WEBVTT - New FDA with Old Problems, Stakeholder Capitalism 0:00:02.720 --> 0:00:07.840 Bloomberg Audio Studios, podcasts, radio news. 0:00:23.079 --> 0:00:25.880 This is Wall Street Week. I'm David Weston bringing you 0:00:25.920 --> 0:00:30.639 stories of capitalism this week. How HHS Secretary Kennedy's FDA 0:00:30.800 --> 0:00:34.479 criticism hearkens back to its approval of OxyContin and the 0:00:34.680 --> 0:00:38.519 enormous losses from opioid addiction. Plus what it takes to 0:00:38.600 --> 0:00:41.159 keep a company on track or get it back on 0:00:41.320 --> 0:00:44.199 track when it's wandered off. The tale of two very 0:00:44.240 --> 0:00:48.000 different companies, the Mars Company and global power giant Ennel, 0:00:48.360 --> 0:00:56.080 and their particular take on stakeholder capitalism. This is a 0:00:56.120 --> 0:00:59.280 story about regulation, not too much of it, but instead 0:00:59.360 --> 0:01:02.720 too little and when it matters most. The new sector 0:01:02.800 --> 0:01:05.679 of Health and Human Services, Robert F. Kennedy Junior, has 0:01:05.720 --> 0:01:08.520 accused the Food and Drug Administration of being too cozy 0:01:08.680 --> 0:01:10.080 with the pharmaceutical industry. 0:01:11.000 --> 0:01:14.200 No, you want a present, who's going to end the 0:01:14.280 --> 0:01:17.200 corruption at the federal agencies? 0:01:19.280 --> 0:01:20.640 Our FDA. 0:01:21.360 --> 0:01:24.800 In a closed door staff meeting this month, Secretary Kennedy 0:01:24.840 --> 0:01:28.319 called the FDA a sack puppet, echoing his claim that 0:01:28.360 --> 0:01:31.320 the agency has been captured by the industry it's supposed 0:01:31.360 --> 0:01:32.000 to regulate. 0:01:32.319 --> 0:01:36.000 Look, these are the companies that gave us the opioid epidemic. 0:01:36.400 --> 0:01:40.080 They pressured FDA to lie, and they got their way. 0:01:40.400 --> 0:01:44.080 A report in Bloomberg BusinessWeek examines how the FDA violated 0:01:44.120 --> 0:01:48.280 its own rules in green lighting broad marketing of opioid painkillers, 0:01:48.600 --> 0:01:52.760 sparking the epidemic, leading to years of litigation and ending 0:01:52.880 --> 0:01:56.200 in Purdue Farmer's seven point four billion dollar bankruptcy plan. 0:01:57.360 --> 0:02:01.440 Doctor Andrew Kolodney of Brandeis University is medical director for 0:02:01.520 --> 0:02:04.080 the Opioid Policy Research Collaborative. 0:02:04.280 --> 0:02:07.600 If you think about FDA's failure with regard to opioids, 0:02:07.920 --> 0:02:11.960 it's probably the worst regulatory failure leading to a public 0:02:12.000 --> 0:02:14.960 health catastrophe in history. 0:02:15.240 --> 0:02:19.280 Since nineteen ninety nine, opioid overdoses have claimed over eight 0:02:19.360 --> 0:02:24.040 hundred thousand American lives. Fentnyl makes headlines now, but the 0:02:24.080 --> 0:02:27.760 addiction crisis began when FDA approvals led the way to 0:02:27.840 --> 0:02:32.200 aggressive prescribing for chronic pain. Patients still pay the price. 0:02:32.760 --> 0:02:36.359 One in thirty two on long term high dose opioids 0:02:36.480 --> 0:02:39.360 loses their life within two and a half years, and 0:02:39.440 --> 0:02:44.120 nearly five million are addicted, many just following the doctor's orders. 0:02:44.840 --> 0:02:48.000 Estimates of economic loss rise to two point seven trillion 0:02:48.040 --> 0:02:50.360 dollars in twenty twenty three alone. 0:02:50.680 --> 0:02:54.720 The FDA, if it had been following the law, it 0:02:54.760 --> 0:02:58.560 would have required Purdue to demonstrate that OxyContin was safe 0:02:58.560 --> 0:03:03.359 and effective for long term. Unfortunately, it never did that, 0:03:03.800 --> 0:03:09.440 and it allowed produce pharma to promote OxyContin for conditions 0:03:09.520 --> 0:03:13.639 where opioids are more likely to harm a patient than 0:03:13.720 --> 0:03:14.240 help them. 0:03:14.400 --> 0:03:15.320 Could it happen again. 