Kathleen Gallagher: Briggs & Stratton board of directors focused on executives and themselves rather than innovation – Milwaukee Journal Sentinel

By Kathleen Gallagher, Special to the Journal Sentinel Published 7:00 a.m. CT Sept. 29, 2020 | Updated 11:51 a.m. CT Sept. 30, 2020

Now that Briggs & Stratton has changed hands, its time to tackle the elephant in the room: its board of directors.

The small engine makers nine directors in June awarded executives more than $5 million of retention bonuses rather than make a $6.7 million interest payment on debt they incurred. That forced the more than 100-year-old company into bankruptcy and a sale earlier this month to New York private equity firm KPS Capital Partners.

Was the Briggs board a mutual protection society for its top executives and, frankly, its members? Or did the board, through no fault of its own, encounter impossible obstacles and have no choice but bankruptcy?

The mutual protection society theory seems to carry the most weight.

Despite a 20-year trend toward separating the chairman and CEO jobs, Briggs board decided Todd Teske should have both.

The board justified Teskes dual role by saying his tenure at Briggs since 1996 made him most familiar with the company and best-positioned to identify what the board should review and discuss. According to one securities filing: Centralizing power with Teske prevented ambiguity about accountability and the possibility that two leaders might communicate different messages.

Umm, maybe there was some confusion about accountability. The board has a fiduciary duty to shareholders to ask questions of management, evaluate the risks of the strategies and plans management presents for approval, and assess the performance of management against those plans.

What Briggs board missed under the cozy arrangement that handed all the power to Teske is the cold reality that things were getting worse, not better.

Briggs stock price peaked in June 2004 at $44.175 and its market capitalization reached nearly $1.9 billion. Sixteen years later, KPS Capital bought virtually all of Briggs assets for about $550 million.

Briggs demise was not due to a competitor who upended them, not due to a poor product, a former executive observed. Briggs wounds were all self-inflicted.

The alienation of much of the companys top operational talent, frequent factory openings and closings along with massive production re-locations, the accumulation of more than $100 million in restructuring charges since 2015, and problems with a new business management system that caused a steep drop in Briggs ability to ship service parts all drove the downward spiral.

But more telling may be the decision in 2012 to retreat from the US retail market and re-focus on selling engines to lawn and garden equipment makers.

After the strategy shift, Briggs ramped up commercial lawn care acquisitions: Outdoor lighting maker Allmand Bros in 2014; Specialty turf equipment maker Billy Goat in 2015; Fertilizer equipment maker Ground Logic in 2017; Leaf blower maker Hurricane in 2018. You get the idea.

While Briggs was making those acquisitions, companies like EGO, Black & Decker and Greenworks were selling cordless, battery-powered lawnmowers. And players like Global Garden Products and Husqvarna were selling autonomous lawnmowers, while startups like Santa Monica, California-based Graze innovated new ones.

Briggs made an end market pivot rather than an innovation pivot.

Maybe thats no surprise. Briggs board had prodigious amounts of financial, and not much technical, experience and degrees. None of the directors had high-level technical chops. Remember, it was when Satya Nadella, the engineer who studied computer science at UW-Milwaukee, got the top job that Microsoft started to be cool again -- or rediscovered its soul, as he put it in the title of his 2017 memoir.

Despite the downward spiral and lack of strategic innovation, directors got a steady gig and good pay.

Average tenure was nearly 11 years, anchored by the three longest-serving directors: Charles Story (26 years), president of ECS Group, a Nashville executive development company; Brian Walker (18 years), the boards lead independent director and a partner at Huron Capital, a Detroit private equity firm; and Keith McLoughlin (13 years), retired president and CEO of Swedish home appliance maker AB Electrolux.

Directors gave themselves a $5,000 raise in August 2018, bringing their cash compensation to $95,000 in addition to $110,000 of Briggs stock annually and pay for extra duties. Walker, for example, got an extra $40,000 a year for being lead independent director and chairing a committee bringing his fiscal 2019 pay to $244,130. Not bad for attending between 17 and 23 meetings that year.

But with no real technological innovation, Briggs faltered. Debt levels ballooned. Inventories grew. Briggs had $412 million of inventory on its balance sheet in June 2018. Within a year that number had grown by $90 million to $502 million.

Businesses come and go, and some downturns are unavoidable. Buggy whip-making had a bleak future in 1900. But Briggs was one of the premier lawnmower engine companies in the world. Its board and executives had a choice of financially managing the downward spiral or innovating into new markets.

They harvested the business rather than the future.

Kathleen Gallagher, Executive Director of 5 Lakes Institute is a former reporter who was awarded the 2011 Pulitzer Prize for Explanatory Reporting. She is writing a column for the Milwaukee Journal Sentinel(Photo: Milwaukee Journal Sentinel)

Kathleen Gallagher was a business reporter at the Milwaukee Journal Sentinel and the Milwaukee Sentinel for 23 years. She was one of two reporters on the team that won a 2011 Pulitzer Prize for the One in a Billion series. Gallagher is now executive director of 5 Lakes Institute, a non-profit working to grow the Great Lakes region's high technology entrepreneurial economy and culture. She can be reached at Kathleen@5lakesinstitute.org.

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Kathleen Gallagher: Briggs & Stratton board of directors focused on executives and themselves rather than innovation - Milwaukee Journal Sentinel