The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [413]
And there was more disturbing news, via Don Keough, who remained the bottlers’ best friend at Coca-Cola. He was now retired from the company and had become chairman of Allen & Co.—but Goizueta had kept him on as an adviser to the board. Keough was almost as much a part of Coca-Cola as he ever had been. Through Keough, Buffett heard that Ivester had been dictating terms to the bottlers in an unheard-of way. This troubled him, because so much of the good results produced by Ivester had come from reengineering the relationship between the bottlers and Coca-Cola. Now Ivester was pushing that same lever so hard that the century-long partnership between the company and the bottlers had broken down.28 Don Keough had become a sort of “father confessor to the disaffected” among the bottlers.29 They were in open revolt. Meanwhile, Ivester had snatched away Keough’s official role, a dumb move since Ivester needed Keough on his side. He might be King Arthur, but Keough was Coca-Cola’s Merlin and must be paid due respect.
This squeezing of the bottlers reiterated the question of whether Ivester really knew what to do about Coca-Cola’s slowing sales growth. The philosophy at Coca-Cola had always been that it was all about the relationship with the customer. Ivester favored a continuation of the accounting solutions to business problems, troweling more makeup on Coke when the CEO’s main job—as Keough and Allen and Buffett perceived it—was to make the Coke brand more popular around the world.
Since Goizueta had been engineering the company’s earnings before he died, and Ivester was the engineer and reaped the rewards for doing so, why should he behave any differently now that he was CEO? As one board member put it, “The finance committee was the center of everything,” which was odd for a marketing company like Coca-Cola. In the end, the mistake was not Ivester’s. The board had deferred to Goizueta even after his death, when it followed his wishes and made the head of the financial engineering department the new CEO of Coke.
Still, Buffett was pretty sure that the problem so obvious to him was not so obvious to the whole board. As he ticked off marks against Ivester, Buffett spent the whole fall in a wrung-out state of anxiety. By Thanksgiving, the paralyzing limitations of his role as a board member, given the travails of Coca-Cola, had almost reached a breaking point.30
Then Fortune magazine, which had labeled Ivester “the 21st-century CEO” not two years earlier, published a highly critical piece blaming him for the company’s problems.31 That was a bad sign. Fortune rarely smiled on CEOs whom Fortune smacked around this way, especially if the CEO had previously been featured in a flattering profile on the cover of the magazine. Being knocked off one’s pedestal in public this way signaled that the powerful people whom Fortune’s reporters used as sources were displeased, and on the brink of tossing away the teddy bear they had once embraced.
Right after Thanksgiving, Herbert Allen put in a call to Buffett. “I think we have a problem with Ivester,” he said. “We picked the wrong guy,” Buffett agreed.32 “That’s about it,” said Allen. They began to lay their plans.
They both estimated that it would take more than a year for the board to come around to their point of view that Ivester had to go—and that, says Allen, “would have been devastating to the company. So I think we decided, just as two individuals, to tell him the truth about how we felt.”
Allen called Ivester and said he and Buffett wanted a meeting. They agreed to get together in Chicago, where Ivester would be stopping following a meeting with McDonald’s.
On a cool, cloudy Wednesday, the first day of December 1999, Buffett and Allen flew into Chicago. Ivester’s well-known obstreperousness kindled Buffett