During the weeks between when the proxy statements were mailed and the scheduled meeting, local stockholders and employees mused about renting a bus and going to the meeting in Manhattan en masse. In the end, only a handful of stockholders made the trek to New York. It was just too expensive and too inconvenient.
For all their trouble, the stockholders who attended got to sit in a plush conference room in a high-rise on Madison Avenue where the coffee was served in white china cups. The meeting started promptly at 9:30 a.m. Eleven minutes later it ended before the coffee in the cups had time to get cold. Based on the results of the proxies received by mail, the vote on the final sale of the company had gone quickly, smoothly, and without discussion. More than two-thirds of the outstanding shares of Easton common stock had voted for the merger. Once those numbers were announced, there was no point in raising objections. The few stockholders who had actually planned to speak were easily intimidated from doing so. The meeting was adjourned. The stockholders present were thanked for their attendance and escorted to the exit.
“Well I never would have guessed,” Linda said to her husband Greg as they rode down in the elevator with Ellen and Russ, who had driven to New York with them for the meeting. The two couples were stockholders and Easton retirees.
As the foursome found themselves spit back through the skyscraper’s revolving door onto bustling Madison Avenue, Greg asked, “So now what?”
“Christmas shopping,” Ellen replied.
“Then lunch,” Russ added.
“Somewhere nice?” Linda asked.
“Sure. Why not?” said Greg. “By the time the Visa bill shows up, it looks like we’ll have some extra cash to pay for it.”
In the News
FOR IMMEDIATE RELEASE
November 4
SHAREHOLDERS OF THE EASTON COMPANY
APPROVE MERGER WITH PRATT-MILES INC.
N. Virginia – Officials of The Easton Company (NYSE:TEC) announced today that, at a special meeting of Easton Shareholders held this morning, the holders of more than the requisite two-thirds of its common shares approved the merger of a subsidiary of Pratt-Miles Inc. (NYSE:PMI) with and into Easton.
As Kate Cooper read the press release, it occurred to her that anyone reading this who had not been present for the special stockholders meeting probably assumed key information must have been purposely omitted or accidentally left out. But nothing more had happened during the eleven minute meeting.
The wording in the last line of the press release struck some as curious. That language about “…merger of a subsidiary…with and into Easton” gave new hope to some employees about who the actual power player might be in this deal. Some speculated that a significant portion of The Easton Company might independently survive when the merger dust settled. Others hoped the layoff rumors would turn out to be wrong and most of Easton headquarters employees would remain for the foreseeable future. Those who knew better than to be optimistic recognized the wording for what it was – legal mechanics required to pass the acquired “pig” through the tax and corporate “python” most efficiently. Once consumed, it would hardly be recognizable.
Spinning Plates
If anyone had bothered to ask Jeffrey Elkins to honestly describe how he was feeling during his last year as CEO of The Easton Company, he likely would have replied: “Stressed.” Jeffrey had a mental picture of that stress. It was a picture he shared with no one, not even his wife. Near the close of his tenure as CEO, the visual was so vivid it became part of his dreams. At the end of his career, Jeffrey Elkins became a plate spinner – just like the performer on the old Ed Sullivan variety show who spun a dozen platters balanced atop tall poles. In recent years, Jeffrey was balancing more and more plates. The plates had names like corporate debt, 9/11, Sarbanes-Oxley, stockholder expectations, and skyrocketing employee medical costs. His dream became a nightmare where the plates were spinning so fast he couldn’t even see the names on them anymore.
With all those spinning plates, Jeffrey was forced to constantly look up. There was no time or opportunity to do anything else but keep watching to make sure none of the plates stopped spinning.
Once he decided to sell the company, Jeffrey started having a new dream. In this dream he stopped looking up. He stopped spinning all those plates and just let them fall. In the new dream when the plates crashed to the floor Jeffrey felt such relief, he became gleeful – a state of being he had never before experienced in his entire life.
In the dream, when the plates crashed to the floor, it was clear that he was done spinning plates forever, and he could now leisurely look at the world around him. He could walk off stage and finally get the crick out of his neck from all those years of looking up.
Dreams of spinning and crashing plates summed up Jeffrey’s perspective on the end of his career at The Easton Company. But Jeffrey Elkins was the only person who had this perspective. Long-service Easton employees, who had been with the company since the early days with Ed Easton as their CEO, held a dramatically different perspective. In just twenty-one weeks, Jeffrey Elkins had thrown away what they had spent thirty-five years building: a good and respected company with a solid reputation, a positive profile and a profitable balance sheet that kept thousands of people comfortably employed – including Jeffrey Elkins.
Moving Day
It came as no surprise to many in the company when – one week before the scheduled closing date to sell The Easton Company to Pratt-Miles – Jeffrey Elkins hired a private moving company to remove his antique office furnishings, one-of-a-kind artwork, and museum-quality personal possessions from the Easton headquarters building in the middle of the night.
