McKinnell, Henry A. Jr. 1943–

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Henry A. McKinnell Jr.
1943–

Chairman and chief executive officer, Pfizer

Nationality: Canadian.

Born: February 23, 1943, in Vancouver, British Columbia, Canada.

Education: University of British Columbia, BA, 1965; Stanford University Graduate School of Business, MBA, 1967; PhD, 1969.

Family: Son of Henry A. McKinnell Sr. (owner and operator of cargo vessels) and wife (name unknown); married (divorced); children: four.

Career: American Standard, 1969–1971; Pfizer, 1971–1979, various international posts; 1979–1985, president of Pfizer Asia; 1992–1995, executive vice president; 1995–97, executive vice president and CFO; 1997–1999, executive vice president and president of Global Pharmaceuticals Group; 1999–2001, president of Global Pharmaceuticals Group, president, and COO; 2001–, chairman and CEO.

Awards: Top CEO in the Pharmaceutical Industry, Institutional Investor, 2003; Global Leadership Award, United Nations Association of the United States of America, 2003; Corporate Service Award, Woodrow Wilson Institute for International Scholars, 2003; Cleveland E. Dodge Medal for Distinguished Service to Education, Columbia University Teachers College, 2003.

Address: Pfizer, 235 East 42nd Street, New York, New York 10017; http://www.pfizer.com.

■ Dr. Henry A. McKinnell Jr. became chief executive officer of Pfizer in January 2001 and chairman of the board in April 2001 after holding a series of senior executive positions spanning more than 32 years with the company. During his time at Pfizer, McKinnell helped turn the company from a leader in the pharmaceutical industry into a "transforming force" with the acquisitions of Warner-Lambert in 2000 and Pharmacia in 2003 and the subsequent successful integration of both firms, forming a behemoth that earned $45 billion in 2003. Observers described McKinnell as polished, stately, and avuncular, yet also exacting, passionate, and sometimes impatient. A deeply moral man, McKinnell expanded Pfizer's philanthropic activities both in the United States and in the developing world.

PERSONAL BACKGROUND

McKinnell was a third-generation Canadian brought up in Vancouver, British Columbia. He went to a Christian Brothers school through the eighth grade, an experience that imbued him with a strong moral code. His father owned and operated cargo vessels; during his teen years and through college he spent school vacations working on his father's ships as a deck-hand and first mate. He gained a penchant for racing Austin Healey sports cars in events sponsored by the Sports Car Club of America and spent two summers racing many West Coast tracks, from Vancouver to Los Angeles.

He enrolled at the University of British Columbia intending to major in chemical engineering and eventually become a college professor. He described himself as an average student with a greater focus on extracurricular activities than academics during the first half of his five-year stint at the university. He then married and decided to "get serious," switching his major to business administration and finishing second in his class.

Based on his achievement McKinnell received a $10,000-a-year fellowship to the Stanford Business School, a tidy sum at that time—it was in fact more money than most full-time jobs offered. He accepted and earned a doctorate within three and a half years. Although he received several offers to join business-school faculties as an assistant professor, McKinnell instead elected to gain practical experience in the business world. He accepted his first job at American Standard, turning down an offer from Pfizer. After working in Brussels for two years, he accepted a position with Pfizer in Tokyo for what he thought would be another two-year period, after which he would return to academia.

An early riser, McKinnell woke up between four and five in the morning and put in 11- to 12-hour days at the office. He lived in Manhattan and on the weekends went to a retreat home in Greenwich, Connecticut, where he enjoyed swimming, fishing, skiing, and bike-riding. An avid sportsman, he ran a full marathon while living in Japan and competed in four mini-triathlons in Greenwich.

EARLY CAREER AT PFIZER: A GLOBAL FOCUS, AN UPWARD PATH

When McKinnell joined Pfizer in 1971 in Tokyo, he requested sales training, a request that was initially puzzling to his new employer given his possession of a doctorate. But McKinnell brushed past the perceived diminutive nature of sales positions, knowing that understanding how sales worked would be essential to understanding a business as a whole. His request was granted, and he developed an appreciation for pharmaceutical sales, medical marketing, product development, and product commercialization. This knowledge, coupled with early exposure to international business, laid the foundation for a career at Pfizer that spiraled inexorably upward until McKinnell was named chief executive officer in 2001.

