Editorial

Avoiding another Alamo

2/21/00 When Chip Morse was in Wisconsin for a meeting with Ocean Spray growers and board members, he also met with John Swendrowski, President of Northland Cranberries, Ocean Spray's primary competitor in the cranberry juice business. During the Ocean Spray meeting, Morse challenged Ocean Spray board member Jeff Kapell on Kapell's interpretation of David Harding's explanation of the Bain Consulting investigation. Sources have told Stressline that this did not endear Morse to influential Ocean Spray Wisconsin growers. Morse became a target of the group calling for an alternate proxy to be elected to comprise the new down-sized board which would eventually include eleven growers, the CEO, and three outside directors. The meeting with Swendrowski proved to be just the excuse needed to effectively rally support against Morse, especially in Massachusetts.

The alternate proxy replaced Morse, who was nominated by Massachusetts' growers; Don LeClair, also nominated by Massachusetts' growers; and Daryl Robison, who was nominated by growers in Washington and Oregon. Don LeClair expressed views highly critical of Tom Bullock's management and was an early advocate of replacing him while most of the board was still in favor of keeping him in place. The reason being put forth in informal meetings as to why LeClair's nomination should be negated by the national Ocean Spray "electorate" is that one of Don's sons leases acreage from him and sells his crop to an independent.

Daryl Robison was quite literally a last minute replacement to run against Don Hatton in the west coast nomination, after his predecessor resigned amidst charges he had leaked a memo from Bain Consulting. No accusations are being made regarding Robison's fitness to serve on the board. Don Hatton wrote a letter stating he wouldn't serve but left some semantic doubt in his phrasing. Since then he has apparently clarified his intentions saying he would not serve under any circumstances. This is an important clarification since it is possible that the final vote tally will still give Hatton and one other candidate more votes from the alternate proxy than Robison. In that case the Oregon and Washington will be left without a member on the board unless Hatton accepts the position on the board.

The strongest case against the targets of the alternate proxy is being leveled against Chip Morse. While Morse has stated he showed poor business judgment in meeting with Swendrowski, who he has known since before Swendrowski left Ocean Spray to start Northland, there is certainly a case to be made that business judgment should be considered when one seeks to serve on the board. If the situation was reversed and a member of the Northland board decided, on his own, to meet with a member of the Ocean Spray board, would there be a hue and outcry among other members of the Northland board?

Since Ocean Spray has board members in Wisconsin, where Northland is headquartered, I wondered whether such meetings might be a common occurrence. To find out, I called John Swendrowski who said "because we're a small town, casual meetings similar to the Chip Morse meeting, historically, have happened diverse times between senior employees and board members of Northland, with growers and board members of Ocean Spray."

Swendrowski also pointed out that David Lucas, a Vice President of Northland and Douglas Beaton from Ocean Spray serve together on the Cranberry Marketing Committee. In Massachusetts, Northland representative John Wilson is on the board of the Cape Cod Cranberry Growers' Association along with relatives of three Ocean Spray board members, Peter Beaton, Kirby Gilmore and Ted LeClair.  In Wisconsin, Jerry Bach, Northland's head of Grower Relations, sits on the board of the Wisconsin Cranberry Growers' Association with Craige Scott, former chair of the Ocean Spray board, and current board member Gary Dempze. To put things in perspective, is it realistic to think that all conversations between these Northland and Ocean Spray representatives are "on the record?" Can anybody be so naive as to think that other Ocean Spray board members haven't had private conversations about a wide variety of topics with Northland board members and senior officials? If the leaders of those promoting the alternate slate are tarring Chip Morse with that particular brush, they are doing so deceitfully, to serve their own political agenda, and to garner votes to their side by manipulating the emotions of other shareholders.

What advocates of the alternate proxy don't seem to realize is that board censure, and at worst, removal from the board for cause, are the proper ways to deal with misconduct by board members. By targeting three nominees and urging they be replaced by candidates who lost their regional elections, and have their own political baggage, the nature of this movement becomes glaringly apparent. It is no less than an effort to add three, or if Hatton is removed from the alternate slate, two members to the board who are likely to resist all efforts to objectively explore the merger/sale option once Ocean Spray is a going concern again. The Ocean Spray loyalists who are deeply offended by Morse's meeting with Swendrowski, or LeClair's son having an independent contract, are being used by the powers behind the scene, such as the still influential Craige Scott (WI), former chairman of the board, and William Cutts (NJ) who was one of the twelve who signed the alternate slate letter, to further their agenda.

The stage is now set in Texas, literally across the street from the site of another historic battle, for an unprecedented proxy fight which can tear the company apart. Whether or not a deal is brokered prior to the elect remains to be seen. There is still time for both sides to try to reach a compromise.  They could sit down together, or ask Ocean Spray CEO Robert Hawthorne to mediate, and do a little Texas horse-trading. The most likely scenario is for a trade of one of the seats on the Massachusetts company slate for one on the alternate slate. The most likely trade would be to give up Chip Morse's seat and allow Beaton or Gilmore to fill it. Beaton is a better choice to sit on the board than Gilmore whose own judgment has been questioned because of his trips to Russia to help cranberry growers there, and because of his lack of diplomacy in working with shareholders.

There is nothing short of an eleventh hour resolution of this proxy battle to save Ocean Spray from, if you'll excuse the hyperbole, reenacting the battle of the Alamo.