January/February 2015
John Brummett: The Past, Present & Future Legislature 2015 Legislative Preview Top 10 Legislators To Watch 2014 Year-in-Review Hometown, Arkansas: Fort Smith Executive in Residence Wes Kemp
The Class of 2015
State Business Hall of Fame
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Contents January/February 2015 5 Publisher’s Letter
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Commentary
7 Katherine A. Deck Arkansas Economy Poised for Growth
9 Jeff Weidauer
Disaster Preparedness for Businesses
11 Congressman Rick Crawford Country of Origin Labeling
12 Cover Story 14 17 21 24
The State’s Business Hall of Fame Legendary Music Pioneer Al Bell USA Drug Founder Stephen LaFrance Advertising Exec Millie Ward
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Tyson Foods’ Buddy Wray Profiles
26 Hot Springs’ Famed Bathhouse Row 30 U.S. Attorney Conner Eldridge
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Insights
34 AECC Embraces Wind Power 50 Agent: Pay on Way for College Athletes 50 Blackwell, Sabin Recognized Politics
36 Legislative Preview 43 Legislators to Watch 46 The Changing Body of Lawmakers
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Industry
52 ACC: New Name, Same Mission 56 Hometown, Arkansas Fort Smith Makes a Comeback Regional Northwest Arkansas
66 Inventive Partnership 67 The Compass Report Northeast Arkansas
68 Reactions to Obama’s Cuban Plan 69 Changing Times at Mid-South
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Features The Year in Review
Business: More Ups Than Downs Politics: The Republican Sweep
76 Leadership
Most Pressing Issue Six Leaders on How to Tackle It
78 Executive Q&A
Former ABF CEO Wes Kemp Now Executive in Residence at UA
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How Arkansas Culture is Building a Billion Dollar Company Arkansas Economic Development Commission
Bold Profiles: Dr. John James, Acumen Brands As a seasoned entrepreneur, Dr. John James of Acumen Brands knows that success in digital retail requires more than just understanding basic search engine optimization. “Our goal is to own Southern lifestyle online,” says John. Located in Northwest Arkansas, Acumen Brands is surrounded by an innovative environment it brings to markets all over the globe. “We’re trying to be the fourth largest company in northwest Arkansas,” John said. “There’s Tyson, Walmart and J.B. Hunt, and we want to be next.” John is committed to growth by doing things his own way, which includes tapping into Arkansas’s independent spirit. “If someone at Acumen has a good idea, it flows all the way up to me.” Arkansas favors Acumen Brands with an authentic culture and a robust logistics network to keep merchandise moving. How can Arkansas favor you? Learn how at ArkansasFavorsTheBold.com.
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
From the Publisher
The Old and the New Talk Business & Politics is owned by River Rock Communications and is published six times a year. For additional copies, to be included in our mailing list, or for information about advertising, contact Katherine Daniels at katherine@talkbusiness.net. January/February 2015 Publisher & Editor-in-Chief Roby Brock roby@talkbusiness.net Art Director Bryan Pistole DesignMatters LLC bryan@designmattersllc.com Editor Bill Paddack wbp17@comcast.net Contributing Writers Larry Brannan Steve Brawner Jeanni Brosius Wesley Brown John Brummett Kerri Jackson Case Michael Cook Rex Nelson Casey Penn Bob Qualls Kim Souza Michael Tilley Jason Tolbert Michael Wilkey Photographers Trey Ashcraft treyark@yahoo.com Stephanie Dunn dunnmsteph09@yahoo.com Tim Rand pix@trand.com Bob Ocken bob@ockenphotography.com Kat Wilson katographic@gmail.com Vice President Operations Stephanie Baker stephanie@talkbusiness.net Vice President Sales & Marketing Katherine Daniels katherine@talkbusiness.net Printer Frank Parke Democrat Printing & Litho fparke@democratprinting.com River Rock Communications 8308 Cantrell Road Little Rock, AR 72227 501.529.1737
It’s been a great 2014 at Talk Business & Politics and I want to express my appreciation for your readership, listenership, viewership and support. To our advertisers, we wouldn’t be in business without you. Thank you for the 15 years you’ve been supporting us. We’re proud to continue strengthening, growing and expanding our reach to help you place your messages in front of these influential business and political decision-makers. It’s been an important mission of mine for a decadeand-a-half to make sure the quality of our content ensures meaningful engagement from our audiences. In addition to our day-in, day-out solid business and political news coverage, here are some changes to highlight from this past year that I’m particularly proud of: • We brought our magazine back in-house in a way that better allows us to control the quality of the content, the integrity of our sales, and the final product we provide. • Talk Business & Politics expanded in Northeast and Northwest Arkansas with microsites that brought new and original regional coverage to our products. • Moved our weekly television program to the No. 1 TV station in Arkansas – KATV Ch. 7 in Little Rock. This move greatly raised our profile and has allowed us to team with some of the best news veterans in Arkansas. • With Ch. 7, we partnered on two of the most important debates in the 2014 election season – the U.S. Senate debate in Fayetteville and the gubernatorial debate in Little Rock. • Our Ch. 7 partnership also saw us expand political coverage through our daily Election Central updates and unprecedented Election Night coverage. • With Hendrix College, Talk Business & Politics’ polling continued to be the most trusted and most-anticipated political surveys of the entire season. • We expanded our email newsletters from three days a week to seven days a week to provide more relevant content to readers. • And, we added to our lineup a number of new writers, including John Brummett, as well as new opinion voices and a bigger sales team. For 2015, we are working on additional upgrades to Talk Business & Politics. I don’t believe in change for the sake of change; I’m an advocate of change for the sake of improvement. We’ll keep providing you the quality content you’ve come to expect and we’ll keep you posted on the changes that are in the works. As always, I value your feedback on what you want to see and what you think of our efforts. Drop me a note at roby@talkbusiness.net and share your thoughts. Sincerely,
Roby Brock Publisher & Editor-in-Chief www.talkbusiness.net
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
Commentary
Better Consumer Conditions Set the Stage for Job Growth By Katherine A. Deck Katherine A. Deck is the director of the Center for Business and Economic Research in the Sam M. Walton College of Business at the University of Arkansas.