0:03:16.120 --> 0:03:19.960 It absolutely can happen again, and it's been happening. We're 0:03:20.360 --> 0:03:27.560 seeing FDA put products onto the market despite the concerns 0:03:27.600 --> 0:03:33.280 of FDA's own external advisory committees that products are not 0:03:33.400 --> 0:03:38.720 necessarily effective or safe for the conditions that they're being marketed. 0:03:38.960 --> 0:03:41.840 The opioid crisis may be the most well known case 0:03:41.840 --> 0:03:45.920 of regulatory failure in pharmaceuticals, but it's not the only one. 0:03:46.400 --> 0:03:50.040 Controversy has followed a wave of costly new therapies, including 0:03:50.080 --> 0:03:53.680 treatments for genetic diseases, cancer, and Alzheimer's. 0:03:54.160 --> 0:04:00.000 Because we haven't tried to study or learn from this mistake, 0:04:00.800 --> 0:04:05.400 we're ready for the next public health crisis to result 0:04:05.800 --> 0:04:09.200 from improper marketing of a drug that's not safe and effective. 0:04:09.640 --> 0:04:12.160 To understand how we got here, it helps to look 0:04:12.200 --> 0:04:14.840 at the climate at the FDA in the nineteen eighties, 0:04:15.280 --> 0:04:18.880 a time when AIDS activists and palliative care doctors began 0:04:18.960 --> 0:04:21.040 pushing for faster drug approvals. 0:04:21.160 --> 0:04:25.440 We are simply asking the FDA to do it quicker. 0:04:25.640 --> 0:04:28.640 In the fight for the FDA to release all these 0:04:28.680 --> 0:04:30.479 are possible treatments. 0:04:30.960 --> 0:04:34.800 Frank Vacci reviewed opioid applications at the FDA back then, 0:04:35.320 --> 0:04:39.120 including Produe's first new opioid MS content. 0:04:39.360 --> 0:04:41.479 People were going to be on this drug for some time, 0:04:42.440 --> 0:04:44.960 basically until they died. 0:04:45.400 --> 0:04:49.760 He says. Purdue exploited that political moment bypassing FDA directives 0:04:50.120 --> 0:04:53.719 and launching their opioid without submitting clinical data. 0:04:53.880 --> 0:04:55.800 When the company came in and told us what they 0:04:55.800 --> 0:04:58.960 had done at the actually marketed this product, I was shocked. 0:04:59.080 --> 0:05:02.719 I was actually star there is a pathway to do this, 0:05:02.960 --> 0:05:06.520 and they completely ignored it, and they ignored it with 0:05:06.839 --> 0:05:09.359 a certain amount of arrogance. Also, I mean they actually 0:05:09.440 --> 0:05:11.200 told us they weren't going to take the drug off 0:05:11.279 --> 0:05:14.200 the market. To take the product off the market, which 0:05:14.480 --> 0:05:17.120 the FDA could have done, would have made FDA the 0:05:17.160 --> 0:05:21.560 bad guy here that they're essentially denying pain control to 0:05:21.640 --> 0:05:24.200 people who are dying they had the FDA over. 0:05:24.080 --> 0:05:28.640 A barrel emotion trumped standards, and the firm persuaded the 0:05:28.680 --> 0:05:32.920 agency to defer its plans for action on humanitarian grounds. 0:05:33.440 --> 0:05:36.240 Purdue was permitted to make a late application for what 0:05:36.279 --> 0:05:41.039 it was already doing. That late application was exceedingly weak. 0:05:41.640 --> 0:05:45.360 There was nothing in there that actually substantiated the duration 0:05:45.560 --> 0:05:46.560 of effectiveness. 0:05:46.960 --> 0:05:50.920 The usual regulatory and scientific requirements need not apply. 0:05:51.760 --> 0:05:55.520 I thought the MS Cotton issue was set a bad precedent, frankly, 0:05:55.760 --> 0:06:00.200 that companies could then do very little or no thing 0:06:00.240 --> 0:06:03.520 at all, and then market in opioid products. Once precedent 0:06:03.720 --> 0:06:06.960 is set, then you have a hard time reversing it. 0:06:07.560 --> 0:06:11.359 The next opioid on Vacci's desk, a fentanyl patch called 0:06:11.520 --> 0:06:16.080 dura Jesik, was rejected under the standard. The studies failed, 0:06:16.560 --> 0:06:19.680 but higher ups created a new fast tracked division and 0:06:19.800 --> 0:06:23.200 sent the application to a reviewer named Curtis Wright, who 0:06:23.240 --> 0:06:28.719 approved it. Richard Doblin, president of the Multidisciplinary Association for 0:06:28.839 --> 0:06:32.480 Psychedelic Studies, got to know right in the nineteen nineties, 0:06:33.200 --> 0:06:33.480 and what. 0:06:33.480 --> 0:06:36.560 I got to understand about Curtis is that he was, 0:06:37.760 --> 0:06:42.080 when I worked with him, very focused on unmet medical 0:06:42.120 --> 0:06:46.800 need and that he was not as focused on all 0:06:46.839 --> 0:06:49.279 of the bureaucratic niceties. You could say that the law 0:06:49.320 --> 0:06:52.880 required for these two double blind, placeble controlled studies to 0:06:52.920 --> 0:06:53.680 approve drugs. 