An Urban's Rural View

Syngenta Tries To Make Up With Shareholders

Urban C Lehner
By  Urban C Lehner , Editor Emeritus
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The Startling Sentence of the Year Award goes to the Wall Street Journal for this beauty, which summarizes the teachings of Hiroshi Tsukakoshi, a 77-year-old CEO who some follow as a management guru in his native Japan:

"He says companies should exist to make their workers happy, and says employees should clean the office toilets to foster a sense of responsibility (…)."

See what I mean? It's not every 24-word sentence that contains three startling ideas. There's the notion that employees should clean the toilets. There's the seeming contradiction between making employees happy and expecting them to clean the toilets. And then there's that bit about a company existing to make employees happy.

Let's disregard the toilets and focus on the third thought. It might not seem startling in Japan, where some companies still offer lifetime employment and board directors are mostly employees who have risen through the ranks. In the West, however, companies do not exist to make employees happy.

If not employees, who? Business-school marketing theory urges companies to be "customer focused." Corporate law puts more weight on a company's owners.

In practice, senior executives also rank high. They work for the owners, to be sure, but they can't help having interests and ideas of their own. That's why boards strive to structure compensation in a way that aligns executives' interests with owners'.

The paramount position of owners is clearest when a change in ownership is at issue. Even then, though, executives may have their own views. Consider Syngenta's rejection of Monsanto's $47 billion acquisition bid.

Syngenta's senior management thought the company would be worth more in the long run if it remained independent. But at least some of Syngenta's owners liked Monsanto's sweetened offer. The Wall Street Journal quoted a few in a recent story, including a representative of one of Syngenta's top-ten shareholders (…). "The management of Syngenta," he complained, "is throwing away $15 billion to $20 billion of shareholders' money."

Some disgruntled owners would like to replace the company's board, the Journal reported. The paper said some analysts believe there's still a 30% chance Monsanto could end up with Syngenta.

Even if it doesn't, the Economist thinks "consolidation of the industry may be in prospect anyway (…)." Other combinations of big seed and chemical companies would raise fewer antitrust concerns, the magazine reasons. BASF reportedly tried to arrange financing for a rival offer for Syngenta.

Syngenta's top executives are scrambling to placate unhappy owners. They just announced plans to sell the company's profitable vegetable-seed business and return $2 billion to shareholders (…). Said Syngenta's CEO: "Shareholders are going to be justly rewarded for their patience."

It's worth noting that no party to this controversy spoke of making employees happy. Nor were customers among the prime movers of events. True, many farmers feared seed and chemical prices would rise further if the two companies became one. But their angst wasn't why the deal fell through.

In rebuffing Monsanto, Syngenta's executives predicted antitrust regulators wouldn't approve the combination. Monsanto disagreed -- and put a $3 billion breakup fee where its mouth was. In the end Monsanto walked away after Syngenta rejected the sweetened offer, so we'll never know how the trustbusters would have ruled.

No, neither employees nor customers nor trustbusters had anything to do with it. This was between owners and executives and the only startling thing is that the executives prevailed. Next time, maybe they won't.

Urban Lehner



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