vaccine makers. That has been very much a principle that J&J has managed to, and certainly the resources required to bring the vaccine to market were well outside the norm of the current R&D portfolio. And I have to say the board was intimately involved every step of the way. We had so many off-cycle board meetings to talk about progress, to understand the implications of what we were taking on, really intersecting all the key points in terms of testing and development and making sure that we were fulfilling oversight role on something as critically important as the vaccine.
One of the reasons that J&J felt so strongly about the vaccine they were developing, one shot and no special storage requirements, is because they have demonstrated commitment to the developing world with vaccines. And obviously, a twoshot regimen with special storage requirements is not feasible in many parts of the world. Because of our experience, particularly with Ebola and HIV, this path forward was super important and will demonstrate its importance as we play out the distribution of vaccines to the third world.
As a public company, did you need to do outreach to your investors about these decisions?
I’ve talked to my investors for J&J every year for many, many years now. So yes, I did investor communications to keep them posted. In some ways the vaccine research was not core to the financial results because it was a nonprofit activity. How it would impact the bottom line was not necessarily the big question. But from a resource perspective, from a reputational perspective, it was important for investors to hear what was happening at J&J, why we were doing it, and what we were taking on in terms of vaccine development.
Were any communications with investors specific to the decision to make the Covid-19 vaccine development a nonprofit program?
It’s an interesting question. We did not have to say it all. We talked to our top 20 investors during that period, and I think they were interested in what happens post pandemic. When you come out of a pandemic, could it then be for-profit? And, if there’s a booster, how do you handle that? So, they did have questions about that, but there really was no pushback as it related to going nonprofit during the actual pandemic. I think they know J&J well enough to know that it’s consistent with our value system. We’ve done it before on other vaccines,
from TB and Ebola to HIV in third-world countries. In the boardroom, there was discussion related to potential liabilities and that kind of thing, but, at the end of the day, there was total consensus about working on and delivering a vaccine.
Tell us about what happened when Covid hit. What were some of the challenges presented to the board early in the pandemic, and how did it respond?
Communications were c
ritical, so the executive team was full on communicating pretty consistently with employees, first of all, ensuring that remote people were enabled to perform and that actions were taken to ensure that our on-site people were protected. They were doing such important work in terms of not just vaccine development, but keeping our pharma business going and cancer medicines delivered to patients, ensuring that we didn’t have gaps that could be life-threatening. J&J provided what I’ll call kind of gratitude incentives because we had, at one point, 20,000 or 30,000 people working on site in those functions and wanted to make sure that they understood how much their diligence was appreciated.
And we had to double down on production and manufacturing and supply chain on a lot of consumer products. While we were 100 percent focused on making sure we could deliver this vaccine as quickly as possible, we also didn’t want the business to stall. So, we needed to make sure that the pharmaceutical pipeline, the innovation pipeline continued to move forward and that we didn’t lose ground in terms of business-as-usual R&D activities. That was super important as well. So, it was a moment of truth in terms of how companies behave and prioritize and think about helping communities and rewarding employees, and I think J&J fared really well.
What lessons came out of it?
Like everyone else, we learned the power of some degree of remote work. Everyone’s now struggling to figure out the right formula in terms of what works and what doesn’t. But I do think some degree of that will remain with us.
Another thing we all learned was the impact during Covid-19 of what was already a health disparity issue. A lot of our efforts coming out of this is dealing with health equity and really double downing on our impact as it relates to health equity. I work with [the nonprofit] Save the Children, and I have to tell you that Covid made everything worse for the poor.
That phrase, health equity, refers to disparity in access to healthcare, right? But doesn’t it translate to income inequality?
They are intertwined, no question. Access to quality healthcare is clearly driven by income inequality. Where J&J has expertise and can have an impact is in ensuring that communities have equal access to quality healthcare. For example, we invested in mobile healthcare capabilities in communities that were underserved.
