Johnson & Johnson: Living Up To Its Credo

Monday, December 1, 2008 - 01:00

On October 29, 2008, Atlantic Legal Foundation presented Mr. Weldon with its first Annual Reward to honor a person who exemplifies the ideals and principles of public service and private enterprise. This interview includes highlights from Mr. Weldon's address on that occasion.

America's business corporations have made immense contributions to America's economy and to the achievement of positive social goals. This has occurred because their successful use of self-regulation has not inhibited their ability to compete successfully or to use their strengths to seek out innovative ways to achieve worthwhile social goals as illustrated in this interview.

At this time when consideration will undoubtedly be given by a new administration to the adequacy of existing regulations, it is vitally important for CEOs to inform the public of the many respects in which their companies currently serve the public - and under effective self-regulation.

Editor: Johnson & Johnson has benefitted the U.S. economy in a number of significant ways. Describe its financial performance.

Weldon: Johnson & Johnson has been a part of people's lives for more than 120 years and a valuable part of their investments for more than 60 years. Founded in 1886, we listed our shares on the New York Stock Exchange for public investors in 1944.

During our history, we have built the most comprehensive base of health care businesses in the world, generating more than 70 percent of our revenues from No. 1 or No. 2 global leadership positions in our respective markets.Because it is one of the world's great companies, Johnson & Johnson has been able to turn in a remarkable record of performance that few, if any, companies can claim: 75 consecutive years of sales increases; 24 consecutive years of adjusted earnings increases; and 46 consecutive years of dividend increases. Over the last 10 years, Johnson & Johnson stock generated a 9.1 percent total return for investors compared to a 5.9 percent total return for the S&P 500. Johnson & Johnson announced sales of $15.9 billion for the third quarter of 2008, an increase of 6.4 percent as compared to the third quarter of 2007.

Editor: Tell us about some of the other ways in which J&J has benefitted the U.S. economy.

Weldon: We have more than 250 operating companies in 57 countries employing 119,400 people. As our worldwide employment has grown, so too has the number of employees located in the U.S. We rely on thousands of suppliers worldwide to provide the materials, goods and services that the Johnson & Johnson Family of Companies needs to manufacture products and service our customers. Over the years, the number of these suppliers located in the U.S. has also grown, generating additional jobs.

Editor: Tell us how you work to bake integrity into the culture of Johnson & Johnson.

Weldon: At Johnson & Johnson we believe that we have a tremendous opportunity and responsibility to help improve the health of people across the globe. In this regard, we also have a significant competitive advantage - Our Credo - a statement of our values and responsibilities that was written more than 60 years ago. It articulates our responsibilities to customers, employees, communities and shareholders. It sets the tone at Johnson & Johnson.

When Robert Wood Johnson wrote Our Credo, he had several important goals in mind. These included creating a common set of values that would apply to all managers of all of our companies as he took the company global. He wanted to have confidence that the managers in our decentralized system, who would be responsible for their daily operations, shared his values and business philosophy, and that their actions reflected these values.

General Johnson believed in free markets, but he recognized that if companies, and individuals, wanted to be free from undue regulation, they had to earn the trust of both governments and citizens.

Thus, he intended that Johnson & Johnson would be a good citizen, living up to fundamental responsibilities - providing quality products, supporting good work and charities, bearing a fair share of taxes, improving health and education and protecting the environment.

We have a record in each of these areas that Johnson & Johnson employees are proud of, and the insight that General Johnson provided so many years ago applies today. If we want to maintain an economic system that is not unduly burdened with too much governmental regulation - and clearly we need some - companies and individuals must earn that right.

We strive to earn that right through everything we do, guided by Our Credo. To help assure that we conduct business according to the values embodied in Our Credo, we have policies that define what we expect of the people within the Johnson & Johnson Family of Companies throughout the world.

Our Policy on Business Conduct is at the center of those policies. It gives clear direction on how to act according to our business values, as well as the laws and regulations where our companies operate around the world. Every employee is required to follow this policy. Managers must enforce it and certify each year that their employees understand and follow its requirements. As to our suppliers, Johnson & Johnson follows a procurement approach that requires them to partner with us to meet our business goals while fulfilling Our Credo responsibilities.

Editor: In line with its Credo, how has Johnson & Johnson benefitted the environment?

