We continue our series of conversations with IROs at Fortune’s World’s Most Admired Companies on managing financial reputation when pressure is the most intense.
Starting with the onset of the pandemic in 2020, companies across all sectors endured a difficult run of macro events that included the supply-chain disruptions of 2021 and market decline into bear market territory in 2022.
The annual Fortune ranking is the most comprehensive survey of public perceptions on companies with revenues greater than $10 bn in more than 50 industries across regions. The IROs represent companies that also rate highly for the financial measures surveyed – specifically, long-term investment value, use of company assets and financial soundness.
Here we catch up with Jessica Moore, vice president of investor relations for Johnson & Johnson (J&J), for the second of three articles.
You bring 20 years’ experience in finance and healthcare to your role at J&J. While nothing could quite prepare one for a global pandemic, did being at a company with the knowledge and history of J&J provide any advantages?
As circumstance would have it, I joined J&J in the first quarter of 2020 and after a few weeks in the office, the pandemic shifted our teams to a virtual setting. I had never met most of the people on the extended management, finance and communications teams in person at this point, but thankfully the culture at J&J helped me to overcome that. The response and support I received from people was just amazing.
To directly answer your question: yes, absolutely – every single person at J&J contributes in some way, shape or form to the information we communicate to investors. From the start of the pandemic through the events of the past few years, we were in frequent contact with colleagues across all different levels, regions and functions of our business.
What were the internal discussions like ahead of that first earnings call following the onset of the pandemic?
Each earnings season, we’re one of the first companies to report our quarterly results so, even in a normal environment, we’re a bellwether for the sectors in which we operate. In the run-up to the call, one of the many issues we confronted as a team was how to handle the guidance we had provided to the investment community. Investors in those early days were challenged in how to adjust their models and a few companies had begun to withdraw their guidance. It was a moment in which our CFO, Joe Wolk, who previously led IR, understood the precariousness of the market.
We ultimately decided to update rather than withdraw our guidance and, as Joe put it to The Wall Street Journal, ‘One thing I know for certain is that we’re going to get it 100 percent precisely wrong’. We broadened the range and had a detailed discussion on the earnings call around the assumptions that were made from segment to segment and in some cases by product. It was done with a sense of responsibility, honesty and humility and, as a result, investors responded positively to the effort we made in reducing some of the uncertainty and angst, while still understanding there would be volatility.
What strikes you as essential to managing through turmoil?
From my perspective, you can’t do this job if you don’t have credibility. It’s our duty and responsibility to celebrate when things are up and also be transparent when there are things we could’ve done better. The strength and character of the team really becomes apparent during those times when the pressure is on.
Getting to the right response requires a lot of work in a short timeframe and you have to be conscientious. J&J, despite its size, has a non-hierarchical culture in which people are encouraged to bring their best ideas to the table. You also really need to know your story. When market-wide turmoil hits, investors go back to the thesis. Is it intact? Is it broken? You can’t simply continue normal-course communications during such times.
J&J was early in communicating to the markets that potentially disruptive supply-chain issues were coming. Why was that?
Companies all along the value chain have been managing through a lot in recent years. A few months into the pandemic, different teams at J&J began elevating labor and supply issues. Given the nature of our products – which can be life-saving – we have extensive contingency plans in place. Nevertheless, complications were inevitable, and we had a responsibility to communicate to the doctors, nurses and patients who rely on us. It gets to the heart of J&J’s credo to be responsible to the communities in which we serve and help people get healthier, which we always put first when making decisions.
In addition, we had a responsibility to communicate to investors. As the issues weren’t affecting all products across the board, we identified specific products likely to be affected, actions that were under way, parameters of uncertainties and potential financial impact. This analysis allowed us to place these issues in the context of an incredibly diversified company with $95 bn in annual revenues.
What can management and IR do to assuage employee concerns during challenging economic times?
