Could Monsanto's Special Culture Survive a Merger?
By DAVID BARBOZA
The New York Times
March 3, 1999
CHICAGO -- Robert Shapiro, the chief executive of Monsanto
Co., occupies a modest cubicle on the ninth floor of the
Merchandise Mart in downtown Chicago, about 300 miles from the
company's headquarters in St. Louis.
On most days, Shapiro, 60, arrives in a plaid shirt or a sweater, with
khakis. No tie. Employees call him Bob. In the nearly four years that he
has headed the company, formalities have been dropped lower down
the ranks, too: Discussion, through e-mail, is encouraged, and nearly all
top executives work in cubicles.
"I think it's better to have an open office rather than dark-wood
paneling and cuff links, where there's a message about power and
privilege," Shapiro said in a recent interview. "You want a place that
doesn't look like it takes itself too seriously."
At the same time that Shapiro is beating a drum for an open and
free-thinking corporate environment, however, he and other executives
are in merger negotiations with DuPont, a much larger company with
more traditional ways, according to executives who say they have been
briefed on the negotiations.
The result has been a peculiar courtship in recent months between the
two companies. Shapiro, these executives say, has been searching for a
way for Monsanto to be acquired by DuPont and still retain its special
character and habits, with its own compensation and incentive
programs, and possibly its own stock.
Shapiro declined to comment on the prospects of any deal. DuPont
officials also would not comment. The talks, according to the executives
who say they have been briefed, are still at a preliminary stage and may
go no further. In June, Monsanto agreed to be acquired by the
American Home Products Corp. for $34.4 billion, but that deal fell
apart in October.
Still, corporate culture is clearly important to Monsanto as it slowly
transforms itself from a chemicals concern to what is called a life
sciences company, making everything from arthritis drugs to genetically
modified crops.
To revive flagging earnings, the $9 billion conglomerate is trying to act
like a small, high-technology start-up company, favoring teamwork and
spontaneity over hierarchy and convention. While some critics have
dismissed Shapiro's style as New Age management, he says that a
start-up's attributes -- being aggressive, entrepreneurial and quick to
market with new products -- are what Monsanto needs to compete
with larger rivals like Novartis and Rhone-Poulenc.
"I think Shapiro thought Monsanto had to set the metronome at a higher
speed to compete," said James Wilbur, an analyst with Salomon Smith
Barney. "And so they adopted an environment to accomplish that."
But the right environment may not be enough. Monsanto could use a
huge infusion of cash after spending more than $8 billion in the last few
years on acquisitions aimed at strengthening its agriculture division. And
to compete better against the giants in life sciences, the company needs
a bigger partner, like DuPont.
Can Shapiro get Monsanto the size and cash it needs and still preserve
the company's freewheeling ways?
Many analysts are skeptical, especially given their belief that the deal
with American Home Products collapsed in large part because Shapiro
and John Stafford, the chief executive of American Home, clashed over
who would control the company and how the two different ways of
doing business would blend. In meetings, one Monsanto official said,
the differences were stark: Monsanto employees spoke up and
disagreed with "Bob," while American Home officials deferred to "Mr.
Stafford."
"The two companies did have different cultures, but there was also a
CEO ego conflict," said William Fiala, an analyst with Edward Jones &
Co.
A Monsanto spokeswoman would say only that the directors of the two
companies had decided it was not in their shareholders' best interest to
merge, echoing what a joint press release said at the time.
But DuPont may want to strike a deal with Monsanto. Both companies
are increasingly focusing on life sciences. DuPont, which has a small
pharmaceuticals division, wants to expand its drug business, while
Monsanto's G.D. Searle & Co. unit is a small but growing force, with
strong cancer and arthritis drugs.
"It would be a very complicated deal," said Robert House, a professor
of organizational behavior at the Wharton School of the University of
Pennsylvania. "If it's managed as a holding company manages an
acquisition, things won't change for Monsanto. But that would mean
they're not taking advantage of the merger. So what's the point?"
While it is unclear whether Monsanto's insistence on doing things
differently is encouraging or hindering a big merger, its approach has so
far done little for the bottom line. After years of spectacular earnings
gains, the company faltered in 1998. Heavy research spending and a
string of high-priced acquisitions in the seed business saddled the
company with a huge debt load. Earnings suffered, and heavy
reorganization charges and layoffs were announced.
The stock tumbled in October after the deal with American Home
Products collapsed, and it has been treading water ever since. The
shares closed Tuesday at $44.375, down 6.5 percent so far this year
and a 31 percent drop from their 52-week high of $63.9375 in August.
