The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [414]
Still, Ivester was not actually fired. Buffett and Allen lacked the authority to fire Ivester. “He might have won a board vote, and he knew that,” Buffett says.
Ivester took the news stoically. He rushed back to Atlanta to call an emergency telephone board meeting for four days later, leaving the mystified board to wait in suspense.
On Sunday, Ivester told the board members that he had concluded that he was not the right person to run the company. He would step down immediately. This was exactly as Buffett and Allen had hoped. But he also said there would be no transition; he was leaving as of that day. As the board listened in stunned silence, he described it as a voluntary decision, and that was true—in the sense that it is voluntary to avoid the firing squad by walking the plank.34
Board members began asking what had happened. Was he sick? Was something terribly wrong at Coca-Cola? Why didn’t they have any warning? Must the transition be so sudden? Ivester never wavered from his script.35
A while back the board had insisted, against some resistance, that Ivester put a name in an envelope that said who should succeed him if he were hit by a truck. The envelope was now opened to reveal the name of Doug Daft, head of Coca-Cola’s Middle and Far Eastern divisions. Daft was halfway out the door to retirement, but the board, among them Buffett and Allen, instantly made him Ivester’s successor, with apparently no serious discussion of any alternative.
The recriminations began as the market took a hatchet to the stock.36 Investors had figured out that Ivester was walking the plank. In private conversations with a few board members, he let on what had happened. The board now realized with varying degrees of outrage how much their role had been usurped.
With the media howling, it became clear that the company had better become more forthcoming. Fortune wrote an exclusive piece revealing details of the secret Chicago meeting.37 Ivester had negotiated a staggering $115 million consolation package, which angered both his detractors and his supporters; it gave the impression that he was either paid off or wronged. And observers now realized that an inner circle ruled the Coke board.
“It was carried out badly, except that there wasn’t anything better that we could have carried out. It was almost a disaster the way we did it, but if we hadn’t, it would have been a disaster for sure. I don’t think we could have gotten the board to vote to make a change like that—bingo! I think the only way to have made a change fast is the way we did it. And it took both of us to get it done; if either of us had done it individually, it wouldn’t have happened.”
But by year-end, Buffett’s reputation was suffering in an even more overt way, because the biggest, most profitable feat of stock selection that he had ever made, Coca-Cola, was down by one-third after Ivester’s departure. That Buffett had felt forced to intervene in a particularly graceless way, which had backfired in public on both the company and himself, left the impression not that he had ridden to the rescue—as with Salomon—but that what he and Herbert Allen had done was the meddling of a couple of old men.
That impression compounded the worries raised when the biggest acquisition he had ever made, General Re, coughed up a nasty surprise within days after Berkshire closed the purchase. Ron Ferguson, the CEO, had called to say that the company had been duped out of $275 million in an enormous, elaborately designed fraud called Unicover. Investors had been surprised, to say the least, when the first report Buffett gave them about General Re was an apology for this foolish thing, as well as an expression of confidence in Ferguson and the prediction that affairs would