Harry Kraemer's Moment of Truth

It's not any of that. What separates Kraemer from most CEOs you've read about is this: He is relentlessly authentic. He tells the truth, and he acts on his beliefs. "There are relatively few people in the world like Harry," says Donald P. Jacobs, dean emeritus at the Kellogg School. "Harry lives his life the way most of us would like to live our lives. What Harry says he believes in, you can put it in the bank. The way he treats his coworkers is the way he'd like people to treat him."

Kraemer has attracted attention for his vocal insistence that he remain a deeply involved dad to his five children - and for his hope that others at Baxter will get a life too. But that's just part of the deal. What he's done in a short time at Baxter is change the way an entire company thinks.

Back in 1993, Baxter International pled guilty to cooperating illegally with an Arab boycott of Israel. That same year, the U.S. Department of Veterans Affairs temporarily banned Baxter from selling to its hospitals, alleging that the company fraudulently oversold products to the government. Around that time, Baxter put forth a set of "shared values" for the company: respect, responsiveness, and results. The response would have seemed like typical corporate window dressing, a predictable, shallow response to public scrutiny, but for the guy who directed the effort: Baxter's newly appointed, 38-year-old chief financial officer, Harry Kraemer.

Respect, responsiveness, results - people at Baxter actually believe that stuff. "Do the right thing" - Kraemer repeats it ad nauseum. So does everyone else. People know what it means. And it sticks. That's why Kraemer could drive off that Saturday confident that Heller would act responsibly. "If I didn't think Al would do the right thing on this one, I had a much bigger issue," he says.

Do the right thing. "We have this situation," Kraemer continues, describing the filter crisis. "The financial people will assess the potential financial impact. The legal people will do the same. But at the end of the day, if we think it's a problem that a Baxter product was involved in the deaths of 50 people, then those other issues become pretty easy. If we don't do the right thing, then we won't be around to address those other issues.

"I'm not a very smart guy, so let's keep it simple. Think of any problem you need to deal with. There are a million pieces of information that can get involved in a decision. But let's get above the tree line and ask some simple questions. What is the issue? What are the alternatives? What are the pros and cons? What is the best solution? Life is complex, but you can boil the morass down to thinking simply."

"This Problem Will Never Happen Again"
Baxter could have ducked the blame. It could have pulled the filters ever so quietly from the market - and since the line accounted for less than $20 million in revenue, it's likely that few would have noticed. With some justification, it could have blamed Althin's former owner, since Baxter had only recently taken over the business. It could have blamed 3M, for that matter. It could have faulted the lack of cooperation from Croatian and Valencian authorities.

Too often, that is how it works in business. "You bring in lawyers and PR companies, and you find ways to say, 'This is not our fault,' " says Brad Googins, executive director of the Center for Corporate Citizenship at Boston College. Companies and their executives duck, shirk, and deny. And in doing so, they destroy trust.

On November 5, 2001, Baxter announced that it had identified the probable cause of the dialysis-patient deaths. In a press release, Kraemer made this statement: "We are greatly saddened by the patient deaths and I would like to extend my personal sympathies to family members of those patients. We have a responsibility to make public our findings immediately and take swift action, even though confirmatory studies remain under way."

Baxter could have stopped selling only the 10% of filters that needed repair. After all, those were the only ones in which the solution had been used. But the tragedy had compromised the entire Althin brand. And Baxter didn't have all of the facts; it never did see the filters from Croatia. Perhaps some patients had died from filters that hadn't been exposed to the solution. "Were we 100% confident?" Kraemer asks. "No. We didn't know."

So Baxter shut down Althin for good. It closed the factory in Ronneby and another in Florida. It took a charge to earnings of $189 million to cover the costs of the closure and its anticipated settlements with the families of patients who had died. By year's end, it would pay the Spanish families a reported $290,000 each. (The company won't confirm the amount or disclose the sums paid to families in Croatia, who also have settled.) The lone suit involving an American patient has also been resolved. The plaintiff's attorney in the case, Kenneth Moll, says that Baxter "behaved appropriately and responsibly."