I think it’s important in any environment for all employees to understand the financials and the questions Wall Street is asking about the business. As part of the quarterly earnings process, we produce an internal video with Joe for distribution to the whole organization where he talks about the results in an accessible and engaging way that makes people want to watch. During the year, IR is continually asked to speak to different groups within the company about conversations with analysts and investors and what’s important to know.
We also put out an internal series in which Joe goes deep on certain subjects – such as M&A, business transformation and ESG – that are viewed by thousands of employees across the organization. Again, the information is presented using language that helps non-financial audiences understand these financial topics and their ability to have an impact on them. Communicating internally is in our DNA. Again, you don’t want to wait until challenging times to discuss the financials.
As a mega-cap, J&J has a massive buy-side following. How does the IR team manage to stay meaningfully engaged with target firms outside of the standard investor conferences, non-deal roadshows, and so on?
Investors really value access to management, whether in one-on-ones or small group settings. We have a lot of ground to cover and we’re grateful to be able to offer access to several different leaders. In addition to attending conferences, we frequently lead mini-events for the buy side during intra-quarter stretches between earnings as part of the IR arsenal.
After each quarterly earnings conference call, we have a standing buy side-only call to enable direct Q&A with management. We also host several individual and group meetings at medical congresses, which provide investors with access to additional leaders along our deep bench, including scientists and researchers working to develop the pharmaceutical pipeline, new devices and breakthrough technologies. And, of course, we frequently schedule one-on-ones with investors including analysts, fund managers and steward teams.
We’re continually mixing in person and less formal virtual settings and we’re meeting a wider circle of people inside target firms who are involved in the investment process beyond the buy-side analyst. Last year, through the team’s efforts, we had 30 percent more interactions with our top 100 buy-side firms, compared with the prior year.
In what ways are you using technology to enhance reporting and marketing?
J&J teams are always evaluating new technologies for process efficiencies. Finance is going through a transformation right now to enhance analytics through artificial intelligence-driven (AI-driven) predictive data. Similarly, we’re assessing different tools that could be part of the IR dashboard of the future.
I think the potential of new technology is particularly exciting for IR teams given the traditionally small team size. As mentioned, we’re one of the first companies to report and one tool we’ve started using leverages AI to generate sentiment scores for companies based on management language contained in public transcripts. This gives us a read on the tone for us and relative to competitors.
Why do you think J&J outperformed other mega and large-cap stocks over the past few years?
Despite the variables, the logic for investors in a downturn is relatively straightforward. J&J is the largest, most diversified healthcare products company in the world. This, coupled with our consistent financial discipline, which can be seen by being one of only three companies with a AAA-rated balance sheet, makes J&J a stock of choice, especially when there is volatility in the market.
Despite the challenging macroeconomic environment during 2022, this financial discipline afforded J&J the ability to deliver on all four of our capital allocation priorities with our largest operational R&D investment in the company’s history, maintain our Dividend King status with our 60th consecutive year of dividend increases, complete the $17 bn acquisition of Abiomed and complete half of our $5 bn share repurchase program – performance we are extremely proud of.
J&J announced plans to separate its consumer health segment Kenvue in late 2021. Did the market’s 2022 descent into bear territory give the management team any pause?
Our leaders and IR team are always monitoring the market, big trends or how events are playing out. In internal discussions on Kenvue, however, the team always returned to the fact that we were doing this from a position of strength and that the separation would enable each company to drive growth more effectively and unlock significant value. The success of Kenvue’s IPO demonstrates just this.
As we transition to a two-sector J&J, we have high expectations for the future. The scale and breadth of our capabilities, portfolio and pipeline are truly unique in our industry. While we will be a new version of J&J, our overarching mission remains the same: to sustain a strong Johnson & Johnson over the next decade and beyond, one that’s grounded in our credo and with patients at the center of everything we do.
Jonathan Mairs is director of investor communications at Imagination. Next week, he will be in conversation with Mikael Grubb, head of investor relations for JPMorgan Chase & Co