Nobody said it would be easy, filling the shoes of E. Bronson Ingram. Nearly a year after his death, his heirs and others who revered and depended on the strong-willed patriarch of Nashville’s powerful Ingram family are learning just how hard it is to replace him.
One difficulty has followed another. First Ingram was diagnosed with incurable, swift-moving cancer in December 1994. Then, on June 15, 1995, he died. No amount of advance warning could prepare the family and top officials of Ingram Industries Inc. for the loss.
“We were all so shaken that we just wanted to carry on as we were,” his widow, Martha R. Ingram, recalls. Then in September, reversing course, the Ingrams announced a plan to split up their corporate empire, dividing it into three parts: one large, publicly traded company and two smaller firms privately run by family members.
Among members of the Vanderbilt University Board of Trust, which Bronson Ingram had chaired, a not-so-genteel, internecine warfare broke out within weeks of his passing. The brahmins were divided over the issue of who would succeed Ingram. Factions lined up for and against the candidacy of Thomas F. Frist Jr., vice chairman of Columbia/HCA Healthcare Corp. There were intrigues surrounding the future of Chancellor Joe B. Wyatt. Only after months of indecision was Kentucky oilman John Hall elected to replace Ingram, signaling the ascendancy of an anti-Frist, pro-Wyatt faction.
Meanwhile, the largest Ingram company, Santa Ana, Calif.-based Ingram Micro Inc., was continuing to grow at a fantastic rate. Its 1994 sales were just under $6 billion, and its 1996 sales should reach $12 billion. Ingram Micro is, by far, the world’s largest wholesale distributor of personal computer hardware and software. However, the man widely credited with Ingram Micro’s success is not named Ingram.
Success inevitably brings stress. On Monday, May 20, after three months of top-level turmoil and a weekend of acrimonious wrangling in Nashville, Linwood A. (Chip) Lacy Jr. resigned as CEO of Ingram Micro Inc. Managing explosive corporate growth and arranging the breakup of the Ingram holdings were apparently major factors leading up to his exit. His departure leaves Ingram Industries, one of the 10 largest private corporations in the country, without the respected leader of its main division—at the very moment when that division is planning to spin off as a public company.
The Ingram presence in Nashville is so all-permeating that it is nearly invisible: It is with us every day, whether we notice it or not. Keeping track of all the family’s activities is, to say the least, a daunting challenge.
Over 2,000 Nashville-area residents work for the Ingram companies, most of them at the massive Ingram complex off Interstate 24 in LaVergne. Just about any new book purchased in any bookstore, here or elsewhere in the U.S., has passed through the distribution channels of Ingram Book Co. At this summer’s weekly Dancin’ in the District concerts, banners plugging video distributor Ingram Entertainment Co. will hang over the Riverfront Park stage—while the gritty landscape of the Ingram Barge yard looms across the Cumberland. The charitable and cultural contributions of the Ingrams are widely known. For years the future of the Nashville arts community has been charted at meetings in the Ingram Industries boardroom. From Tennessee Repertory Theatre to Nashville Ballet to Nashville Opera and beyond, the Ingrams’ guidance and financial support have kept the city’s major arts institutions alive. Because of their willingness to take charge—and to spend money—the Ingrams, Martha Ingram in particular, maintain a virtually unchallenged position of power in Nashville’s cultural community.
When Vanderbilt wanted to raise money wholesale, it turned to Bronson Ingram. In 1992, Ingram launched the most ambitious capital campaign in the university’s history. Providing a hefty dollop of his own funds as seed money, Ingram embarked on a road show, wielding his influence to wrest contributions from acquaintances among the high and mighty. One day in the spring of 1995, when he was already very ill, Ingram visited the Vanderbilt campus to announce that the campaign had reached its goal of $500 million.