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ccording to the National Bureau of Economic Research, the organization tasked with deciding such things, the Great Recession ended in June 2009, about five and a half years ago. Since that time, the United States has gained more than 9.4 million jobs, surpassing its previous all-time high employment level, while at the same time, the national unemployment rate dropped from a high of 10% percent all the way down to 5.8%. These numbers represent an impressive, if slowly paced, national economic recovery. Here in Arkansas, however, many regular people feel like we have not experienced improvement at all. While it is true that the pace of employment growth in the state has lagged the country, Arkansas finds itself poised to reach new employment heights in 2015 and 2016. Economic vitality in Arkansas is absolutely dependent upon the individual metropolitan areas thriving. At the end of 2014, about two-thirds of all jobs in the state of Arkansas were located in six of the state’s metropolitan areas: Central Arkansas, Northwest Arkansas, Fort Smith, Jonesboro, Pine Bluff and Hot Springs.
As we move into 2015, there is strength in the construction and manufacturing sectors in Arkansas, but growth in our core trade services sectors has been subpar.
ROBUST NORTHEAST ARKANSAS The metro area that stood out for its positive economic performance in 2014 was Jonesboro. From November 2013 to November 2014, Jonesboro gained 1,600 jobs. Half of those employment gains were private services, 200 were government jobs and 600 were goods producing. This kind of
sectorial distribution indicates that the Northeast Arkansas economic hub is clicking along and creating a diversified set of opportunities. MODEST GROWTH IN NORTHWEST Northwest Arkansas, known for its spectacular job growth numbers for the last 25 years, had a surprisingly modest 2014. The area, which has about four times the number of employees as the Jonesboro metro, gained only 2,300 jobs from November 2013 to November 2014. The biggest factor holding back the area from the kinds of gains seen in the recent past was that the trade, transportation and utilities sector shed 1,800 jobs during the year. Each of the subsectors – wholesale trade, retail trade, and transportation and utilities – was down during that period. The downturn in this key area of employment for Northwest Arkansas is somewhat surprising, given the continuing national economic recovery and the strong gains in the sector during the 2010 to 2013 time period. However, improving domestic consumer demand, perhaps from long pent-up wage increases and low gas prices, could help boost Northwest Arkansas employment along in 2015. CENTRAL ARKANSAS ADDS JOBS The Central Arkansas metro, including Little Rock, North Little Rock and Conway, also experienced slow growth in 2014. The area gained 2,100 jobs to bring employment to a total of 350,300. Weakness in hiring in leisure and hospitality, trade, transportation and utilities, information, and professional and business services meant that gains in construction and manufacturing employment were offset. In Hot Springs, there were 400 jobs gained, in Fort Smith, there were 200 jobs gained, and in Pine Bluff there were 400 jobs lost. As we move into 2015, there is strength in the construction and manufacturing sectors in Arkansas, but growth in our core trade services sectors has been subpar. Leisure and hospitality employment gains have been a positive point across most of the state’s regions. Professional services and health care continue to make gains in the state, as well. Improving national consumer conditions set the stage for Arkansas and its metros to take advantage of our retail and logistics strengths and enjoy the kind of job growth in 2015 that leaves us with no doubt that the recession is long over.
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
Commentary
Program Helps Businesses With Disaster Preparedness By Jeff Weidauer Jeff Weidauer, who volunteers as chairman of the board of the American Red Cross of Greater Arkansas, is vice president of marketing and strategy at Vestcom International.
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e all know being prepared for an emergency is a good idea. But what does it mean to be prepared? Emergencies like power outages, water main breaks and medical emergencies may disrupt a business for an hour or two. Disasters like tornadoes and floods, which can happen in Arkansas anytime, have the potential to cause numerous workplaces to close for weeks, or never reopen. Workplace violence can have residual effects on employees far beyond the initial event. According to the U.S. Department of Labor, more than 40% of businesses never reopen following a major disaster. One quarter of businesses in an affected area that struggle to continue through the aftermath close within two years. That’s more than 60% of businesses gone and too many workers unemployed or displaced. The economic impact to a community’s economy can be devastating, adding insult to injury. According to a recent American Red Cross survey, 82% of businesses were in agreement with the following statement, “If someone could make it easy for me to be prepared, I’d do it!” The Red Cross can help make preparation easy, and it’s free through a program called Ready Rating. The Ready Rating assessment program helps prepare your business for disasters and other emergencies. You’ll have access to one-of-a-kind tools, resources and information for evaluating and improving your ability to withstand disaster, maintain operations and protect lives and property. Ready Rating is a free, self-guided program to help your company become better prepared for emergencies. Just complete the 123-point
Prepared companies minimize costly losses due to emergencies and enhance productivity by having employees return to work sooner.
self-assessment to see your level of preparedness to begin or to improve your readiness. The 123 Assessment is aligned with the Federal Emergency Management Agency’s (FEMA) private sector preparedness standards (PS-Prep). A recent survey of companies that have completed Ready Rating reported the following results: • 75% updated existing emergency response plans, • 70% educated employees on preparedness for the workplace, • 51% educated staff on the importance of also being prepared at home, and • 45% created new emergency plans. Last February’s ice storm and subsequent bouts of severe winter weather across Arkansas did more than close schools for a few days. Portions of Interstate 40 between Memphis and Little Rock – as well as Interstate 55 south from the Missouri border to West Memphis – were gridlocked with traffic immobile on icy roads for hours. Was your business adversely impacted? Did you have a viable plan B? The deadly April 27 E-F4 tornado that devastated 80 miles of Central Arkansas, killing 16 residents, plowed through the town of Vilonia, destroying 90% of the businesses. Many of these businesses were just finding their way from a tornado that destroyed much of the town almost three years earlier to the day of this storm. Does your emergency plan include preparations for continuing operations after minor damage? What about total destruction? After completing Ready Rating, you may be surprised at your vulnerability. But, you will also be empowered like the many businesses that took action after seeing their response level to be more resilient in the face of disasters and emergencies thanks to the information provided by Ready Rating. Prepared companies minimize costly losses due to emergencies and enhance productivity by having employees return to work sooner. This preparedness earns trust from employees and the communities served. Go to readyrating.org. Conduct the free readiness assessment. Do it today. Disasters and emergencies don’t make appointments. For more preparedness information, contact Jeff Robbins, Oklahoma/ Arkansas regional manager of preparedness, at jeff.robbins@redcross.org. Visit redcross.org/arkansas; Twitter @RedCrossArkansas.
