International Executive of the Year 2022: Kenneth C. Frazier

We do. I was born and raised in North Philadelphia, which is like, you know, every city has a tough area, and North Philly was the area in Philadelphia which was the poorest area in the city. Right now it is the poorest census tract. Among other things, just in my old neighborhood, the stroke rate is 20 times what it is the national average for lots of reasons. It's a tough area with a lot of trauma. But I was born with great parents. The most important thing in the world is who are your ancestors. My mother and father were terrific. They valued education. They demanded that we take advantage of the opportunities. My dad came to Philadelphia in the year 1913 as a 13-year-old from South Carolina. He had a third-grade education, or what passed for third-grade education for a black child growing up at the turn in the 20th century. But they were very focused on education. Now, the more important thing about my upbringing is, and we were just having this conversation at the table, is that I had an opportunity to be bused out of my neighborhood to the very best schools in Chicago. I objected to that as a child because I couldn't hang out with my friends. I had to get up very early in the morning to get to school. But now that I look back, that was the biggest influence on my life was being given an opportunity to get educated in schools that had high standards and rigorous curricula. So that's a little bit about my upbringing.

Okay, my very first job, I'm going to be very honest, I worked as a dishwasher in one of the best restaurants in Philadelphia. It's still around. It was called Old Original Bookbinder's. It was a very important restaurant. And I skipped a bunch of grades, and so when I was in 10th grade, I think it was, I had just turned 14, and you had to be 16 to get a job. But because I was skipped and they could see my report card, they assumed that I was 16. So I applied for this job. And so what did I learn? I learned something very important, which was, and I'm going to be very honest, how segregated the workplace is. Because if you worked at Bookbinder's, there were certain jobs for black people and certain jobs for white people. And there was not only that sort of dividing line around race, but obviously there was a huge economic difference. And the work was very hard. And it convinced me that everything that my dad told me, my dad was a janitor, about going to school was 100% right.

I knew that wasn't a job that I wanted very much. I also learned what it's like to feel disrespected. Because the people who had worked in that kitchen for many years, I was in and out because I only worked a few hours to make a little money in the summer. But for the gentlemen who worked in that dishwashing room, I realized what it's like to be treated with disrespect. That's the honest answer.

Okay, so when I went to law school, I went to law school because I grew up idolizing Thurgood Marshall and a courageous band of lawyers who went throughout the South and created, case by case, the infrastructure that eventually led to Brown versus Board of Education, which ended up overruling the precept of separate but equal. And so I knew all about him. One of his main colleagues was a lawyer named Bill Coleman, who was a Philadelphia lawyer and who wrote the brief in Brown versus Board of Education. And so I looked up to those guys, and that's to me what it was like to be a lawyer, to represent poor people, to represent people who are disadvantaged. I went off to Harvard Law School and I took out a lot of loans. And I realized that, you know, it's not so easy to do. You got to get a job in a big law firm like Sidley in order to pay off your loans. But I have to say, I also learned, and Sidley's an example of that, that just because you work for a big prestigious law firm doesn't mean that you can't devote a substantial amount of your time to doing the kind of work that you always dreamed of doing. And so you mentioned the death row case, it's the thing I'm most proud of in my life. I met my client, Bo Cochran, 13 days before his scheduled execution date. And after about eight years of working back and forth in trials, he actually was exonerated. And when he was retried, he spent 19 years on death row. And I just want you to know, can you imagine spending 19 years on death row for a crime you didn't commit, never knowing when that day is going to come? You know, you have to think there's no God. How could this be? How could you be stuck in this terrible place? But in any event, when we got his retrial, he was acquitted in less than an hour. And that really goes to the importance of having a lawyer when you're facing something like a sentence of death. Or, by the way, can I say, you know, can I just make this point, please, because I'm going to end my lawyer commercial here. You know, my friend John Levy over there from Sidley, who chairs Legal Services Corporation's board, we just released a report last week called The Justice Gap Report. And what it shows is that 93% of low-income Americans have significant legal problems and they have no representation. That means that you could be thrown out of your house, you can have your children taken away from you, you can be a veteran who deserves certain benefits and not get them. There is a real gap in our country between when we talk about values like equal justice versus what we say our stated creed is and what we actually do. So that's the end of my lawyer speech. Keep going.

