CFO Studio Magazine with Dominic Caruso, CFO, Johnson & Johnson

Q4 2016 WWW.CFOSTUDIO.COM 9 teach you more about yourself.” Caruso’s first thought was, “Why would I want to do that?” And even though it was a beautiful, clear day, he remembers imagining the storm he would be entering in a new, unknown environment. As it turned out, taking that job was one of the best moves of his career. “I expanded my network and exposure across the company and was able to demonstrate my value beyond the pharmaceutical sector. Being new to the role allowed me to ask probing questions that my business partners may not have been asked in a long time.” He didn’t mind challenging the way things had always been done. Leaving behind a niche he knew well and immersing himself in a far different one gave him an opportunity to say, “Wait a minute: What am I really good at?” “We all have unanswered questions,” says Caruso. “You just have fewer and fewer of them as you go up the ladder.” Caruso proved that he was good at leading, not just good at what he did in a particular sector. He was named CFO of J&J in 2007. At that time, the stock price was around $50; today it’s climbed to an all-time high above $122. Long-Term Value Caruso seems formal but comfortable during an interview and in between other pressing obligations. He is gracious with his time and articulate. We were in a small con- ference room down the hall from the office where he had met with Darretta 13 years earlier, talking long-term versus short-term value. A few weeks prior, Larry Fink, the CEO of BlackRock (which is one of J&J’s top-five shareholders), sent a letter to chief executives of the S&P 500 urging them to lay out for shareholders their value-creation plans each year. When asked his reaction to that letter, Caruso says, “First of all, I was glad that he called upon CEOs to take a longer-term view of their responsibilities to shareholders and to not be overly influenced by short-term thinking.” Caruso notes that many of the shareholders he meets with are “long-term, loyal J&J shareholders,” though he does meet some who wish J&J would do more share buybacks. “That’s more of a trader mentality than an investor. The majority of our shareholders have more of an owner mentality,” he says. “I think [Fink] was appropriately critical of companies that just react to short-term shareholder demands, and he was giving at least his endorsement to say, ‘Look, there are other shareholders who have your back.’ And that’s good to know.” Caruso remarks that CFOs in the pharmaceutical industry tend to be more long-term thinkers compared to those in other sectors, because they are used to an environment where development times are drawn out. “You’re more patient, you’re making long-term investments, you’re continuously funding research and development to find cures.” Later, he says one of the most exciting parts of his job is watching innovations become reality. For example, the finance team was involved in structuring a transaction with Genmab, a Danish biotech company, whereby J&J and Genmab would co-develop a drug for multiple myeloma. Subsequently, in 2013, the therapy received Fast Track designation from the FDA. Finance has been in the mix at each juncture in the product’s development, he says, and now the drug “is benefiting patients.” Caruso has a deep personal interest in health-related causes. He is on the Board of Trustees of the Children’s Hospital of Philadelphia. His partner through 40 years of marriage, Debbie, also has a strong interest in the health and welfare of children. They have three grown children and nine grandchildren. Because one of his grandchildren has cystic fibrosis, Caruso became involved with the Cystic Fibrosis Foundation – Delaware Valley Chapter. He serves on the Board, and helps raise money to find a cure. Besides being a family man, Caruso is a guitarist (rock, jazz, classical) and a golfer. He says he would enjoy having a superpower that enabled him to be in two places at one time. “If I could come to work and do what I love doing here, but also spend time at home simultaneously, that would be fantastic.” The J&J organization has 50 other CFOs around the world reporting to him. They meet annually to discuss who is going to succeed whom, choosing from around 5,000 finance professionals in the J&J organizational structure. “I can’t possibly be involved in developing each of the 5,000 people,” says Caruso, “but I can be involved in the top 120 to 150 people: knowing who they are, seeing how they’re doing, making sure they’re answering those critical questions.” Thinking about succession and giving the top picks the right opportunities “takes some time, but it’s really important because if I don’t get that right, when I leave, I haven’t really done a service to the organization,” he says. Caruso doesn’t say so directly, but developing a successor who understands and will adhere to the principled business practices he has followed is how the CFO can best create long-term value. C “We all have unanswered questions. You just have fewer and fewer of them as you go up the ladder.”