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
Commentary
COOL Leaves Cold Future For the State’s Exports By Congressman Rick Crawford Congressman Rick Crawford, R-Jonesboro, represents Arkansas’ First District. He is a member of the House Committee on Agriculture and serves as chairman of the Subcommittee on Livestock, Rural Development and Credit.
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rkansans take pride in their ability to feed, clothe and manufacture goods not only for their own state, but for the country and the world as well. These products – including aircraft, poultry, rice, cotton and steel, to name a few – combined for a total export value of more than $7.1 billion in 2013, growing by more than 35 percent since 2010. This growth has occurred because our state’s private sector invested in meaningful economic activity, and it cannot occur if lawmakers in Washington strap that sector with undue regulatory burdens and expenses. On the national level, the U.S. has enjoyed healthy trading partnerships with multiple international markets, including its neighbors to the north and south, Canada and Mexico. U.S. trade with these two countries sits at $1.2 trillion and supports nearly 14 million domestic jobs, while Arkansas, alone, exported nearly $2.5 billion in products there last year. Yet, despite this success, Washington has jeopardized it by failing to properly address an unnecessary labeling requirement. Known as Country of Origin Labeling, or simply COOL, Congress began an effort in 2002 requiring retail stores to identify where certain food items were produced. Congress greatly expanded COOL in the 2008 farm bill, and the U.S. Department of Agriculture (USDA) controversially implemented the final rule for it one year later.
Livestock and food industry groups rightly criticized COOL over increased production and packaging costs.
AN ADDED BURDEN Livestock and food industry groups rightly criticized COOL over increased production and packaging costs, while Canada and Mexico challenged the rule with the World Trade Organization. The two countries
claimed U.S. consumers would view meat items from another country as inferior, creating a trade-distorting impact on purchases. The WTO ruled in Canada and Mexico’s favor, citing COOL regulations treated imported livestock more harshly than U.S. livestock without accomplishing its original purpose to inform U.S. consumers. When the USDA revised COOL in 2013 to show each production step for meat – including “born,”“raised” and “slaughtered” – the WTO ruled on Oct. 20, 2014, that COOL still violated trade obligations by unfairly favoring domestic meat. The WTO subsequently gave the U.S. 60 days to comply or potentially face billions of dollars in costly retaliatory tariffs from Canada and Mexico. Many studies within the U.S. have supported the WTO’s findings. One of the country’s leading universities for livestock research, Kansas State, discovered that consumers show little awareness of COOL, and the rule has not influenced how they buy meat. COOL had become simply an added and costly burden on producers and packers. Similarly, an agricultural, food and manufacturing consortium, known as the COOL Reform Coalition, has cited that non-compliance with the WTO will have a devastating impact on the U.S. economy. Arkansas, alone, could face $283 million in tariffs for its rice, chicken, prepared foods, eggs and wheat exports to Canada and Mexico. THREATENS ECONOMY Washington should not arbitrarily impede the ability of its citizens to engage in legal and gainful commerce, and the WTO’s latest decision underscores that the current mandatory COOL law needs changing. The House Committee on Agriculture – of which I am a member – has long maintained this position. In fact, we expressed our disappointment that the Senate proved uncooperative to fix COOL during the 2014 farm bill and that U.S. Agriculture Secretary Tom Vilsack openly opposed Congress acting on this issue – an issue that threatens the economy of Arkansas and every state in our union. In summary, I support the full repeal of mandatory COOL for beef, pork and chicken products, but I also recognize the difficulty of this mission and remain open to alternatives that bring the U.S. into complete WTO compliance. In doing so, Arkansans can continue taking pride in feeding, clothing and manufacturing goods for the rest of the globe.
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
Cover Story
ETCHED IN STONE Four new well-deserving inductees – Al Bell, Stephen LaFrance, Donald “Buddy” Wray and Millie Ward – are headed into the shrine for the state’s business elite.
ILLUSTRATION: SHAFALI ANAND
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Cover Story: Hall of Fame
Al Bell
Legendary music executive credits business concepts gleaned from his father and former Governor Winthrop Rockefeller for his savvy dealings in the recording industry. By Wesley Brown
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hen Al Bell learned that he had been named to the 2015 class of the Arkansas Business Hall of Fame, the longtime music industry executive says that he was literally overwhelmed at being honored with the “giants” of Arkansas business and industry. “I must tell you that it is quite humbling,” said Bell, the legendary Stax Records executive largely responsible for the Memphis sound that still influences rhythm and blues, pop, rap and soul music today. “I don’t know if I can get a greater honor – it brought me to tears to be recognized at home.” Born Alvertis Isbell in Brinkley on March 15, 1940, Bell will be inducted into the state’s Business Hall of Fame on Feb. 13, 2015. Now 74, Bell’s long list of lifetime honors include The Trustee’s Award at the Grammy Awards, the W.C. Handy Lifetime Achievement Award, Arthur A. Fletcher Lifetime Achievement Award from the National Black Chamber of Commerce and the National Award of Achievement from the U.S. Department of Commerce. He was also inducted into The Arkansas Black Hall of Fame in 2002. Yet, the influential music and entertainment executive says getting a seat at the table alongside Arkansas business heroes he has admired his entire life will be the crowning achievement of his lifelong career. “To be recognized and listed amongst the giants that I have always admired and held in awe is quite an honor,” Bell said. “It says to me that someone had an appreciation for the contributions I have made as a business person while functioning in the music industry and other businesses.” As a member of the 2015 class, Bell will
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join former Ebony magazine publisher John Johnson and Thelma L. Joshua and the late Ernest P. (Josh) Joshua, Sr., as the only other African-American honorees in the Arkansas Hall. Johnson, former CEO and chairman of Chicago-based Johnson Publishing Co., was inducted with the 2001 class. The Joshuas, who founded J.M. Products, one of the largest manufacturers of ethnic hair-care products in the U.S., were inducted as part of the 2007 class.
