Talk Newspaper by Jeff Golden: Bill Williams has been the Valley's premier corporate CEO for over twenty years, deftly steering what the paper called our ''best-known company'' for a series of larger corporate owners.
"Bill Williams has been ousted as Harry & David Holdings' chief executive"
— Mail Tribune, February 9
Local business stories don't get much bigger than this. Bill Williams has been the Valley's premier corporate CEO for over twenty years, deftly steering what the paper called our "best-known company" for a series of larger corporate owners. Not lightweight duty.
Just four days earlier H&D (formerly Bear Creek Corp.) reported a 2009 bottom line that, unless you're just awakening from a two-year nap, you'd have to call impressive. Sales were down 13% from the same quarter last year, but some smart cost reductions and inventory control actually pushed net earnings up from $30.4 to $31.7 million. Plenty of companies, especially those in the higher end of mail-order industry, would love numbers like that.
"It was more challenging than we hoped, with later shopping and a shorter sales period," Bill Williams said in what turned out to be his last media interview at the helm. "We effectively met challenges, and we're looking to spring and planning our strategies for next fall to generate additional income."
Well, sorry, Bill, that's just not enough. Maybe it's enough to support the largest private workforce in the county, including thousands of people who'd be in serious hurt without the seasonal income. It's enough for the company to shine as a positive national symbol for Medford and a healthy tourism draw. It's enough to keep work flowing to a wide variety of local service businesses and suppliers that contract with your company. It's been enough to keep Bear Creek in the forefront of business donors to good community causes. But it's not enough to ship truckloads of cash across the country to Wasserstein & Company, which purchased Bear Creek in 2004. Big truckloads.
That's what they expect. Wasserstein describes itself (www.wasserco.com) as "focused on middle-market leveraged buyout investments." The past two decades have accustomed this breed of investors to expect big returns from little effort. And Medford performed. According to Wasserstein's SEC filings, the company's pulled $82 million in "dividends" out of Harry & David in recent years, plus an annual $1 million dollar "management fee," earned, as far as anyone can tell, by periodic phone calls from New York asking, "So how's it going, Bill?"
In the 1992 election Ross Perot liked talking about the "giant sucking sound" of NAFTA pulling resources south to Mexico. Can you hear the same sound now, with the far end of the hose in downtown Manhattan?
This story, replayed different ways in different places, is part of what millions of pro-business Americans have against global capitalism (which might explain why the H&D "History" webpage at www.bco.com tells how Harry and David's father family founded the venture, shows three nostalgic sepia photos, and mentions not one event later than 1947). We've seen it here more than once, most dramatically when Amalgamated Sugar used other people's money in 1984 to buy Medford Corporation and then mowed down the forests around Butte Falls to pay off the debt. It worked like a charm for Amalgamated's stockholders. For the town of Butte Falls, suddenly surrounded by more stumps than trees, and for thousands of timber and millworkers who'd worked for generations under Medco's sustainable, community-minded management, well — too bad.
I'm not comparing Wasserstein with Amalgamated Sugar. I don't know Wasserstein and its directors. Maybe they're delightful people. Just after the buyout I talked to Bear Creek friends who seemed impressed with them, hopeful that they'd be good supportive bosses. No Gordon Gekko characters from the film Wall Street ("Greed is good") in the bunch.
That doesn't matter. They have a job to do. It is to maximize return on investment for their shareholders. That's accomplished by extracting as many dollars as they can from businesses they purchase, and therefore from communities like ours (cue the sucking sound). They might cut and run like Amalgamated did, or follow a more civilized multi-year strategy with periodic reinvestment in the business. Either way we wave goodbye to more hard-earned income than our community can afford to lose.
This — and the inability to rein in the financial giants that brewed up the global meltdown — is what happens when capital is elevated so much higher than labor, management, raw materials and everything else that goes into creating value. We can't cancel that modern law of economics, but we can reduce the damage it does here. We can strive to keep every possible dollar circulating in our community, fueling job creation and small-business viability, by buying local every time we can. We can crack the myth that Wal-Mart is always cheaper and learn more, with tools like Michael Shuman's blog at www.small-mart.org, about "the high cost of low prices." And when a native company like H&D gets in trouble because its profit margin doesn't include truckloads for Wall Street, we can nudge local government or credit unions to try facilitating employee buyouts of their own companies, like the one that saved Bi-Mart a few years ago.
Or "¦ but there is no good "or," is there?
Jeff Golden is the author of Forest Blood, As If We Were Grownups, and the novel Unafraid, with excerpts available at unafraidthebook.com.