Holiday Tradition
On the Tuesday before Thanksgiving for as long as Easton employees could remember, the company distributed a pumpkin pie to every employee at corporate headquarters. Not just any pumpkin pie, mind you. These beauties were trucked in each year from a boutique farmhouse bakery in Virginia’s rural Piedmont hunt country. The pies were made from a hundred-year-old secret family recipe and the product lived up to the hype.
Each year the pies, boxed and tied with orange and brown organza ribbon, were delivered to employees’ offices and cubicles by members of the corporate events staff along with a “Happy Thanksgiving” note from the CEO.
The order for the pies had been placed and paid for long before the merger announcement was made in August. However, it wasn’t until a week before the scheduled merger close date that the director of corporate events realized she had a problem. That was when 400 preprinted Thanksgiving cards displaying an embossed Easton logo and Jeffrey Elkins’ printed signature were delivered to her office. Once the stockholders voted for the merger, no one on staff thought to ask what should be done about the pies.
For Julia West, Easton’s corporate events director, it was a “damned if you do, damned if you don’t” situation. No one else had mentioned the pies, so obviously she wasn’t the only one who had forgotten about them. She had three choices. She could say nothing and just distribute the pies as usual Thanksgiving week – maybe without the cards – and hope that her first phone call from the new management would not be about pies. Or she could ask for direction. But what senior executive did she dare bother with questions about pastry at this point in the merger? It crossed her mind that the best move might be to donate the pies to charity; but if the employees were to find out, it would be one more reason for them to feel morose and angry.
Julia put off taking any action for a few days, hoping someone would tell her she was on the list to be pink-slipped the day of the close. If that happened, she could walk away and the pies would be someone else’s problem. Finally, she gave up hoping for divine intervention and emailed Gloria, Jeffrey Elkins’ executive secretary, asking for guidance. Although no one had seen Jeffrey in the building for days, Julia was hopeful for some kind of response. Gloria copied Julia when she forwarded the email to Jeffrey but with only two days left before the close date, she
knew it was futile.
Julia read the forwarded email and groaned. Pies, she thought. I’m bothering this man about pies when he’s working on closing a $13 billion dollar deal. With my luck I’ll be an early layoff victim, my name will forever be associated with the Thanksgiving pie fiasco, and Jeffrey Elkins will see to it that I never work in this town again.
What Do You Give as a Farewell Gift to a Guy Worth Ninety Million Dollars?
The Easton Company had a reputation for giving high quality gifts. Service awards, company anniversary commemoratives, holiday presents, stockholder meeting give-aways and even token mementos bore the names of Tiffany, Baccarat, Liberty, Channel and Gucci. With the sale of the company on track, it made sense for the executive board to begin discussing an appropriate parting gift for Jeffrey Elkins. Some board members were quietly shocked by the idea, while others seemed to think it appropriate to give him something in recognition of his effort to successfully sell the company. As one division head commented, “After all, he is making us multimillionaires.”
The executive board was comprised of the company’s senior vice presidents and corporate division heads. As they talked together and traded emails with ideas, the real issue revolved around how much each board member would contribute for the gift. Some thought each person should give equally, while the “lower paid” of the group suggested contributions based on a percent of each member’s total compensation.
After several false starts and failed proposals, the group of ten senior executives decided to gift $100,000 to an inner-city private charter school that Elkins and his wife supported. The funds would establish a college scholarship in Jeffrey Elkins’ name. Some executive board members quietly grumbled as they wrote their personal checks – but in the end, they were pleased with their gift to the CEO.
When the executives made their presentation at the last executive board dinner, Jeffrey was touched by the group’s thoughtfulness and liked the idea of his name attached to something that would make his wife and family proud.
In return, Jeffrey gave each of the executives an antique lapel pin. Every pin was one-of-a-kind, stunningly jewel encrusted and uniquely designed. His wife’s jeweler had selected each pin based on the personal profiles of the recipients. There were speeches, laughter and tears as the dinner progressed through the best regional food and French wine money could buy. When the evening ended, everyone felt special, privileged, and well feted.
The next day all the members of the executive board proudly wore their new pins. When one accountant complimented chief financial officer Lindsey Gordon on her beautiful ruby and diamond saber brooch, she smiled and replied that it was a gift from Jeffrey Elkins, mentioning that each division head had received one.
The Easton Foundation
Whenever a company is acquired, the local community suffers. Changes brought about by acquisitions generally result in declines in regional employment and operations. Small businesses suffer. Caterers, business supply stores, coffee shops, temp agencies, dry cleaners, car washes, lunch counters, office cleaners, landscapers – the list goes on – lose a major client or a significant number of regular customers.
Equally affected are community nonprofits. New corporate ownership brings new leadership, which affects area charities and other beneficiaries of the corporate citizenry. When a merger is actually a buyout or an acquisition and the acquiring company is from out of town, the local community loses.
