The Quiet Giant Speaks
June 1 2004 by Mark C. Thompson
As most CEOs of public companies scramble to reduce exposure to market volatility, terrorism and shareholder suits, America’s largest private company boldly heads into markets others fear to tread. Who else could invest in Russia as its economy collapsed into bankruptcy, or quietly control almost a quarter of U.S. beef production as mad cow disease flared up around the world? Cargill, for certain-and its long-term bets have consistently paid off. The Minneapolis firm, controlled by eight surviving members of the original founding Cargill and MacMillan families, grew revenues 19 percent last year, to almost $60 billion, which would have ranked it among the top 20 largest U.S. companies if it were public-bigger than Procter & Gamble, Boeing or Johnson & Johnson. In a rare interview, Cargill’s conservative, down-to-earth CEO Warren Staley shares some of his thoughts.
Cargill is thriving in volatile places where it has been challenging for public companies to do business. How do you manage risk?
When there’s a lot of volatility, you need a lot of discipline and other people looking over your shoulder, keeping you intellectually honest. Most people who trade or manage risk at Cargill have a limit as to how much of that they can do. Every morning before 8 a.m., we roll off hundreds of risk limits around the world. That’s when our [oversight] committees kick in and I’ve elevated it to my level with other senior people just to review the process.
But at the end of the day, it’s about people being honest. We’ve all read about the trader who stuck a trade in the drawer and didn’t register it. That hardly ever happens here. Our owners came from Scotland [in 1865] and just set the tone. At Cargill, it’s much more important how you behave €¦ than how much money you make for the company.
How do you make the right acquisitions to fit with this strategy?
When we first look at an acquisition, we have to decide if we’re comfortable with the ethics of that business, that they’re not going to do something we’re going to be embarrassed about. If you’re going to get nicked or severely wounded by some people’s actions by the time you sort this all out, you probably shouldn’t do it. There have been countries where there have been wonderful opportunities in industries in which we’re pretty good, but we didn’t think we had enough economic advantages to offset the corruption. [Competitors] are going to make a lot of money because they cheat. They don’t pay taxes; they bribe people. We said we’re clearly not going to do that. We’ve kidded ourselves and said, “Oh, we can be successful anyway,” and had our heads handed to us in some of those places. It is very hard to compete against unethical people.
Isn’t Venezuela an example of a historically challenging place to do business where you’ve been able to manage the volatility?
We own brands in very basic foods in Venezuela. It’s a very difficult place to be-a lot of volatility, a lot of security issues. And whenever you get in volatile environments -either financially, politically, [or in terms of] security-a lot of companies, especially publicly traded, can’t stand that volatility in earnings. So we’ve made a lot of nice acquisitions [in places where public companies would be reluctant to invest]. And when you’re there every day and being a very honest, ethical company, and distributing consistent, quality products, the government values those kinds of companies.
You’ve bought a major portion of a public company, IMC. Is that a vehicle for the family to get some liquidity and eventually take Cargill public?
No. We’re not going to carve up this company into bits and pieces. People said, “Well, is the family going to go public?” And I said, “First of all, it’s not my call; it’s the family’s, the common shareholders’.” They have no interest in going public. And why should they? We’re performing very well. They get dividends based on rolling two-year performance. They’re all living very well, thank you. But we would consider owning stock in a publicly traded company if it made sense. So, an opportunity came along, IMC, which is in the fertilizer business and potash. Cargill is in the phosphate business and nitrogen. We get a lot of synergies by putting those businesses together, and we preserve Cargill’s capital for a lot of the other things.
You’d been at Cargill for decades before being named CEO. What did you want to change?
I wanted to define for the corporation a set of behaviors that aligns with the strategic intent. We had a culture [that depended on] who you knew or what was going on. You discussed and made a decision, but you wanted to let everybody know, “I didn’t agree with this decision,” and you did everything you could to make sure it wasn’t successful. I hated that.
So now we say, “Discuss, decide, support,” and when we walk out of there we’ve made decisions we’re all going to support, diligently. It’s okay to come back and say, “It’s not working, we’ll tweak it, we’ll make a major change.” But we will spend time trying to make this work. We have rigorous debate. We come from different backgrounds, different cultures, but I say that’s the best thing the company could have-a diversity of ideas and people challenging the heck out of others.
What’s the toughest thing you’ve had to do here?
Things like BSE (bovine spongiform encephalopathy, or mad cow disease). A lot of people worked very hard and the economics of their business was just taken out of their hands overnight. So I spend time trying to bolster them up while they’re just getting beat up by customers.
The other [difficult issues] on a more personal level are, once in a while you have a rogue employee who does something. If I know him, I might talk to him after we’ve been through the situation and agreed to part company, and just say, “Why did you do this?” I have had them sit in my office in tears. I’ve fired a few people I would have considered friends. I hate those situations. You’d like to take them back. But I’ve never wavered.
What is the legacy you want to leave with Cargill?
That [Cargill] would go on and be an even better company after I’ve gone than it is now. I have three years until I reach mandatory retirement, and I’m just fine with that. This is hard work. You give your life when you’re a CEO of a global company. I wouldn’t change it for anything. I probably have one of the few greatest jobs in the world, at least as far as I’m concerned.
Thanks to Cargill’s private status, CEO Warren Staley is able to take it into markets others fear to tread.