0:06:54.320 --> 0:06:57.640 At the time, Doblin was researching the division called the 0:06:57.720 --> 0:07:02.960 Pilot Drug Evaluation Staff for his Harvard doctorate, interviewing officials 0:07:02.960 --> 0:07:06.479 and spending time inside the agency. He says, Wright was 0:07:06.520 --> 0:07:09.640 handed a quote license to kill bureaucracy. 0:07:10.400 --> 0:07:12.000 So he was a bit of a maverick, a bit 0:07:12.000 --> 0:07:14.920 of a cowboy, and so he was willing to move 0:07:15.000 --> 0:07:19.400 things forward through the FDA regulatory system in ways that 0:07:19.440 --> 0:07:21.200 some of the old guard were not that happy with, 0:07:22.000 --> 0:07:25.840 and some of those decisions turned into disasters. What he 0:07:25.920 --> 0:07:31.800 did with opiates was a bit reckless, but this was 0:07:31.840 --> 0:07:34.720 this experiment to try to see what would be the 0:07:34.760 --> 0:07:37.280 outcomes if they remove layers of review. 0:07:37.720 --> 0:07:40.440 In a pledge to both chronic pain patients and the 0:07:40.520 --> 0:07:43.960 drug industry, Wright told a conference in nineteen ninety three 0:07:44.120 --> 0:07:48.160 his narcotics team would do everything that is humanly possible 0:07:48.360 --> 0:07:50.840 to make it as easy as possible to get these 0:07:50.880 --> 0:07:56.640 products to market. He was already working with Purdue on OxyContin. 0:07:57.240 --> 0:07:59.400 And one of the things that Pilot drug also did 0:07:59.400 --> 0:08:04.240 that Curtis ro was really instrumental with is having a 0:08:04.280 --> 0:08:07.800 different perspective on who the pharmaceutical companies were instead of 0:08:07.840 --> 0:08:10.600 seeing them as the enemy, and that we don't trust 0:08:10.600 --> 0:08:13.960 them and they're trying to get drugs through just so 0:08:14.000 --> 0:08:16.400 they can make money, and we need to put up 0:08:16.440 --> 0:08:20.400 all these obstacles and all these rigorous data gathering things 0:08:20.400 --> 0:08:23.320 that they have to do. One of the key innovations 0:08:23.320 --> 0:08:25.800 I would say that has lasted that Pilot drug put 0:08:25.840 --> 0:08:30.520 into place was to see a partnership between the regulators 0:08:30.520 --> 0:08:31.280 and the industry. 0:08:31.840 --> 0:08:35.800 Purdue worked closely with Wright. According to a Justice Department investigation, 0:08:36.480 --> 0:08:40.520 the drug baker behind OxyContin rented a room nearby and 0:08:40.559 --> 0:08:43.800 spent days helping him write reviews of the clinical study 0:08:43.840 --> 0:08:48.640 reports and the integrated summaries of efficacy and safety. Meanwhile, 0:08:48.720 --> 0:08:52.400 the old guard at FDA had been raising concerns. They 0:08:52.440 --> 0:08:57.240 said the Pilot division lacked objectivity, ignored regulations, and wasn't 0:08:57.320 --> 0:09:02.200 scientifically rigorous. The agency shut down the division, but OxyContin 0:09:02.360 --> 0:09:06.200 was already moving toward approval. A year after Wright left 0:09:06.200 --> 0:09:08.960 the FDA, Purdue hired him. 0:09:09.320 --> 0:09:15.040 The opioid epidemic happened because the Food and Drug Administration 0:09:15.520 --> 0:09:21.080 dropped the regulatory standards necessary to approve drugs, and with 0:09:21.280 --> 0:09:27.320 that put opioids on the market labeled for chronic high 0:09:27.400 --> 0:09:29.720 dose when they were never effective. 