Online Extra: Hagedorn: "We Care About Our People"

The Scotts CEO talks about the perils of smoking, rising health-care costs, and the controversial nature of his wellness program

Jim Hagedorn, Scotts Miracle-Gro's chief executive officer, is famous among his employees for his "straight talk" sessions. These no-spin zones are a chance for Hagedorn to talk freely about the issues affecting his company. None looms larger right now than the cost of health care, and Hagedorn's wellness program is among the most leading-edge in Corporate America. Michelle Conlin recently interviewed Hagedorn about his motives for taking such a bold step.

Why do you hold straight-talk sessions?

We're nonunion. We're also in Marysville [Ohio], where we have Honda. And they've been trying to unionize Honda for ages, kind of like the way they've been trying to unionize Wal-Mart. It would be terrible if we unionized, so it's important to have really strong relationships with our people. My straight talks are about allowing them to ask questions. Employees have a right to talk back. They get to listen in an unfiltered way.

How would you describe what you are trying to do at Scotts with your wellness program?

Clearly we're on the edge in terms of taking responsibility for our health care. The way I run my business is the way I run my life; If we're trying to do something, let's find something to do that's really important. You can't just build a fitness center. You can't just do a gym. It's too superficial. The whole center is designed around wellness. I always hope people feel we care about them and we're a family. What's wrong with saying we care about our people?

What's your view of the health-care situation in America?

How can you live in this country and not think we have significant health issues? I told my people that you cannot expect us, the company, to just continue to pay these kinds of increases and not say to our people you are partly responsible. There were a lot of pissed-off people. But I knew we needed to do something about health care. Everybody I think feels strongly that smoking and obesity are a major issue in this country. Nobody can say that's not true. Government and the health industry are not fixing this. The people that need to deal with this, and can deal with this right now, are the people who are paying the bill—and that's the employers of the American workers. Why aren't the American employers dealing aggressively with these issues of wellness?

How did your legal team and advisors respond when you told them about your vision?

They told me we were going into FEBA (forward edge of battle area). FEBA is not a cleanly defined area. On the ground there's a lot of smoke, yelling and screaming and noise. FEBA is a kind of dangerous place to be. For a public company, people don't want to be in FEBA. People want to play where it's really safe.

How did you explain the situation to your people?

I told them it would be like three of us had this great little company. But one of us wasn't living in a healthy way. But it's going to cost us all money, and so we as a group should not tolerate certain behaviors that are going to cost us more. If you need a bypass or have cancer or lose a leg because of diabetes, there are significant events and our community health insurance is designed around helping each other out. And we should do that. But we're not supposed to just let the dude who is so grossly unhealthy, just let that be.

What has been the reaction of other CEOs?

This is another area where CEOs are afraid to go. But if we had a machine that was grinding people up and we didn't do anything about it, everyone would say Hagedorn is irresponsible. Well, it's the same way with unhealthy behavior. Just look at lifestyles. Look at smoking. If you explain that to people, how can they do anything else but say I get it?

My view is we choose not to employ smokers because it comes right down to us saying that as a culture we care about our people and we are not going to tolerate suicidal behavior. If we had somebody running around saying I'm going to commit suicide, we'd call an ambulance and take them away. They have a problem and they need help. To me, what I think is missing in this debate about wellness is that it is O.K. for a company to say we care about our people, and we choose not to have our folks behave in a way that's going to be heartbreaking.

Critics say your wellness program is an invasion of privacy. How do you respond?

Look, you think I want anyone looking at me in my bedroom? I don't. I don't think it's anybody's business what I do. What business is it of yours to worry about me? The difference, though, is then don't ask me to pay for it. If you choose to smoke then don't ask me to cover your insurance. Well, some federal laws say we can't do that. They say we can't transfer the risk to the person behaving in a way that will cost more. The rules are lining up so you can't assign the risk where it belongs. Think about it. If I'm a bad driver and have a lot of accidents, I will pay more. You can't do that as an employer with health insurance. This country needs to deal with this stuff. It's not right, the way it is. Certain things are worth taking the risk. This is one of them.

    Before it's here, it's on the Bloomberg Terminal.