After three years in Tokyo, Pfizer gave McKinnell an opportunity that was rare for a 30-year-old who still thought he would get back to teaching: the chance to run Pfizer's operations in Iran and Afghanistan, which comprised a fully self-contained pharmaceutical business. The opportunity allowed McKinnell to learn about all aspects of the business—sales, marketing, manufacturing, operations, and product development.

Subsequently, McKinnell was named president of Pfizer's Asia Division, based in Hong Kong, until 1984. His first post in the United States came afterward in corporate strategic planning, where he was instrumental in convincing Pfizer's board of directors to alter the company's capital structure in order to implement a share repurchase program. This move was significant in that up to that time Pfizer had been debt-free; the new program would require that the company borrow in order to buy back its own shares. McKinnell effectively argued that the company's long-term growth prospects would more than offset the interest that would accrue in paying back the loan. His assessment proved right and successive chief financial officers continued the program.

McKinnell continued to move quickly up the corporate ranks. He was named chief financial officer, his first finance job, and president of Pfizer's U.S. Pharmaceutical Division in 1994. By 1997 he was again promoted: as president of Pfizer's Global Pharmaceuticals Group, the company's principal operating division, he was responsible for worldwide pharmaceutical operations. He was executive vice president from 1992 to 1999 and then president and chief operating officer from May 1999 to May 2001. In January 2001 he took over the reins as chief executive officer from William C. Steere Jr., with whom McKinnell had worked closely for over a decade. By May 2001 he added the position of chairman of the board.

Steere had ended his decade-long tenure as CEO having achieved his goal of making Pfizer the number one company in the world, which had come with the 2000 merger of Pfizer and Warner-Lambert. With the company having achieved the industry leadership position just as he entered the role of chief executive, McKinnell wanted to articulate a new vision that would push Pfizer to ever greater heights. He faced some daunting challenges: an industry under attack due to pricing issues, patent expirations for several blockbuster drugs (with sales of at least $1 billion), and growing calls to expand the availability of prescription drugs to the needy and those without insurance. McKinnell would have to apply his considerable executive, political, and leadership skills to address these issues.

AT THE HELM OF PFIZER: NEW VISION, GREATER ACHIEVEMENTS

One of McKinnell's first actions as CEO was to gather a group of the 25 most senior managers to define a new vision and mission for Pfizer. McKinnell posed a simple yet compelling question: "How do we move beyond number one?" With McKinnell leading, the group decided that Pfizer's new vision would be to hold a position as "the world's most valued company to patients, to customers, to business partners, to colleagues, and to communities where we work and live" (Becker, March 2002). In order to achieve this transformation, the group defined six areas that needed change, most of which had been addressed by early 2004.

FOCUS ON CORE BUSINESS: HUMAN PHARMACEUTICALS

As CEO, McKinnell continued to implement a key strategy he had been espousing since arriving at Pfizer's New York headquarters: to focus Pfizer on human pharmaceuticals by selling off noncore businesses. Indeed, in early 2004 human pharmaceuticals was the largest business segment, making up 92 percent of Pfizer revenues. At that time Pfizer announced plans to review some 60 noncore consumer products for possible sale. In 2002 and 2003 Pfizer divested itself of several of these noncore business units.

IMPLEMENTING THE VISION THROUGH STRATEGIC MERGERS AND ACQUISITIONS

What set Pfizer apart from the hundreds of other large corporations who had attempted large-scale mergers in the hopes of achieving operational efficiencies and increased competitiveness was that under McKinnell's leadership the company successfully completed not one but two mergers of big pharmaceutical companies. In 2000 Pfizer acquired Warner-Lambert, which had been marketing Lipitor, one of the world's most prescribed drugs of those used for lowering levels of low-density lipoprotein (LDL), or "bad" cholesterol. The acquisition saved the combined company some $2.5 billion; the new market share exceeded the two companies' previous market shares combined, increasing from 7.8 percent to 8.2 percent.

In April 2003 Pfizer completed the acquisition of Pharmacia Corporation, another major drug manufacturer, for $56 billion. Market share increased to 11 percent among world pharmaceuticals. Pfizer now had 10 drugs generating annual sales of $1 billion each and one drug with sales of over $8 billion. By 2004 Pfizer marketed eight of the world's 25 bestselling medicines and 14 products considered leaders in their therapeutic categories. The company had over 130,000 employees worldwide and a pipeline of over two hundred projects in research and development.