0:09:30.960 --> 0:09:35.600 Edwin Thompson is president of PMRS, a drug manufacturer based 0:09:35.600 --> 0:09:36.880 outside Philadelphia. 0:09:37.760 --> 0:09:40.960 Whether a drug's effective or not isn't a matter of opinion. 0:09:41.720 --> 0:09:44.560 It is a matter of data. And if you don't 0:09:44.559 --> 0:09:48.160 have substantial evidence of efficacy, if you don't have adequate 0:09:48.160 --> 0:09:52.600 and well controlled trials with statistical evidence, the drug's not effective. 0:09:52.679 --> 0:09:53.760 It's just that simple. 0:09:54.559 --> 0:09:57.840 Thompson began his career in opioids at Johnson and Johnson 0:09:57.880 --> 0:10:01.040 back in the nineteen seventies. In the nineties, he dealt 0:10:01.080 --> 0:10:04.760 with the FDA's Pilot Drug Division, where he says he 0:10:04.800 --> 0:10:08.679 first saw politics start to outweigh science. In his view, 0:10:09.240 --> 0:10:14.240 it happened with OxyContin and is still happening today. 0:10:15.440 --> 0:10:19.560 There are patient populations and diseases that are unsuitably treated. 0:10:20.280 --> 0:10:25.320 Without question, we all accept them. But approving and labeling 0:10:25.400 --> 0:10:29.160 drugs as being effective for that patient population when there's 0:10:29.200 --> 0:10:32.160 no data to support it, there's no substantial evidence of 0:10:32.160 --> 0:10:36.200 efficacy to support it does more harm than good. It's 0:10:36.280 --> 0:10:39.800 really wrong, and you can see the consequences. The harm 0:10:39.840 --> 0:10:44.400 of this epidemic over thirty years is overwhelming. 0:10:44.120 --> 0:10:48.480 The greatest epidemic that the America has ever seen. 0:10:49.120 --> 0:10:53.000 It's the basic problem that we have the FDA, the law, 0:10:53.040 --> 0:10:56.040 what the law says, or how the law is being enforced. 0:10:56.400 --> 0:11:02.720 The problem is how the law being enforced. We have 0:11:03.559 --> 0:11:07.960 a good law. The failure was not a failure of 0:11:08.000 --> 0:11:12.800 the law. The law is good. The law requires well 0:11:12.840 --> 0:11:18.720 controlled trials that demonstrate safety and efficacy. The problem here 0:11:18.800 --> 0:11:23.120 was that the FDA did not enforce that law. 0:11:24.480 --> 0:11:28.320 The system works, it doesn't have to be bureaucratic, but 0:11:28.360 --> 0:11:30.400 it's got to be applied, and it's got to be 0:11:30.480 --> 0:11:37.199 applied scientifically and without bias, and it has to be 0:11:37.280 --> 0:11:43.319 applied with real methodology as well. And so there were 0:11:43.360 --> 0:11:48.280 a number of breakdowns in the opioid approval process, starting 0:11:48.360 --> 0:11:52.200 back with MS Cotton and how the drug ever got 0:11:52.240 --> 0:11:56.240 approved and when it shouldn't have rad on up to 0:11:56.280 --> 0:12:03.079 oxycotton and even immediate release oxycodone. Those approvals defy explanation 0:12:03.200 --> 0:12:07.640 at the FDA. They're just a series of compounded mistakes 0:12:07.720 --> 0:12:10.920 on compounded mistakes, and there was no one to be 0:12:10.960 --> 0:12:14.960 able to step in and to stop them from going forward, 0:12:15.559 --> 0:12:17.640 and certainly to reverse them as well. 0:12:18.000 --> 0:12:18.360 And so. 0:12:20.000 --> 0:12:23.760 Where we are today is we haven't made any progress 0:12:24.040 --> 0:12:28.120 in stopping the opioid epidemic, and we've not made any 0:12:28.160 --> 0:12:35.120 progress in stopping to approve ineffective drugs at the Food 0:12:35.160 --> 0:12:36.160 and Drug Administration. 0:12:37.000 --> 0:12:40.040 Up next. Every week seems to bring another story of 0:12:40.080 --> 0:12:43.520 a successful company losing its way. But what about those 0:12:43.559 --> 0:12:46.800 that don't, or that having strayed, find their way back 0:12:46.840 --> 0:12:49.439 to what made them great to begin with. We look 0:12:49.440 --> 0:12:52.880 at the Mars Company and n AL, two major global companies, 0:12:53.040 --> 0:12:55.920 and what they share in the way they do their business. 