Outside Nashville, Bronson Ingram presided over other interests. His companies employ about 14,000 people worldwide. He owned a stake in, and sat on the board of, Weyerhaeuser Co. The Tacoma, Wash.-based lumber products giant carries on the legacy of his great-grandfather Orrin Ingram, a Wisconsin pioneer who founded his first sawmill in 1857 and later went into business with German immigrant Frederick Weyerhaeuser. Ingram and his family have also had major stock holdings in banking, pharmaceuticals and other industries.
Ingram had the foresight to implement a transition plan for his empire. In 1993, when he was a youthful 62 and still in fine health, he tapped Chip Lacy as his heir apparent. “If something should happen to me in the next couple of years,” Ingram said, “I think it’s clear Chip would be elected the next chief executive.” The plan was that Lacy would run the company until Ingram’s sons, Orrin, John and David, all in their 30s, were ready to take charge. (A daughter, Robin Ingram Patton, is not involved in the business.)
Bronson Ingram made a tough call in picking his successor. In making the appointment, he passed over Phil Pfeffer, a highly regarded long-term Ingram executive who subsequently left the company and was recently named president and chief operating officer of Random House Inc. Just as planned, Lacy took over as CEO of Ingram Industries upon Ingram’s demise. Within months, however, the carefully crafted succession plan fell apart.
At the vortex of the family’s recent tribulations is Martha Ingram. For years, she ran a virtual subsidiary kingdom within the family empire. It was Martha Ingram who controlled the business of giving away Ingram money and using Ingram clout to ensure that important things, at least the Ingrams’ version of important things, get done in Nashville.
She still has that job, but now she is also chairman of Ingram Industries. Ingram’s life as a high-powered executive is tinged with sadness at having assumed the helm following her husband’s death. “I much preferred being the person who did the things that he did not have the time to deal with,” she says.
“It’s certainly different when you’re the one at the top. It is lonely there sometimes,” Ingram chuckles. No doubt the adjustment has had its awkward moments, but business is nothing new to Martha Ingram. Spearheading the drive to build the Tennessee Performing Arts Center, which opened in 1980, was big business, as was her recent role in putting together the state’s bicentennial celebrations, as was her work in the late 1980s to resuscitate the moribund Nashville Symphony. She has built her own political alliances, and she has used the connections she has made.
Tennessee Repertory Theatre artistic director Mac Pirkle calls the Ingram clan “the modern Medicis.” Like the benefactors of the Italian Renaissance, he says, the Ingrams are committed to “the idea that somebody in society has to take responsibility for the process of cultural development.” Martha Ingram has “used her bully pulpit at Ingram to achieve a tremendous amount,” Pirkle says. “She’s so confident and so visionary. When she decides that something needs to happen, she makes it happen.
“She has a wonderfully strong will.”
Running the family conglomerate has put her iron will to the test. “You listen to your advisers,” Ingram says, “and the advisers don’t all tell you the same thing. So, ultimately, you’ve got to make your own decision. Some of these choices are very difficult.”
Ingram made her hardest choice yet on May 20, when she refused to give in to Chip Lacy’s demands for power within the corporation. Late that afternoon, he left the company. Lacy and Ingram issued a joint statement that cited “irreconcilable differences regarding corporate governance” between them.
“I want this to be a no-fault divorce, as amicable as possible,” Ingram says. “I have great admiration for Chip. He’s very bright. He’s an intensely likable person.”
The word “intense” crops up often in various descriptions of Lacy. The 51-year-old executive’s drive and energy have been widely credited as the catalysts of Ingram Micro’s success. In a profile last year, the trade publication Computer Reseller News reported that Ingram Micro employees called Lacy “the Tasmanian Devil,” summoning images of the whirling-dervish cartoon character.
Computer Reseller News characterized Lacy’s management style as abrupt and abrasive. A former Ingram Micro officer was quoted as saying, “In a business context, [Lacy] is a very intense person, and it sometimes rubs people the wrong way.”
Lately, as he has had time for introspection, tinkering with his boat on the Virginia shore, Lacy has been pondering such impressions. “The process just fell apart,” he says of his derailed negotiations with the Ingram family, whom he praises as “terrific people.”