THE SOUL MAN & THE BILLIONAIRE The affable 6-foot-4-inch Bell can tell story after story about a career that gave America some of the most endearing soul classics in modern music history. But the most interesting and engaging part of a recent hour-long interview were colorful anecdotes about the soul man’s special relationship with Arkansas governor and billionaire philanthropist, the late Winthrop
TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
A. Rockefeller. Bell said Rockefeller served as his very first mentor not long after the New York business and political icon moved his family to the foothills of Arkansas in 1953. Bell said Rockefeller, who was extremely popular with the African-American community as the state’s first Republican governor since Reconstruction, took notice of him when he was only 16 years old while working at his father’s local grocery store in North Little Rock at the corner of Broadway and Hazel streets. Bell said many of the business fundamentals and sophisticated risk-taking tactics he deployed as a young businessman in the recording and music industry were largely gleaned from his interactions with the East Coast industrialist. “He was my godfather and taught me business concepts and strategies that are still with me today,” he said. One of Bell’s earliest risk-taking moves as a 30-something Stax executive occurred a few years before Rockefeller’s death in 1973. At the time, one of the cardinal rules in the music industry was that the average time for a single on an album for a black artist was only two minutes and 30 seconds. “It could never be longer than three minutes,” Bell recalled. The other industry standard for black music artists was that there had to be at least 10 songs on an album, a long-lived urban tradition for the 12-inch LP (long-play) records that ushered in the golden era for American soul and R&B during the 1950s, ’60s and ’70s. But Bell said he decided to break the mold when he began working on a long-play album for a Memphis soul artist with
a smooth and sensual baritone voice named Isaac Hayes. Called “Hot Buttered Soul,” the 1969 release is remembered today as a landmark classic in soul music. The soul masterpiece gave Hayes unusual creative license and included a lavish and expensive production with rich rhythm section arrangements and instrumental accompaniments by the Detroit Philharmonic Orchestra. Side one on the album included a 12-minute cover of the Burt Bacharach/Hal David classic, “Walk On By.” The other song, “Hyperbolicsyllabicsesquedalymistic,” was an up-tempo funk-inspired jam session with voice-mimicking guitar riffs and rolling piano solos that lasted more than nine minutes. Side two of the album included the shortest and longest songs on the album. The first song, “One Woman,” focused on the pangs of infidelity and betrayal in love. But the single that Bell says broke every rule in the music industry was an extended 18-minute reinterpretation of Jimmy Webb’s #KeepOnAmazing
country music hit, “By the Time I Get to Phoenix.” The song famously begins with an eight-minute spoken introduction with a very low-sounding musical mix that builds to a climax of horns, strings, organs and vocals. The Bell-Hayes produced classic also includes innovative engineering techniques that are still used in recording studios today. All four of Hayes’ songs from the album are still often sampled by contemporary urban artists, and remain as staples on “old school” urban radio stations across the U.S., as well as soul music-listening channels on cable TV and satellite radio. Hayes’ second album ended up selling well over 1 million copies, a rarity at the time for black artists outside of Motown. “That [production] changed the dynamics of the industry … as it related to albums of African-Americans and album sales in general,” Bell evoked. “We did something that never had been done before in the industry … and that kind of [risk-taking] became a trademark of Stax Records.”
He added: “And it was some of the business concepts that I had learned from Mr. Rockefeller to have the audacity to take chances, and the guts to spend the money that at the time was unheard of for a black artist.”
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6. Get outside – vitamin D, like that found in sunlight, can help control your appetite and cause fat cells to become more metabolically active.
1. Get a flu shot – it’s one of the best ways to keep you and your family healthy. 2. Hold off on holiday desserts – eating sugar directly after a meal disrupts the absorption of nutrients. 3. Take care of your skin – it’s your largest organ. Use a humidifier and moisturize dry skin regularly. 4. Keep kitchen and bathroom surfaces clean – you’ll eliminate germs that could possibly cause illness or re-infect you. 5. Drink more water – make sure to keep your fluid levels up, even when it’s cold out.
BELL’S STAX SOUL MUSIC LEGACY LIVES ON Under Bell’s helm, from 1965 until the company was forced into involuntary bankruptcy in 1975, the Arkansas recording executive helped build Stax Records into one of the most influential record labels in the world, working with artists such as Hayes, Otis Redding, the Staple Singers, the Emotions, Johnnie Taylor, Sam & Dave, Booker T. & the MGs, the Bar Kays, Richard Pryor and a host of others. Bell also produced and wrote such hits as the Staple Singers’ “I’ll Take You There.” At its height in the 1970s, the Memphis record label was the second-largest AfricanAmerican-owned business in the U.S. Founded by two white business owners,
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Cover Story: Hall of Fame Memphis native Jim Stewart and his sister Bell said he then took those same lessons Estelle Axton, Stax began as a small, racialand became familiar with every wholesale ly-integrated music studio. After Redding, distributor and local record store owner its biggest star, died in 1967, and the sevwho sold Stax records to urban and soul erance of the label’s distribution deal with music lovers across the U.S. Atlantic Records in 1968, Stax was reorga “They know what people wanted better nized with Bell as chairman and the driving than these large distribution companies force behind the independent label. owned by publicly held companies who After the demise of Stax, Bell went on to believed in throwing a piece of product on serve as president of Motown Records Group, and later started his own Bellmark Records label, releasing Prince’s, “The Most Beautiful Girl in the World,” and Tag Team’s Platinum hit “Whoomp (There It is).” Stax is also remembered for having the sexiest and coolest album covers, many of which are still collectibles today. Besides his relationship with Rockefeller, Bell says his greatest influence in life and business was his father, Albert Bell, who moved his family from Bell in front of the Stax Museum of American Soul Music Brinkley to North Little Rock in 1945. The the wall and hoping it sticks,” said the longyounger Bell said his father first put him to time recording executive. “I took that into work in his local Isbell’s Grocery, but also business, period, and frankly, I still believe operated a landscape business that opened in that today.” up the door for the younger Bell to meet There were other life lessons the Arkansas Rockefeller and develop the close relationship that changed his life. In building Stax into one of the nation’s most successful independent record labels, Bell said he learned the industry-changing, guerilla-style marketing and distribution tactics at Stax by watching how beverage vendors interacted with his father and other local store owners. “At my father’s grocery store, I saw how Pepsi, Coke Bell receiving the NATRA Man of the Year award and beer distributors sold their products on consignment going from music legend learned during his colorful store to store, and then adjusting their career that spanned more than a half inventories based on sales at each location,” century. Many occurred when he crossed he said. paths with other humble American entre-
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
preneurs and business people like Rockefeller who influenced him along the way – from legendary Motown executive Berry Gordy to Fedex Founder and Chairman Fred Smith of Memphis. But the bottom line to Bell’s business successes was always making sure everyone involved in any business enterprise was rewarded for their work – whether the business was a local record shop, an entrepreneur’s own personal vision, or a multinational publicly held company. “If the business is enjoyable and profitable for everyone involved, then it will be a success,” Bell said of his personal business philosophy. Bell lives in North Little Rock with wife, Sylvia, and continues to be involved in the music industry today, traveling across the U.S. and Europe to work with independent music artists and producers. He also maintains an online music website and radio show at AlBellPresents.com. And now, upon entering the Arkansas Business Hall of Fame, Bell said he is simply overjoyed to be a part of the 2015 class. He said he looks forward to joining great people and businessmen like the first class of honorees in 1999, which included Arkansas business icons Sam Walton, Charles Murphy, William Dillard and Jack Stephens. “I’m appreciative of American capitalism, including the spectacular ups and downs that I’ve had. That is what makes us great as a country – capitalism. God knows I wouldn’t have it any other way,” said the former Little Rock disc jockey. And God also knows that America is better off for the wonderful music that the gifted Al Bell dreamed up in a Memphis recording studio that became known as Soulsville U.S.A.
