An American Company: The Tragedy of United Fruit
The author of this book was for twenty years a senior official of United Fruit1 and one fact must be put down at the outset: it is about as bad as a book can be and still get printed, which is now very bad. The writing is grammatical but vacuous—“free enterprise simple Simon” I believe the style is called. Its author cannot always stay with a thought for a paragraph and never in any organized way for a chapter. He has little understanding of the modern corporation and, I believe, he gets the story of United Fruit wrong, And yet in a curious way the book is interesting, the interest being in what so disingenuous and agreeable a man says about his depraved job and about a company with which, always on the seamy side, he was associated for so long.
His story is of an aristocratic business instrument of proper Bostonians which for several generations recruited executives on the basis of family connections and social excellence, and thus got people who were personally elegant but administratively incompetent. And so secure that it did no good to tell them they were inadequate. Things would have been worse except that the actual operations in the banana republics were in the hands of hard-bitten independent plantation satraps. Since there was no social life or Boston symphony down there, these were Southerners or Texans who also knew how to get production out of the natives and cooperation of a suitably submissive sort from the local governments. The inadequacy of the Boston managers was thus manifested mostly in marketing and overall planning.
The author holds that there was a revival for a brief time in the Thirties when Samuel Zemurray took over. Zemurray was a Romanian Jewish banana and shipping entrepreneur from the fruit markets of Mobile and New Orleans; the monopoly-minded United Fruit bought him out with a distressingly large issue of stock. As one heard the story in Boston in those days, Zemurray became troubled by the way the company was going during the bad years and wrote offering help. The management, being anti-Semitic as well as incompetent, naturally did not stoop to reply. So Zemurray came himself to the next annual meeting with his proxies and voted himself in.
After Zemurray, by the author’s account, the company slipped, then recovered very well until 1968 when a shoe-string operator named Eli M. Black, head of the then much smaller AMK Corporation (mostly Morell Packing), staged a raid on United Fruit, which meantime had enlarged its operations with some acquisitions as required by the age of conglomeration. Black paid for the stock he purchased for control with money borrowed, in effect, against the assets of the company he was trying to take over—an exercise in financial levitation which the corporation laws allow, to the benefit of no one but such thimble-riggers. Under Black things went from good to very bad. This was not noticed for some time; a highly successful public relations campaign persuaded the press and the financial community that prospects were wonderful and improving all the time and that Eli Black, a former rabbi, was a sensitive industrial statesman, as, indeed, he seems to have regarded himself. He was an ample supporter of Richard Nixon and got an invitation to the Inaugural Ball and some cufflinks, and he was very proud of both of them. They gave him the inspiring thought that he might be the man to succeed Henry Kissinger as secretary of state.
Perhaps he was a person of some sensitivity, for he made a point of negotiating with Cesar Chavez and was at least attracted by the thought of other acts of social responsibility. And, more specifically, on the gray morning on February 3, 1975 he was led to fill a briefcase full of heavy books, proceed to his office in the PanAm building, bash out a window with the case, and throw himself onto the Park Avenue ramp forty-four floors below. That was because it was about to become known that he had recently offered a large bribe to General Oswaldo Lopez Arellano, the Honduran chief of state, to reduce the recently enacted banana export tax and that the company had racked up an appalling loss in 1974—$71.3 million on continuing operations, on top of poor performance in the years before. United Fruit was by now, of all things, second in the banana business after Dole.
Its share in the banana business, through last year, was still declining. And by 1975 meat, not bananas, accounted for two-thirds of its sales, although bananas in that year produced close to three-quarters of the operating revenue. In 1975 the company was marginally in the black. The stock, which in 1969 had reached fifty-five and in 1973 was down to three, is now around eight. No dividend is being paid on the common and there are substantial arrears on the preferred.