In retrospect, Lacy says, “I think I bear a fair amount of responsibility in regards to not understanding well the impact of my intensity on some people.”
One person privy to the negotiations confirms that the Ingrams and their board members had trouble dealing with Lacy’s approach. “It’s hard to understand how this guy got so worked up,” says the insider, who admits to being an Ingram ally.
Lacy won’t elaborate on what transpired at the final sessions. When asked about those meetings, he responds with a sphinx-like chuckle. “A lot of good people sure got crosswise,” he says.
As the power players began to cross swords, a faint sense of déjà vu hovered over the Ingram Industries corporate offices atop the One Belle Meade Place office building at the corner of Harding Road and White Bridge Road. Lacy and the Ingram family had done battle before. In 1985 Ingram Industries began buying stock in Micro D Corp., a publicly held California company that Lacy headed. Lacy had only recently taken over at Micro D, and he had just called off a planned merger with another acquirer. In short order, however, Ingram owned 59 percent of the company. The companies then spent years negotiating the sale of the remaining 41 percent.
Lacy—by all accounts a forceful and highly effective negotiator—bargained hard to get a better price for Micro D. When a special board committee rejected a $12.50-per-share offer late in 1988, an irritated Bronson Ingram vowed not to raise his offer. “We’ve gotten nowhere trying to negotiate with the special committee,” he complained. Ingram Industries then offered the same price to Micro D shareholders—an act that Lacy now characterizes as “a hostile offer for its own subsidiary.”
Further negotiations ensued. Within three weeks, the deal was done. Ingram paid $14.75 a share.
“There were contentious periods during that time, no question,” Lacy says. But he denies that any antagonism lingered between him and his new boss. “Obviously, I would have left if I had wanted to leave,” he says.
“I constantly learned from Bronson,” Lacy says. “He was often strong-willed, but I enjoyed it and feel that I grew a great deal under his direction.”
In sparring with Ingram over the price of Micro D, “Chip was just doing his job,” says Robert Anastasi, who followed Lacy’s company as an analyst and senior vice president at the Atlanta-based brokerage firm of Robinson Humphrey. “He had Micro D’s shareholders’ interest at heart.”
Bronson Ingram’s distaste for the rough-and-tumble aspects of running a public company was widely known. He wanted neither the hassles of media and analyst scrutiny nor the pressure of generating short-term profits for shareholders. After his death, Ingram Industries seemed determined to stick by that position. “We don’t need the money,” Lacy told a reporter late last June. Behind closed doors, however, rumors of an initial public offering of stock, or “IPO,” had been bruited about for some time.
Bronson Ingram “did mellow over time” in his opposition, Martha Ingram says. But he did so to the accompaniment of a steady drumbeat of suggestions from Lacy—suggestions that were finally coupled with a threat to quit.
“I felt it was very important that all the employees have an opportunity to benefit from the wonderful company they had built,” Lacy says. “I was very excited at the prospect of a public offering and the possibility for a significant base of the employees to benefit from stock options.”
Bronson Ingram’s change of heart had come about in 1993, when Lacy told him he was considering leaving the company. Lacy says he vividly remembers a conversation in which Bronson and Martha first called him in to discuss the prospect of his taking over Micro public after Bronson’s retirement, which was set for Ingram’s 65th birthday in November 1996. “Martha was very excited about the prospect of being able to support her charities through stock options,” Lacy recalls.
Martha Ingram remembers the secret commitment to pursue a public offering as “a compromise Bronson made, and not easily.” Lacy maintains that he did not pressure Ingram into the compromise. “You didn’t make Bronson Ingram do anything,” Lacy says. “You could negotiate with him; you could present your point of view; you could argue vociferously, and he’d argue back. But you couldn’t push him.”
Ingram sweetened the pot further. In a dramatic gesture later in 1993, he signaled the ascendancy of Ingram Micro as his company’s dominant subsidiary when he nominated Lacy as his eventual replacement.
