Saturday, July 4, 2015

Do pharma boards meet their responsibilities?

The value of scrutinizing directors and top managers in pharma consists of learning to distinguish good from bad leadership in a research-driven industry that requires 10 years or more to develop its new products. If setting companies on the wrong course can take most of a decade to correct, it makes sense to find the best ways of starting them right and keeping them that way.

Do pharma boards meet their responsibilities?

0 comments

One aspect of the drug companies worth examining concerns the way they're governed.

The value of scrutinizing directors and top managers in pharma consists of learning to distinguish good from bad leadership in a research-driven industry that requires 10 years or more to develop its new products. If setting companies on the wrong course can take most of a decade to correct, it makes sense to find the best ways of starting them right and keeping them that way.

That issue was the topic of a Pennsylvania Bio breakfast meeting last week. Although the focus was on small, startup pharmas, the Big Pharmas also formed a point of reference since all the featured speakers had spent parts of their careers there.

Perhaps the morning's most impressive speaker was Brenda Gavin, a founding partner of the venture capital firm, Quaker Partners. Gavin was previously the president of S.R. One, GlaxoSmithKline's capital investment company. In addition to her obvious experience, she possesses a remarkable candor and perspicacity that nudges other speakers to display those qualities or, at the least, to avoid the platitudes and spin that characterize most senior executives.

Gavin established a frank tone to the discussion when she made the point that most board members reflexively line up behind a company's CEO to an extent that others perceive anyone posing tough questions or suggesting alternative directions as an annoying thorn. "That's unfortunate," she told the audience, "because sometimes the thorn is right."

Her forthright tone proved catching. When Paul Tuohey, CEO of Fujirebio Diagnostics, was then asked what qualities he wants in his board members, he replied glibly, "I want people who won't ask me tough questions and will rubber stamp everything I do." Thus acknowledging a temptation to which too many managements yield, Tuohey and the other speakers went on to explain that top executives should seek out prospective directors whose skills and experience complement their own.

Gavin then made the important point that many boards of large, publicly held companies are stacked with the CEO's golfing buddies and cronies. Of course not all large companies follow that pattern, and it would have been instructive to hear Gavin's reflections on the European model that prevents the same person from holding both the CEO and chairman positions.

But her point is mainly valid. Even some European companies illustrate another of Gavin's points that, "Boards never replace CEOs soon enough." Perhaps she gained that insight from several years at GSK, where the board showed undue forbearance with an egomaniacal Frenchman as its CEO.

In Gavin's experience, small, closely held companies, where investors occupy the board seats, do a better job of overseeing management's actions. Even there, she finds that boards maintain CEOs "months or years" after they should be replaced. Two factors account for that.

First, even if directors weren't buddies with the CEO before they accepted their seats, most wind up becoming fast friends. Second, when they do decide to replace the CEO, someone on the board usually has to take the top executive position temporarily until the board can find and screen a permanent replacement. Few board members want to work that hard, so they try to persevere with the incumbent well after he or she has exhausted his or her usefulness.

When viewing the operations (e.g., product/franchise management, drug development) and the strategic decisions (e.g., acquisitions, co-development deals) that characterize pharma companies, most people focus on the actions that occur from mid-management up through the C-suites. The actions and dynamics within the boardrooms remain largely hidden, so these determining aspects of pharmas are often neglected. The Pennsylvania Bio speakers offer a useful reminder that whether pharma is slowly sinking in its own quicksand or appears poised for a strong takeoff, the directors often provide the difference.


To check out more Check Up items go to www.philly.com/checkup

0 comments
We encourage respectful comments but reserve the right to delete anything that doesn't contribute to an engaging dialogue.
Help us moderate this thread by flagging comments that violate our guidelines.

Comment policy:

Philly.com comments are intended to be civil, friendly conversations. Please treat other participants with respect and in a way that you would want to be treated. You are responsible for what you say. And please, stay on topic. If you see an objectionable post, please report it to us using the "Report Abuse" option.

Please note that comments are monitored by Philly.com staff. We reserve the right at all times to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable. Personal attacks, especially on other participants, are not permitted. We reserve the right to permanently block any user who violates these terms and conditions.

Additionally comments that are long, have multiple paragraph breaks, include code, or include hyperlinks may not be posted.

Read 0 comments
 
comments powered by Disqus
About this blog

Check Up covers regional health news and a wide array of healthcare topics from pharmaceutical happenings to patient safety. Read about some of our bloggers here.

Portions of this blog may also be found in the Inquirer's Sunday Health Section.

Michael R. Cohen, R.Ph. President, Institute for Safe Medication Practices
Daniel R. Hoffman, Ph.D. President, Pharmaceutical Business Research Associates
Hooman Noorchashm, M.D., Ph.D. Cardiothoracic surgeon in the Philadelphia area
Amy J. Reed, M.D., Ph.D. Anesthesiologist and Surgical Intensivist in the Philadelphia Area
Latest Health Videos
Also on Philly.com:
letter icon Newsletter