Citizen Kraemer: How baxter international's chief Harry Kraemer learned to stop worrying and love sustainability. . - Sustainability - Harry M. Jansen Kramer Jr., Baxter International Inc. Deerfield, Illinois

Chief Executive, The, Feb, 2002 by Bill Birchard

On Nov. 13, 1998, a coalition of activist investors, led by advocacy group Healthcare Without Harm, filed a shareholder resolution with Baxter International, a provider of biomedical therapies and equipment with approximately $7.6 billion in revenues. The resolution demanded that Baxter "adopt a policy of phasing out the production of polyvinyl chloride plastic." PVC comprises many of Baxter's leading products--products as common as IVs, blood bags and dialysis tubing.

The resolution was like a draft indictment. The activists claimed that PVCs release carcinogenic dioxins during waste incineration. They also claimed that compounds in PVC leach toxicants that can damage testicular development in newborn boys and put dialysis and AIDS patients at risk.

The filing of the resolution was a critical test for then-President Harry M. Jansen Kraemer Jr., who would become CEO two months later. The investor group, a coalition led by the Interfaith Center for Corporate Responsibility, the New York group at the center of socially responsible investment, was preparing to confront Kraemer at the annual meeting. Baxter's manner of responding would establish the company's reputation as a good corporate citizen--or an errant one.

Kraemer issued a challenge to his people that set the tone for the negotiations that followed: "Can we sit down with these folks and -- rather than let them think they're sitting down with corporate drones who aren't listening -- can we convince them that we really care? We want to be involved, and we want to be sure we're doing the right thing."

When the activists traveled to Baxter headquarters in Deerfield, Ill., the company dispatched a group of top brass to meet them. Among them were the company's vice presidents of advanced technology, quality management, environmental affairs and IV systems, along with the corporate secretary, senior research scientist and medical director. Charlotte Brody, head of Healthcare Without Harm, came with three colleagues, a Greenpeace activist and three institutional shareowners representing tens of thousands of Baxter shares held by socially responsible investors.

The verdict by the activists? "A very impressive meeting," says Rev. Gordon Judd, representing 46,600 shares held by Detroit's Sisters of Mercy retirement plan. "They do their homework."

"They allowed an open, heated dialogue that made all of us smarter," adds Brody. "They had the people who could make the decisions at the table... It wasn't just public relations and investor relations [people] to politely disregard everything we had to say."

In a memorandum of understanding, Baxter agreed to three points: to inventory its PVC products, set a phase-out schedule and refrain from letting PVC trade groups include Baxter in advertising. In return, the activists withdrew their resolution, relieving Baxter of bringing it to a vote at the annual meeting.

Kraemer and his executive team thus won a key early battle in bolstering the company's reputation as a good corporate citizen. The activists laud Kraemer as supportive, knowledgeable and, in Brody's words, "gracious."

Alpine epiphany

An imprimatur from social investors and activists isn't something Kraemer has been seeking. But he's glad to have it. In his tenure as CEO since January 1999, he has vowed to make the world a better place at home, work and internationally. "Somebody has to do this," he says. "Why shouldn't it be the 45,000 people at Baxter?"

Championing citizenship used to be an unusual activity for CEOs. Such was the idiosyncratic domain of Ben Cohen at Ben & Jerry's and Anita Roddick at The Body Shop International. But Kraemer, 46, differs from early practitioners, whose efforts had a revolutionary flavor. To Kraemer, corporate citizenship is simply a sensible business strategy whose time has come. "He puts the same energy into this part of the business as he does the financial part," says Martha Ingram, a board member and chairman of Ingram Industries in Nashville.

Kraemer, who graduated summa cam laude from Lawrence University in Appleton, Wis., in mathematics and economics, loves the hard numbers of business. He received his Master's degree in finance and accounting from Northwestern's Kellogg School. But Kraemer has always had an eye on the big picture. After starting with Baxter in 1982, he became in 1993 one of the few CFOs who saw value in environmental management.

In 1996, when many CFOs still viewed "green" management as a way to spill red ink, Kraemer saw otherwise. "Being an environmental leader is one of the most important things we can do to be a global leader," he said at the time. In part because of his support, Baxter has for years issued one of the rarest of documents: an environmental profit/loss statement -- which shows that Baxter netted $12 million in savings during 2000 as a result of its environmental programs.

In 2001, Kraemer began the year with three big goals: to be the best team, the best partner and the best investment. But in February 2001, he attended the World Economic Forum in Davos, in the Swiss Alps. That year, the annual summit of business leaders drew record numbers of anti-globalization protesters -- and unprecedented discussion about corporate responsibility. Klaus Schwab, president of the Forum, called on corporate bosses to make the world a better place.