The Pharmaceutical Industry Increasingly Looking Inwards for Leadership Roles Despite Significant Challenges on the Horizon 

White Papers | July, 2016

By Alin Popescu

Shareholders and management consultants have often expressed the concern that the pharmaceutical industry has been hiring for key leadership roles from a restricted pool of company insiders or shortlist of pharmaceutical industry veterans. While this has given the boards of these companies deep scientific and technical expertise it may have slowed the industry’s development by inhibiting growth of a broader skillset.

Whilst nobody would deny the importance of technical and scientific understanding at board level in healthcare companies the side effect can be a perceived lack of diversity. This is particularly relevant in a climate where pharmaceutical companies face significant challenges including declining R&D productivity, increased threat from generics, and pressure on margins from key customers. Such major problems may require innovative thinking both at a strategic and at an operational level. Bringing in fresh thinking from outside the sector could deliver that.

So is the pharmaceutical sector really so restricted in its appointment of board members as some suggest?  Have they the range of skills needed to overcome the challenges that face the industry over the coming years?  To shed some light on this we analysed the board composition of over 24 of the UK’s largest pharmaceutical companies and the top five European pharmaceutical giants (see appendix below) to examine the background of their directors.

Executive Summary

  • A quarter (26%) of executive directors on the main boards of UK-listed pharmaceutical companies are recruited from outside the industry, down from two-fifths (40%) in 2010.
  • Just over a quarter (28%) of all board-level directors had no prior pharmaceutical or biotech experience.  In 2010, this was two-fifths (40%).
  • Just 15% of board-level directors possess experience outside of the pharmaceutical, biotech or banking sectors, falling from more than a quarter in 2010 (28%).
  • European pharmaceutical companies are more likely to have board directors with experience outside of the pharmaceutical, biotech or banking sectors than UK competitors. Over a third (34%) of directors held expertise gained from another sector.
  • The proportion of executive directors with non-pharma backgrounds was lower in European pharmaceutical companies (23%) but almost half (45%) of all board-level directors had experience outside the pharma and biotech sectors, indicating that the majority of non-executive directors have backgrounds outside the sector

Table 1: Pharmaceutical Board experience UK




Executive  board members with no pharmaceutical or biotech experience



All board members with no pharmaceutical or biotech experience



All board members  with no pharmaceutical, biotech or banking experience



Table 2: Pharmaceutical Board experience - Europe



Executive  board members with no pharmaceutical or biotech experience


All board members with no pharmaceutical or biotech experience


All board members  with no pharmaceutical, biotech or banking experience


Our research found that the UK pharmaceutical industry’s use of executive directors with backgrounds outside of the sector has fallen substantially over the last five years, to just a quarter (26%) in 2015 from two-fifths – or 40% - in 2010.

There is also a similar trend across all board members (both executive and non-executive) as just 28% of directors possess experience outside of the pharmaceutical or biotech sectors, compared to 40% in 2010. So we see what had been a very healthy use of executives from outside the pharmaceutical sector reduce over time.

Percentage of executive directors with non-pharma expertise on the main boards of UK pharmaceutical companies nearly halves since 2010


Percentage of all board members (both executive and non-executive) with non-pharma or biotech experience has also fallen at a similar rate


Our research also found that where there are board directors without pharmaceutical or biotech experience, the vast majority instead have a background within the investment banking/commercial banking industry, bringing skills in financial engineering and deal making, but possibly lacking operational expertise.

Just 15% of all board directors possess experience outside of the pharmaceutical, biotech or banking sectors which has fallen from almost a third since 2010 (28%).

Percentage of all board members with no pharma, biotech or banking experience on the main boards of UK pharmaceutical companies has almost halved in the last five years


However, UK-listed pharmaceutical companies did outperform their major continental European rivals in hiring executive directors from outside the pharmaceutical sector – less than a quarter (23%) of executive directors at the European pharmaceutical companies in our research possessed non-pharma backgrounds.

On the other hand, the research suggests that European pharmaceutical companies have a better record at recruiting board-level directors with non-pharma or biotech backgrounds, with almost half (45%) of all board members possessing experience outside the pharma and biotech sectors.

European pharmaceutical companies have greater sector diversity among non-executive board members than the UK.


Recent research from PwC found that this trend is reversed amongst CEOs in other sectors. The research shows that between 2012 and 2015 almost a quarter (22%) of all CEOs brought in via a planned succession had experience from outside the sector, an increase from 14% in 2004 to 2007.

There are questions over whether the shift towards ‘inward’ focused leadership at some pharmaceutical companies may make it harder for companies to overcome the challenges facing the industry, having impacted the industry’s ability to adopt best practice from other sectors.

Furthermore, with little non-pharma expertise at board level could companies inadvertently become more resistant to change?

Challenges facing ‘Big Pharma’ companies and the lessons learned from other sectors

The primary reason for pharmaceutical companies to increase the range of experience among their leadership teams is to tackle the new generation of challenges facing the industry. Those who have worked in sectors which have already overcome similar obstacles will prove a valuable asset.