Weldon: Protecting our planet is one of the ways we endeavor to fulfill Our Credo responsibilities. For the past 15 years, we have set long-term goals to protect the environment, conserve energy, minimize waste, preserve natural resources and improve our packaging and manufacturing practices.

Our CO2 emissions from all our operations are actually on a decline. Between 1990 and 2007, we reduced our carbon dioxide emissions by nearly 13 percent, this during a time of significant revenue growth and business expansion.

By the end of last year, we had opened ten solar facilities in the United States, including the largest - a 1.1 megawatt installation of almost 6,000 solar panels - in California. Last year we had no major environmental spills and paid less than $30,000 in total minor permit violations across the globe.

Editor: What U.S. companies do abroad reflects on the impression people elsewhere in the world have of the United States. Mention a few examples of how Johnson & Johnson's dedication to philanthropy has enhanced not only J&J's reputation abroad, but also that of the U.S.

Weldon: We live Our Credo through our legacy of philanthropy, which began more than 100 years ago with our response to the San Francisco earthquake in 1906 and continues today through our recent work with international relief partners around the world to provide first aid supplies and medications following disasters such as the Sichuan China earthquake, the major storms and flooding in the Caribbean and U.S. Gulf Coast, and the cyclone in Myanmar.

Editor: You mentioned that Johnson & Johnson, because of its focus on health, has a tremendous opportunity and responsibility to help improve the health of people across the globe. Tell us about a few of its philanthropies directed toward this end.

Weldon: As a health care company, we have created a collaborative role in our philanthropy in which we partner with others who have the shared goal of improving health. It's part of how we view our mission - "Caring For The World One Person At A Time."

This extends to creating programs and partnering with organizations to improve health and well-being and create long-term self-sufficiency for communities.

Our Campaign For Nursing's Future has raised more than $12 million in scholarships and grants and inspired more than half a million men and women to pursue nursing.

Our Safe Kids campaign has reduced childhood injury by 45 percent in the U.S. over 20 years and has expanded to more than 17 countries.

Our partnership with UNICEF to drive the Safe Motherhood initiative provides mothers in multiple countries with access to critical emergency care needed to save the lives of mothers and their infants during childbirth.

Johnson & Johnson has the ability to apply our unique expertise and know-how to improve health care around the world. However, we cannot make these kinds of changes in a vacuum. We strive to learn from our partners and gain the understanding we need to make a real difference.

Editor: To rephrase an old saw, "Health begins at home." How does Johnson & Johnson improve the health of its employees?

Weldon: An important part of fulfilling Our Credo responsibilities is providing our own employees with the resources to lead healthier lives. Johnson & Johnson's long-standing commitment to improve and sustain health extends to our workforce, which is one of the healthiest and safest in the world.

Our healthy people program provides an integrated focus on mental health and well-being, occupational injury and illness, health education and awareness, and wellness and prevention. Our successful efforts in these areas have expanded globally over the past several years for our employees. And virtually all of our work places are tobacco free.

Our health and wellness programs, which focus on prevention of illness by encouraging exercise and good nutrition, have made a big difference. Our U.S. employees made significant improvements in key health risk areas.

In 2007, employees who smoked represented 4 percent of our U.S. population, down from our baseline of 12 percent. Those with high blood pressure were 6 percent of the population, down from 14 percent. Employees with high cholesterol represented 7 percent of the population, down from 19 percent. And employees considered to be vulnerable by reason of inactivity were 36 percent of the population down from 39 percent.

These programs not only help our employees be healthy and productive, they also save money. We have reduced health care costs by $400 per employee, per year, resulting in a ten-year cumulative savings of $250 million.

Editor: Having learned from experience the health and cost saving benefits of providing preventive and lifestyle modification tools to your employees and their families, does the company plan to expand this learning and opportunity to others?

Weldon: We recently announced that we are taking a comprehensive approach to health care that will establish new growth platforms for our business and, importantly, improve health worldwide through our acquisition of HealthMedia, Inc. - a provider of web-based behavioral tools and services.

Going forward in the area of wellness and prevention, we will build a portfolio of products and services designed to prevent chronic disease, sustain wellness and even restore faculties to the aging. With an initial focus on employers, we will enable our customers to optimize employee performance, just as we have done.

And as individuals, payers and governments struggle to address soaring health care costs, we believe that a comprehensive solution must begin long before the onset of illness. We recognize that investing in wellness and prevention now can avoid more costly health care expenses later.