To return to the company’s history: although outsiders were still living in innocence (something for which the author takes credit) when Black took his dive, insiders knew he was a disaster. His method was to make bad decisions and then get rid of those who disagreed. A plot was in the making to get rid of him, which included having Nixon make him an ambassador, a simple and harmless way of letting him down lightly. After the suicide the whole dreary story came out and his widow’s pension was cancelled.
A year after Black’s suicide the author of this book, Mr. McCann, having previously left the company to set up his own public relations firm, resigned the United Brands account. This was not wholly an act of conscience. He had been highly successful in misleading the press, but he was coming to accept that there were tasks that strained his competence as well as his principles. There are things and people—biological warfare, Ron Zeigler, swine flu, and possibly now Nelson Rockefeller—which simply do not lend themselves to effective public relations.
The limited charm of Mr. McCann’s saga lies partly in his belief that, as on the Nixon tapes, failure, error, or imbecility are not things to be corrected but problems in PR (although he does, to his credit, think some correction would be useful). In reaching this conclusion, it must be said, he was greatly helped by the business press. This with few exceptions is the wasteland of modern journalism because there is a presumption, as there is not in political reporting, that the business spokesman or press release is on the up and up and to be believed. However, laziness, innocence, and editorial aversion to serious investigative reporting on business also play a part. Here is Mr. McCann’s account of a conference with his boss when the company was not only down the drain but well into the septic tank.
On September 3, 1973, Time magazine carried a story on United Brands. It was researched and written by Hall Moore, whom I had got to know a few months earlier and who would become a friend. The article went through several Time rewriters and editors, and although the result was extremely favorable, my feelings were mixed. I was pleased with it as a PR accomplishment, but I was also aware [sic] that my view of PR was coming to look more and more like Eli Black’s.
Shortly after it appeared, Black called my office.
“Well,” he said, “at last we have one that’s not too bad.”
The comment made me angry, and I asked Black what he meant. But before he had a chance to respond I mentioned similarly favorable stories that had appeared in recent editions of Business Week, that front page New York Times piece and the Chicago News.
“Well,” he said, “What I mean is it could have been worse.”
“You’re right, Eli, it could have been worse—it could have been a lot worse.
“Let’s look at it a bit closer, Eli. The article says that you’re the guy who transformed the company. It says that you brought ‘peace, harmony and profits.’ It says you’re an empire builder.
“Now let’s consider what it left out,” I went on. “When you think about it, the things that make this article really remarkable are what it leaves out.”
Black said nothing.
“For example, it omits reference to profit levels before the takeover. It doesn’t say anywhere that United Fruit made a hell of a lot more money before you showed up than they have since.”
“There’s no reference to the price of the stock which stands at about 80 percent below its level before the takeover. There’s nothing about the company dropping down to second banana in the industry. No mention of the lettuce problem. No reference to our invasion of Guatemala: this is the first major story on the company in the past two decades that doesn’t bring up the Guatemala story. And it never mentions the Old Guard: Fox, Cornuelle, Sunderland, Zemurray.
Eli waited until he was sure I’d finished. I expected to be fired.
“Tom, Tom,” he said. “We agree, we agree. It could have been a whole lot worse.”
So much for Time‘s business reporting. Better, possibly, than most.
Mr. McCann’s story is not confined to covering up. He also tells of a great deal of misfeasance which was not in danger of getting out.
Mr. McCann gets the story of the Company wrong in three major respects. It is my strong impression that the record of the Boston management is one of virtually uninterrupted decline for the last half-century. Samuel Zemurray was a man of intelligence. He made friends with Felix Frankfurter, Henry S. Dennison (for whom I once worked), and other liberal and intelligent men, and delighted in telling them of his need to be kind to the stuffed shirts he found when he arrived. What other work could T. Jefferson Coolidge do? What a humiliation if he were fired! When I was directing price control during the war years, it was Coolidge who led the United Fruit delegation to Washington asking for higher prices. This he did with such a combination of hauteur and incoherence that it was a struggle not to turn him down forthwith. When Zemurray sought to retire, his replacement was from the classic bloodline:
Here’s to United Fruit
A hoary old corporate bawd.
