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Martin F.C. Emmett, Tambrands Inc..

In the spring of 1989, Tambrands Inc. was a company a drift. The maker of personal care products - whose dominant brand is the Tampax tampon - was suffering from lackluster performance, a disappointing diversification strategy, and the sudden resignation of its chairman and CEO. Its stock was trading at about $30, having run up to that price amid takeover speculation fueled by its business and management turmoil.

Today, the company has been restored to vitality. The diversifications have been wound down and its business strategy has been sharply focused, under the firm hand of Chairman and Chief Executive Officer Martin F.C. Emmett, on its core feminine hygiene products.

When he was chosen by the Tambrands board to be CEO in April 1989, Emmett was chairman of an investment banking firm, with Tambrands as one of his clients. Previously, from 1972 to 1983, he had been with Standard Brands Co., rising to president and COO.

With the stock trading comfortably above $60 at the time off a DIRECTORS & BOARDS visit with Emmett in his White Plains, N.Y., office, the Tambrands revival is a good "Governing for Shareholder Prosperity" story - specifically, the creation of $1.3 billion in shareholders value. In the following Q & A with D & B Editor James Kristie, Emmett discusses the philisophies and activities behind that value creation of the past three years and what will drive the long-term values to be created in this decade.

Directors & Boards: Looking ahead broadly, to start, are we going to see a different approach to creating value in the 1990s compared with the M & A-driven era of the past decade?

Martin Emmett: Managements are going to have to pay more attention to such things as quality and product improvement, sticking to the basic of what they do best, and creating inherent value in the products and services that they provide. What happened a lot through the '80s is that there were changes of value going from one party to another, without any change - any improvement - taking place in the company. What we have to do now make better products, make new products that are close to what one knows how to do well, and do possible geographic expansion and decentralization.

D & B: Which is what you are doing here at Tambrands. How easy it that for companies to do - to get back to concentrating on one's core business and focusing a total strategy of renewal and growth around it?

Emmett: It is a very difficult thing for a companies to get back to, because for a long time, companies have been so finance-driven and so distracted by outside circumstances that they have not spent the time trying to improve the basic products or services that they provide. If someone was trying to concentrate on a single product or improve their product, there was a good chance that they'd get taken over and someone else would then come in and reap the benefits. Now, they are going to have to come to the realization that a strong focus on what they do well is going to be essential if they are hoping to be successful in the future.

When we started to focus on tampons and tampons only, once of the early reactions of many people here was, |But what opportunities will there be for me if we are only going to concentrate on tampons? How can I have a successful career in the company?' Interestingly enough, as we have gone through that last three years, every time we turn around there is something more to do - another product improvement, another area to sell our product into where we weren't selling before.

Tambrands has 37% of the U.S. sanitary protection market. So, if we do our job well, there is opportunity to grow there. We have 60% of the tampon market. If we do our job well, there is opportunity to grow that. We can improve in Europe, and, of course, there is the Pacific Rim, China, and the whole area of what was the U.S.S.R., where the opportunities are limitless because they are not using much of our product right now. The opportunities almost seem to be increasing with time as we concentrate on this very narrow area. And I think this can be done with a lot of products in a lot of companies.

Plus, there is a level of competition today that we have never seen before. The whole area of distribution within this country, with the Wal-Marts and the K-Marts, is an incredibly competitive environment. So again, unless you know what you are doing and you do it extremely well, you are just going to get blown out of the water.

The Change Process

D&B: How did you begin the change process within Tambrands?

Emmett: What we did early on was to write a mission statement (see box on page 62). It took a lot of work, a lot of dialogue, and it was very much forged with the directors. It is amazing how meaningful that statement has become within the company. There is no question now in the board and the and the board and the employees as to what it is that we are trying to do. Out of that mission statement came a whole series of action plans for taking the company forward, including changes in structure and management processes, performance guidelines, and compensation philosophy.

D&B: Let's talk a bit about compensation. Directors are obviously on the hot seat on this issue. How do you assess the controversy?

Emmett: Boards are going to have to become much more responsible for the whole compensation system. It's a very difficult thing to explain when you have situations where the company is not performing, where its shareholders are, in fact, worse off than before, yet its executives are getting very large cash compensation. It is a tremendous PR problem. On the other hand, if a company is performing well and getting significant increase in shareholder value, there is no reason that the top people shouldn't receive their just rewards. Compensation should be something that is variable upward and downward, and boards, more and more, will be pressured to do that.

At the Cutting Edge

D&B: How have you addressed the compensation issue at Tambrands?

Emmett: It would be hard for me to imagine another group of directors who have put as much time into the design and approval of a compensation package. We have gone from a program that was certainly pedestrian - basically, a salary and annual bonus, neither of which was very competitive - to something that is quite cutting edge.

