Psychological Perspective:

Why aren't more food companies merging?
by Hal Brown

...a primary impediment to mergers is psychological, and perhaps even psychosexual! They say that a big hurdle is that "new CEOs at many food companies want to sow their wild oats and make their mark on their companies."  Even the symbolism is phallic as John McMillian, from Prudential Securities, is quoted "you've got a bunch of young CEOs who don't want to give up the corporate jet -- they're all in a little bit of denial".

8/14/99 According to Wall Street Journal reporters Nikhil Deogun and Shelly Branch ("Food makers facing heat to cook up some mergers", ( WSJ  fee site 9/13/99 ), the time is ripe for deal making between some of the best known food companies. Campbell Soup, H.J. Heinz, Kellogg, and Hershey have all seen profits dwindle. While Ocean Spray is conspicuously absent in the companies listed, perhaps because the cooperative doesn't quite register on Wall Street seismographs, it obviously meets the criteria as a company which can no longer go it alone, but can reemerge from a strategic merger or acquisition stronger than ever. Many companies seem to be resisting mergers.

The Journal article lists the following company consolidations as making good business sense: Campbell-Bestfoods, Cadbury-Schweppes - Hershey, Kellogg's-Bestfoods, Kellogg's-Keebler, Pepsico-Nabisco, General Mills - Quaker Oats and Heinz-Campbell.

The authors of the article imply that a primary impediment to mergers is psychological, and perhaps even psychosexual! They say that a big hurdle is that "new CEOs at many food companies want to sow their wild oats and make their mark on their companies."  Even the symbolism is phallic as John McMillian, from Prudential Securities, is quoted "you've got a bunch of young CEOs who don't want to give up the corporate jet -- they're all in a little bit of denial".

The four CEO's listed in the article are Dale Morrison, age 50, from Campbells; William Johnson, 50, from Heinz; Carlos Gutierrex from Kellogg's, 45; and James Kilts, 51, from Nabisco. All have been in their positions for only a year or two. Hardly young enough to be "sowing wild oats", their ages suggest midlife crises. Indeed, there does come a time when a man should psychologically "give up the corporate jet" and come down to earth. The reluctance to do so often leads to affairs and divorce, but in corporations when a CEO clings to his youth through denial, he can bring down an entire company.

In Ocean Spray, CEO Tom Bullock, age 53, who was forced into early retirement, may or may not still be in control of the company. The inner workings of his psyche remain a mystery.  The ultimate fiduciary responsibility for the cooperative rests with the twenty-five men who are members of the board. Ocean Spray gave up its airplane years ago, but the perks of power continue and power can have an aphrodisiac effect (as Henry Kissinger once noted). Being on the board of a $1.5 billion company may represent the pinnacle of success for some, but being on the board of a subsidiary that represents 1% of a $150 billion corporation puts this in a sobering perspective.

There are two  basic kinds of denial. The first is conscious and not even considered a psychological defense mechanism. The second is unconscious. People engage in unconscious denial because facing the truth is too unpleasant.  Somewhere in between conscious and unconscious denial is a gray area.

In business as in life, what we don't know has the potential to hurt us the most. The closer denial gets to being completely unconscious, the more dangerous it becomes. This is because the individual tends to construct his belief system so it supports the denial, and to behave in ways consistent with what is basically a false belief system. An example of this might be seen in how executives at Ocean Spray blamed the crisis in the cooperative on the surplus and on competition. Facing the truth would have meant admitting their compounded mistakes, and would have reflected on their management skill, and except in the case of the one top female executive, quite possibly been a blow to their male self-image. The fact that upper management of so many companies tends to be male dominated, as are many corporate boards, heightens the "boy's club" atmosphere. One would have to be completely naive to think that this social pressure doesn't influence decision making.

Whether one is the President of a country or a corporation, there is no escaping psychology. The Central Intelligence Agency has some of the top psychologists in the country analyzing world leaders.  Bill Clinton's presidency almost ended because of  his unconscious psychological denial which was dissected  ad nauseam.  A high profile corporate magnate like Bill Gates will be analyzed seriously and satirically.  Corporate leaders come under far less scrutiny.

Unless shareholders exert enough influence, twenty five board members and one discredited CEO will decide the future of Ocean Spray and over 900 family farms. Each of these individuals believe they are acting in the best interest of Ocean Spray grower/owners. But a belief system is as prone to misbehavior (denial)  as an ERP/SAP system, and a lot more difficult to fix.

Hal Brown, LICSW is a psychotherapist
with thirty years of clinical experience.