CEOs become part of the fabric of their business and cultural community. Hometown companies that are thriving, along with their most senior management, often heavily support pet projects such as inner-city charter schools, performing arts venues, and a long list of annual events, charities and fill-in-the-blank-a-thons. In some organizations, corporate culture dictates that senior executives give away four or five percent of their compensation to charity. When the organization is a developer, those donations usually go to area philanthropic groups.
The Easton Company fit this mold. It sponsored and supported a variety of nonprofits ranging from community hospital fundraisers to 10K races and the symphony orchestra. A full-time Easton employee actively managed the company’s charitable giving.
This type of corporate giving is accepted as normal business practice in the United States. When financial analysts crunch the profitability numbers to determine if the shareholder is being well served, corporate dollars to charities get a pass. They escape Wall Street scrutiny with the rationale that the money is going for good works. But how does this practice align with a corporation’s mandate to put the financial interests of their shareholders above all else? Coincidentally, during the four years leading up to the Easton/Pratt-Miles merger, American corporations appreciably increased corporate giving budgets while simultaneously establishing that they could no longer afford to finance retiree pension and health care obligations for their employees, citing erosion of profitability. This statistic reflects an interesting shift in U.S. corporate priorities.
For the CEO about to sell a corporation, what better strategy than to inject into the deal not just a multimillion-dollar severance package for himself, but also a post-merger job as chairman of a newly established local foundation, funded with someone else’s money. It’s the ideal avocation for a former chief executive – managing and giving away five percent of the foundation’s assets each year to favorite causes.
To appreciate the genius of this strategy, it’s helpful to understand how nonprofit foundations are established and operated. Many large foundations provide significant donations to an array of good causes and worthy institutions. Foundations are funded with private money, but the source of the funding often has a clear and direct link to a for-profit corporation. It is unlikely there will ever be a help wanted ad to fill a foundation chairmanship, even in the most elite publications, and salaries for chairmen and presidents of foundations are usually not disclosed.
The multimillion-dollar contribution by Pratt-Miles to permanently establish The Easton Company Foundation was one part of the merger agreement and proxy statement that received ample attention in the press and from nonprofit organizations. The spin on the news about the new Foundation was intended to balance out some of the downside news concerning Easton Company revenue losses and job reductions in the region. Pratt-Miles hoped it would be perceived as a goodwill gesture to the northern Virginia community located halfway across the country from its own corporate headquarters and circle of philanthropic concerns.
George Miles was quoted saying, “The Easton Company Foundation will continue Ed Easton’s philanthropic mission.”
PART FIVE
THE DAY THE MERGER CLOSED
Founder’s Tears From Heaven
Friday the thirteenth of November. Rain poured down. The sky turned black. The weather was the antithesis of that sunny day in August when the world learned The Easton Company’s time was almost up. Clocks had been turned back from daylight savings time two weeks earlier and days were getting depressingly short. On the day the merger was scheduled to close, the weather matched the mood of the Friends of The Easton Company. After months of claiming that news of the merger was enough to make Ed Easton roll over in his grave, now the Friends could claim the raindrops were Ed’s tears from heaven.
For some Easton employees, getting out of bed on this day was agonizing. They dreaded the end of the Easton era. Although few knew what to expect once the day ended, most were sure it wouldn’t be good. Kate Cooper dreaded this day because of the long list of human resources transactions that had to be processed and confirmed, without exception, before the merger closed.
In the human resources, finance, legal and accounting divisions, the day was already in fast-forward having never actually ended from the night before. The division heads in these areas were not going anywhere until the close was official. It did not matter that their change in control group peers were already packing. The associate division heads in these areas – one layer down from the change in control group �
�� had been instructed to keep their cell and office phone lines open in anticipation of information requests from the close meeting in New York.
Critical support staff was told to be in the office by 7 a.m., no excuses. If your kids were sick, bring them with you. If your car broke down, someone would come pick you up. If you were delirious from fever, you would have to be ill at work. There were piles of last minute documents that required approval and signatures; confirming phone calls to be made and faxes to be sent; accounts to close and funds to transfer; ending balances to report and hundreds of data points to calculate, validate and transmit to vendors, administrators, banks, lawyers, the IRS, the SEC and of course, the soon-to-be new owner, Pratt-Miles.
Pink Slips and Parting Gifts
It was the last day The Easton Company stock traded on Wall Street. The important activity, however, was taking place in the merger law firm’s New York offices and the Easton headquarters building in Virginia. While the attorneys for both sides were digging through piles of company papers, Easton employees were digging though mounds of company paraphernalia. The marketing department had unlocked their storage closets and hauled out all The Easton Company wear, gifts and tchotchkes. Each item sported the soon-to-be-defunct company logo. Huge cardboard boxes of the stuff had been deposited in the atrium for employees to help themselves. It resembled the jetsam from a sinking ship.
Pink Slips and Parting Gifts Page 13