0:12:57.040 --> 0:13:00.560 You're listening to Bloomberg Wall Street Week with Data Weston 0:13:00.920 --> 0:13:11.800 from Bloomberg Radio. This is Bloomberg Wall Street Week with 0:13:12.000 --> 0:13:14.440 David Weston from Bloomberg Radio. 0:13:15.440 --> 0:13:18.720 This is a story about heritage. How a company's heritage 0:13:18.760 --> 0:13:22.240 can help it succeed, return it to success, or put 0:13:22.240 --> 0:13:24.280 it at risk when it is left behind. 0:13:24.720 --> 0:13:30.920 Without the unabsolute reputation, the safety and consistency, you simply 0:13:30.960 --> 0:13:31.679 can't compete. 0:13:31.760 --> 0:13:34.040 And that's why everybody's worried about Boeing. 0:13:34.920 --> 0:13:38.480 Boeing is just the most recent and glaring example of 0:13:38.520 --> 0:13:42.080 a once great company stumbling in its case by losing 0:13:42.080 --> 0:13:44.080 its core edge in engineering. 0:13:44.440 --> 0:13:47.520 I'm an aerospace engineering Back in the day, I actually 0:13:47.520 --> 0:13:50.000 work for Boeing. That's where you went if you wanted 0:13:50.000 --> 0:13:50.679 to work on airplanes. 0:13:50.679 --> 0:13:51.720 You couldn't go anyplace else. 0:13:52.160 --> 0:13:52.840 You really couldn't. 0:13:52.880 --> 0:13:54.000 That's not the case today. 0:13:54.920 --> 0:13:58.720 Ron Epstein is a former Boeing engineer who now covers 0:13:58.760 --> 0:14:02.719 aerospace and defense for Bank of America. He watched as 0:14:02.760 --> 0:14:06.320 his former employer lost its way. It's far from the 0:14:06.360 --> 0:14:10.360 only one, but there are also companies that over many years, 0:14:10.480 --> 0:14:14.400 kept their momentum or even regained it after a stumble 0:14:14.520 --> 0:14:14.800 or two. 0:14:15.440 --> 0:14:18.360 IBM turns one hundred and fourteen this year, one hundred 0:14:18.360 --> 0:14:21.600 and forty in the technology industry. Think about companies that 0:14:21.640 --> 0:14:24.880 have lasted a century in the technology industry. They're hard 0:14:24.880 --> 0:14:27.560 to find because of the nature of technology. 0:14:27.800 --> 0:14:31.760 Sam Palmersano spent much of his career at IBM, rising 0:14:31.800 --> 0:14:36.240 to become chairman and CEO. He attributes IBM's long term 0:14:36.280 --> 0:14:39.160 success to a deep commitment to innovation. 0:14:39.840 --> 0:14:42.080 The Watsons defined that it was about the future and 0:14:42.120 --> 0:14:45.120 about innovation, and that that's where you should drive. You 0:14:45.120 --> 0:14:46.160 should drive innovation. 0:14:46.480 --> 0:14:50.240 Hello the business School at Yale University has created a 0:14:50.280 --> 0:14:53.880 program to study what separates the companies that succeed over 0:14:53.920 --> 0:14:57.720 the long term from those that don't. Some may find 0:14:57.760 --> 0:15:01.160 the results surprising. They take a back to that notion 0:15:01.280 --> 0:15:05.880 that has become known as stakeholder capitalism, although many of 0:15:05.960 --> 0:15:08.640 the CEOs don't find it new at all. 0:15:09.600 --> 0:15:13.360 We've interviewed more than one hundred and seventy five chief 0:15:13.400 --> 0:15:18.280 executive officers as to the practice of this concept of 0:15:18.320 --> 0:15:19.520 stakeholder capitalism. 0:15:20.480 --> 0:15:24.240 John Iwada spent thirty five years at IBM, where he 0:15:24.280 --> 0:15:28.800 worked closely on innovation and strategy with Sam Palmisano. He 0:15:28.880 --> 0:15:32.400 is now an Executive Fellow at the Yale School of Management. 