Hi there. I'm specialising in the study of MRSA as part of my medical research and came across this article which I thought might be interesting to those diagnosed with MRSA. It's really raised an issue that such a product has been developed but corporate issues have stood in the way of what could hugely benefit MRSA patients. Please spread the word!!
Crisis Rules
3M's George Buckley Criticizes Obama While Ignoring Good Corporate Governance
Lanny J. Davis, March 9, 2011
"[Obama] is anti-business. ... Forget[s] that business has choice. ... Things will slip away. We've got a real choice between manufacturing in Canada and Mexico ... or America."
--George Buckley, chairman and CEO, 3M, London's Financial Times, Feb. 28, 2011.
Just a few weeks ago British 3M chair and CEO George Buckley - a man who reportedly flies the Union Jack above his secure, gated estate while heading an American company headquartered in St. Paul, Minn. - told leading British newspaper the Financial Times that if President Barack Obama doesn't act the way Buckley wants him to, he could take 3M's 67,000-plus U.S. jobs to Canada or Mexico.
Buckley's indiscrete statement is just one example of what can happen when a cardinal rule of good corporate governance is violated. That rule: not allowing a company's chairman to also serve as CEO, and vice versa. Buckley, in effect, reporting to himself.
Another consequence of Buckley serving in both roles was coincidentally reported in the same issue of the Financial Times, and the day before in the London Sunday Express. According to these reports, in February 2007 3M acquired a life-saving health care product called BacLite, invented by the research arm of the U.K. British Ministry of Defence (MOD).
The matter is now in litigation in the U.K. between the equity investors in BacLite, called the Porton Group, and 3M. The case is supposed to go to trial sometime this summer. (Full disclosure: I am an attorney and represent the Porton Group in America, but am not involved in conducting the U.K. litigation, and have relied in this piece only on public facts and documents in the U.K. legal filings and elsewhere.)
Some brief background: The U.K. MOD developed BacLite using photo-fluorescent technology while it was searching for detection systems of biological weapons of mass destruction. BacLite is a fast and reliable way for detecting the "superbug" MRSA -an antibiotic-resistant strain of staph infection that ravages hospitals and reportedly kills more people annually than AIDS.
The MOD wholly owned subsidiary Ploughshare Innovations received equity backing from the Porton Group and won E.U. regulatory approval for BacLite to be sold to hospitals in Europe and the U.K. They formed a joint company, Acolyte, to market and sell the product. [The British Government] owned 40% of Acolyte, and Porton owned about 60%.
In 2006 3M approached Ploughshare and Porton to sell Acolyte and BacLite. There is reason to believe CEO Buckley was personally involved in expressing interest in that purchase. 3M knew BacLite had already been approved for sale by E.U. regulators. 3M convinced Acolyte (Ploughshare/Porton) that it had the expertise both to market health care products globally, especially in the hot U.S. market, which it promised to do "actively" in the contract through the end of 2009, and to obtain regulatory approvals in the U.S., Canada, and Australia, which the purchase contract required them to "diligently" pursue.
The purchase contract was signed in February 2007. 3M paid a modest [GBP10 Million] down, with a promised payout of up to GBP41 Million pounds, 40% (or up to 16 million-plus pounds) would be paid to [the British Government], i.e., British taxpayers, through the end of 2009, depending on the sales achieved under 3M's ownership.
Yet just nine months after 3M's purchase of Acolyte/BacLite, according to the public legal papers filed by the Porton Group, 3M failed to follow the same protocols that had been used to test and obtain E.U. regulatory approvals and failed to obtain the U.S. Food and Drug Administration (FDA) approval.
Why? According to the publicly filed legal papers, 3M's own internal 11-member technical committee found 3M had made multiple errors in the clinical trials - such as refrigerating Petri dishes growing possible MRSAs at temperatures below permissible levels, and thus potentially artificially inhibiting the growth of MRSAs. 3M also used a different "comparator" for testing BacLite's reliability as had been successfully used in the E.U. clinical trials that led to E.U. approval. According to the legal filings, 3M also failed even to try to obtain regulatory approvals in Canada and Australia, which, as noted above, the contract had required it to do so "diligently."
Then, according to the public legal filings in the U.K., 3M decided not to try again to fix the errors identified by its own internal experts and to try again to get FDA approval. This was especially surprising given that 3M, as a public company, owed a fiduciary duty to its shareholders to maintain its public reputation as a company with integrity that cares about the public good and public health. BacLite, after all, was a product that could possibly save lives if introduced into the U.S. hospital market and fully tested and developed for practical use.
Pete Hotten, the CEO of MOD-owned Ploughshare Innovations, was not too happy about this decision.
"We are disappointed that 3M Corp. failed to get an excellent diagnostic technology into the market through what 3M's own officials describe as avoidable mistakes," Hotten said in an e-mail. "Ploughshare believes 3M's decision not to reapply for FDA approval is contrary to its obligation to its partners."
Why would 3M risk alienating such an important customer as the British Ministry of Defence, or at least those proud of their invention of BacLite? Wouldn't a chair of 3M, were he a different person than Buckley, have questioned Buckley on why 3M didn't use the same approach to obtain FDA approval as had been used to obtain E.U. approval - or at least try again in the public interest to correct the errors its own internal experts had pointed out?
And what about 3M's decision in the summer of 2009, with six months still to go in the purchase contract with Ploughshare/Porton, to announce it was facilitating the marketing of its own health products division's product - a competitive, more expensive technology - to detect MRSAs? Might not a different person acting as chair of 3M have said to Buckley: "George: The optics on this aren't too good. Can't you wait at least until the contract period with the U.K. MOD company is over?"
It is true that once 3M pulled the plug on the rest of the contract, it returned the BacLite technology to Ploughshare and the equity investors. But the company 3M had purchased that had previously marketed BacLite was by then, according to Ploughshare and the equity investors, decimated - i.e., it had lost most of its sales force, distribution network and good will of those customers who had purchased BacLite detection systems on the premise it would be supported in the early stages of development with training and upgrades. Now that isn't possible, at least not in the short term. And lives are still at risk from MRSAs in hospitals in U.K., the U.S. and throughout the world.
So instead of attacking President Obama and threatening to move 3M to Mexico or Canada, perhaps Buckley and 3M should go transparent and voluntarily answer all these questions affecting the public's health. That is one of the fundamental rules of crisis management--if you don't go transparent yourself, then someone else might force you to, and you are worse off. If 3M doesn't do so voluntarily, then perhaps it's time for U.S. public health officials and regulators to require it to do so.
And perhaps shareholders too will want to know - and perhaps so should the Securities and Exchange Commission - why there wasn't full disclosure of material nonpublic facts, if any, concerning these decisions, facts which might endanger 3M's reputation and adversely affect share values once the full story is known.
Lanny Davis is a Washington, D.C., attorney in the firm of Lanny J. Davis & Associates, and represents the equity investors in BacLite, the Porton Group, that have sued 3M in the U.K.; he is not participating in that litigation. Davis is also a partner in the strategic communications and consulting firm of Davis-Block, which has also worked for Porton. He is a former special counsel to President Clinton in 1996-'98 and a member of President Bush's Privacy and Civil Liberties Oversight Board in 2006-'07.