From the Harvard Business School, a Call to Rethink Management's Conventional Wisdom
So it was with some hope that I read about a call to change the fundamental beliefs of corporate leaders, particularly corporate health care leaders. An adjunct faculty member at the august Harvard Business School, Raymond V Gilmartin, posting on the school's blog first summarized the conventional wisdom of corporate leaders:
Most CEOs and corporate board members would agree that the theories and beliefs listed below drive their decision-making on how best to meet the challenges they face:
- The focus of the CEO and the board should be on maximizing shareholder value.
- The stock market is short-term-oriented.
- Stock-based incentive compensation aligns the self-interest of management with shareholders, and a performance-based pay system increases employee motivation.
- Societal concerns should be addressed through corporate social responsibility programs.
- The 'best athlete' from inside or outside the company should be chosen as the successor to the CEO.
In my experience, these beliefs have led managers and boards to take actions that have had unintended, destructive consequences.
Some of these issues seemed to overlap those we have discussed. We have written about the harmful effects of some of these aspects of the conventional wisdom of health care leaders, particularly the perverse incentives supplied by excess executive compensation that seems unrelated to how his or her or the organization's performance affects patients' and the public's health, that health care leaders seem to care little about the organization's health care mission, if they are not actively hostile to it, and that leaders often seem to be chosen because of their perceived ability as generic managers, not their knowledge of health care or their understanding of its values.
Furthermore, Mr Gilmartin advocated for a new set of guiding beliefs that also were at least somewhat resonant:
Shareholders benefit most when CEOs and boards maximize value for society and act as agents of society rather than shareholders.
Actions to address societal issues should be an integral part of strategy, and operations and should not be isolated as a separate activity under the heading of corporate social responsibility.
Thus Mr Gilmartin seemed to be supporting the notion that health care corporations should focus on providing products and services that actually improve health care, and should operate in ways that support health care's core values.
Purpose, meaning, and recognition are more powerful motivators than economic self-interest, and large external rewards can reduce intrinsic motivation.
Here Mr Gilmartin seemed to be calling for less extravagant monetary rewards within health care corporations, and perhaps implying that awards should be aligned with health care outcomes and values rather than financial goals.
Did He Practice What He Preached?
Long-time readers of Health Care Renewal know that we often base our arguments about how health care should be renewed on demonstrations of the internal contradictions within the current dysfunctional system. So for those of you wondering if this is one of our rare upbeat posts about the message getting out, it is time to demonstrate the paradoxical aspects of Mr Gilmartin's apparently reformist views.
If you did not recognize his name right away, Mr Gilmartin, besides being a current adjunct faculty member at Harvard, was the CEO and Chairman of Merck from 1994 to 2005 (see here). When he proclaimed his beliefs above, he did not assert they were new revelations, but rather his guiding beliefs since before he became the leader of Merck:
Listed below are an alternative set of beliefs that guided me when I was the CEO of Merck and Becton Dickinson. I strongly feel that they have greater validity, are more effective in meeting today's management challenges, will lead to superior outcomes, and will help restore public faith in business and its leaders.
However, his record as leader of Merck, a record that supplied considerable grist to the Health Care Renewal mill since 2005, stands in stark contrast to these stated beliefs.
CEOs should "maximize value for society and act as agents of society"
Mr Gilmartin presided over what became known as the Vioxx scandal, one so big that it was actually eventually well-documented in medical journals, thus escaping the anechoic effect.
In summary, Vioxx (rofecoxib, Merck) a Cox-2 inhibitor non-steroidal anti-inflammatory drug used for pain, and touted for its ostensibly low risk of gastrointestinal side-effects, was withdrawn from the market in 2004 because of its cardiac risks. The Vioxx case is flush with examples of how the company used deception to market a very profitable drug without regard to its risks to patients.
There is evidence is that the company knew about these effects since 2000, but suppressed the clinical research evidence until 2003.(1) In particular, in 2005, the editors of the New England Journal of Medicine raised concerns that an article published in that journal in 2000 about the results of the VIGOR study of rofecoxib sponsored by Merck failed to report data that would have suggested that the drug caused excess cardiovascular risks.(2) In 2007, the company paid more than $4.9 billion to settle patient lawsuits alleging harm due to Vioxx.(3) Also in 2008, the company made a $58 million settlement of claims its advertising of Vioxx deceptively minimized its risks.(4) In 2008, it became clear that at least one apparently clinical trial of Vioxx, the ADVANTAGE trial, was merely a "seeding trial,' that is, a marketing exercise.(5)
On Health Care Renewal, we starting writing about Vioxx in 2005, including,
- here about ghost-writing of a Vioxx research publication;
- here, and here about allegations that Merck executives tried to intimidate Vioxx critics;
- here about how advocates of an extreme laissez faire approach to regulation of health care corporations used illogical arguments about the Vioxx case;
- here about the ADVANTAGE "seeding trial," that is, a study really meant to recruit supposed physician-researchers as prescribers; and
- here about how one once prominent Vioxx researcher pleaded guilty to fraud in connection with his research on other drugs.
