11/23/2017

April 6, 2000: The Curtain Has Been Pulled on the Wizard of Oz

Doug Ivester, the retiring chairman of The Coca-Cola Company, has managed to do in two short years what all of his predecessors combined could not do in the previous 111:  He has turned an institution of mythical proportions into just another company.  A company that merely sells sugared water.  The curtain has been pulled on the Wizard of Oz.

People like me who labored in other vineyards always marveled at the fierce loyalty that Coca-Cola received from its employees.  It wasn’t necessarily the best paying company, nor were its benefits all that much better than other corporations.  There was, however, something magical about Coca-Cola.  People who worked there were convinced they were in pursuit of a higher and nobler purpose.  The rest of us envied what seemed on the outside as a very special culture, yet, when we traveled to other parts of the country, we were quick to validate Atlanta’s place among the world’s leading cities because it was the home of Coca-Cola.

Now, the magic is gone and Ivester is gone with it.

Weep not for the fallen, however.  Ivester will leave Coke at the age of 53 with almost 3 million shares of stock and the opportunity to acquire another 2.4 million shares.  (I would assume he will wait until his successor, Doug Daft, gets the price back up where it should be.)  According to Coke’s proxy statement, he will also receive payments of $1.5 million this year and again in 2001 and 2002.  From now until March 2002, when Ivester turns 55, he will receive $66,300 per month.  After that, payments “drop” to $56,300.  But that’s okay, because he will also be getting consulting fees of $675,000 for five years, beginning in 2002.

That’s not bad for someone who presided over a 30 percent drop in the price of Coca-Cola stock in the past 12 months (Note: my grandsons and I are shareholders).  Needless to say, the company won’t be quite as generous to the 6000 employees who are losing their jobs in Coke’s belt-tightening.

Under Ivester’s watch, Coca-Cola was involved in the biggest recall in the company’s 113-year history, which occurred in Belgium in June 1999 after Coca-Cola products were blamed for nearly 250 consumers becoming ill.  That incident quickly turned into something approaching mass hysteria.

Unlike Johnson & Johnson, which turned the Tylenol poisonings in the early 1980s into a textbook case of superb crisis management, Coca-Cola was slow to react and was defensive when it did.  As a result, it lost both the public relations and the legal battles, despite an army of legal and external counselors.  One must assume that either Ivester didn’t listen to his advisers or, if he did, they were giving him bad advice and he didn’t recognize it.

A racial discrimination suit filed by four black employees has been turned into a cause celebre.  Ivester didn’t help matters when he decided that the company’s highest-ranking black executive, Carl Ware, would no longer be directly reporting to the CEO.  It was like handing the plaintiffs in a gift-wrapped six pack proof of the company’s insensitivity.  Ware promptly announced his retirement, leading the new CEO, Daft, to “unretire” him and promote him to head a newly created Global Public Affairs Division.

In the meantime, Jesse Jackson has swooped down into the fray like a buzzard smelling carrion, and that eminent business expert, Joseph Lowery – former head of the Southern Christian Leadership Conference – is telling the company how to reorganize its board of directors (as if he’s got a clue).  Once again, Coca-Cola looks clumsy and disorganized.  They have handed the momentum to the other side and can do no better in this fight than to sue for peace.

How did Ivester ever land the top job?  He was a superb financial manager, I am told.   But being adept at a balance sheet doesn’t translate to skill in the external world, and Ivester seems not to have had a clue about dealings outside the boardroom.

Unfortunately, CEOs become so insulated by their palace guard constantly chirping about how wonderful they are that they forget where the power really is:  in the hands of the public.  Doug Ivester seems never to have learned that lesson.

As a result, he will be forever remembered as the man who destroyed the Coca-Cola mystique.