Stephen L. LaFrance In his early days as a pharmacist, USA Drug founder established a prescription for success. By Roby Brock Editor’s note: The following is an edited version of an interview that was conducted a few months before Stephen LaFrance passed away on June 5, 2013.
T
wenty-six dollars doesn’t sound like much of a foundation to build a multi-million dollar enterprise, but for the late Stephen LaFrance, it was enough. LaFrance, the founder and former chairman and CEO of USA Drug Stores and SAJ Distributors, will be posthumously inducted into the Arkansas Business Hall of Fame. LaFrance died in 2013 at the age of 71 after selling his retail empire to Walgreens in July 2012 for $438 million. His business career was filled with smooth sailing and choppy waters, and in the interview in 2013, he recalled the early years when he took his first solo pharmacy job in the back of a Gibson’s Department Store at 10th and Main Street in Pine Bluff in February 1968. “I was 26 years old and living in a one-bedroom apartment on Wisconsin Street,” LaFrance remembered. On his first day at Gibson’s, he rang up $26 in business for the whole day. “I looked in the mirror that night and thought to myself, ‘What am I doing?’” His soon-to-be wife, Linda, whom he met in Atlanta while working for her father’s pharmacy business, soon joined him in Pine Bluff, and after toiling long hours and growing that small Gibson store’s sales, LaFrance said he finally started making a little money. “Man, we had nothing,” LaFrance said. “But I always tried to make myself accessible so my customers could get what they needed with their medicine.” That attention to customer service proved to be a winning formula that would steer all
of LaFrance’s major growth in the years to come. It also drove customer and employee loyalty. LaFrance tells the story of a woman who came into his Pine Bluff pharmacy in the ’70s with her young son, who was seriously ill, but undiagnosed. The woman was weeks away from getting a doctor’s appointment and LaFrance recognized that her son needed immediate attention. He picked up the phone, called a doctor with whom he was friends and got her an appointment right away. The doctor said to
send them over and LaFrance never heard about the eventual outcome. Twenty-five years later, walking down the hall of his warehouse operations, a lady approached him and relayed the story of how LaFrance had saved her young son’s life by calling a doctor and getting him a faster appointment. She was now working for him. “I always got a real charge when I got off from work and I came home and thought I had helped a person,” LaFrance said. “The story of that woman and her son still chokes me up today.”
THE FIRST ACQUISITION While the Gibson pharmacy proved to be a bustling enterprise for LaFrance, an opportunity presented itself a few blocks away. LaFrance was approached about buying a pharmacy on Ohio Street in Pine Bluff for a whopping $5,000 – more than he happened to have at the time. He was turned down by a few banks, but finally found one who would lend him the money. Smart move. With the loan to do the deal, LaFrance acquired his competitor, combined the two prescription departments, and grew the business. Eventually, he would expand into other parts of Pine Bluff and outside of the city to Warren and Malvern. On a drive back from Louisiana to visit family, LaFrance and Linda settled on the name USA Drug Stores for their fledgling business. The red, white and blue capitalized on American pride and small town values. With multiple operations, LaFrance was getting to the point where he realized there were savings to be found by controlling his wholesale costs. For years, he had collected business cards from manufacturing reps who came into his stores checking on their business. LaFrance parlayed that Rolodex into the creation of a wholesale distribution outfit, SAJ Distributors in the mid-70s. The S, A and J represented his three children’s names – Stephen, Amy and Jason. “I started trying to buy everything from the manufacturers instead of wholesalers to make better margins,” LaFrance said. He couldn’t buy enough quantity for discounts with just his drug store business, so he made the decision to sell to other outlets in the region. He laughed about the sophistication of www.talkbusiness.net
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ARKANSAS BUSINESS HALL OF FAME Friday, February 13, 2015 Statehouse Convention Center Wally Allen Ballroom Little Rock, Arkansas Reception at 5:30 p.m. Dinner and Program at 6:30 p.m. HONORING Al Bell Stax Records
Stephen L. LaFrance Sr. USA Drug
Millie Ward Stone Ward
Tickets to the black-tie optional event are $150 per person. Sponsorships are also available through the Sam M. Walton College of Business, Office of External Relations at 479-575-6146, abhf@walton. uark.edu or waltoncollege.uark.edu/abhf. 18
TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
Donald E. “Buddy” Wray Tyson Foods Inc.