 Current and future challenges to pharma companies include:

a)         R&D productivity and a shortfall in innovation

The output of the pharmaceutical sector’s multi-billion pound R&D pipeline has caused concern with returns on investment in R&D falling and fewer new ‘blockbuster’ drugs coming onto the market. Research by Deloitte recently found that returns on R&D activity in the pharmaceutical sector fell from 10.1% in 2010 to just 4.2% in 2015.

The models and processes used in the sector have in some ways remained fundamentally unchanged since the advent of modern medicine, with some in the pharmaceutical industry viewing any signs of change as a temporary and undesirable disruption to ‘business as usual’.

As R&D involves the analysis of huge volumes of data, the pharmaceutical sector is being encouraged to look at how other sectors - from banking to retail - have embraced ‘big data’ to stimulate innovation and ensure they utilise the opportunities that data science offers.

b)         Pressure from customers over efficacy of drugs

Healthcare customers are scrutinising the value of medicines and demanding more efficient and cost effective results; in addition to greater ‘real-world’ evidence to support a product’s advantages.

The aerospace and semi-conductor sectors have faced similar scrutiny and have responded with robust and advanced quality systems to enable products to meet customer demands. For example, the semiconductor industry has moved towards a model of building in ‘manufacturability’ from the very earliest stages of R&D, by increasing the use of standardisation wherever possible. The semiconductor industry has also broadly adopted a ‘built-in’ approach to quality assurance, resulting in lower variability of products than is generally achievable with a traditional ‘inspection-based’ approach.

c)         Cost challenge and generics

There are many issues which can lead to significant supply chain costs, such as overstocking/understocking of inventory, low inventory turnover rates and manufacturing lead times, all of which can impact profitability. For pharmaceutical companies in particular, concern remains that some companies retain too high a cost base when faced with competition from generics.

The FMCG sector is often held up as good example of how to manage a global supply chain and reduce costs through vendor-managed inventory and serialisation systems. These are key practices which pharmaceutical companies are recently starting to adopt to improve efficiencies.

The FMCG sector has also encountered supply chain issues such as counterfeiting, inventory management and long manufacturing lead times, all of which are also key issues facing the pharmaceuticals industry.

Best practice examples: Where the pharmaceutical sector has broadened its skill set at board level 

It is surprising that there has been a decline in the number of main board executive directors from outside the pharmaceuticals, bio tech and banking sector, and this does seem to run counter to practice across other industries. For many pharmaceutical companies it may be the case that leaning towards proven performers in their own sector is attractive in a slightly uncertain time.

However, given the nature of the issues facing the industry, leaders with backgrounds in other areas – FMCG being a great example – may be able to better leverage their experience in facing similar challenges elsewhere. A lot of leaders from the FMCG sector have experience of achieving substantial cost reductions in recent years by completely overhauling their supply chain models. Pharmaceutical companies could well derive significant benefit from that skillset.

The same applies when hiring for compliance roles, currently a critical area for pharmaceutical companies. Hiring an individual with experience in an already heavily regulated industry with a longer compliance tradition, such as financial services, could be advisable

Although DHR International’s research showed an overall decline in sector diversity, it also flagged up several examples of “best practice” where European pharmaceutical companies have hired talent from outside the pharma and biotech sectors in order to ensure a diverse range of skills at board-level. Examples of “best practice” include:

  • The Chief Executive Officer of Novartis International AG, has previously served as CEO of the European and North American divisions of businesses of Heinz. Joseph Jimenez has also served on the Board of Colgate Palmolive for six years.
  • In 2015, France-based pharmaceutical giant Sanofi appointed Suresh Kumar as Executive Vice President, External Affairs to its Executive Board. Suresh Kumar was previously Vice President of the Worldwide Consumer Pharmaceuticals at Johnson and Johnson as well as a member of the group’s operating committee. 
  • Hutchison China MediTech, with a market capitalisation of £1.15bn, recruited current CEO Christian Hogg from consumer goods giant P&G. Christian Hogg had spent 10 years at P&G, including roles in the US, China and Belgium focussing on areas including laundry and cleaning products, detergents and bleach.
  • SkyePharma (market cap of £477m) recruited Peter Grant as Chief Executive Officer in January 2012, having been a board member since November 2006. Peter Grant offered a skillset developed in previous roles at Worldpay, the FTSE 100 payment processing company, EURIDOS, one of Europe’s leading logistics networks and US multinational giant General Electric.
  • Roche’s current Head of Group Communications and member of Executive Board was hired in 2010 from Siemens, Europe’s largest engineering company, where previous roles included Head of Communications for its Healthcare sector. 

Our research suggests that since 2010, the pharmaceutical sector has opted to recruit board-level talent within the sector, rather than expand their search into other sectors. Where board-level hires do have non-pharma experience, this expertise often lies in the banking sector where they are recruited as Financial Directors or with a specific remit such as advising on deal making.

 Whilst boards with large proportions of pharma experience still perform strongly, injecting additional skillsets from more consumer-facing sectors could bring the fresh insights at a strategic and operational level needed to boost performance.

This is particularly the case when recruiting from sectors which have already encountered comparable challenges to those which the pharma industry is currently facing - FMCG being a great example.

Those companies forward-thinking enough to broaden their slate of candidates and look beyond their immediate competitors for the next generation of executive leadership may well be the ones that emerge from this period of uncertainty with stronger boards.