A Grain Of Activism At Archer Daniels Midland

It was corporate governance, Dwayne Andreas-style. At the Oct. 19 annual meeting of Archer Daniels Midland Co., the agribusiness giant under investigation for price-fixing, Chairman Andreas shouted down shareholders and ordered the audience microphones turned off. To a pension official who yelled out: "This is telling us a lot about how this company is run," Andreas shot back: "This meeting, sir, runs according to my rules."

Running contrary to this guy could be like putting your head in a lion's mouth. But two ADM directors--members of a board widely derided by shareholders as milquetoast--are about to risk doing just that. Ray A. Goldberg and O. Glenn Webb, co-chairmen of ADM's new corporate governance committee, will work with outside consultants and other directors to examine the board's size, director qualifications, ethics, compensation, and other issues. Their goal, sources close to directors say, is to restructure the board. "All things have to be addressed--and they will be," Goldberg promises.

"FULL COOPERATION." Andreas, in a rare interview, promises to give the committee free rein. "They can do anything they want," he told BUSINESS WEEK. And Webb says he expects Andreas to "give us his full cooperation." But the 77-year-old Andreas also defends ADM's 17-member board. Is it too big? "Seventeen is a good size," he declares. Part of its growth has come as the company has kept on "very valuable" longtime directors, he says.

Andreas also casts doubt on the allegations raising investor ire--the charge by ex-ADM executive and whistle-blower Mark E. Whitacre that ADM is involved in global price-fixing for some of its products. Andreas claims it would be nearly impossible to fix the price of commodity items such as lysine, an ingredient in animal feed. If prices were artificially inflated, customers could simply switch to soy meal, Andreas says. Whitacre is telling "fairy tales" to cover up his alleged theft of $9 million from ADM, Andreas says. Whitacre is sticking to his charges.

Some investors think big changes are needed to restore confidence in ADM. The board needs a majority of "truly independent directors," says Richard H. Koppes, deputy executive officer at the California Public Employees' Retirement System (CalPERS). "They have to get some people off." Investors gripe that eight ADM board members are over 70, four are members of the Andreas family, and two are related by marriage.

Many, however, doubt that Goldberg and Webb will be able to achieve significant change at ADM. Both have long had close ties to the company. The 59-year-old Webb heads Growmark Inc., a $1.1 billion farm cooperative partly owned by ADM since 1985. Goldberg, 69, a Harvard professor, is a longtime Andreas friend who has presented case studies on ADM. And ADM for years has ignored critics of its insider-dominated board: It earned an "F" grade from CalPERS earlier this year after failing even to respond to its governance queries.

But some outsiders think the two may surprise a few people. As a director of CoBank ACB in Denver, Webb is helping to downsize a board that was bloated by a recent merger. And Goldberg has led the boards of Pioneer Hi-Bred International Inc. and Vigoro Corp. in compensation, ethics, and environmental issues. "He's not a screaming, shouting director, but he's an activist," says Robert E. Fowler Jr., chief executive of Vigoro. Now that ADM is mired in scandal, both Goldberg and Webb see their--and in Goldberg's case, Harvard's--reputations as being on the line. "This is very sensitive to me," Goldberg says. "I don't want to be a lousy role model to my students. I don't want to do anything that would ever diminish the ethical system I and this university live by." Goldberg promises to resign from the board if "it feels like I'm tilting at windmills."

The governance committee's first report is due within three months. For his part, Goldberg acknowledges that any medicine might be hard for ADM to swallow: "For companies like this that grew up as family firms, the transition is difficult when you need to satisfy shareholders." For Dwayne Andreas, the alternative may be even harsher criticism from key investors.

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