Cover Story: Hall of Fame his early wholesale business. “Our first warehouse was a garage and third bedroom,” he said. LIFE GETS MORE COMPLICATED LaFrance’s new sprawling business endeavors seemed to mirror the expansions in his personal life. With his wife and their three children to provide for, LaFrance felt the pressure to grow his business to support his family. He had grown up in Monroe, La. His father was a theater manager and his mother operated a women’s dress shop. He was the second of four children and the two brothers he’s sandwiched between in age both became pharmacists. His younger sister was a schoolteacher. LaFrance first studied chemistry in college, but by his sophomore year gravitated to the pharmacy program at Northeastern Louisiana State College, now known as the University of LouisianaMonroe. Creating a family business was important to him because all of his siblings went different directions after they completed their degrees. “My whole family scattered when we got out of college. My whole goal was to have a company, to have a business that would sustain and keep our family in one spot,” he said. It almost worked. His two sons eventually joined the family business, but his daughter married and moved to California to raise a family. INNOVATIONS AND BUYOUTS LaFrance was a fundamentalist retailer: Pay attention to the customers, stock your shelves with inventory that moves and keep the aisles spotlessly clean. “We always paid attention to the ABCs of retailing,” LaFrance said. “It was my belief that if you put the business first, you’ll be successful. If you don’t, you’ll go out of business. That’s as simple as it is. It’s not a very complicated theory.” In the early days of go-go growth in the late ’70s and early ’80s, LaFrance was determined to capitalize on any advantages and opportunities he might find. From his
non-conventional desk of a door on top of two file cabinets, he hatched the idea of using computer technology to strengthen his inventory control. At the time, “coding” was new territory and computer systems were expensive. He convinced – with much persuasion – his banker to loan him $50,000 to buy a computer for an inventory control system, a move that later turned out to be very visionary. Streamlining his processes shrunk expenses and grew the bottom line and eventually put LaFrance and USA Drug in a position to go on a series of acquisition sprees.
“It was my belief that if you put the business first, you’ll be successful.” – Stephen LaFrance In the ’80s, he bought several Revco stores, later followed by a big buyout of the Memphis-based Super D drug store chain. At the time, LaFrance had 15 stores and Super D had 90. He had hooked up with a Texas private equity group on the Super D deal, but the banks were nervous as to how LaFrance planned to take the struggling Memphis chain, which was losing money, and return it to the black. “Here’s the key,” LaFrance recalled. “They didn’t have their own merchandise. They didn’t have generic pharmaceuticals. They had an office in Memphis that was costing $8 million a year.” LaFrance shut the Memphis headquarters down on day one and filled the stores with the wholesale goods from his company and
inventory similar to the USA Drug model. “It worked. We made money in the first year,” he said with a grin. ‘BACK DOOR’ POLICY In 2004, he had the opportunity to move into the Tulsa market and add another 60 stores to his empire, which was pulled under the umbrella of Stephen L. LaFrance Holdings. The deal was even more complicated as he was negotiating with two family-owned pharmacy chains, Med-X and May’s. It was imperative that neither side had knowledge of the potential merger with the other. LaFrance pulled it off. LaFrance said he never did a deal too big to fail. His deal-making style was always full of options, he contended. “I always had a back door, so I’d always have a way out,” he said. In all of his acquisition transactions, LaFrance always looked for efficiencies, which often meant combining prescription departments and consolidating stores in proximity to each other. So when Walgreens and LaFrance cut their $438 million merger in July 2012, he knew how it would play out. The Walgreens combo involved 18 months of negotiations beginning in early 2011 and consummating on Sept. 17, 2012. At the time, Stephen L. LaFrance Holdings, Inc., and members of the LaFrance family had 144 stores in seven states operating under the USA Drug, Super D Drug, May’s Drug, Med-X and Drug Warehouse franchises. Those stores generated $825 million in sales in 2011. The deal also involved the sale of SAJ Distributors, which Walgreens flipped to L&R Distributors of New York in late November of that year for an undisclosed sum. Walgreens quickly shuttered nearly half of the stores in the seven-state region shortly after the close. LaFrance said he was ready to exit the business as he moved into his 70s. He said there was too much uncertainty in the future and his sons were not interested in taking over. “I’ll have to admit that I’ve had many www.talkbusiness.net
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Cover Story: Hall of Fame second thoughts, but I’m getting better,” LaFrance said. “You know, if you’ve birthed something 45 years ago and all of a sudden it’s gone, you miss it. And I do miss it … but it was time to sell.” There were plenty of setbacks in LaFrance’s 45 years in the business world. He talked about how hard the first 10 years were. Twelve-hour work days, six days a week were routine, and even after he made it big, that work ethic was a driver for more success. In the early ’80s, his wholesale business was doing well and a sizable relationship with Skaggs stores based out of Memphis drove a period of “exponential growth” for SAJ. For the better part of the decade, LaFrance supplied Skaggs stores with inventory ranging from private-label drugs to mops and brooms. The business reach stretched from the mid-South across Texas, even into New Mexico, as Skaggs kept asking LaFrance to supply its stores with more and more items. Toward the decade’s end, Skaggs opened
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its own wholesale operation in Oklahoma and pulled all of its business from LaFrance. Pressed with a choice to downsize or ramp-
“I always had a back door, so I’d always have a way out.” – Stephen LaFrance up to replace the lost business, he gambled and hired salespeople across his territory. Within three years, he had replaced the lost Skaggs sales. “When you have one basket and they keep pouring things in it, sometimes you have to take it,” LaFrance explained. “It was
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a devastating event, but we survived and we went on to grow.” A PASSION FOR COOKING His obituary on the Ralph Robinson & Son Funeral Home website noted that LaFrance “cherished his Friday afternoon spades games in Pine Bluff ” and that “there was nothing he enjoyed more than to cook.” Once when asked what his dream profession would have been, he replied, “to own my own restaurant and be the cook.” In fact, the obituary noted, when he designed his home in Pine Bluff in 1980, he insisted that the kitchen be the focal point for interaction with family and friends. Many great memories were made around the table with loving family and lifelong friends, and many remember his legendary Thanksgiving feasts. For those who knew - and should know Stephen LaFrance, there are plenty of solid business lessons to be learned from the selfmade millionaire and the life and companies he led.
