EXHIBIT 99.4
VEI INTERNAL ANNOUNCEMENT
To: All Schering-Plough Colleagues Worldwide
From: Executive Management Team
RE: VALUE ENHANCEMENT INITIATIVE (VEI)
Dear Colleagues:
Today we are launching important new actions on the previously announced Value
Enhancement Initiative (VEI). These actions have four objectives:
1. BRING DOWN OUR COSTS AND INFRASTRUCTURE TO REFLECT OUR SMALLER SIZE
FOLLOWING THE LOSS OF PRESCRIPTION CLARITIN - WITHOUT DAMAGING OUR
GROWTH POTENTIAL OR IMPACTING OUR COMPLIANCE AND BUSINESS INTEGRITY
COMMITMENTS.
2. CREATE MORE EFFICIENT, GLOBALIZED SYSTEMS AND WORK PROCESSES, AND
DE-LAYERED STRUCTURES WITH MINIMAL DUPLICATION TO IMPROVE COST
EFFECTIVENESS AND PROVIDE BETTER SERVICE TO INTERNAL AND EXTERNAL
CUSTOMERS.
3. IMPLEMENT HR POLICIES AND PROCESSES THAT WILL BETTER REWARD,
INCENTIVIZE AND DEVELOP OUR PEOPLE TO DELIVER HIGH PERFORMANCE.
4. MAKE SURE THAT HIGH RETURN ON INVESTMENT (ROI) ACTIVITIES ARE PROPERLY
RESOURCED.
Achieving these objectives is critical to the success of our five-phase Action
Agenda for Schering-Plough over the next five to eight years:
Stabilize. Repair. Turnaround. Build for growth. Breakout.
The initiatives we are announcing today are tough actions responding to tough
challenges. However, they are not the kind of actions that create a shrinking
company with declining long-term sales and declining long-term earnings per
share (EPS). Rather, our actions are geared to help transform Schering-Plough
into a lean, strong and resilient organization that will reverse our downward
performance and become a long-term growth leader in our industry.
o BRING DOWN OUR COSTS AND INFRASTRUCTURE TO REFLECT OUR SMALLER SIZE
FOLLOWING THE LOSS OF PRESCRIPTION CLARITIN - WITHOUT DAMAGING OUR
GROWTH POTENTIAL OR IMPACTING OUR COMPLIANCE AND BUSINESS INTEGRITY
COMMITMENTS.
We have already committed to achieve $200 million in annual savings. We must now
commit to exceed that goal. Here is how we will get there:
o Implement a U.S. Voluntary Early Retirement Program and other
workforce reduction programs including reductions in contract
workforces. You will learn more about the U.S. Voluntary Early
Retirement Program, and eligibility for it, in a letter from Human
Resources that is being issued to all Schering-Plough employees via
e-mail today.
o Freeze all routine merit increases through 2004, with exceptions only
where local contracts or practices prevent this action, for
customer-contact employees, for employees engaged in fulfillment of
the company's Consent Decree obligations and other business-critical
employees. Any exceptions to be approved by the head of Global HR.
o Reduce annual travel and entertainment expenses by over $10 million.
In addition to companywide reductions, this will include the sale of
the Gulfstream G-IV company airplane. To set the right behaviors from
the top, we will also be halting and reducing a variety of executive
privileges. These steps include closing executive dining rooms, sharp
reductions in executive travel options, elimination of special
executive health plans and other actions.
o Renegotiate existing supplier contracts and implement global
purchasing across unit lines. We seek savings in excess of 6 percent
in the first two years.
o Eliminate nonessential IT projects, duplicative programs and projects
companywide, and noncritical projects currently in the budget.
o Eliminate noncritical business meetings, limit attendance and cut the
running costs of business-essential meetings. We seek annual savings
in excess of 30 percent.
o Enforce tight worldwide headcount controls and require approval by the
appropriate Executive Management Team member and the head of Global HR
of all exceptions. CEO approval will be required for all exceptions
over a base salary of $100,000.