The company has also come under sharp criticism, especially in Britain,
for its genetically altered seeds. When Shapiro was in San Francisco
last year, he was hit in the face with a pie thrown by someone protesting
"Frankenstein foods."
Monsanto executives, however, say their long-term strategy is sound.
The company bought seed companies to speed its genetically modified
seeds to market. Monsanto says that such products have been proved
safe and could even bring great environmental benefits.
Company executives say that a revolution is under way in food, nutrition
and health care, and that it involves using biology and genetic science.
So Monsanto has spent heavily on research and development to create
a pipeline of blockbuster drugs, like its popular new arthritis drug
Celebrex, and it is modifying corn and soybean seeds to make their
crops more productive and more resistant to disease.
Shapiro and other Monsanto executives say that for the last few years
they have staked the future of Monsanto not just on what the company
plans to create but also on how it plans to create it.
"All companies think they have the smarter guys," Shapiro said. "So we
came to the conclusion that our biggest competitive advantage was our
culture. If we got a higher percentage of people's potential, we could
win. In an environment where people care about what they're doing and
feel a personal bond, it will release a lot of potential."
Shapiro talks about companies' having complex ecosystems, of trying to
create a setting where employees can be honest, of channeling a
worker's energy and creativity. And he says that the right corporate
environment comes down to two things: authenticity and caring.
He rejects traditional corporate structures as cold and debilitating.
When Shapiro, who has been with the company in various capacities
for nearly two decades, first visited Monsanto's huge corporate campus
in St. Louis, where the buildings are lettered, he said that it was as if he
could hear the voice of Monsanto calling out to him, saying, "We are
very big and you are very small."
Nearly four years after taking over as chief executive, Shapiro has
refashioned Monsanto as an open and free-thinking company,
executives there say, where bright cubicles are decorated with art and
flowers. In addition to abolishing executives suites, he instituted flexible
work schedules and work locations, including his own. Each business
unit has co-presidents. He has encouraged free discussion, even
something he calls an "underground newsletter" -- a computer site
where employees can post their thoughts about the company
anonymously.
"Bob's really keen on how people feel when they work," said Nick
Rosa, a vice president at Monsanto who has worked with Shapiro since
1982. "He believes that the more you trust people, the more honest and
productive they'll be."
Few outside Monsanto seem to know much about its unconventional
working environment. Many of the Wall Street analysts who cover the
company say they don't know much about the company's corporate
culture or about Shapiro himself, other than that he plays the Japanese
board game Go and that he works out of Chicago, where he lives with
his wife and two children, ages 3 and 11 months.
Shapiro was born in New York City, the son of a corporate lawyer
turned chief executive. He went to Harvard but said he felt lost there
after he was given sophomore standing during his first year. In the
yearbook for the class of '59, he was one of the few students not
pictured.
"By the time I graduated, I wasn't into pictures and yearbooks and 'Fair
Harvard' and all that stuff," he said. But those years were important.
"Up until then I had defined myself as someone who read a lot and got
good grades. In those three years I discovered that wasn't what life was
about."
Among other things, he discovered folk music, playing the guitar and
hanging out with people like Joan Baez, who was a student at Boston
University. And, he said, he played lots of poker.
Shapiro went to Columbia Law School, and later taught law at
Northeastern University in Boston and at the University of Wisconsin at
Madison, where he offered a course on cities and how they function. It
was then, he says, that he came to believe that the very culture of the
cities, their fabric and environment, had devastating social and emotional
consequences for their inhabitants.
He said he was interested in how to design policies that were good for
people. It was this notion that he later brought to Monsanto.
Before arriving at Monsanto, though, he was general counsel for the
General Instrument Corp., under his father, who was the chief
executive. There, he said, he fell in love with business. He went on to
become general counsel of Searle, a small pharmaceutical company in
Chicago, which was later bought by Monsanto. From there, he headed
Nutrasweet, then a small unit of Searle, eventually becoming chief
executive of Monsanto in April 1995.
"He's about as good a CEO as I've ever seen," said William
Ruckelshaus, the chairman of Browning-Ferris Industries and a longtime
Monsanto board member. "He's a very inclusive type of manager. He
makes the decision, but he encourages and listens hard to what
everyone else has to say."
Some experts question, however, whether Monsanto can remain
Monsanto if the company is acquired. "If history is any guide, that
cubicle thing may be short-lived," said Thomas Lys, a mergers specialist
at Northwestern University's Kellogg Graduate School of Management.
Still, the company's special qualities could survive a merger -- and
perhaps even survive Shapiro.
"This is not an expression of Shapiro's philosophy," Shapiro said. "This
is a business philosophy of how you make money in life sciences. And
in a Darwinian world, this culture will prevail."
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