No-one ever thought that there was anything soft about Bob Dole, until Pfizer persuaded the ex-Presidential candidate to spearhead its Viagra ad campaign. However its success is not that surprising when compared with the company’s reputation for transparency and plain-speaking of the type that Bob Dole himself liked to cultivate.
Peggy Foran is vice president for corporate governance for Pfizer, where she acts as advocate, ombudsperson, and curate for the cause. She came over from ITT where she had worked, she says with pride, when it did the first plain English registration. She suspects that there is at least one other company with a similar position, and cites similarities with Coca Cola, but still proudly holds up Pfizer as among the flag bearers, giving full credit to her predecessor in the position, Terry Gallagher.
Long before she had arrived, the fixation with corporate governance issues ‘was a management mindset,’ she says, exulting in ‘not just working for a great company but for people who do really believe that corporate governance matters.’ As VP she reports to Lou Clemente, who is executive VP for corporate affairs, as well as secretary of the corporation.
Long-term view
Brian McGlynn, corporate communications director recalls that even before Foran’s post was created, Pfizer executives had that outlook. And adds that the 150-year-old company, that went public in 1942, traditionally had a large employee shareholder base. ‘It all adds up to the sense of responsibility that management has had all along to shareholders,’ he says. It’s reflected at annual meetings – where almost 1,500 shareholders, most retail, gather. It’s not quite Berkshire Hathaway, ‘but then we don’t have barbecues,’ he explains.
He adds ‘ Of our eight core values, one is respect for people. That should just come, but I don’t think there’s enough of that in business any more,’ On the other hand, it’s not enough to be just nice, ‘Above all you have to deliver the performance – without our success and enterprise, nothing else matters, once you have achieved that, then you can treat people decently – and shareholders are our owners.’
McGlynn describes Foran’s job as ‘doing SEC law for us, and helping along our relationship with the stock exchange and with shareholders.’ Foran herself divides her work three ways: internal, external, and what she calls ‘missionary work.’ The internal task is mostly working with the senior corporate officers and the board. ‘Bill Steere is very interested in corporate governance and when he became CEO, he wanted to learn more, so he established this department.’
Internally she says the job is ‘really about monitoring our corporate governance and kicking the tires once in a while, making sure that what we do really stacks up.’ The external side involves monitoring what other companies are doing, and checking what the expectations of the institutions are. ‘Sometimes we may go to a senior person and say, You know from a governance point of view that may not be the best way to go.’
The most concrete manifestation of Pfizer’s governance concerns, is, she proclaims, the ‘Tide Pill.’ This is not some form of directorial dependence-inducing drug. If not a poison pill, it could be a little unsavory, since Tide stands for ‘ Three-year Independent Director Evaluation.’
‘That’s really the core of what our managers believe: if you have independent directors, that’s the foundation. We also have a shareholder rights plan, and a committee of directors, which every three years evaluates whether it’s necessary to have a shareholder rights plan.’
The company guidelines stipulate that the outside directors meet at least once a year, without management. Their task, which they have chosen to accept, is, according to the proxy statement, to review ‘the report of the outside auditors, the criteria upon which the performance of the chairman and CEO and other senior managers are based, the performance of the chairman and CEO against such criteria, and the compensation of the chairman and CEO and other senior managers.’
Externally, Foran works with with Jim Gardner the IRO, so that she deals with the institutions when they come calling, explaining to them what the company is doing and why. ‘She is an important and highly visible point of contact to our key shareholders.’ She has also been extremely busy with the Warner-Lambert merger, where some analysts credit Pfizer’s corporate governance as a significant factor in carrying the deal.
McGlynn who is also involved when needed points out, ‘They can talk to the IR department but this gives them somewhere else to go, especially over, say, the proxy statement.’ Other issues raised he says ‘are no different than with other companies but the way we handle them may be different. We invite shareholders in and talk with them. Groups have raised questions about our environmental performance and our pricing. We do spend a lot of time listening to our shareholders. I think we do a better job than many other companies.’
