Introduction

It was a rainy afternoon back in 2003, when I got the phone call that could have been the beginning of the end of my family's then 107-year-old company. “You must come to Basel immediately,” the man on the other side of the line said. “Come to my private home.”

Alarmed, I got into my car, typed in the address in what was then still a brand-new technology—the GPS navigation system—and … almost got lost. (GPS navigation wasn't as smooth and reliable as it is today!) The device instructed me from my home through the forested back roads of Switzerland to the northern border city of Basel, just as a heavy rain poured down. It was like being in a movie.

When I finally got to my destination, I got the news. “We have just received a call from Novartis,” Fritz Gerber, the then-chairman of our family company, Roche, and a confidant of my family, told me. “They are interested in acquiring the family shares.”

I hadn't been expecting that message. Over the course of more than 100 years, my great-grandfather Fritz Hoffmann and his descendants helped grow Roche from an experimental pharmaceutical start-up into the global pharma leader it was when I joined the board in the mid-1990s. Roche had been among the largest pharmaceutical companies in the world for most of its existence. It certainly was one of the world's largest family-controlled companies. And it had never been any generation's intention to change that legacy.

We had seen ups and downs, both in the company's fate and that of our family. Nevertheless, the company had created value in the long run, and had a symbiotic relationship with our hometown of Basel, the country, and the health industry at large. We had also managed to hold on to the majority of voting shares in our company, even as our overall shareholding had diluted, as 20th-century history affected us and our company. Now, a large minority shareholder had just sold its voting shares to Novartis.

As I let the news sink in, my mind went to what a potential merger would mean for others. What good would it bring to Basel, Switzerland, the pharma industry, or the economy at large? Novartis was our neighbor across the Rhine. It was itself the result of a merger of two 19th-century competitors of ours—Sandoz and Ciba Geigy. I respected the company as one that kept us always alert. They were a constant reminder that in a free-market innovation and competition are crucial to survive. But it was never anyone's intention in the family to merge, and we weren't alone in seeing things that way. “Bread is better in a town with two bakers,” one of our new top executives would say. The merged company would lead to market concentration certainly in Basel and Switzerland, and to a certain extent the global pharmaceutical industry as well. It would bring a lot of social disturbance to the combined company—and it wasn't certain it would be better for other stakeholders, either.

Still, we faced a difficult decision. Although the resulting company would bring an end to our ownership, it would also enable the merged company to take a fresh start. As a family, we had taken a hands-off approach to Roche's ownership for decades, mostly since my grandfather's untimely death in a car accident in the 1930s. Entrusting the company's day-to-day management to nonfamily members worked well for a long time, but cracks had started to appear. Just a few years earlier, our company had gotten in trouble, being convicted in the US after a vitamin price-fixing scandal. Roche was obliged to pay a multibillion-dollar fine. And all of us with ties to the company had had to accept that this had happened under our watch. The fact that as owners, we had been ignorant about such practices and failed to prevent them from happening, had sown doubt even among ourselves about our ability to steer the company into the 21st century. Wouldn't everyone be better off with the proposed merger, after all?

As I drove back in the middle of the night from Basel, those conflicting thoughts were on my mind. As one of only two family members on the board, many of my relatives would look to me to come up with a first reaction. And I had to admit: If someone made an offer for the entirety of our company, it was probably because the company was undervalued. We—and I—needed to think hard about what our added value as family owners was.

We also had to answer the imminent question in front of us: Do we go to the “safe” route of cashing in, and allow the two industrial assets to merge? Or are we willing to fight on our own, with a lower financial return in the short term, perhaps, but potentially also a better long-term outcome for shareholders and stakeholders?

Today, as I think back of those events two decades ago, I realize that in that moment of crisis also lay the start of my vision for our company and the role of business in society more broadly. We did in fact maintain our independence, and built the Roche of the 21st century, following the north star of “doing now what the patient needs next.” Product-wise, drugs like Tamiflu and several of our oncology drugs became big successes in the years following the takeover bid, helping millions of people, and proving the value of the raison d'être of our company to patients. They also proved to be a financial vindication of our approach, as Roche surpassed Novartis in market capitalization in the 2010s, after trailing it at the time of the bid.

Before we got there, though, there had been many things to sort out, including about our purpose. I had had to define for myself and my family members what my proposed alternative to a merger would look like—and why it was better. As I had mulled this over, my basic belief had come to be this: A company does not exist solely to make money for its shareholders in the short term. Novartis, Roche, or any other company should not simply aim to maximize profits or “total shareholder returns” in the next quarter or year. Of course, from the narrowly defined view on “fiduciary duty,” any well-meaning advisor would have been excused to tell my family at the time—or any shareholder of a takeover target—it was better to sell. But it would not have advanced what I now see as the central responsibility of a company and those who own it: to create sustainable and inclusive prosperity. The new nature of business, I came to believe, had to include adding value to society, and doing so in an inclusive way that doesn't harm the environment.

Why do I want to tell this story, and that of my journey? Because after many decades of peace and prosperity, the societies we are part of are faced with turmoil, and even existential threats. Just as my family members and I were at a crossroads 20 years ago (or Roche's previous stewards were in the turbulent first half of the 20th century), I feel like all of us are today. In my family, a new generation is getting ready to steer business and the economy into a new direction. The narrow context in which my children and their cousins will need to reinvent the family business is one where new Roche products and offerings need to be brought to market, as a previous generation of “blockbusters” loses steam. But the next generation also needs to reinvent the business model in a broader context, where no business can be unsustainable any longer in the environmental and societal sense. Businesses need to be regenerative, adding more to society and the planet than they take from it, whether from a natural resource, financial, human, or societal perspective.

Collectively, we haven't yet figured out how to meet that challenge, and time is running out. Will we continue to think and act in the short term and in our narrow self-interest, or will take a more enlightened approach? As you—the current and next generation—tackle this question, I hope you can build on the insights I gained throughout the years of stewarding Roche.

Of course, companies and their owners, management, and employees cannot solve all the multitude of crises we are facing today—at least not alone. But by taking our responsibility, we sure can do more than they are doing today in creating the sustainable and inclusive prosperity we so badly need. Today's economic actors still destroy more value than they create, mostly because they don't account for the natural, social, and human externalities they bring about. That upsets me, as it means we are sleepwalking toward more disasters in the future.

But at the same time, I'm not a doomsday thinker. My frustrations lead me neither to despair nor a blanket j'accuse toward my peers. I do not believe we are helpless in the face of the crises we are confronted with. I also do not believe we need an actual revolution to turn things around. (My mother's family was dispossessed of their estates in Central Europe, after a revolution brought the communists to power there. They would not forgive me for such failure to learn from history.) In fact, besides being an environmentalist I am also a capitalist, and I believe capitalism can provide the answers to the challenges we are facing.

As vice-chairman of a family-controlled company, the prosperity I enjoy came about because of private ownership, free trade, competition, and innovation our company could benefit from. At the same token, the society I am part of benefited from our family company's entrepreneurship as well. Basel today is the prosperous town...