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WHY CAMPBELL'S COPPED THE TOP SPOT

By the time the board huddled in secret at the Philadelphia Airport Marriott in early September to approve an ambitious new strategy for Campbell Soup Co., every director was as familiar with its details as was Campbell's flamboyant CEO, David W. Johnson.

For the past six months, through eight meetings, the directors became partners in crafting new strategic goals. They grilled Johnson over the impact of piling on debt to pay for a $2.5 billion stock buyback. They peppered him with questions over the proposed layoff of 650 employees. And they wondered aloud if he was paying too much --$210 million--for a German soupmaker. ''There was vigorous and challenging discussion in the boardroom over all these issues,'' says director Philip E. Lippincott.

Hardly your typical board of nodding suits. But that's not what Johnson expected when the board passed over internal candidates and recruited him as chief executive from Gerber Products Co. in 1990. ''The board is my boss,'' Johnson says. ''I need to win the directors' support and confidence, and they need to feel this guy knows his cookies and his soup.''

No wonder Campbell won the honor of having the best board of directors in BUSINESS WEEK's first-ever corporate-governance ranking. The company is at the forefront of a movement that is beginning to transform the boardroom from a cozy club into an active and independent body. Perhaps the best example is its involvement in Campbell's strategic plan. Most boards review and approve major strategy decisions, but they rarely shape them.

By refocusing on the core soup business, Johnson has been able to nearly triple Campbell's market value, to $18.9 billion. Earlier this year, though, he began to toy with the idea of turning Campbell into one of the world's top consumer-goods companies, with the kind of premium market multiple commanded by such global leaders as Coca-Cola Co. Johnson first floated this plan at a two-day board meeting devoted entirely to long-range strategy at the Hotel DuPont in Wilmington in March. Recalls director George Strawbridge Jr.: ''We said: 'My God, could we possibly ever do it?''' Johnson returned to headquarters to plot the details.

In meeting after meeting, the plan began to unfold under continual testing by directors--a group that now includes top officers of American Express, GTE, the Bank of East Asia, and four of the decendants of John T. Dorrance, the inventor of condensed soup, whose portrait hangs in the boardroom. The most controversial part of Johnson's strategy was to go into significant debt for the $2.5 billion stock buyback. ''That was a subject on which certain directors had very strong positions,'' says Lippincott. ''A lot of them couldn't understand why that was a good idea.''

The board retained its own investment banker and legal counsel to appraise the strategy's potential impact. ''Probing, searing questions on every area was the order of the day,'' says Johnson. ''They helped me by asking the right questions, and we often had to go back to get more information. It forced more precision.''

The debates simmered over four regular board meetings and four sessions with smaller groups of directors. ''The discussion was always open, and the tenor was always collegial,'' says Charles H. Mott, another Campbell director. ''People can and do confront management and each other when there are differences of opinion.'' Finally, on Sept. 4, Campbell's 15 directors gathered in Philadelphia and approved the plan in a three-hour meeting.

The role of Campbell's board isn't unique, but it is unusual. So is its desire to stay the best-governed company in America. ''I don't know how much further we have to go, but we are determined to keep striving for excellence in governance,'' says Strawbridge. The board's role will face an interesting test if Campbell's turnaround starts to fade or if the new strategy tanks. For now, the company is clearly a role model.

By John A. Byrne in Camden, N.J.


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Updated June 14, 1997 by bwwebmaster
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