Despite Bronson Ingram’s assent to the IPO, the public offering was not a sure thing when he died, Martha Ingram says. She describes the offering as only “something he had agreed that he would consider.” Last June, the company denied any intentions of going public. Then, last September, Ingram Industries announced its breakup.
While Micro became a public company, Ingram Entertainment would become an independent private company under David Ingram’s control. Orrin Ingram and John Ingram would be copresidents of what remained of Ingram Industries—Ingram Barge and Ingram Book.
Taking apart a company like Ingram Industries is “at best, a very contentious process,” says David R. Dukes, cochairman of Ingram Micro. Still, Dukes insists that there was no individual incident that triggered Lacy’s departure—“not a fixed asset expenditure, an acquisition, a divestiture, nothing like that. It was about who has the right to set the rules.”
Lacy demanded full autonomy for Ingram Micro. The Ingram family agreed the company could set up an independent board after the initial public offering. Even though the family would still own a majority of the stock after the spin-off, the Ingrams would have only two representatives on the seven-member board. This time, Chip Lacy pushed too hard, say Ingram officials. He wanted Micro’s independence immediately, not after the IPO.
The dispute over Ingram Micro’s autonomy cropped up some three months ago. It looked so menacing to Martha Ingram that she soon began consulting with an executive search firm about possible replacements for Lacy. “I wanted to be sure we had a Plan B,” she explains. Lacy says he did not know about the search firm.
For Lacy, the dispute coincided with a time of both hard work and hard knocks. In early April, his mother died. Meanwhile, Dukes says, Ingram Micro was “operating on mach speed,” and Lacy was discovering that he would have to tiptoe through bureaucratic mine fields if he wanted to make the offering happen.
To this day, the offering is still being slow-walked by officials at the Internal Revenue Service, which must affirm that the breakup won’t have negative tax consequences before the deal can proceed. In April, in a move both sides say was not directly related to the controversy between them, Lacy relinquished the title of CEO of Ingram Industries in order to focus on the public offering. On Friday, May 17, Lacy flew to Nashville after a week in Europe. Meetings began the next morning.
The conferences involved Lacy, the Ingram Industries board of directors, Ingram family members and family advisers. “I’ve had lots of advice,” Martha Ingram says.
Other issues were resolved, but Lacy’s demand for the immediate independence of the Micro board remained a sticking point. Lacy won’t say why autonomy was so important to him, and Martha Ingram says she has “never been quite clear” about why he wanted it.
There was “a glimmer of hope” on Sunday that the issue could be resolved, Martha Ingram says, and on Monday she and Lacy had a “very cordial” one-on-one lunch lasting an hour and a half. “I really thought, even then, that there might be a chance to work things out,” Ingram says. “Then, by late Monday afternoon, it became apparent that we could not stay in business together.”
Lacy won’t discuss the specifics of the demands he made in the negotiations, but he says the governance issue was just one of several hot spots. “I felt agreements had been reached that were withdrawn, on three or four occasions in the two or three months prior to this,” he says. “The family felt there were new facts and circumstances that needed to be weighed. Each of us had a different perspective on the issues which we felt very strongly about.”
Once it was decided that he would leave, Lacy wanted to take part in his transition from the company—“but that’s not how the family wanted to handle it,” he says. “I was told I couldn’t go to California.”
Martha Ingram went instead, boarding the company jet early Tuesday morning to fly to Santa Ana; she met with Micro’s managers there. Then, that night, she flew on to Micro’s Buffalo office. En route, she directed an associate to call Lacy and ask him to remain on the Ingram Industries board. He accepted, and he remains a director of the parent firm despite his past differences with it.
Lacy denies having harbored any long-standing grievance against the ruling family of Ingram Industries, even though some of his prior entanglements with the Ingrams were thorny. “I absolutely don’t believe it was a matter of the cork blowing off,” analyst Anastasi says. “Things just worked too well at this company for the past seven years. Look at what Chip built. You just don’t build something like that if you’re not happy.”