- here about how in settling a shareholder lawsuit Merck vowed to improve its scientific and academic integrity, and refrain from manipulating and suppressing clinical research.
In 2010, we summarized the Vioxx case thus, " the Vioxx case provides a good lesson about some of the tactics used to deceptively and unethically promote health care products (pharmaceuticals in this case)."
The widespread deceptions of the Vioxx case, which likely fooled many patients into taking and physicians into prescribing a drug whose harms greatly outweighed its benefits, seem to be the antithesis of "maximizing value for society."
"Purpose, meaning, and recognition are more powerful motivators than economic self-interest"
Yet Mr Gilmartin embraced compensation that greatly boosted his economic self-interest even as the scope of the Vioxx case became well-known.
In 2005, we noted that Merck CEO and Chairman Raymond V Gilmartin got a 2004 salary of US $1.6 million, plus a $1.4 million bonus, and stock options worth $19.2 million. Also, he exercised other stock options that year, gaining a further $34.8 million. All this he received soon after the withdrawal of Vioxx, and despite Merck's stock 30% drop after this withdrawal.
Lack of Insight
We have occasionally discussed evidence that a significant proportion of organizational leaders, including health care leaders, are "snakes in suits," that is, sociopaths who only care about their own self-interest. However, it is likely that the majority of leaders are certainly not sociopathic.
Why, then, do so many health care leaders preside over, if not directly authorize, direct or implement actions they ought to have known were wrong? The stark contrast between Mr Gilmartin's stated beliefs and the history of Vioxx case which occurred on his watch suggest a failure of insight about his own actions. He did not seem to realize that what he practiced appeared at odds with the beliefs he now says he espouses.
We constantly hear that our health care organizational leaders, particularly the CEOs of large health care organizations, are the "best and the brightest," especially when their enormous compensation needs justification (for example, look here for a recent example, and here for more.) A reasonable assumption would be that the "best and the brightest" have some insight into their own actions, and the extent their actions live up to their principles and beliefs.
This new extension of the Vioxx case suggests that an important reason that health care leaders continue to appear ill-informed, incompetent, self-interested, conflicted, or even corrupt is that they lack insight into how their actions might make them seem such. If their mental model of their own actions tells them they well-informed, competent, devoted to the mission of their organization, and honest, regardless of any evidence to the contrary, this faulty insight will allow them to continue actions that make them appear otherwise.
The challenge then is to somehow provide real feedback to health care leaders when their actions appear ill-informed, incompetent, self-interested, conflicted or corrupt. Some reasonable hypotheses would be:
- CEOs and other top leaders must be removed from their bubbles, must relinquish their "imperial" status. They must not be too sheltered from the vicissitudes of daily life, or shielded from criticism or disagreement.
- We must end the perverse incentives that reward CEOs for doing wrong, particularly for making short-term revenue, or even the illusion thereof, their primary benchmark.
In other words, as we have said before, health care leaders must become accountable for what they do, particularly for the effects of what they do on patient's and the public's health.
Maybe if health care leaders can begin to see themselves as others see them, they will start to act to benefit patient's and the public's health, and we might see some improvement in our drastically expensive, inaccessible, and poor quality health care system.
Hat tip to Ed Silverman on the PharmaLot blog.
1. Topol EJ. Failing the public health - rofecoxib, Merck and the FDA. N Engl J Med 2004; 351: 1707-1709. Link here.
2. Curfman GD, Morrisey S, Drazen JM et al. Expression of concern reaffirmed. N Engl J Med 2006; 354:1193. Link here.
3. Charatan F. Merck to pay $5bn in rofecoxib claims. Brit Med J 2007; 335: 1011. Link here.
4. Charatan F. Merck to pay $58m in settlements over rofecoxib advertising. Brit Med J 2008; 336: 1208-1209. Link here.
5. Hill KP, Ross JS, Egilman DS, Krumholz HM. The ADVANTAGE seeding trial: a review of internal documents. Ann Int Med 2008; 149: 251-258. Link here.