Douglas Chia knows that it is the intersection of the people who use his company’s products that creates its success. The assistant general counsel and corporate secretary of Johnson & Johnson (J&J) has embraced a philosophy that says the goal of companies is to get people to achieve collectively what they cannot do individually.
That viewpoint has led Chia to cooperate not only with his colleagues, but also with his competitors. He was one of the primary organizers and drafters of three comment letters to the Securities and Exchange Commission (SEC) concerning proxy access rules, whistle-blowing policies, and median pay disclosure. All three letters, which the SEC cited in its releases on the subjects, resulted from careful and meticulous cooperation with Chia’s peers.
In 2013, Chia was instrumental in bringing together the shareholders of several pharmaceutical companies to craft standard-setting guidelines for executive compensation recoupment policies. Sometimes referred to as clawback policy, the return of compensation to shareholders of public companies for misconduct or financial results not achieved has increased in the post-Enron era. In the health-care industry, misconduct defined under the False Claims Act (such as physician kickbacks or manufacturing malpractice) can have
repercussions for shareholders.
In spring 2013, a handful of pharmaceutical companies faced proposals by shareholders seeking say on pay for executive compensation that would instate clawback policies. UAW Medical Benefits Trust, a stakeholder of J&J, had been considering one such proposal when Chia proactively met with Meredith Miller, chief corporate governance officer of the $52.4 billion UAW Trust.
Chia, seeing a trend, proposed a collaborative approach, inviting five pharmaceutical companies and 12 institutional investors to join the discussion and develop compensation principles for the entire industry. After 18 months of discussion, the group produced Principal Elements of a Leading Recoupment Policy, a manifesto of best practices for corporate governance strategy. Amgen, Bristol-Myers Squibb, Eli Lilly, Merck, Pfizer, and Johnson & Johnson all endorsed the principles. Miller called the experience an “unprecedented collaboration in corporate governance.”
That UAW was willing to give the process a chance before making its own policy proposal was due to the relationship Chia had established with Miller. “There was a level of trust between us,” he says. “Without that, this never would’ve happened.”
That experience is why Chia advises all corporate secretaries to get to know their shareholders. “You need to reach out, connect with them, and establish a working relationship. Then, when you need to call them, explain something to them, or work on an issue together, they’ll know who you are.”