The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [475]
Studies, however, had shown either no correlation or negative correlation between board independence and a firm’s performance.15 But for the Coke board to rail against ISS also lacked a certain credibility and seemliness. Now that Coke’s stock was barbecue, its board members could convincingly summon no more than low to middling dudgeon. The accusations of a “crony board” neared the mark. Although it had factions, one faction ruled; or rather misruled; Buffett admitted that he should have done more to try to steer things right at Coke. Indeed, if Coca-Cola had been run by him, assisted only by a six-pack of Cherry Coke, perhaps many of its woes could have been avoided.
Instead, a brew of important people—several of them titanic personalities, and all of them accustomed to being in charge—could not sit back and simply allow themselves to be led by a weak CEO; they had spun into a vortex. That Daft had improved Coca-Cola’s profits, sales, and cash flows and had mended poisonous relations with the bottlers were not enough to turn things around for him. In February, Daft suddenly told the board he was resigning.
Daft was unpopular in many quarters, but his announcement set off dismay at the prospect of more bad publicity for Coca-Cola. This time the next guy in line could not be simply plugged into the job. Some board members viewed that as the chance to finally do the job right. In a move that had instantly attracted controversy, however, concurrent with the announcement of Daft’s resignation, seventy-seven-year-old Don Keough had joined the board; Keough, who had been sometimes referred to as the “shadow” CEO, became chairman of the search committee. He and Buffett now spent hours on the phone trying to find a leader for Coca-Cola.
The search for a fourth CEO in eight years quickly turned into a spectacle. The board looked at Coca-Cola’s president, Steve Heyer, once considered a shoo-in, but the board members split over him, and once outside candidates were proposed, his chances began to fade. Various celebrity CEOs considered then turned down the job. Each rejection fed the media another bit of Schadenfreudenfodder. Slit-eyed rumors gathered for a chat. Maybe Coke would buy another company. Maybe it would sell itself to Nestlé.
Buffett flew to the April 20 board meeting in Wilmington, Delaware, the evening before the Coca-Cola shareholder meeting, prepared for two days of intense work. He was not looking forward to the reading of the results of the director election, which would show a significant percentage of the vote withheld from him.
In the faded grandeur of the old Hotel du Pont, Buffett began with the meeting of the audit committee, which was still conducting the inquisition and preparing to do corporate penance over the SEC investigation of earnings management.16
“If you don’t come clean the first time you discover it, you’re stuck. And that may mean giving up your job too. I can see how it happened. Roberto was a wonderful guy. He did a good job of running the company. And the rest of them were decent people, pretty much. But if Roberto told them, ‘I want you to ship some extra cases,’ it would have been unquestioned at the Coca-Cola Company.”
The audit committee felt all this had been concealed from them. Buffett, sentenced to remain on the Coke board for another year, knew of no real solution except: Clean up the damned mess and never do it again. He moved on to the finance committee, then the executive committee.