Millie Ward Along with a successful career of helping clients tell the stories behind their brands, advertising executive makes a practice of assisting others. By Casey L. Penn
A
sk Millie Ward how to run a company, and she may respond in 20 words … or two. “Find people whose values you share, and help them succeed. We call that building good,” says Ward, referring to the business philosophy of Stone Ward, the full-service advertising agency she co-founded in 1984 with partner and husband Larry Stone. “Along the same lines, we have 20 principles that we refer to as our ‘Rules of Engagement.’” Ward and her team draw daily from principles like “Remember that business should be profitable, ethical, and fun” and “Don’t confuse effort with results.” This sense of personal integrity – along with a stellar record of business achievements and community service – recently led to Ward’s becoming an incoming University of Arkansas Walton College of Business Hall of Fame honoree. Friend and colleague Larry Wilson nominated Ward, one of four inductees chosen for recognition in 2015. “Because of Millie’s leadership, Stone Ward is recognized in the South and Midwest for its creativity and diverse client list,” says Wilson, who serves as president and CEO of First Arkansas Bank & Trust in Jacksonville. “She infuses every client and personal encounter with her distinctive energy and insight.” IMPACTING FUTURE LEADERS Along with Stone, Ward has served as an employer, mentor and teacher to many young business leaders, some of whom have worked directly under her command. “Because we work with clients at different levels and stages of their business, our
agency is a great training ground for business leadership,” she says. “It’s actually a point of pride for me that some of our people learned from us, and used that experience to start new successful businesses.” Among those who have moved out on their own with a nod to Stone Ward are Shawn Solloway, Exit Marketing; Martin Thoma, Thoma and Thoma; Martin Wilford, Red Deluxe; and Chris Allison, Allison Marketing. Allison, an entrepreneur and marketing
consultant, credits Ward’s significant influence in his career path. “Being fortunate enough to meet Millie Ward at the beginning of my career was one of the best professional events in my life,” he says. “She is one of the most talented and effective business leaders I have met.” Colleague and former Stone Ward employee Mimi San Pedro, chief operating and marketing officer for P. Allen Smith
Companies, calls Ward a personal inspiration. “My gratitude to Millie,” she says, “for challenging the status quo, for pushing me to think that ‘good enough is not good enough,’ for giving me the courage to see myself as ‘an equal’ and to celebrate successes each and every day.” Ward is active in Central Arkansas’ booming startup movement – something she believes is beneficial to the state. “There’s so much going on,” she explains, mentioning organizations like Arkansas Venture Center, Innovation Hub (North Little Rock), Innovate Arkansas, Noble Impact and other groups. “Helping young entrepreneurs understand challenges and opportunities is a worthwhile place to spend time. This country, this state, was built on the energy of entrepreneurs,” she says, citing J.B. Hunt, Don Tyson, Bill Dillard and Sam Walton – Arkansas entrepreneurs who built their “small” businesses into global players. As for her part, Ward speaks to entrepreneurs and maintains membership in related organizations. She is a charter board member of the aforementioned Arkansas Venture Center, a newly formed group working to help startups through related targeted activities, coaching and classes. As a past president of the Downtown Little Rock Partnership (DLRP), Ward helped bring the Technology Park to the downtown area. “The Technology Park locating downtown makes sense,” Ward says. “Everything that young entrepreneurs need to live, work and play is in downtown Little Rock – from legal and financial support for their businesses – to dining, entertainment and green spaces to complement their www.talkbusiness.net
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Cover Story: Hall of Fame lifestyles. All of this makes our downtown a great breeding ground for young companies.” “Millie has a special way of doing everything,” says Sharon Priest, outgoing DLRP executive director. “Her wisdom and guidance has taken the Partnership to new heights.” SERVANT LEADERSHIP Hall of Fame recipients demonstrate
concern for their community. Again, Ward fits the bill. “She has always had a passion for giving back,” says Wilson, in reference to Ward’s long list of community and professional affiliations. Ward is involved in a handful of organizations aimed at helping Arkansas women. “As a woman and a business owner, I have an opportunity to help other women do the same thing,” Ward says. She holds memberships in Women & Children First, a group
Stacy Sells, Breast Cancer Survivor
Beating
the
Odds
“When I was diagnosed with stage IIIB inflammatory breast cancer, I knew I was in for the fight of my life. And I said, ‘time out – if I have cancer, I’m going to UAMS.’ My comprehensive care included chemotherapy followed by a double mastectomy, radiation and reconstruction. It gave me incredible comfort to know that I had a team of brilliant doctors who are among the best in the U.S. Today I am grateful to be a cancer survivor, always mindful of how precious it is to be alive.”
UAMShealth.com/cancer
“Every morning I wake up and am thankful for UAMS. They pulled me through, and it’s a new day.”
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
supporting women and children victims of domestic abuse, and Arkansas Women’s Foundation, a group focused on raising women in a positive way by providing resources (money, time and mentoring) to help them succeed. Giving back is instinctual for Ward, who watched her parents do the same. “Growing up, money was tight; however, every Christmas, from the time I was a tiny girl, we would gather things that we had and take them to a family that had less than we did,” she says. “My parents’ principles of giving shaped me. They are faithful to God, and active community volunteers.” Giving brings both responsibility and reward, Ward has learned. “I’m blessed and it is rewarding to me to support organizations who bless others.” Citing the pro bono work that Stone Ward does annually for one of its clients, the United Way, Ward explains, “One out of every three Arkansans benefit from a United Way agency. That’s an incredible impact and a blessing to so many. … I don’t think anybody is ever sorry about anything they give away.” With gratitude, Ward recalls those who paid things forward in her direction. Among them was early Stone Ward client Don Munro of Munro & Company Shoes. “Don was a businessman who cared equally about the difference he could make in the quality of the lives of his employees and the quality of the shoes his factories turned out.” Ward’s father worked for Don Munro for 37 years. She recalls, “We were still a young business when Don gave us an opportunity to pitch for his business – an opportunity he gave me, in part, because of my dad.” In branding a line of children’s shoes for Munro, the young agency made a bold move. “We named the shoes Nickelodeon,” explains Ward. There was a channel by that name (in its very early days), but the channel had not trademarked its name for any products. “We didn’t want to use their brand, but we did use the word Nickelodeon. If people were to associate the shoes with the channel, we thought that would be an advantage.” People – namely, Nickelodeon – did indeed make the association. However, after some discussion, the larger company put the
smaller one to work. Munro’s children’s shoe line became the first Nickelodeon-licensed product, and Stone Ward did some of its first work in a national market. “The experience stretched us,” Ward says, recalling how her company became the agency of record when Nickelodeon opened its studios in Universal Studios, Orlando. WORD OF MOUTH Since serving Munro Shoes, the Little Rock agency (with its Chicago office) has worked with a multitude of local and national clients. Last year, the company recorded more than $47 million in capitalized billings for clients that include Terminix, Snap-On Tools, Sport Clips, the Arkansas Economic Development Commission, Arkansas Blue Cross and Blue Shield, Baptist Health, the U.S. Soccer Federation and many more. As for what has advanced the agency’s client roster, Ward credits a few key traits. “We get hired for our track record of creative work,” Ward says, adding that the com-
pany is also known for niceness. “It’s funny, but I think it’s true,” Ward says with a grin. “When clients complain about agencies, they cite arrogance and bad listening skills. We try hard to listen to our clients, and realize their brilliance.” Finally, the agency stays relevant. “We have continued to morph our agency business model,” Ward says. “We’ve refined the skill sets that we’re hiring and moved aggressively into the digital age. The essence of our business hasn’t changed in that we are still telling our clients’ brand stories, but we are doing it in all of the latest, greatest channels and with the latest, greatest tools.” NOT HERS ALONE Ward stressed that her Hall of Fame recognition should not be hers alone. “Stone Ward is a partnership in the truest sense of the word. There is no way I could have accomplished anything they credit me for without my partner, Larry Stone. Every experience that has molded or shaped me, I’ve shared with him.”