Editor: To what extent is Johnson & Johnson contributing to solving the problem of rising health care costs?

Weldon: Our focus on prevention is one element of our effort to advance quality health care systems around the world. All too frequently, industry is viewed as lobbying against regulation and not seen as offering solutions to problems. We thought it was important to state what we stand for and support in health care reform to help shape the debate on these important issues. In this regard, we have developed a short document called The Promise Of Health Care.

In the Promise , we state our belief that Effective and Compassionate health care systems are critical to achieving better health worldwide. In summary, we believe that health care should focus on individual needs, encourage access to health care for all and provide the incentives and tools to allow individuals to remain healthy and receive care and treatment when needed.

We believe our role is one in which we have a responsibility to advance good health care through our actions as well as through collaboration with others and in this way to help shape public policy to serve the needs of people.

This includes working to address unmet medical needs, providing appropriate clinical and economic information about our products and treatments, enhancing business models to ensure appropriate incentives and improving access.

We support universal access to coverage for all Americans through a public-private health care system that addresses disparities in care, provides low-income subsidies and emphasizes prevention, wellness and chronic disease management.

The Promise outlines our positions on health care reform, but let me briefly expand on a couple of points. One area I have already touched on is the importance of wellness and prevention in stopping the onset of chronic diseases and obesity, which are such substantial drivers of health care costs.

The magnitude of the burden of chronic disease is enormous. Nearly 45 percent of the total U.S. population has at least one chronic disease, and patients with chronic disease drive 75 percent of the nation's $2.2 trillion spend on health care. The proportion of spending in public programs such as Medicare are even higher, with 96 cents of every dollar spent allocated to treat chronic disease.

These are costs that can be avoided through prevention. Primarily, rates of heart disease, type 2 diabetes and cancer could be significantly reduced through smoking cessation, exercise and a healthy diet.

Reform should therefore include incentives to implement effective prevention, wellness, and obesity programs as well as reimbursement approaches aimed at rewarding better health outcomes. This will significantly reduce costs, as well as improve the health of individuals.

Access to care is another critical issue, and we have led several private efforts to simplify access to medicines for people who can't afford them.

As Chairman of PhRMA, I worked to initiate the partnership for prescription assistance, a multi-company, single portal for free or low-cost prescriptions. Johnson & Johnson was one of ten companies to provide a discount card, together with RX access, to low-income individuals who could not qualify for free prescriptions.

And in 2007, we launched our own program, A CCESS2WELLNESS , which provides a broad selection of assistance programs for individuals and families in the U.S. Under A CCESS2WELLNESS , those who qualify have access to an offering of more than 1,000 prescription medications, for free or at a discount. During the past 24 months, J&J companies have provided more than 2.3 million units of medicine to more than 320,000 patients.

J&J has worked with other stakeholders to support health care reform as a member of the Health Coverage Coalition on the Uninsured . With a number of organizations, ranging from the Chamber of Commerce and the Heritage Foundation to Families USA and AARP, we developed a consensus to expand access to coverage, which led to bipartisan legislation.

Our work to support access is global. For example, we have numerous partnerships focused on making life-changing, long-term differences to address the global HIV/AIDS crisis.

Through community-based partnerships with over 100 HIV programs in 50 countries, we focus on developing programs with aids service organizations to help people improve their health and quality of life.

This includes strengthening health care systems in the developing world, promoting research and developing new HIV/AIDS treatments, diagnostics, and prevention tools for people in resource-poor settings.

We established a licensing agreement with Africa's largest pharmaceutical manufacturer to distribute our HIV/AIDS medicine - Prezista - in Sub-Saharan Africa and other less developed countries at a special access price considered the lowest in the world.

Our access efforts include providing a royalty-free license to the international partnership for microbicides to develop one of our medicines for HIV prevention in resource-poor countries. We continue to work closely with non-governmental organizations, to address concerns about access to these essential products.

As you can see, at Johnson & Johnson we have a sense of real responsibility to play a part in improving the quality of health care for people in America and across the globe. This of course includes discovering and providing breakthrough products that cure disease and save lives. It means finding creative ways to provide access to these products to people who cannot afford them. And it means being an active participant working with others to improve health care systems in the U.S. and around the globe. Working together, we can make a difference.