McKinnell sought to fill out the R&D pipeline with strategic acquisitions of biotechnology companies. In December 2003 Pfizer announced the acquisition of Esperion Therapeutics, the biopharmaceutical company that developed therapies targeting high-density lipoprotein (HDL) to treat cardiovascular disease. Other acquisitions were expected in 2004.

DELIVERING THE NUMBERS: PFIZER'S FINANCIAL PERFORMANCE

McKinnell consistently delivered numbers that kept Wall Street analysts humming. In 2001 Pfizer earned revenues of $29 billion and a net income of $7.8 billion, up 11 percent and 109 percent over 2000, respectively. These numbers reflected the acquisition of Warner-Lambert. In 2002 Pfizer earned revenues of $32.4 billion and a net income of $9.1 billion, up 12 percent and 17 percent over 2001, respectively.

Pfizer posted 2003 revenues of $45.2 billion, up 40 percent over 2002—but a net income of only $3.9 billion, down 57 percent from 2002. These numbers were reported under GAAP ("generally accepted accounting practices") and reflected the charges incurred as a result of the acquisition of Pharmacia. In financial reports Pfizer reconciled these GAAP numbers to numbers that took into account purchase-accounting rules, which required inclusion of noncash charges. In the adjusted numbers net income became $12.7 billion, up 28 percent over 2002.

CORPORATE CITIZENSHIP

Pfizer had always had a long tradition of good corporate citizenship; under McKinnell's leadership the tradition expanded. In 2002 Pfizer donated $2 million each working day through various channels. Rather than as an obligation, McK-innell viewed corporate philanthropy more synergistically, noting that "when we help patients in need, we enhance our standing with physicians, win respect in local communities, and create better working relationships with regulatory authorities. When we keep our people out of hospitals and enable them to function as productive members of society, we bolster economies and become the allies of governments" (Flynn, September 2003). This philosophy positioned Pfizer favorably; but McKinnell forthrightly acknowledged that Pfizer's approach was as good for profits and shareholders as for patients and communities.

In March 2002 McKinnell was appointed by President George W. Bush to the Presidential Advisory Council on HIV/AIDS, which was established to formulate recommendations on how best to ensure the highest quality research, prevention, and treatment for the disease. McKinnell traveled to African nations that had been hit particularly hard by HIV/AIDS, meeting with government leaders, nongovernment organizations (NGOs), and health-care providers in order to formulate a strategy to combat the disease.

Launched in December 2000, the Diflucan Partnership Program was initiated with the Government of South Africa in a public-private venture. At no charge health-care workers distributed Pfizer's Diflucan, a drug that fought two opportunistic fungal infections that together struck over half of African patients with full-blown AIDS. Pfizer later expanded the program to 12 other African countries. At the end of 2002 the program had distributed almost three million doses worth over $100 million and trained approximately 11,000 health-care professionals in the latest AIDS-care practices.

Pfizer was the first U.S. pharmaceutical company and the largest U.S. company overall to sign the United Nations Global Compact, created by the U.N. Secretary General Kofi Anan to distribute the benefits of globalization across all nations.

Back home McKinnell took a proactive step to control Medicaid costs in Florida. He contacted Governor Jeb Bush and suggested that, as prescription drug costs accounted for only 10 percent or $70 million of the state's overall Medicaid bill, some of the money could be used for patient education and counseling that would in turn create better health awareness. Pfizer carefully monitored the results of the program, hoping that McKinnell's unorthodox approach would create favorable outcomes and be duplicated in other states. On another thorny domestic health-care issue, McKinnell expanded the availability of prescription drugs to low-income seniors on Medicare. The Pfizer for Living Share Card provided needed medications for a flat $15 fee to qualified seniors.

After the terrorist attacks on New York and Washington, D.C., on September 11, 2001, Pfizer donated medicines, health-care products, and supply services to those in need. Pfizer and the Pfizer Foundation pledged $10 million to the relief effort and the company also matched approximately $430,000 in employee contributions. Yet another humanitarian effort was referred to as "Hank's Peace Corps" within Pfizer. Approximately 20 to 25 medically and technically trained people spent six months to a year working in developing countries, helping health-care providers, faith-based workers, and members of NGOs improve countries' health-care delivery services.

BLENDING EAST AND WEST: AN "AGGRESSIVE CONSENSUS-SEEKING" MANAGEMENT STYLE

Two factors characterized McKinnell's management style: consensus seeking and cross-functional teamwork—both practices originating from his early exposure to Japanese-style management techniques.

