ADM faces rough week
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October 8, 1996: 8:59 p.m. ET
Shareholders, government bring change, reform, and indictments
From Correspondent Ceci Rodgers
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CHICAGO (CNNfn) - Archer Daniels Midland, the agricultural products giant under federal scrutiny in a price-fixing probe, could be facing still more problems in the coming days. Calls for a shakeup are being raised a notch ahead of the annual shareholders meeting next week.
Sources close to the government's settlement talks with ADM said that there's a better than 50/50 chance indictments will be handed down next Tuesday in the four-year long investigation into fixing prices on lysine, a livestock-feed additive.
The indictments are expected to involve two high-level executives including Michael Andreas, son of ADM's founder Dwayne Andreas and Terrence Wilson, head of ADM's corn-processing division. The indictments could be handed down just two days before the company's annual meeting in Decatur, Ill.
So far, the meeting is shaping up as a "David and Goliath" style face-off.
Institutional investors were shouted down at last year's annual meeting by a defensive chairman. This year, they're counting on some, if limited success.
Ed Durkin of the United Brotherhood of Carpenters said that the company missed previous opportunities for independent review.
"The pace has not been fast enough, so we're going to push the pace." he said.
In all, institutional investors have introduced five resolutions for change, which generally address concerns the board serves management, not shareholders.
At the urging of the powerful California Public Employees Retirement System, ADM in January named a special governance board to address critics' concerns that its directors were too inbred and clubby.
Eight ADM board members have quit since then, but 10 of the 17 remaining directors are current or former ADM executives or relatives.
Some said privately that with government price-fixing indictments imminent, an independent board might already have forced a restructuring, possibly even including resignations of key executives.
William Crist of CalPERS said that the reforms, while welcomed, have not gone far enough to satisfy shareholders. (176K WAV) or (176K AIFF)
Weakening earnings over the summer, reflected in the company's stock price, increased investors' leverage against an intransigent management.
In spite of ADM's problems, money managers like Jon Lukomnik, comptroller of pensions for New York City, said that they're still in a buy-and-hold mode on the stock.
"This is definitely a corporation that needs some outside culture influences," said Lukomnik. While it is highly defensive at the moment, he said it "has a great franchise in terms of business."
"What we want to do is make sure that that franchise value gets translated to shareholders," he added.
Last year's shareholder meeting saw heavy-handed control tactics by ADM's chairman Dwayne Andreas including -- at one point -- turning off the microphones to shareholders.
This year, more of the same might be in store, with no cameras allowed inside in what promises to be tense proceedings.
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Archer Daniels Midland
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