‘The investor relations is more on the technical side. IR is about getting technical information out and answering questions from analysts,’ says McGlynn, and to prove there’s no rivalry, Foran volunteers, ‘We have an exceptionally good IR department and we work well together.’
The third part of her auto-job-description, the ‘missionary work’, is also close to Bill Steere’s heart: he is on the Business Roundtable Corporate Governance task force and Pfizer is deeply involved in national and international corporate governance groups. The latter, Foran says ‘is a way to take some of our lessons out there, and also to learn what other trends are, since we are a global company represented in 120 countries – the management wants us to tell them what’s happening out there!’
She takes great pride in Pfizer’s pioneering work, anticipating regulation with innovation. ‘We do a lot of things that are unique or new. The SEC put in new auditing rules, but Pfizer adopted them before it had to. We had an audit committee report, and audit committee charter in this year’s proxy statement.’
One field in which practitioners from the SEC to outside consultants hold up Pfizer as an example was Foran’s special project, Plain English. The SEC rules were not that bitter a pill for Pfizer to swallow. In the usual pioneering mode, she suspects Pfizer was the first company to do its annual report footnotes in plain English. ‘It was interesting talking to these lawyers who said it couldn’t be done. Yet Pfizer did it,’ she reports.
Pfizer also did its proxy statements, shareholder letters, and the 10K in plain English. ‘The controller’s department even wrote the derivative statement in plain English, when the lawyers said it couldn’t be done. In fact,’ she adds, ‘anything we can get our hands on, we put in plain English. If you talk to our chairman, our board, they’ll tell you, If you respect people, then you’re going to write something that they understand. Communication is very important – we sell drugs for a living, and we sell them to lots of people, including our shareholders.’
There is nothing plain about the in-house politicking needed to start the plain English process which illustrated all the reasons to keep a weather eye on corporate governance issues. Once the top people had been signed on, Foran recruited the firm’s outside attorneys to the cause. They had been Warren Buffet’s lawyers, ‘And he insisted on plain English years ago,’ so it was not a tough sell. The combination of pressures broke down the resistance of the prolix-passivists on the language front.
She is keen to emphasize that bar training need not necessarily be a bar to comprehension. ‘The most talented lawyers are those who can take very complicated transactions and explain them so people can understand.’
Foran did the writing while the outside lawyers just made sure that ‘I didn’t go off the reservation,’ and so she was able to convince the investment bankers. ‘There were people who tried to sabotage it, particularly lawyers, who said You can’t do it, you’ll get sued.’ In fact, no-one involved has so far heard of a single case where plain English has led to litigation.
Beyond call of duty
Foran knows of many other companies going beyond the strict call of SEC duty, not least because it makes sense financially. From an IR point of view, she says, ‘Just look at shareholder questions. If we make it clear, I’m going to get a lot fewer calls.’ She also credits plain English for the hundreds of thousands of dollars saved when Pfizer asked shareholders to accept book entries instead of certificates after a three-for-one split. ‘Our consultants thought that 50 percent would want certificates, but in the end only 20 percent of them took them when we asked them not to in plain investor-friendly English.’
In the same spirit the Pfizer web site invites online proxy voting, and also suggests that shareholders with multiple accounts can, at the click of a mouse, relieve the pressure on their mail boxes of all those annual reports.
Richard Koppes, formerly of Calpers and now counsel with Jones Day, gives unqualified praise, ‘It’s a model and head of the field! First under Terry Gallagher and now with Peggy Foran. It’s a great program, and it shows that attention to corporate governance pays dividends. A lot of the institutions that invest in Pfizer also invest in Warner Lambert. They had been impressed with Pfizer’s corporate governance program and work on the Council of Institutional Investors, and they were influential in ensuring the merger went ahead.’
Next time you see those Viagra ads, give Pfizer full justice, don’t think blue pills – think Tide Pill and transparency.