We’ve been working on health equity pre-Covid in terms of pricing and accessibility to important medications, but we’re now investing in education. Part of this is educating communities about what’s available, why it’s important. Having quality healthcare available in these underserved communities, whether they’re urban or rural is, is hugely important. It takes money, it takes education, it takes resources, and we’re trying to be part of that multifaceted solution.
How will J&J’s approach to remote work change as things normalize?
We’re doing an iterative blended scenario. There are some jobs in supply chain and manufacturing that need to be onsite, but with others they’re trying the three-and-two-day approach and coordinating it so that the days when people are in the office, the rest of their teams are also there. I do think companies that are being arbitrary about back-in-theoffice five days a week will suffer. They’re going to lose people.
What is J&J doing about a vaccination policy for employees?
J&J is asking people to log in with their vaccination credentials. They’re not demanding a vaccine, but if you are not vaccinated, then there will be masking and, in some cases, segregation requirements. They’re trying to manage it from the perspective of reporting whether you’ve been vaccinated rather than demanding you be vaccinated.
As a vaccine producer, what was the thinking on not mandating it?
Well, it’s a very diverse company in the sense that you have some people that are working on vaccinations and pharmaceutical products, but tons of people in marketing and consumer-based stuff where there’s not really a mission reason, like a hospital has, to be vaccinated. They’re worried about playing hardball in this area. And you have to acknowledge people who can’t be vaccinated for health or religious reasons.
You once said, speaking about Xerox and a very different situation, that crisis is a powerful motivator. How did that translate at J&J with Covid?
I think all companies have to worry, coming out of this time, about how burned out people are. There’s a real sense of exhaustion, mental exhaustion as well. It’s a time to be very cautious about making sure people are getting the support and help they need to cope with the stress that’s inevitably there during this time. So, yes, there was a bit of a halo effect that helped propel mo
tivation. But we all have to be very cautious now to take care of our people and make sure they take care of themselves so that they can continue to be productive, healthy and motivated.
Shareholder interest in engaging with board members seems to be intensifying. What are the pros and cons of board members engaging directly with shareholders?
One of the great things is that over time you actually begin to develop relationships with your shareholders in a way that allows for a better interchange. And we’ve learned a lot in areas like comp practices and ESG. On the ESG side, for example, we got some really good input about how we need an integrated story about our efforts that’s easier to digest, and we’ve taken that to heart.
It’s a great chance for us to ask what they’re seeing out there in terms of other company practices and to help us be better. But if it’s a check-the-box activity, you can waste a lot of time. You have to go into it knowing that that your job is to extract value from those conversations and come back with areas of improvement or leave that shareholder better informed about what’s happening in the company. That makes it very productive.
What other approaches to governance help J&J’s board operate effectively?
Board culture is super important. I’m head of the nom/gov committee, and that screen is so incredibly important when you bring on directors, making sure there’s a cultural fit so that they share that sense of values and principles that J&J feels so strongly about. We’ll meet with people that we don’t bring on the board for a year or two. Managing that pipeline in a strategic way takes time.
Having a good partnership between a CEO and a lead director, a strong fit in terms of values and approach, is hugely important to optimize the interaction with the board. A board culture of feedback and transparency is really driven by a CEO and a lead director. Alex and I do one-on-ones with every member of the board every year. So, there’s a process element to it, but there’s also a kind of dynamic approach of always wanting to get better as a board and looking for that continuous improvement.
Assessment and learning is also important. At J&J, every year, we do a credo session with the board to evaluate how we behaved for the year, what we learned and what we would do differently. And we hold bookend executive sessions with [CEO] Alex Gorsky at the beginning and end of every board meeting to find out what’s on his mind. Then I meet with him after every independent session to tell him what the board is thinking. Here’s what they want you to come forward with at the next meeting. Here’s what they didn’t particularly think was well done. That kind of transparency and communication makes for a board that has the capacity to operate at a higher level, which is super important.