Dethroning the King (17 page)

Still, it was clear to many Anheuser-Busch executives that a succession plan needed to be put in place, and their conviction stemmed not from their views on The Third's physical capacity but from a shift they noticed in his mental state.

“You could just see that period in the early 2000s, where he's getting older,” said one former top executive. “Though nobody knows him well, he just feared mortality. His whole life, his whole soul, he had given to this company. To see it slipping away . . .”

The Fourth wasn't predisposed to oust his father in the same way his grandfather had been ejected. Thankfully, he didn't have to. Anheuser-Busch had been family-owned when Gussie was forced out, but thanks to a decision by The Third to list the company on the New York Stock Exchange in 1980, it now had legions of shareholders and answered to a stricter set of rules—one of which dictated that its chief executive should retire at or before the age of 65. The Third was set to turn 65 in June 2002, and while he was a powerful man, there was no way he was going to use that power to nullify the age requirement while under shareholder scrutiny. He owned just 3.4 million shares of Anheuser-Busch, less than 1 percent of the company's stock. He had no voting control over the matter. The Fourth would have to lobby the board of directors hard to win the CEO job, but at least he wasn't going to have to kick his dad to the curb. “Considering the history of my father and my grandfather,” The Fourth said in 1997 in reference to the coup, “he knew he would retire by sixty-five.”

Some former Anheuser executives said The Third's greatest fears were geared more toward becoming professionally obsolete rather than toward actually dying.

“I think he was facing his own mortality—not to sound overly dramatic—because of the mandatory retirement policy the company had,” a former strategy committee staffer said. “I believe that if he could have worked until he dropped dead doing that job, he would have. There was no question he didn't want to retire.” This executive once overheard a conversation between August III and Edward Whitacre, a longtime Anheuser board member and friend of August's, who was four years younger and who, at the time, was chairman and chief executive of AT&T. At the dinner table the night before a board meeting, the two lamented that they were being forced to retire just as they were hitting what they felt was the prime of their lives.

“August told me once: ‘You know, guys like us, we never retire,' ” the former executive said. “And I felt like saying, “What do you mean, guys like us? Guys like you!” He thought the wiser, though, smiled, and kept his mouth firmly shut.

Several years before The Third was due to turn 65, Wall Street analysts began to debate whether his son was the right candidate for the job. Many analysts assumed he was the most likely person to replace his father. “I wouldn't operate under the assumption that August the Third's successor would be someone other than August the Fourth,” a Salomon Smith Barney analyst said in 1998. Still, others speculated that The Third might find a placeholder—rumored to be beer business head and August IV's boss Pat Stokes—to manage the company for a while until The Fourth was sufficiently able.

No amount of lobbying was going to change the impression by some investors that August IV was too young and inexperienced, and that promoting him at that particular time would be a stroke of nepotism that could hurt the company's prospects. There were concerns about whether he was well-rounded enough, intellectually or managerially, to handle the top job. He had played a critical role in the company's marketing effort, but he hadn't operated Anheuser-Busch's dozen breweries, run its theme parks, managed its international businesses, or dealt with its network of opinionated distributors. And while The Fourth had tamped down some of the flames over the Arizona crash and his other legal troubles and was closing in on the age of 40, he had a naggingly persistent party-boy image. With a few more years under his belt, perhaps he would be more ready for the job.

Susan Busch in a 1995 interview called her son “an amazingly strong man” who was “doing very well with his life,” and said she believed he was the heir apparent. “I would think so, yes,” she said. “He's got the ability and he definitely has the desire, so I would think that he would be the next one.”

When asked three years later what he would do if he wasn't named CEO, The Fourth indicated that he hadn't even weighed the notion. “What will I do? I don't know. I'm not going to consider that option right now.” By the time 2002 rolled around, bringing with it The Third's 65th birthday, other Busch family members were also quoted saying that they expected The Fourth would claim the title. After all, The Third hadn't prepared any other candidates from within the family.

“August Busch IV is a little bit of a dark horse,” one analyst said that year. “Wall Street doesn't know how bright he is, how good a leader he is. He's not a character who has been tested or tried.”

On July 1, 2002, a month after August III's 65th birthday, he and the rest of the Anheuser-Busch board of directors announced that Pat Stokes, 59, would take charge of the company on a day-to-day basis as president and CEO. The Third would remain chairman of the board and would continue to serve on the company's agenda-setting strategy committee, which meant he'd still have purview over the entire operation. The implications of the decision were monumental, as Anheuser-Busch itself pointed out. For the first time in 142 years, the company would be run by someone who wasn't a member of the Busch or Anheuser families. The dynasty was coming to an end.

Stokes's promotion immediately sparked debate over whether The Third's decision to bypass his son meant that The Fourth might never actually measure up to his expectations and make it to the top. Most Anheuser-Busch watchers assumed The Third was just giving his son more time to get up to speed. “I think he thought that August IV was not ready yet, and so they gave him a number of other responsibilities,” said former U.S. Ambassador to Mexico James Jones, who was a member of Anheuser's board at the time.

“I think he genuinely wanted to pass it down to his son, but I think his son just wasn't up to it,” said Charlie Claggett. “August used to say, ‘You're thinking with your heart and not your head.' And I think that was the weakness his son had. He just did not have that cutthroat willingness to cut somebody off at the knees if he had to, which is the way you have to run a brewery. Because let's face it, anybody can brew beer. It's just a matter of who has the most money and power, and who is willing to do what it takes.”

