The newly reorganized DuPont Co. held its first shareholder meeting since its separation from Dow Chemical Co. and Corteva Agriscience at its suburban Wilmington headquarters on June 25. Kenneth Henley of Philadelphia and Donny Irvin of Richmond, Va., went there for one of the company’s labor unions, the International Brotherhood of DuPont Workers, which says it speaks for 5,000 workers at a collection of plants, mostly in union-hostile “right-to-work” states.
They wanted to remind CEO C. Marc Doyle and executive chairman Edward Breen (as if they need reminding) that their ongoing project — continued cost-cutting and rejuggling of the company’s business lines — have a long and very mixed history at the company.
Since the 1980s, Henley began, “DuPont has bought and sold many businesses — often the same ones — without much to show for it.”
He recalled how DuPont bought Conoco in 1981, “when [oil] prices were high — and sold when low” in 1999 — just before Conoco became highly profitable.
He touched on DuPont’s costly, abortive attempts to become a high-margin drugmaker. And the divestiture of the performance coatings (auto paints) business, Axalta — which made billions — for Carlyle, the private-equity giant that bought the business cheap, then flipped it to public shareholders. And the titanium dioxide business — now Chemours — which also enriched outside investors after DuPont spun it off. And Lycra, the Wilmington-based, Chinese-owned ex-DuPont fabrics business, now weighing a U.S. IPO while building a new research center — in China.
Besides costly bad strategies, Henley went on, DuPont has had to pay out fat settlements for pollution from products including Benlate (which damaged farmland), Teflon production (which leaked cancer-causing perfluorooctanoic acid (PFOA) into Ohio Valley drinking water), and Imprelis (a fast-decaying pesticide that third-party contractors misapplied to evergreens, damaging or killing them).
“Are there any executives at DuPont that paid the price?” Henley asked. “Top-line executives never seem to suffer for their poor decisions, unless suffering means they don’t receive quite as big a bonus or, less frequently, are offered retirement with a loaded-up severance package.”
In fact, a string of bosses departed since Breen took over, with others promoted into new posts and working nonstop in hopes of big stock payouts. Henley was echoing many of the familiar charges lobbed by corporate raider Nelson Peltz four years ago, when he pushed DuPont toward the Dow merger.
Workers, Henley continued, aren’t so well-protected. “They are told how tough things are, and the need to buckle down. What this has meant, in practical terms, is employees having to give up compensation and benefits to save the company money,” wage and pension freezes, retiree health benefits trimmed or cut.
“But now we have a ‘new’ DuPont and, hopefully, a new way of doing business,” added Henley. Prove it, he challenged the executives: Give employees stock options, too, as DuPont did in happier times. Give workers a piece of the action. Let their bonus rise (and if need be, fall) with the boss’.
A union-backed proposal for DuPont’s board to consider cutting bosses’ pay — instead of giving them bonuses — when workers are laid off was voted down by a crushing margin. But another proposal came close to passing over DuPont objections: a measure to let DuPont shareholders vote on major decisions without waiting for the annual meeting received almost half the shareholders’ votes. Similar proposals have lately passed at Allstate and Sprint.
In their pre-meeting response to union-backed proposals, DuPont directors noted they are focused, not on paying workers more, but on ensuring “value to stockholders” through $3.6 billion more in annual spending cuts at DuPont and its recent spin-offs. And that bosses are given incentives to boost profits, not as a multiple of what workers collect.
“I’m not a fan of Breen,” Henley told me on a recent visit to Philadelphia. Breen, who broke up the former Princeton-based conglomerate Tyco International and sold the pieces at fat profits after his team couldn’t convince investors to pay more for the united company’s shares, tells persuasive stories, Henley acknowledged. “But what’s he done that’s positive? Spent how much more money on share buybacks?”
Henley says workers relate a little better to new DuPont CEO Doyle, a veteran of DuPont’s Richmond, Va., works: “Our people there don’t think he’s a bad guy.” But Breen looks like the power behind the throne, the man who keeps putting businesses up for sale even as Doyle tries to build the image and culture of a smarter, focused, renewed company, complete with a multimillion-dollar rebranding campaign (slogans include “Welcome to N:OW”).
Together and apart, DuPont and Dow eliminated a total of 18,000 jobs in the last five years, leaving 98,000. Combined research spending dropped more than 40 percent, to $2.1 billion last year. Capital expenditures fell one-third, to $3.8 billion. They spent more than $3 billion propping up share prices in buybacks, and plan to spend more that way. Despite all that effort, DuPont shares are worth about as much as they were before the merger.
In that environment, with more assets for sale, not knowing whether their future belongs with top management back in Wilmington or buyers in Europe or Asia, managers are "scared of responsibility,” Henley told me.
“The managers are scared for their jobs. The don’t like to look like they are weak, like they are caving in to us. So they have to justify themselves by increasing production, or cutting costs, and being harsh on safety.” One result: Disputes that might have been resolved across a table are now routed to arbitration, potentially boosting legal costs, delays, and frustration for both sides.