News of the schism shocked company-watchers, who had been salivating over the prospect of buying pieces of Ingram Micro. Industry insiders expect the Ingram Micro IPO to give the company an estimated value of around $2 billion, with an offering of $300 million in stock. Ingram Industries will retain a majority interest in the new company.
Jeff Matthews, general partner of the Greenwich, Conn., investment firm Ram Partners LP, told Computer Reseller News that the public offering’s chances had been badly hurt. “The bride is coming down the aisle and all of a sudden instead of her father giving her away, her uncle is giving her away,” Matthews said. “From Wall Street’s point of view, Chip Lacy was Ingram.”
Despite such doubts, Dukes says, “the company will not miss a beat.” He and others say Ingram Micro has a deep and talented management team that is equipped to keep the company moving forward. “Chip has not been involved on a daily basis with the company for the past couple of years,” Dukes adds, because Lacy was busy with other Ingram affairs.
Martha Ingram echoes these sentiments. “While Chip had a lot of visibility and was certainly a wonderful leader, we’ve got a lot of people who have been functioning quite well on their own,” she says. “To Chip’s credit, he put them in place.”
The timing of the IPO has been up in the air for a while, awaiting the IRS ruling. Dukes predicts that approval will come through later this summer. Then, he says, “we’ll look at the marketplace.
“We will evaluate where we are in the CEO search process,” he adds, “but we don’t expect this to have any impact on the IPO.” The search will cover both internal and external candidates. “My job now is to find a world-class executive with global experience,” Martha Ingram says. “We can offer this person a unique opportunity.”
After the public offering makes the Ingram family a passive investor in its largest company, Martha Ingram and her sons will go about managing three businesses that apparently had total revenues of some $2.5 billion in 1995. (The Ingrams don’t publicize results from any of the private businesses, but they did let on last year that the entire conglomerate would do $11 billion or more in business, and $8.59 million of that amount is known to have come from Ingram Micro.)
One son is in charge of, or at least deeply involved with, each of the three companies. David Ingram has been at the helm of Ingram Entertainment for almost two years. Orrin and John Ingram will be copresidents of the new, shrunken Ingram Industries after the split-up, each running one business unit. Orrin’s main background is in the barge business, and John took over the presidency of Ingram Book in 1994 after several years with Ingram Micro. He is currently also part of the interim management team at Micro.
Although the barge subsidiary appears to be smaller than the book-distribution business, Martha Ingram says her two older sons will run comparably sized operations. “It all depends on whether you’re looking at sales or profits,” she explains. “In the distribution business, there are such big numbers on the top line, and by the time you get down to the bottom line the margins are so small that you don’t get very much.”
Ingram Barge, she says, is now “very profitable,” after “a long time when it was a terrible business for everybody” due to a glut of competitors. And Martha Ingram says Ingram Entertainment is “almost as big as the book company.”
The futures of these companies, and of the myriad other involvements through which the Ingram name has become part of Nashville’s life, largely rest with three men under the age of 40. They are close to the ages of their father and uncle in 1963, when Bronson and Frederic B. (Fritz) Ingram inherited the former Ingram Corp. from their father.
That fraternal partnership evaporated 14 years later in a Chicago courtroom, where the brothers hired separate defense attorneys in a bribery case on which Bronson was acquitted— and for which Fritz went to prison. (See sidebar.)
“The remarkable thing is that I don’t really sense any power struggle amongst my sons,” Martha Ingram says. There is reason to believe that the trying process of dividing up the company will ultimately result in more satisfaction and success for them. The continuing expansion of the Ingram fortune depends on the outcome of that process. So do the humbler fortunes of many other Nashvillians. When the Ingrams make decisions behind closed doors, the rumbling can be heard on the Vanderbilt campus, backstage at TPAC, as far away as LaVergne.
Portions of this article originally appeared in The Wall Street Journal.