How so? When Merck called me up, the CEO of Merck, a guy named Roy Vagelos, a famous great CEO, called me up and said, 'I'd like you to come to talk to me.' In addition to doing these pro bono cases, I had to pay the bills, so I represented Merck in a lot of jury trials and was sort of lucky enough to win a few of them in a row. And that caused the company to think I was somehow magical in the courtroom. I wasn't really true. But he said, 'I'd like you to come and talk to me.' Actually, he said, 'I only have time to make one more person's career.' I'll never forget this. And he said, 'Guess what? It's going to be your career.' Wow. And I went home and I told my wife Andrea, who's sitting here, that I was going to go interview as a courtesy, but I wasn't really interested in going to Merck. I hope you could tell about how excited I am to remember death penalty litigation. There's nothing better than jury trial work, I can tell you. There's nothing more exciting than that. So I wasn't going to go to a company, I mean, come on. But my wife said, 'You know, I don't want to tell you how to run your business, but you might want to think about this company and opportunities.' Very smart, right? So I ended up going to Merck. And the thing about Merck that attracted me is the same ethos about helping people who need help, the sort of humanitarian goals that I had as a lawyer doing work in South Africa and the death penalty work. The company really believed in that stuff. And I think I said I spent eight years trying to save one life. Here, the scale of the lives that we can save was much greater. So that was what attracted me to Merck.

Yes, so very quick. At what point did you develop the ambition to be CEO? So it was very late in my career. You can tell I really love being a lawyer. It's not just my job, it's who I am. It's how I identify myself. And so when we had a very big set of litigations over a painkiller called Vioxx, we got sued 60,000 times. It was really, really tough for about four years. And when we finally were able to reach a global settlement of that, the then CEO came to me and said, 'I think you should run Merck's business globally.' I was like, 'Huh? I'm not going to run the business. I'm a lawyer.' And he said, 'No, no, no, you should actually think about it.' And so I agreed to do it. And then once I started flying around the world for three and a half years running the business, I was like, 'Why don't I actually run the corporation? I'm already running the company, right? So why shouldn't I run the corporation?' So that's when it occurred to me, when I realized that I could actually make an imprint on the company by serving the needs of patients around the world. Then I said, 'You know, I'm really happy to be in the CEO role.'

And I should probably make a point here. I mean, we talked about my first being hired by Roy Vagelos and Richard Elman, my colleague is sitting front row. My first six or seven years in the company, I wasn't in the legal department. I ran what was called Public Affairs, which was, you know, communications and government relations. My colleagues from government relations are over here. Policy, philanthropy. I got to know a lot of people in this room. So a lot of famous people, Stephen Keith and I worked together in that time. So, you know, people think of me as a lawyer, but in 30 years of Merck, actually, I've only been in the legal department seven of those 30 years. And it was the fact that the CEO who brought me in forced me out of my comfort zone. He was not just a mentor, he was a sponsor. He's like, 'I'm going to make sure you learn the fundamental business of this company.' You know, I remember he, you know, I'm telling a story, me because I'm a lawyer, he called me in and he said, 'I'm going to put you in the business.' And I said, 'You know, Dr. Vagelos, I'd like to contribute to the company in my own discipline.' And he said, 'That's the most ridiculous thing I've ever heard. We're a pharmaceutical company. We save lives. You're not interested in that part of the business? Well, why don't you stay at the law firm if you want to be a lawyer?' And, you know, learning the business from the ground up was really important. But the point I'm making about this is, and we can talk about mentorship, through every stage of my life, I was very fortunate to have people who saw in me more than I saw in myself. And they were willing to say, 'I'm going to push you out of your comfort zone. I'm going to give you an opportunity.' And by the way, I didn't always succeed at all those opportunities. So I learned early on that failure doesn't necessarily stop you.

So let me start by saying that Merck is a very strong, powerful scientific company, and I'm not a scientist. So the question becomes, how do you think about leading a company where you have thousands of physician-scientists who are incredibly talented, incredibly experienced, and you don't know the difference between a peptide and a protein? How do you do this, right? You know, I do, but don't test me. And so a big part of the role of the CEO is to be an advocate for the company. To be able to communicate values to people. You know, when you take over a company like the company I took over, one needs to be a little bit introspective. I needed to ask myself, what would make a company full of extremely bright people who jealously guard their prerogatives and their free will, well, what would make them give me the gift of their followership? Right? I'm not a scientist. Why would they? You know, I don't know the genre, as they say in Hollywood. I don't have knowledge of the genre. And the answer to that occurred to me is that I need to embody their values. I need to embody their ambitions. I need to embody their goals and their dreams as a company. And so from my perspective, that's the key to leadership, is that you're actually embodying what the people you're purporting to lead already believe in their hearts, what they care about, why they show up every day, why they stay late. And that's, as far as I'm concerned, the only thing that I was able to bring to the table was that ability to articulate the company's fundamental values and to try to take a stand for them. For example, when Wall Street was pressuring us to cut research budgets, that's when people look at you and say, 'What do you really care about? Do you really care about your own reputation? Do you really care about the stock price? Or do you care about these patients?'

