The reputation and integrity of Cochlear, a market darling that could do no wrong for years, was under the microscope in what could only be described as a humbling experience for Roberts and his senior management team. Until the recall, Cochlear was mostly viewed as a good news story. It was an innovator and leader. Bad news was reserved for other listed companies.
Roberts says he relied on his own set of personal values to initiate and meet the daunting task of recalling thousands of suspect devices in the supply chain, from shelves and from within people’s ears.
“The CI500 series recall was pretty tough because of the unknown,” Roberts says. “At the time, you question how bad is it going to be? You’re actually facing a crisis situation. What I had to do was act and make decisions with extraordinarily little data.
“In uncertain situations, having a value system to fall back on helps guide you. But you need to be clear about your value system before a crisis emerges. In my case, it was a matter of what’s the best thing for the recipient or the patient?
“The recall cost was irrelevant. We didn’t know what the recall cost would be until sometime later. The welfare of Cochlear recipients was our number one priority. Everything else was secondary. It’s science before money.
“During the recall, people were saying ‘Cochlear has lost its reputation’ and all that sort of stuff. But to me, reputation is more about how you deal with the problem rather than whether you had the problem.
“In life things happen – but we didn’t sit there hoping things would work out. We were proactive rather than reactive. The danger of delaying a recall, or any major business problem is that you wait and wait and then it’s too late. It gets away from you and more and more problems emerge.
“You can find yourself in terrible difficulties. Then you have to shut down projects and lay off people.
“We saw our problems very early and went in hard. We believed we could manage it. We kept our growth initiatives going and we didn’t cut back on research and development.
“The share price (plunging) was the least of my worries at that point. It was a case of getting up a little earlier in the morning, going to bed a hell of a lot later at night and working through it.
“Anyway, I had the view that doing the right thing for recipients is in the best interests of shareholders.”
First strike
The market applauded Roberts’ efforts at damage control and the share price recovered. But shareholders were quick to rebuke the company on executive pay – landing a first strike in October 2012 – after more than 30% of shareholders voted against Cochlear’s remuneration report, which included awarding $1 million in options to Roberts.
If more than 25% vote of shareholders vote against a second consecutive remuneration report, a motion to spill the board will be put to shareholders.
Roberts acknowledged the shareholder backlash, but says remuneration is a board matter and “as CEO, I don’t want to comment further”.
