The mural was itself a piece of history, and a testament to Farmland’s former greatness. It was painted by a student of artist Thomas Hart Benton and was a symbolic history of Farmland’s rise to greatness. The mural also told a story about what was happening in corporate America, and the broader meaning of Farmland’s collapse.
The mural depicted how Farmland came to be, back in the 1920s. It showed a group of men and women, dressed in Depression-era clothing, sitting next to a tree and a bale of hay. They are watching a pitchman, who waves his arms out to a horizon of fertile fields and a skyline of grain elevators. He is selling them on the promise of a co-op and the prosperity that could be realized by banding together. Just behind him, two men are slouched below a tree, one of them idly chewing a stalk of wheat. These two men are the “skeptics,” doubtful that the co-op structure would work. Over the next seventy-four years, Farmland proved the skeptics wrong. In 2003, the co-op was owned by roughly five hundred thousand farmers. They shared the profits that Farmland generated from more than $12 billion in annual revenue a year. These farmers had a real say in how Farmland conducted business and they shared in its success.
It would not be entirely fair to consider Packebush one of the “skeptics.” His father, in fact, had been a Farmland owner and member. He wasn’t quick to criticize the co-op model. But he wasn’t going to be sentimental about it, either. The model had failed, at least in Farmland’s case. The American economy in 2003 was a private equity economy. Even up until the 1960s, US companies operated under something that could be called the “managerial theory” of capitalism, meaning that the interests of shareholders took a backseat to the decisions of managers. Even CEOs at big, publicly traded companies did what they thought was best for the long-term health of the firm. The wealth of shareholders was only one factor among many in their decision-making. A typical CEO thought about rewarding employees, supporting the community that their company called home, and reinvesting profits to invent future products. This arrangement fell apart during the 1970s, when price shocks, inflation, and recession meant that public shareholders got a terrible deal for their money. The rate of return on capital was 12 percent in 1965, but only a meager 6 percent by 1979. This malaise laid the groundwork for a revolution in corporate management.
A group of academics devised a new way to think about corporations, called the “agency theory.” Under this new way of thinking, a company’s CEO wasn’t in the driver’s seat—he or she would simply be the “agent” of the shareholders. The balance of power was flipped. Now the shareholders would have the upper hand, and they would essentially tell the CEO what to do. Within this framework, the CEO’s only real job was maximizing the return for shareholders. Everything else, from employee pay to civic commitments, even long-term company value, took a backseat to maximizing return to the owners.
The rise of private equity firms intensified this transformation. Private equity firms bought existing companies and ran them in the best interests of the new owners. Between 2000 and 2012, private equity firms would invest a total of $3.4 trillion as they took companies private. More than eighteen thousand companies were thrust into an extreme form of agency-theory management. Labor costs were slashed, headquarters were moved, and expenses were cut across the board.
Koch Industries had been operating under the agency theory for years—the primary interest of managers was to increase the return on investment for the primary shareholders, Charles and David Koch. Packebush and his team were agents for Koch’s shareholders. They were hoping to buy the most valuable pieces from the wreckage of Farmland and reshape them to deliver the highest profit.
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There was a large table inside the conference room at Farmland headquarters. Next to the table, a series of tripods were arranged, each holding a large, poster-sized photo of Farmland’s fertilizer plants. The glossy photos were designed as an enticement, showing off the plants’ big tanks and tall towers. If the Farmland executives believed that the posters might excite more bidding at the auction, they had reason to be disappointed. Only two companies showed up that day: Koch Industries and the Canadian fertilizer company Agrium.
The delegation from Koch took their seats along one side of the table. The