0:15:33.040 --> 0:15:35.880 One of the things we learned in these interviews is 0:15:35.920 --> 0:15:39.360 that most of the CEOs felt this wasn't really a 0:15:39.400 --> 0:15:43.080 departure or anything new, and some of them said this 0:15:43.120 --> 0:15:46.360 is sound business practice, or it's a return to sound 0:15:46.400 --> 0:15:50.840 business practice, especially if you think about the long term 0:15:51.080 --> 0:15:55.120 leading a corporation or an enterprise for the long term. 0:15:55.520 --> 0:15:59.960 There are short term pressures or expectations that sometimes getting 0:16:00.080 --> 0:16:03.600 the way of making investments or decisions that may not 0:16:03.760 --> 0:16:07.480 pay off for many quarters or even years, So you 0:16:07.560 --> 0:16:10.360 have to think about that. You may think about non 0:16:10.480 --> 0:16:16.400 financial commitments to employees, to society, and those are not standardized, 0:16:16.640 --> 0:16:20.160 those are not accepted measurements and metrics, and so those 0:16:20.200 --> 0:16:23.800 are soft or squishy, and other factors that come into 0:16:23.800 --> 0:16:24.320 play here. 0:16:25.160 --> 0:16:27.840 I want to learn from his CEO interviews of the 0:16:27.960 --> 0:16:31.880 challenges leaders face in trying to bring together disparate parts 0:16:31.920 --> 0:16:36.120 of the company and disparate interested parties, and the key 0:16:36.240 --> 0:16:38.880 role of purpose in weaving it all together. 0:16:39.640 --> 0:16:44.440 CEOs, like every executive comes up through a business or 0:16:44.520 --> 0:16:48.680 through a professional career in a vertical finance or R 0:16:48.720 --> 0:16:52.160 and D or sales, and when they get into the 0:16:52.200 --> 0:16:56.560 CEO chair. Satia Nadella Microsoft set it some years ago 0:16:56.640 --> 0:16:59.960 in an interview, is then you realize just how multi 0:17:00.160 --> 0:17:05.719 constituent or how many stakeholders the enterprise actually has. You 0:17:05.760 --> 0:17:08.560 have shareholders, you have governments, of course, you have customers 0:17:08.560 --> 0:17:12.080 and employees, you have suppliers, and you have to have 0:17:12.160 --> 0:17:16.879 these relationships with all of these constituents. The question is 0:17:17.320 --> 0:17:20.719 do you manage them piecemeal or do we think of 0:17:20.760 --> 0:17:25.840 this more holistically. A lot of the CEOs described sometimes 0:17:25.840 --> 0:17:30.040 they use air quotes. This management system almost an operating 0:17:30.080 --> 0:17:35.840 system for the company that is based on common definitions 0:17:35.880 --> 0:17:38.800 of the firm. Some of them say, there are three 0:17:38.920 --> 0:17:42.320 questions that you have to ask and answer why, what 0:17:42.480 --> 0:17:45.240 and how? Why do we exist? Which turns into the 0:17:45.240 --> 0:17:48.119 purpose of the company. What do we do which is 0:17:48.160 --> 0:17:51.720 the strategy of the company? And how and that's the culture? 0:17:51.800 --> 0:17:53.560 And how are we going to show up? 0:17:54.320 --> 0:17:57.600 A well known company that has put purpose and values 0:17:57.640 --> 0:18:00.679 at the core of its operation since it's founding. Is 0:18:00.720 --> 0:18:04.280 the Mars Company in business since nineteen eleven. 0:18:04.840 --> 0:18:07.880 Mars is more than one hundred years old, very successful 0:18:07.920 --> 0:18:11.440 for a long time. And as we began to talk 0:18:11.480 --> 0:18:15.400 to management at Mars and members of the Mars family, 0:18:16.160 --> 0:18:18.800 we learned that they were going through what we would 0:18:18.880 --> 0:18:23.240 refer to as a founding moment. And why because for 0:18:23.359 --> 0:18:27.680 much of Mars' history, members of the Mars family led 0:18:27.720 --> 0:18:31.200 the company and worked in the company. But the reality 0:18:31.240 --> 0:18:35.320 today in the future is very few members of the 0:18:35.359 --> 0:18:38.600 Mars family, perhaps no members of the Mars family will 0:18:38.640 --> 0:18:40.920 be in management or even work in the company. 0:18:41.480 --> 0:18:45.359 The principles and the values are at the heart of 0:18:45.520 --> 0:18:46.080 who we are. 0:18:47.119 --> 0:18:51.359 Victoria Mars is the great granddaughter of founder frank Seymars. 0:18:51.920 --> 0:18:54.400 She has been on the board for nearly twenty years, 0:18:54.760 --> 0:18:56.080 three of them as chair. 