Well, you know, obviously the company is composed of human beings, and human beings have a soul and they have a purpose. And so, you know, it's funny, when I first became the CEO of Merck, people would say to me, 'Ken, what imprint are you going to put on that company?' And I would laugh. I was like, 'This company's been around 130 years saving people's lives.' In the 20th century, just to be really clear, at the beginning of the 20th century, life expectancy in this country was less than 50 years. And now it's, you know, almost 80. Well, education and nutrition and clean water had a big impact, but after that, the big changes are things like cardiovascular health, HIV, cancer. Those are all things that Merck and other pharmaceutical companies, now COVID-19, did to actually improve and expand people's lives. So from my perspective, that's the soul of the company. It's the scientists. A lot of them could have been academic superstars. They came to Merck because they wanted to work on breakthrough science and to translate that into medicines and vaccines that save and improve lives. That's the soul of the company. And so as the leader of the company, you'd better not forget that that's what drives people, because you've got a lot of other audiences. And we all CEOs know that we're being judged by our stock performance. And so I'm not naive about that. But the people in the company need to understand that you have their fundamental values uppermost.

So let me back up, because it's really important for me to talk about COVID-19. Because I said failure doesn't stop you. You know, in our business, we fail more than 90% of the time with those things that we think were good enough ideas to invest clinical development dollars in. More than 90% of the time. Because, you know, human biology is something we don't know very much about. I'll compare it, for example, to space travel. When I was a kid, you needed the whole United States government and NASA to put a man into orbit because we understand the rules of physics and the rules of engineering. Now we got rich guys who do it just for fun. But biology is very different. We are, what I'm always amazed that we ever have a drug given how little we actually know about human biology. I say that to say that at the end of the day, for a company like Merck, when we take on something like COVID-19, nobody had ever heard of that virus before. And we've been very fortunate that these mRNA vaccines have worked so effectively and so substantially. If you live in a wealthy country, you can be protected from COVID-19. But we tried to invent two vaccines early because Merck's expertise was in viral replicating vaccines, replicating virus vaccines, and that had worked for us recently in Ebola and some other areas. We failed at that. So I want to start by saying we had hoped to have had a vaccine and that didn't work. It reminds me of how confounding science actually is. So we've moved over, as you asked, to the issues around therapies. And we have developed one therapeutic product called Molnupiravir, which you take after five days of, you have to take within five days of being diagnosed with COVID. And we are selling that along with a product that's very similar that Pfizer developed called Paxlovid, which has actually, frankly, so far had higher levels of efficacy in the early studies. So we are working on that area. I think the world does need those kinds of therapeutics because it's really going to be hard for us to vaccinate seven and a half billion people on the planet. It's just never going to happen. So we need, if people get sick, they need good drugs that they can take.

Oh, absolutely. Yeah, they were really incredibly bad. So first of all, I think all of us have a sense of isolation now, right? Because we couldn't work with our colleagues, we couldn't collaborate, we couldn't innovate. You know, we were working from home, so people had to become the help desk and they had to become the teacher if they had children at home, and they were very separated. It's not surprising that levels of anxiety and depression have just gone through the roof during COVID. So from my perspective as the CEO, it was really, first of all, about recognizing the pain that people were going through, our employees were going through, the isolation. How do we get a company full of scientists to actually be able to collaborate and innovate when they can't be in the same room? That was very difficult. How did we deal with the two very different populations inside the company? Because our manufacturing people, for example, had to keep churning out life-saving drugs way before there was a vaccine, right? They couldn't socially distance because the world needed those medicines. How do we communicate their value to them or our research colleagues who are working in the labs when the office-based employees are working from home and we're giving those people a lot more flexibility? So a big part of this was really how do you listen more carefully to your colleagues, you know, and understand what they're going through, understand what their families are going through, having the level of flexibility that's necessary to run a company in this way.