Where Zemurray gave way to a Cabot
And did Cabot screw up, My God!
Zemurray had to come back, but when he became ill and finally pulled out in the Fifties, the empty shirts remained. And their successors, of whom McCann speaks admiringly, were on their record certifiable meatheads. The corporate diversification program of the Sixties, as McCann himself admits, was superbly ill-conceived:
…we picked up a lot of little companies in other parts of the country, such as a freeze-dry shrimp processing firm, a catfish farm in Honduras, and whatever else we could dig out of the heap. But we never managed to tie into anything really substantial or worthwhile. The company—and the price of its stock—seemed stuck in the doldrums.
Here is how they avoided purchasing an unpromising West Coast property.
Jack Fox and I had flown out to the West Coast and he was an hour away from putting his name on the papers when he discovered that there was a serious discrepancy between what we thought of Winchell and what a closer look told us the company actually was—a big enough difference that it would have turned a reasonable acquisition into something very different. Fortunately, we were able to back off in time.
No minimally competent management would be working this way. Nor would any competently and aggressively led company have been taken over by such as Eli Black. Apart from looking around for an alternative takeover, the United Fruit management hardly even resisted him. Perhaps it did not know how. More plausibly it was deeply lethargic. It doesn’t seem even to have learned much about the man who was moving in on the company.
More forgivably, perhaps, for many share the failure, the author does not see the relationship of the modern corporation to the state—to government. This is of the greatest intimacy—the government is the source of the orders and auxiliary services that allow business to be done, the authorizations and constraints that determine the way it is done. And here is the difference between the national and the multinational corporation. What is taken for granted in the relation between a national corporation and its government is regarded very differently when it is a foreign corporation intruding on the scene.
With the growing sense of national identity in the Third World the difference in view just mentioned is increasing. It is impossible, I think, to discuss the operations of a multinational corporation such as United Fruit without bearing this inevitable relationship to government in mind. It is far more difficult than most imagine. The multinational corporation must have influence on the foreign government, for that is the nature of the corporate-government relationship. But if it dominates or dictates, or only seems to do so, it risks the consequences reserved for modern colonial power, economic or political.
The author also fails to notice, or at least to emphasize, the solution on which United Brands seems, however accidentally, to have hit. This has been the subject of some interesting recent work2 by Henry Maurer, who has been reporting from Central America on a grant from the Fund for Investigative Journalism. For critics of multinational corporations it has always been a problem that, in the poor countries, the companies produce things that would not otherwise be produced and that however low their wages by the standards of the industrial lands, they are regularly quite wonderful in comparison with local pay. In Central America, United Fruit has taken advantage of its higher wages and the labor-intensive character of its operations to lock its workers and their unions solidly on its side. “The banana enclave in Honduras once benefited only American investors and a few local hangers-on. By spreading the wealth to the workers, the company has won over its most dangerous opposition.”3 Mr. Maurer, as a good radical, would like, in principle, to see public ownership of the plantations. In view of the attitude of the workers and the technical, administrative, and marketing problems involved, he is neither optimistic about the success of such a step nor entirely surprised that it is not being taken.
There is a curious consequence. Mr. McCann, who has spent his professional life dealing with corporate misfeasance and stupidity, ends up with a less than ringing affirmation of his faith in free enterprise and says nothing to support it. Mr. Maurer, who thinks nothing of free enterprise, sees that, along with princes and former prime ministers, the common man is also open to purchase. The resulting political rewards are great, the possibility of scandal or even criticism nearly nonexistent. Mr. Maurer thus sees a future for United Fruit. He is sorry. I am not sure I agree. Buying up workers doesn’t seem to me all bad.
In the early Seventies the name changed to United Brands. The writer sticks generally to the old name as I do here.↩
See particularly "Bananagate," in The Progressive, July 1976.↩
Bananas March 3, 1977