Business Week
called The Third's decision to relinquish his operating titles but remain chairman of the company “a succession process as tightly orchestrated as any in the House of Windsor.” Even though The Third had chosen a non-family member and denied his son the seat, the magazine joined cynics in taking him and the board to task for what it said looked like an “extremely temporary” aberration in the Busch family's succession legacy. “At a time when the image of the regal boss is more than just troubling, the Busch family seems somehow exempt from many of the rigors currently being imposed on the rest of Corporate America,” it said. The Third and his board had allowed the murky succession debate to devolve to the point where they were damned if they appointed The Fourth as CEO and damned if they didn't.

The Fourth was promoted into Stokes's spot as head of the company's domestic beer operations, which would have been viewed as a plum new assignment had he not been in contention to be CEO. Instead, he was forced to address his cloudy future. “I don't take anything for granted in this company,” The Fourth said the year after he was passed over for the job. “It's not a foregone conclusion that I'll go any further.”

“The Fourth was young,” said one former high-ranking Anheuser executive, who said the company faced a timing problem. “If you go back to 1990, he was way too young to be considered for president at that point. He hadn't done enough jobs at the brewery. So there was a gap there that just chronologically needed to be filled. Were people surprised? I was close enough to Pat that I wasn't surprised. August had a lot of confidence in him, and he was a smart guy.”

The board installed Stokes with an almost implicit understanding that he would serve in the interim while August IV took more time to develop, said General Henry Hugh Shelton, a member of the board who helped make that decision. The goal was for The Fourth to be seen as a clear heir apparent by the time Stokes was ready to retire.

“Pat was there as the guy who could watch The Fourth ripen,” agreed a former top ad agency executive. “He wasn't ready yet—the board would never have approved him when the heart thing happened, and then Pat stepped in. But listen, all of the strings were being pulled by The Third.”

August III graciously insisted that Stokes move into his office when he became CEO. All the same, The Third shifted his own office just down the hall, and with the board's complicity, he kept both Stokes and his son on a tight rein starting in mid-2002. Stokes had never been prone to flights of fancy anyway. Rather than rising up through Anheuser's ranks by way of its more illustrious job functions, like brewing or marketing or sales, he came in through the back alley. He scored a major coup when he was named as August III's assistant not long after joining the company in 1969. Two years later, however, he shifted over into the company's purchasing division and spent the next decade and a half buying raw materials and deciphering Anheuser's web of transportation operations.

Stokes put those skills to good use after he was picked in the mid-1980s to run Campbell Taggart and Eagle Snacks, two struggling units Anheuser had been trying to build that were far removed from its brewing operations. After 15 years in brewing, Stokes became a baker and a pretzel vendor—and for the next six years tackled both units' production and distribution inefficiencies. He was never able to shine the tarnished Campbell Taggart into a company jewel, and Eagle Snacks never gained much of a presence against behemoth Frito-Lay. Stokes helped prevent further bloodletting in the wake of Anheuser's misguided acquisitions of those businesses. When The Third finally picked someone to fill Denny Long's seat as head of the brewery, he picked Stokes, pulling him back into Anheuser's big leagues.

Stokes didn't have his own crowd of “yes” men. He wasn't the type to advertise himself or spend time pressing the flesh to get ahead. “Pat was not known for being Mr. Congeniality,” said a former executive who worked with him closely. “Let's just say that Pat's personality was not multi-dimensional.”

August III relied on Stokes for guidance—at least, as much as he relied on anyone. They sat together in policy committee meetings, and because he was well aware of Stokes's mind for numbers, The Third liked to toss concepts his way in search of an opinion or analysis. “Pat had an incredible brain,” one of his former colleagues said. “The guy knew numbers; he had a photographic memory. I wouldn't say August depended on Pat, but he would frequently seek Pat's opinion on things. So from that standpoint, I think people should not have been surpr ised.”

“Stokes is an incredibly intense person, just as cold and analytic and hard charging as the Third,” said Bill Finnie, another former colleague. “I think they are pretty much damn close to clones of each other.” Those personality traits, plus Stokes's longstanding devotion to the company, made him an ideal CEO candidate for someone like The Third, who was looking to retain significant control over the business in “retirement.” “During those days, I think there was an understanding between Pat and August III that Pat was going to run the company but August was going to watch after the beer,” said a former top Anheuser-Busch executive.

“All the calls still got made by somebody named Busch,” said another person close to the company. “Pat is a very smart guy and a capable executive. He's not an empty suit by any means. But he was just working in an environment that was not a democracy.”

Stokes's appointment—and the way The Fourth tried to manage Anheuser's internal politics after he was passed over for the job—made things complicated at headquarters. The Third remained nearly as imposing a figure as he had before, and his position on the strategy committee gave him a view into everything the company was doing at its highest levels. The company's convoluted new management structure didn' t bode well for morale or performance.

“It was just amazing how things started to fall apart when August didn't get that final nod,” said a former strategy committee member. “He had the dynamic above him that was freaking him out, and every time he moved, it became a mess underneath because he wasn't paying attention anymore. He was looking up to manage his own situation and wasn't paying enough attention to what was going on down below. It was classic.”