It started with a simple handshake in 1853 between John Jacob Bausch and his friend Henry Lomb. Lomb loaned Bausch $60 to start an optics company with the promise that if it grew they would become full partners.
This handshake gave birth to Bausch + Lomb, a great American business success story until the early 1990s, when the company was derailed by reckless ambition. Warren Buffett once said that if you demand your executives “make their numbers,” they eventually will “make up their numbers.” That happened at B+L and that is when the vision, and spirit, of Messrs. Bausch and Lomb left the company.
Now there’s word the company is being shopped, with the assistance of Goldman Sachs. Considering the current chairman and CEO of B+L were successfully involved in selling the large pharmaceutical company Schering Plough to Merck in 2009 for $41 billion, a sale is likely to happen, which does not bode well for Rochester. I have no criticism of these executives as they carry out a plan that private equity firm Warburg Pincus implemented when it took the company private in October 2007.
So what went wrong and what can we learn? After rereading press reports and SEC filings from the mid-1990s through October 2007, an unsettling but familiar story line emerged. Professional managers more concerned by what they might get versus what the company might eventually become led the company over the cliff. When managers don’t share the founders’ passion and vision and act accordingly, a corporate cancer begins to metastasize. This deadly culture presents itself in overstating revenue, accounting irregularities causing the restatement of financial results, a board asleep at the switch and a handful of reported lesser transgressions, punctuated with a keen ability to rationalize failure. From 1993 to the sale in October 2007, B+L touched them all.
Typically, successful company founders are forged in the crucible of survival, including its hardships, scarcity, and a deeply rooted appreciation for workers that they view as colleagues. Their company is an extension of, or is, their family, and they still make the difficult decisions. Their greatest satisfaction comes from seeing others succeed — in many circumstances beyond what the individual worker believed was possible. The company trappings of success are understated with deference given to the public shareholders. They worry about obsolescence and have a burning desire for innovation. “Professional managers” void of a founders’ DNA have brought many a great company to its knees.
So 140 years of success was eroded and Bausch + Lomb became a private equity play. We can only hope, though unlikely, that the bids are not attractive, and Warburg Pincus takes the company public again, with stewardship inspired by the vision of Messrs. Bausch and Lomb.
If not, I am afraid the loss to Rochester, and B+L employees, could be significant, including a 10 percent to 15 percent reduction in redundant positions, loss of community financial support and the loss of a Fortune 500 company headquarters — all marked by a rose-colored tombstone downtown once called the Bausch + Lomb building.