Yes, I learned that I was very much identified with a routine that I had every morning of getting up, going to work, and then I had to stay home with my spouse. I'm not so sure she found that to be the right way. She would call that an overrated experience, spending time with me. And I learned that I had to figure out sort of what was valuable to me, right? That all my assumptions about time in the future and, you know, what I could put off because I would get to it eventually, I had to sort of rethink those kinds of things. My well-laid plans didn't work out because I was going to step down as CEO when I turned 65, but it just wasn't the right time.

A couple years ago. I'm now 67.

So let me loop back to something I talked about a while ago. You know, I said that being a lawyer wasn't always just a job to me, it's who I am. So I brought a series of values to the CEO chair, and I think my colleagues knew that. And so I tried to think about those instances where my personal values were consonant with the company's expressed values. And then I said, is this a situation where if I speak out, I believe I will have impact? Right? And if I believe that it was consistent with our values and I believe that I had impact and it had some relationship to my business, then I felt like I had the right to speak out. I think the challenge is the country is divided down the middle, I know, and no matter what position you're taking, you're going to alienate one side or the other. And so for me, it really was, are you taking a position that you believe is consistent with the country's fundamental values and the company's values? I'll give you an example. Some colleagues of mine and I started to work around voting rights. Okay. That was not easy, as you might remember. Mitch McConnell came out and said companies should not be involved in politics. By the way, I am the single largest giver the year before to Mitch McConnell. He never sent any money back. Okay, I just want to be really clear. Okay, he's always at the door. Why? Why Mitch McConnell, you're asking? Because I'm a CEO of a drug company, right? So from the perspective of defending my company's business model, I end up making donations. But I'm not going to be told that if I take a stand that says that voting is fundamental to Americans and that every eligible voter should be able to vote without undue interference, that somehow that's wrong. And I just want to make the following point. It's fascinating about principles versus pragmatism. I don't think I've ever seen the American business community speak and act with as much unison as we have recently about Ukraine. Okay. I've never seen it before. And we take a very strong stand for democracy in Ukraine, and yet we're afraid to talk about democracy in this country. What is that about? Right. So to answer your question, if I feel that my values are consistent with Merck and if I believe Merck's values are consistent with fundamental values of a people, right, I don't think voting is by definition a partisan issue in a hyper-partisan... some people will say it is, but that doesn't make it partisan, right? We're all taught that in elementary school. And so from my perspective, those kinds of issues are things that I speak up. But I have to say, when you do speak up, every cause calls you now, right? I've gotten criticized because I didn't say anything about gun control. Right? When the so-called Muslim ban happened, friends of mine said you should speak out on this. I thought the courts were capable of adjudicating those issues. I didn't think Merck needed to be out front on those issues. So I try to pick my spots and I try to go to my board and say, are you okay with this?

It's another example of this. You know, the whole situation in Charlottesville, we all remember, and we remember some of the comments that were made in the immediate aftermath. I joined the president's Business Council with some hesitation, to be honest. He'd asked more than once, but I thought I owed it to the country, I thought I owed it to my company to be at the table. Somebody said, 'If you're not at the table, you're on the menu,' right? So I didn't want to be on the menu. And so I joined it. But when those comments were made, I felt like that issue called upon me to take a stand. I remember a quick story. My son was in college at the time, my youngest, and my wife and I in New York when the president on a Saturday made his original comments about this that were disturbing to us. So I drive home and my son is waiting and his question to me is, he says, 'Dad, what's up?' What's up? Okay, that passes for searing inquiry for a college kid. But what he was saying is, you talk about your principles, okay, are you going to be silent about people marching with torches? I shouldn't tell the story, but I'm going to tell you a story. About other CEOs then called me up and said, 'You're stepping out, you're forcing other people to take action.' And my view was, I got to look in the mirror and I have to have a sense of my own conscience. And so for me, it was very clear again what the principled position was about what people were chanting in Charlottesville. And then subsequently, this one woman was killed. But I needed to figure out whether I spoke on my own behalf or whether I spoke as the CEO of Merck. I'll share with you that when I decided to speak out, there were some who advised me to do what they called sort of a silent withdrawal, just send a private note saying I'm withdrawing. I said, 'No, no, no.' I went down to the White House three times and by coincidence, I was the one sitting next to President Trump every time, right? The picture, I'm right next to him. So I'm very visibly aligned with the president's Business Council. I said, 'We need a noisy withdrawal here. People need to know what my principles are.' I called my board after I decided to step down. I wrote a statement and I sent it to the board and I said, 'The only question I'm asking you, I'm not asking your permission to step down, I'm gone. Okay? The question is, should I say I am doing this as a matter of personal conscience, or should I say I'm doing it based on my personal conscience and on the company's values?' And I'm thrilled to say that unanimously they said, 'We want you to speak to the company's values.'