0:18:57.000 --> 0:19:02.760 My grandfather had very strong principles and values, and these 0:19:02.760 --> 0:19:07.600 principles and values I grew up with without actually knowing 0:19:07.760 --> 0:19:10.439 that I was growing up with them. So when we 0:19:10.480 --> 0:19:14.440 talk about the Mars Principles, we're really talking about the 0:19:14.480 --> 0:19:18.840 family values that have existed since the beginning. And as 0:19:18.880 --> 0:19:21.880 the company got larger and it was more and more 0:19:21.920 --> 0:19:25.359 difficult for the family, specifically at that point my father 0:19:25.440 --> 0:19:28.520 and my uncle to be around all the associates, to 0:19:28.520 --> 0:19:30.440 be able to talk about the values and to be 0:19:30.520 --> 0:19:33.879 able to talk about how we do business, they decided 0:19:33.920 --> 0:19:36.840 it was time to write them down. The five principles 0:19:36.960 --> 0:19:43.360 that were actually written down and defined in the early eighties. Quality, responsibility, efficiency, 0:19:43.560 --> 0:19:47.840 mutuality and freedom have been our principles since the beginning 0:19:48.720 --> 0:19:52.320 and they are the foundation of everything we do within 0:19:52.400 --> 0:19:52.960 the business. 0:19:54.760 --> 0:19:59.200 Times change and businesses evolve, something the Mars Company has 0:19:59.280 --> 0:20:02.800 certainly done. But as much as the Mars Principles maybe 0:20:02.920 --> 0:20:06.960 updated every few years, the fundamentals do not change. 0:20:07.320 --> 0:20:10.920 So they haven't changed. They've just been updated to be relevant. 0:20:11.640 --> 0:20:15.159 Management helps us and supports us and clearly obviously implements 0:20:15.200 --> 0:20:19.040 them in our business, but any changes to them, any 0:20:19.119 --> 0:20:22.880 tweaks to them, anything from the colors to the script 0:20:23.359 --> 0:20:26.120 to the words, belongs to the family. 0:20:26.920 --> 0:20:30.240 A company having principles is one thing. Putting them to 0:20:30.400 --> 0:20:34.440 use in everyday decisions, not to mention big strategic decisions 0:20:34.920 --> 0:20:36.600 is something else. Entirely. 0:20:37.160 --> 0:20:41.160 It's not a checklist, but it comes up in conversations 0:20:41.200 --> 0:20:43.760 when we make decisions. And I think that are two things. 0:20:43.840 --> 0:20:47.760 One is this aligned with the purpose of what we're 0:20:47.760 --> 0:20:51.119 trying to deliver here, whether it is overall from Mars. 0:20:51.640 --> 0:20:53.440 You know, the kind of company that we are trying 0:20:53.440 --> 0:20:56.080 to deliver today is well set up for the world 0:20:56.160 --> 0:20:57.040 we want tomorrow. 0:20:57.680 --> 0:21:01.320 Klass our guard is the Mars Chief financial officer and 0:21:01.760 --> 0:21:04.639 like all members of management, not a member of the 0:21:04.680 --> 0:21:05.800 Mars family. 0:21:06.160 --> 0:21:09.600 Five principles come up, certainly as a fact check. You know, 0:21:10.000 --> 0:21:12.679 this doesn't feel like in line with the five principles? 0:21:12.680 --> 0:21:15.159 Well why not? And you know, and sometimes they're not 0:21:15.240 --> 0:21:19.120 all equal in every decision. Are we really delivering quality? 0:21:19.240 --> 0:21:22.359 Are we really directed by the consumer? Or is this 0:21:22.560 --> 0:21:26.920 mutual to the stakeholders around us When we may make 0:21:26.960 --> 0:21:31.320 decisions around renegotiating certain things or whatever, you know, we 0:21:31.400 --> 0:21:33.360 are we true to the stakeholders around us. 0:21:34.000 --> 0:21:37.560 The Mars principles underlie the values of the family, but 0:21:37.640 --> 0:21:41.000 the family also believes it makes the company more successful. 0:21:41.240 --> 0:21:46.920 Overall, the principles and the values help us be proud 0:21:47.320 --> 0:21:52.080 of this company. We do believe that utilizing these principles 0:21:52.560 --> 0:21:56.399 helps our associates make the right decision, the decisions that 0:21:56.440 --> 0:21:59.320 create the concept of a win win We are all 0:21:59.359 --> 0:22:03.440 going to seed together versus let me win and let 0:22:03.440 --> 0:22:06.439 me see you fail. So I really do believe that 0:22:06.640 --> 0:22:10.280 utilizing these principles has helped us be successful in business. 