Corporate governance structures are established to make sure corporations are accountable to their owners—the shareholders.
Our corporate governance goes beyond the company’s relationship to our shareholders, because it reflects our relationship to society, and issues that matter to our key stakeholders can very quickly become important issues for our shareholders. As such, our objective is to balance fiduciary duty and accountability to generate long-term shareholder value, while also considering, in a transparent manner, the concerns of other stakeholders.
Our Board's primary mission is to represent and protect the interests of the company's shareholders. The Board meets a minimum of six times per year and as otherwise needed to review our progress on a wide variety of measures. In overseeing the affairs of the company, including our governance, the Board has several committees to help fulfill our obligations to Merck shareholders.
As of December 1, 2011, Kenneth C. Frazier, Merck's chairman of the board, president and chief executive officer, is the only Merck executive on the Board. Mr. William B. Harrison, Jr., serves as the Board's lead director. As lead director, Mr. Harrison confers with management on matters involving the Board and serves as a liaison to shareholders on investor matters. Mr. Frazier is not a member of any of the Board's committees; only independent directors serve on these committees.
The Board has a balanced membership, representing relevant areas of experience, types of expertise and backgrounds. While it is the Merck’s philosophy that the full Board should consider and act on matters of significance, as appropriate, the committees assist it in carrying out its responsibilities and provide greater focus in key areas.
Board Independence & Performance
Some shareholders believe that the Board should be completely independent. Our policy is that the Merck Board should consist of a substantial majority of independent directors in accordance with the standard for independence established in our Policies of the Board. As noted above, Mr. Frazier is the only member of the Board who is not independent.
For additional details on our Board’s leadership structure, please see page 16 of Merck's 2012 Proxy Statement.
Merck chairman, president and chief executive officer Kenneth C. Frazier is accountable to the Merck Board. Merck's Executive Committee, an internal management committee of Merck executives who report directly to Mr. Frazier, meets monthly and as needed to review the company’s progress and to attend to other matters affecting the company.
Merck’s Board of Directors and senior management, including the company’s chief ethics and compliance officer and Corporate Compliance Committee, oversee the company's global compliance program. Merck’s compliance program is designed to maintain a culture that promotes the prevention, detection and resolution of potential violations of law or company policies. The program is dynamic—involving regular assessments to ensure the program is responsive to the company’s evolving business and associated compliance risks. Since the merger, the Global Compliance Organization (GCO) has been headed by Richard S. Bowles, executive vice president and chief ethics and compliance officer, and reports directly to the CEO and president. After more than 30 years of service to Merck and Schering-Plough, Dr. Bowles retired from the company in June 2012. Effective June 25, 2012, Michael Holston became our new chief ethics and compliance officer. Mr. Holston most recently served as executive vice president and general counsel for Hewlett-Packard Company, where he oversaw compliance.
The Corporate Compliance Committee meets quarterly to oversee the development and implementation of the company's compliance program. Each division within Merck, through its divisional compliance officer, periodically assesses the division's respective compliance risk areas; sets priorities for addressing risks; participates in the development of training and other educational programs; addresses the need for appropriate monitoring and auditing programs; and establishes performance objectives and reviews to assess the effectiveness of the division's compliance program.
Divisional compliance officers present regular updates on the status of their compliance programs to Merck's Corporate Compliance Committee. The chief ethics and compliance officer gives a quarterly report of the state of ethics and compliance at Merck to the Audit Committee of the Board to help it meet its governance and oversight responsibilities.
Environment, Health and Safety Governance
We are committed to full compliance with all environmental and employee health and safety laws and regulations, and are also committed to actively identifying, understanding and addressing potential environmental, health and safety (EHS) risks and concerns of our stakeholders.
The Executive Committee has established an EHS Council to provide enterprisewide leadership and governance of our EHS compliance and performance. In addition to a corporate EHS policy, we are continuing to implement and sustain a robust compliance management program that effectively oversees and manages EHS issues affecting the company in order to meet and exceed our responsibilities and commitments.
Merck's Corporate Audit and Assurance Services group is accountable to the Audit Committee of the Merck Board for assessing the adequacy and effectiveness of the company's control environment related to financial reporting and operating processes. This includes the appropriate management and oversight of key company risks, in accordance with our corporate policy on audit, control and risk management.
We are committed to a policy of full, true, timely and plain-English disclosure of all material information in order to keep shareholders and the investing public informed about the corporation's business and operations. Accordingly, we have established a corporate disclosure policy that articulates the standards, processes and governance for the company's disclosure practices. Pursuant to the policy, Merck's Disclosure Committee oversees the company's disclosure practices and disclosure obligations.
Governance of Our Research Agenda
The Research Leadership Team, headed by the executive vice president and president, Merck Research Laboratories (MRL), develops divisional strategy, allocates resources and manages the portfolio of MRL products. The Research Leadership Team is made up of the heads of six functional areas within MRL. Each area provides expert, efficient support of our drug candidates-ushering them from drug discovery through product-life-cycle management.
Merck has an efficient global system of pharmacovigilance that compiles, assesses and reports adverse experiences related to our products. Our global safety teams within MRL are responsible for the safety evaluation of our medicines and vaccines. In parallel, at the country level, local pharmacovigilance teams at our subsidiaries worldwide are responsible for ensuring that safety information is collected and reported to our global safety staff at headquarters and to local regulatory authorities. For more information, please click here.
Corporate Responsibility Governance
Merck’s Office of Corporate Responsibility identifies corporate responsibility issues that are important to our business success and our stakeholders, and formally manages targets and performance for those issues. Learn more.