o CREATE EFFICIENT, GLOBALIZED SYSTEMS AND WORK PROCESSES, AND DE-LAYERED
STRUCTURES WITH MINIMAL DUPLICATION TO IMPROVE COST EFFECTIVENESS AND
PROVIDE BETTER SERVICE TO INTERNAL AND EXTERNAL CUSTOMERS.
o Aggressively implement globalized functions and shared services
operating model. This means, for example, that we implement global
standard practices and processes for business units and enabling
functions. Where we have multiple units and businesses in the same
geography, we will install a single team in support areas to serve all
units and businesses.
o Simplify and de-layer organizational structure so that people at the
working level are as close as possible to senior management.
o Implement global planning and templates for the Global Pharmaceutical
Business. For example, we will implement global templates and action
plans for key products to be tailored locally versus "ground-up" plans
created in each market. This will save time and money, and will
deliver better results for customers.
O IMPLEMENT HR POLICIES AND PROCESSES THAT WILL BETTER REWARD, INCENTIVIZE
AND DEVELOP OUR PEOPLE TO DELIVER HIGH PERFORMANCE.
We must change our company from what might be viewed as an "entitlement"
model to a high performance model in which individuals and units are
rewarded based on what they deliver. Also, we must dramatically upgrade the
training and development support for our people.
O BECAUSE OF THE COMPANY'S POOR PERFORMANCE FOR 2003, NO STANDARD
BONUSES WILL BE PAID FOR THIS YEAR. -----------
---------------------------------- This reflects the dramatic gap
between expectations for our company's performance and what is
actually being delivered this year.
O BECAUSE OF THE COMPANY'S POOR PERFORMANCE FOR 2003, NO PROFIT SHARING
PAYOUT WILL OCCUR FOR THIS YEAR. -----------------\
------------------------------- This also reflects the dramatic gap
between expectations for our company's performance and what is
actually being delivered this year.
o IMPLEMENT A NEW HIGH-PERFORMANCE COMPENSATION SYSTEM. Starting in
2004, a new compensation system will be implemented to reward high
performance at all levels in the company and to build a
high-performance culture.
This new compensation system will include an incentive compensation
plan for 2004 and for subsequent years that will be based on realistic
but
tough objectives. We expect that the annual compensation plans will
deliver payouts each year so long as the company's realistic but tough
annual objectives are met.
o IMPLEMENT ENHANCED TRAINING AND DEVELOPMENT PLANS ON A GLOBAL BASIS.
Global HR will have accountability to develop consistent and
systematic programs globally to support capabilities development of
Schering-Plough people.
o SPECIAL CUSTOMER-CONTACT PAY AND INCENTIVE PLANS. Customer-contact
personnel will have new pay and incentive plans developed based on
industry norms and, meantime, will be EXEMPT from the zero bonus and
incentive payout policy that we are announcing for 2003 in order to
assure that we continue to bring in maximum revenue at this critical
time.
o MAKE SURE THAT HIGH RETURN ON INVESTMENT (ROI) ACTIVITIES ARE PROPERLY
RESOURCED.
o Significant funds to be allocated immediately to support REMICADE
in Europe.
o Major additional resources to be allocated to support ZETIA
launches and ZETIA/simvastatin clinical development and launches.
o Major additional resources to be allocated to support key
pipeline product projects.
Further companywide and unit-specific announcements will be made in the coming
days on all of these actions, how they will be implemented and how they will
affect business units and individuals.
The steps announced today are part of a rolling program of VEI actions. Further
actions will be announced as they are decided. The test that each further action
will have to pass is whether it will contribute to the transformation of
Schering-Plough into a long-term growth leader in our industry.
All the actions announced today have come from recommendations by our people. In
order to assure that we continue to capitalize on value-building ideas from the
people of Schering-Plough, we will be establishing a "VEI hotline" e-mail box
-----------------------
beginning in September. Suggestions via the hotline will go directly to the VEI
implementation team and to senior members of management.
These are very challenging times for our company. The VEI actions we are
implementing - and other actions that will follow - are essential to reversing
our downward performance and transforming Schering-Plough into a
high-performance company. We know that these measures will make additional
demands on everyone.
These measures will mean sacrifices for all our people. These measures are
necessary, however, if we are to put our company on a trajectory of success.
Thank you for your support.