0:22:10.920 --> 0:22:15.200 It helps us recruit good people and keep good people. 0:22:15.840 --> 0:22:19.159 It helps us earn trust with government, It helps us 0:22:19.160 --> 0:22:21.920 earn trust with our associates, It helps us earn trust 0:22:22.000 --> 0:22:25.840 with communities where we work. So to us, yes, it 0:22:25.920 --> 0:22:29.040 does make a difference and helps us be successful. 0:22:30.200 --> 0:22:33.160 The Mars Company is, at its base, a family company, 0:22:33.480 --> 0:22:38.040 a global, highly successful one, but nonetheless a family endeavor, 0:22:38.560 --> 0:22:41.679 which may give it advantages in pursuing its principle based 0:22:41.760 --> 0:22:45.560 business strategy, but they can also come with some challenges. 0:22:46.000 --> 0:22:49.399 There no doubt many public companies with a long history 0:22:49.400 --> 0:22:52.520 that also has a very great story to tell. We 0:22:52.600 --> 0:22:56.080 believe we have our own story and our unique vision 0:22:56.160 --> 0:23:00.840 for the future, while respecting that long term success is 0:23:00.880 --> 0:23:05.200 also built on continuing to have healthy short term performance, 0:23:05.240 --> 0:23:07.480 if you want to call it. That is an ingredient 0:23:07.520 --> 0:23:10.960 that live well in our context with the way management 0:23:11.400 --> 0:23:17.000 is set up, with the commitment also of our owners 0:23:17.000 --> 0:23:20.880 to take a long term view and you know, leave 0:23:22.000 --> 0:23:24.879 a lot of capital for reinvestment in the company and 0:23:25.240 --> 0:23:29.800 set some objectives, both financial and non financial objectives that 0:23:29.920 --> 0:23:32.680 really enables us to do the things that we're doing. 0:23:33.720 --> 0:23:35.960 When people used to ask me and say, you know, 0:23:36.040 --> 0:23:40.280 what is your biggest fear, what is your biggest worry, 0:23:40.600 --> 0:23:43.800 my response usually is it's not the business. The business 0:23:43.840 --> 0:23:50.600 really can function very well on its own. It's managing 0:23:50.640 --> 0:23:54.600 a family. So part of being able to be a 0:23:54.640 --> 0:23:59.080 family business, to continue to be a family business, requires 0:23:59.760 --> 0:24:05.360 a lot of energy and effort into working with the family. 0:24:05.640 --> 0:24:09.800 We have been having annual family meetings for over twenty years. 0:24:10.240 --> 0:24:14.880 Our family is continuously there because we're connected to this business. 0:24:14.920 --> 0:24:18.040 We're joined at the hit by this business. So having 0:24:18.119 --> 0:24:22.200 the family functioning well and having the family and being 0:24:22.240 --> 0:24:25.720 able to manage through conflicts that come up, which of 0:24:25.760 --> 0:24:28.879 course will come up in every family, and being able 0:24:28.880 --> 0:24:33.399 to work towards a common outcome and common goals takes 0:24:33.520 --> 0:24:34.480 a lot of work. 0:24:36.200 --> 0:24:39.000 The Mars family continues to work hard at pursuing the 0:24:39.040 --> 0:24:41.600 goals and values it has established since the beginning of 0:24:41.640 --> 0:24:44.840 the last century. But could a similar approach succeed in 0:24:44.840 --> 0:24:47.959 a publicly traded company in a very different business. And 0:24:48.000 --> 0:24:50.720 that's where we turn next to the second biggest power 0:24:50.760 --> 0:24:54.640 company in the world and how it moved forward by 0:24:54.680 --> 0:24:56.280 returning to its basic purpose. 0:24:57.040 --> 0:25:00.560 You're listening to Bloomberg Wall Street Week with Data Weston 0:25:00.960 --> 0:25:04.840 from Bloomberg Radio. 0:25:07.400 --> 0:25:10.520 The Mars Company has enjoyed a very long and successful 0:25:10.600 --> 0:25:14.440 history as a family company, pursuing the family's values even 0:25:14.480 --> 0:25:17.359 as it expanded around the world and into new businesses. 0:25:17.760 --> 0:25:19.960 But the Yale Project learned from its one hundred and 0:25:20.000 --> 0:25:24.119