Associates at Pfizer described McKinnell as "an aggressive consensus seeker" at a time when many American corporations were run under a military-style command-and-control structure. McKinnell was a leader who encouraged open discussion of issues but knew how to bring closure to them. Deftly finding that zone of agreement where all minds involved could back a final decision, McKinnell effectively imported consensus-seeking to Pfizer.

While most American companies struggled to improve internal operations by breaking down the barriers to communication inherent in silo-like functionally oriented organizations, Pfizer instead adopted a Japanese-style cross-functional team structure. Teams were composed of members of different functional areas who met together regularly over long periods—sometimes years—to see a product through all the processes of development, regulatory approval, and consumer marketing.

The would-be scholar and college professor was able to cultivate a culture of agreement and collaboration at a time when corporate chieftains typically operated with a hierarchical mindset and expected subordinates to follow the chains of command that they had successfully climbed. That Hank McKinnell was able to develop this leadership style while climbing to the same top job as his contemporaries suggests that what worked for him also worked for Pfizer.

Industry analysts gave positive assessments to McKinnell's performance at Pfizer through 2004. As he continued to promise double-digit returns, the company remained a Wall Street favorite. Referring to the two successful megamergers, one industry observer noted that Pfizer was in a "league of its own" (Becker, March 2002). Another analyst noted that Pfizer was at the "peak of its game."

Media observers covering Pfizer attempted to present McK-innell even-handedly. Lee Clifford of Fortune magazine described McKinnell as "polished, tall, stately, and stiff with a barely perceptible Canadian accent" (October 30, 2000). John Simons, also of Fortune, characterized him thus: "warm and avuncular one minute, exacting and impatient the next, McK-innell is an odd cross between Mr. Rogers and the cranky Dr. 'Bones' McCoy from Star Trek. In a single conversation, he can deliver a stirring monologue about curing the world's ills, then launch into a stern rant against consumer activists who think drug companies charge too much for their wares" (Boersig, October 2003).

Robert L. Joss, the Dean of the Stanford Graduate School of Business, was proud of one of his most successful alumni: "When we see in one of our alumni a person of integrity, an effective manager at the highest levels, and a business leader who understands that business is a social institution which must keep the public trust, we—as a school of management—want to recognize those achievements. Hank McKinnell has demonstrated in every way that he is a leader—as the head of the largest pharmaceutical company in the world, as the overseer of the firm's tremendous research efforts aimed at improving the human condition, and as a corporate citizen" (Lee, February 18, 2001).

THE FIRST AMONG EQUALS: MCKINNELL'S REPUTATION IN THE INDUSTRY AND COMMUNITY

The clearest indication of McKinnell's reputation among his peers was his election in 2001 as chairman emeritus of the industry's leading trade organization, the Pharmaceutical Research and Manufacturers of America (PhRMA), a group composed of the CEOs of leading research-based pharmaceutical and biotechnology companies. In his first address McKinnell laid out a blueprint for a reformed health-care system in the 21st century. McKinnell was also chairman of PhRMA's Business–Higher Education Forum.

After ascending to the chief executive's role, McKinnell garnered a series of accolades. In 2003 Institutional Investor magazine named McKinnell the top CEO in the pharmaceutical industry. He was also named chair of Pfizer's Executive Committee, was a member of the Pfizer Leadership Team, and was a director of Pfizer since June 1997. He was a member of the influential Business Roundtable (BRT), an organization of business leaders; vice chairman of the BRT's Corporate Governance Task Force; and chairman of its SEC subcommittee. McKinnell sat on the boards of several companies, including ExxonMobil Corporation, Moody's Corporation, and John Wiley & Sons. He was chairman of the Stanford University Graduate School of Business Advisory Council and a Fellow of the New York Academy of Medicine and the Massachusetts Institute of Technology Corporation. McKinnell also sat on the boards of trustees of several organizations in New York City.

Under McKinnell's leadership Pfizer's reputation rose as well. In February 2003 Fortune magazine ranked Pfizer 14th on the list of the World's Most Admired Companies. In October 2003 Med Ad News, a leading industry publication, named Pfizer the Most Admired Pharmaceutical Company in the industry. In March 2003 Investor Relations Magazine awarded Pfizer the Best Corporate Governance award. In 2002 the Journal of Philanthropy named Pfizer the world's most generous company. In 2001 Fortune named Pfizer the second smartest company in America, after General Electric.

See also entry on Pfizer Inc. in International Directory of Company Histories.