Yeah. I go around and people say, 'Oh, that was so courageous.' I said, 'That's not courage. Walking across the Edmund Pettus Bridge, that was courage.' All right? This is all about, you know, all of us want to be popular, we want to be liked, we don't want to be criticized. But it's not the end of the world if the president tweets at you. The sun came up the next morning. So it's about the question of whether you really believe in what you're saying. But if you can't look your son in the eye, that's a big deal. That is a big deal.

So let's be really clear. No one can do this in two years. We're talking about centuries and centuries of systematic structural disadvantage in this country. And sometimes I want to sound like I'm being strident in about what I'm about to say, but it was in my lifetime when black Americans lived in a completely different place than white Americans. I know there are other groups that have struggled with equality in this country, but the problems that African-Americans face, you know, for example, the wealth gap, where the average white family's wealth is 10 times what the average black family's is, that is to a great extent the historical residue of a country that actually had very fundamentally different rules for black people and white people, and those were enshrined in the law. And so that disadvantage is not going to go away overnight, right? There's economic instability, there's issues with law enforcement, there's issues around educational opportunity, there's issues around healthcare access. I don't expect that corporate America can fix that overnight. But I do see companies committed to doing things that I never saw before. And I'm going to give a little commercial. 70 companies have signed up for something called 110. Yes, I was just going to... And 110 is a coalition of companies that are committed to hiring 1 million African-Americans who lack four-year degrees over the next 10 years into family-sustaining wages. Yeah. Coming back to our historical antecedent, if you looked at the 2020 census, rather, over 75% of African-Americans don't have a four-year college degree 10 years after they leave high school. So when companies reflexively say you have a minimum requirement of a four-year degree, irrespective of whether it's really a skills-based job versus what should legitimately be a credentials-based job, they don't necessarily intend to prevent people from being hired, but you've cut off access to the middle class. So what 110 is about is creating different pathways for these people to have family-sustaining wages. You know, you asked me early on about being raised in the inner city of Philadelphia. My dad was a janitor. But in the 1950s and the 1960s, a janitor at the United Parcel Service made a family-sustaining wage. My mother was a housewife. He paid the mortgage. We had a used Buick. You know, people nowadays with many of these jobs, they couldn't sustain a family. So our whole thing is, let's not have people hired based on pedigree. Let's ask ourselves which of these jobs should be skills-based jobs, and then we can train people to do those jobs and we can give these people a pathway. You asked about George Floyd. After George Floyd, when people were in the streets, I think businesses were worried about the stability of our country going forward. And so we're saying, look, we can't have this intergenerational problem continue to go on. And last year, in our first nine months, I'm very pleased to say we were able to hire or promote 25,000 people into family-sustained wage jobs.

She who must be obeyed told me it was time. That's really it. Yeah, no, actually, you know, I think that there's wisdom, there's wisdom in term limits. And I've done this job now for 11 years. And I said to my board, any ideas that I hadn't had in the first 10 or 11 years, you could probably consider mischief. So you probably ought to bring somebody in with a fresh perspective. And that's what we're doing. Yeah. And my successor is going to do a great job.

Well, I have to be honest, you got to stay out of the CEO's way. You got to let the CEO take the company in the right direction for where it needs to go over the next 10 years, not where we've been over the last 10 years.

Well, first of all, the opportunity that we have around this 110 mission is the thing that I worry the most about. Okay? Because I don't want companies to lose the focus on this issue. I don't want them to become fatigued. This is the kind of thing, there's a reason why we never had pathways for these people. And I just want to make one more point to people who are listening. I get asked the question all the time, 'Well, why are we focusing only on black people?' And I gave the answer based on the census, okay? But there's another answer to that. Every time we take down a barrier in our society for one group, we take it down for everybody. So let's think about handicap people. When we first started saying, for example, that we would do cutouts and curbs so that people could go on wheelchairs, stand on a corner in Manhattan, what you see is people do their baby strollers, they do their wheeled luggage. So reducing that barrier again is for everybody. So it hurts almost 80% of black people if you say I have to have a four-year degree, but you know what, it hurts 60% of white people. And there are people in the rural areas of this country who don't get opportunity either. So again, I think it's really important for us as business people to realize that business has the opportunity to help reinvent this country. We're coming through this pandemic. We're going to have to reinvent our economy. I hope that we do it not just for innovation, but we also do it for equity.

I've been blessed. Blessed.