As we pared back to the core business, what we have tried to do here is to set up a situation that had a bit of the LBO mentality to it - that is, trying to keep salaries at a modest level and have more of the remuneration through such things as options and restricted stock.

One of the latest things we have put in is what we call the exchange option program, whereby managers can trade in their salary and bonus and even restricted stock to buy additional options in the company. This way they become even more committed to the company and to the principle of building shareholder value. Three years ago, approximately 1.% of the company was owned by management. Today, that number is about 6.5% on a fully exercised basis. So that has been a substantial change.

And the directors participate in the program as well. They can take their annual retainer and buy options on exactly the same basis. The directors' ownership in the company is also significantly greater today than it was three years ago.

We have everyone committed to the same, single purpose of building shareholder value. The golden rule that we have followed is that management would benefit only if the shareholders benefit first.

Shareholders and Pay

D&B: An issue on the horizon is giving shareholders a say in executive pay. Is that something that you think is appropriate?

Emmett: I can see that coming. I actually arranged to have two of our large institutional shareholders meet with our board on the whole issue of executive compensation. They gave us the benefit of their thoughts as to which means of compensation would be the most appropriate for a company such as ours. We didn't necessarily follow exactly what they said, but we wanted their input and they came up with some interesting ideas.

As I mentioned, our directors have put in an inordinate amount of time analyzing the compensation program - correctly so, I think, because as the business community moves forward to address some of the problems in this area, the fact that we have done it this way will be shown in a good light. You look at some of the things that are being written today about the problems in executive compensation and they just don't even apply to us.

Shareholder Relations

D&B: Management responsiveness to shareholders has been a problem area for some companies. Do you feel you are close to your shareholders?

Emmett: Yes, perhaps more so than many companies. And that, too, is a big change for this company. Up until three years ago, do you know that this company had never had an analyst meeting? That is unbelievable, isn't it? We certainly have analyst meetings now, and I make a point of talking to our top institutional investors. Once a year I meet with our major investors - who own 25% to 30% of the company - to discuss what we are doing and to solicit any ideas that they might have for improvement in our operations. I want to know what our shareholders are looking for and to let them know that we are not running this company in a vacuum. We are running it for the shareholders, who, while they may have different reasons for owning our stock, presumably one of the reasons is that they want the price of the stock to go up. That generally is a fairly common thread, you know.

One of my management traits is that I hate surprises. As far as possible, I try to avoid surprising the sharesholders, in any adverse sort of way. We keep our investors very informed as to what it is that we are trying to do.

Back to the Future

D&B: And what you are telling your shareholders and the investment community is that the future is with your core product, tampons.

Emmett: It is all going to be tampons. The first third of this decade our focus will be the U.S. market, the middle third will be Europe, and the final third will be the developing countries. I have said that between now and 1995, our investors can expect a compound earnings growth rate to exceed 15%, and that the dividend will be about 50% of the trailing year's earnings. With a product like ours that is really recession-proof, there are not a lot of companies that can offer that type of dividend payout with that increase in earnings over the next few years.

Every year as we go along we'll be making small improvements to the product - nothing dramatic, because that would probably just get us in trouble. What we have in this company is the name Tampax. That is our strength. You can take everything else away from us, but if you leave me with the name Tampax, I guarantee that I will rebuild it and within five years I will be right back up there.

Management Philosophies

of Tambrands's Martin Emmett

* A CEO should not spend a lot of time in the office.

* The right to try something new and fail must be part of a

successful culture.

* A very strong commitment to agreed-upon plans is paramount.

Also, substantial reward for achievement.

* There should be constant renewal and improvement.

* Quality and listening to the customer are essential ingredients for

the enhancement of shareholder value.

* If you can't understand how your capital is allocated, you're

probably too diversified.

* Integrity, commitment, and competitiveness must be embraced

by all.

* The CEO must create and sustain a compelling vision.

* Create a fun atmosphere - you're only passing through once.

The Tambrands Mission Statement


Our core business is the manufacture and sale of tampons. Our objective is to be the leading supplier of all types of tampons in each market we serve on a worldwide basis. We will exert great effort to expand the tampon category worldwide.


We will accomplish our share and market growth objectives through continuous improvement to our products and through product line extensions, utilizing innovative techniques of manufacturing, marketing, distribution, and education that are appropriate to local conditions.


We will be the low-cost producers in every market in which we complete, while maintaining our traditional high product quality. We will conduct all aspects of our business at a level that makes us burst with pride.


Diversification opportunities must build on our existing strengths and/or hold the potential for near-term profitability. Profit - not volume - will be our creed. Unless we can see a measurable benefit to our shareholders, we will not diversify. Rather, we will operate our basic business profitably for the shareholders.
COPYRIGHT 1992 Directors and Boards
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:includes related article
Author:Kristie, James
Publication:Directors & Boards
Article Type:Interview
Date:Mar 22, 1992
Previous Article:New directors, new opportunities.
Next Article:The inalienable right.

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