Most of all, they wanted earnings guidance — a quarterly estimate. But three of the most important variables that determined short-term earnings were out of our hands. A hurricane could wreak havoc with production. A new European Union regulation could change the economics of our most important market. And a shift in the euro-to-dollar exchange rate could affect our margins dramatically. How could the company then commit to earnings of 20 cents per share for the fall quarter? “We will commit,” I told the shareholders, “only to those metrics over which we have control. And we will deliver what we promise.”
Of course, the real reason shareholders wanted a number was to hold us to it. Those who miss their guidance numbers are crucified in the market. But demanding earnings guidance also gave analysts an easy way to judge the company without having to do their homework. If we missed our numbers, they could easily conclude that we didn’t know how to forecast, or how to control our business.
As an alternative approach for our investors, I found myself returning to the phrase “commit and deliver.” Ultimately, the team who prepared the annual report put it on the cover in 2002. This report was a turning point. Hereafter, our focus was clear. To investors, customers, and employees, we would be a Commit and Deliver company.
Mantle of Infallibility
While all this was going on, of course, we were engaged in running the company. Again, I was taken aback by something I had previously understood only on an intellectual level: the mantle of infallibility attributed to the CEO. Managers do not want to openly disagree with a CEO. You have to make it comfortable for people to express their points of view, and yet retain decision rights about important things.
Chiquita had a history of dominant chief executives. Too many people reported directly to the CEO; far too many trivial matters crossed the CEO’s desk. My e-mail inbox overflowed, often with grievances by one individual against another, or with copies of routine reports and memos. An entire financial reporting system had been set up exclusively for the CEO. It deserved an “A” for volume and an “F” for content.
It took more than a year to sort through and structure the deluge of data into a form that was useful to me. I killed the special financial reporting system, reorganized the hierarchy, and restructured the management committee. Anything not related to the strategic direction of the company was delegated. Meetings were redesigned to encourage people to express their own points of view instead of trying to second-guess mine.
One area was kept at the top: the enforcement of our commitment to integrity. Chiquita’s bankruptcy had coincided with the collapse of the Internet bubble and the fall of companies like Enron. We were now in a much more transparent world. Consumer products companies, in particular, were scrutinized by their customers. We had to live up to a set of legal and ethical standards that hadn’t even existed 10 years before. To do that, we had to open doors that many people within the company would probably have preferred to keep closed. For example, whenever the board became aware of a potential legal or ethical problem, we reported it to the Department of Justice, the Securities and Exchange Commission, the European Commission, or other appropriate government agencies, and worked with them on a resolution. We also decided, despite the bankruptcy, to continue investing money to meet environmental and social objectives and to obtain certification from independent NGOs.
We took transparency to new levels for us. For example, we used a corporate social responsibility scorecard that rated the company in several specific areas: green for doing well, orange for showing evidence of improvement, and red for needing a lot of work. I remember looking at our yet-to-be-published results and saying, “There is too much red. We’re reporting to the world that we’re doing a lousy job.”