Where Ward brings optimism to the table – friends and co-workers call her Pollyanna – Stone brings thoughtful wisdom. “The creative soul of our agency, Larry’s leadership as our executive creative director and his wise approach to the business of advertising and life is Hall of Fame quality,” Ward says. “Larry is relied on as a strategic adviser to our people and to our clients. He was my first mentor in this business and has continued in that role throughout our partnership.” Stone, who worked with Ward for many years before becoming partners with her in both work and life, weighs in on the partnership. “In addition to trust and compatibility, a good partnership is made by two people with differing talents and strengths, making the two together greater than each on their own,” he says. “Those who know us would tell you there is very little redundancy between Millie and me. It didn’t take long before I contracted the Millie virus. Millie’s character, energy and optimism are quite contagious.”
Ward Applauds Work of Three Besides your partner, Larry Stone, who is in your personal “Business Hall of Fame?”
Tommy May, Retired CEO of Simmons Bank “Tommy has suffered from ALS for nine years”, Ward notes. “Yet, he continued to successfully lead his organization through a decade of growth. Now he is using his unique brand of leadership to run the Simmons Bank Foundation. Through it all, his mantra has been [to] stay positive and make a difference – something he has done in spades. Tommy lives by what he calls the ‘Do Right Rule.’ And he does it with grace and a sense of humor that amazes me.”
Russ Harrington, Retired CEO of Baptist Health “Baptist Health, a longtime client, is an organization that positively impacts the health of millions of Arkansans every year,” Ward says. “For Russ, the job of CEO was a healing ministry to the individuals that Baptist Health cared for across its system. The impact of his leadership on our state was and is incredible. Yet, he remains one of the most humble, caring men I’ve ever known.”
Dale Dawson, CEO of Nonprofit Bridge2Rwanda “Dale is a successful businessman and entrepreneur who had it all,” Ward says. “Yet after he sold his last company, he says he moved from ‘success to significance.’ What he did was establish a nonprofit whose scholars program is providing a way for Rwanda’s best and brightest students to receive college educations in the U.S. and other parts of the world and return to help rebuild their country. Dale is a connector, entrepreneur extraordinaire whose faith and passion for servant leadership is making a global difference.” www.talkbusiness.net
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Cover Story: Hall of Fame
Donald ‘Buddy’ Wray Retired poultry executive believes corporate success can be as simple as hiring the right people and giving them the tools to succeed. By Michael Tilley
COURTESY OF THE CITY WIRE
B
uddy Wray does not fear mistakes or weaknesses. They are essential to the growth of any company, he says. But there is a caveat. “Now, don’t make the same mistake over and over,” he noted during a recent interview. And weaknesses are good only if honestly assessed, with the assessment used to develop strengths within processes, products and people. Or all three at the same time. “Too many great things happen through mistakes, so you have to look at those ... and find strengths in what your weaknesses are.” Donald “Buddy” Wray, 77, one of the legendary executives who helped Don Tyson grow a regional poultry operation into a multibillion-dollar global food company, is one of four new members of the Arkansas Business Hall of Fame. EARLY DAYS After a short stint with the U.S. Army and after graduating from the University of Arkansas with an agriculture degree, Wray began with Tyson Foods in 1961. In 1959, Leland Tollett had already joined Tyson Foods – then just a regional poultry company with John W. Tyson and his son, Don, running the show. Tollett had encouraged the Tysons to interview Wray. Wray planned to finish graduate school. Halfway through the first year he was asked to visit with John W., Don and Bill Martin about working for Tyson Foods. The Tysons’ had a good sales pitch. “Consequently, I never went back to graduate school,” Wray said. Wray’s early job with Tyson Foods was to recruit farmers to raise chickens. He drove
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many miles those years, with many of those miles “where there wasn’t much blacktop.” “You have to remember, poultry was in its infancy,” Wray said in explaining the difficulty in convincing farmers to enter the business. The infancy didn’t last long. Wray was promoted in 1963 to run a processing plant in Rogers that Tyson Foods acquired from Garrett Poultry Co. In those days, the plant manager of a processing plant was also responsible for sales. That’s where Wray
began learning about sales and marketing. In 1965, he was moved to manage the Springdale processing plant – the original Tyson processing plant – and also assumed the sales manager role for the entire company. Tyson Foods had around $5 million in sales his first year with the company. “Man, I thought that was a huge company,” Wray said.
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(The company would post more than $7.2 billion in sales in 2000 when Wray first retired. With the $8.5 billion Hillshire acquisition under its belt, the company is poised to post total revenue of around $42 billion in its next fiscal year.) GOING PUBLIC, EXPANDING During the same time, Tollett was rising through the ranks to run the parts of the business involved in getting the chickens to processing facilities. Wray’s responsibility was then to turn the clucking chickens into higher-margin dead chickens. Wray said one of the first times he and Tollett traveled with Don to visit with market analysts, Don Tyson introduced them as “live chicken and dead chicken.” But after going public in 1963, the company became more complex than a bifurcation based on the status of a chicken. Through the 1970s and 1980s, Don Tyson was focused on growing the company, primarily through acquisitions. By 1982, Tyson Foods made the Fortune 500 list. Wray said it was often his and Tollett’s job to integrate the new operations Don would add to the portfolio. Although it required a bitter fight with ConAgra Foods and ended up costing Tyson Foods a premium price of $1.45 billion (roughly $450 million more than the initial offer), acquiring Holly Farms in 1989 boosted Tyson Foods’ U.S. market share in chicken to more than 25%. Not all of the Tyson acquisitions were a success. The 1992 purchase of Arctic Alaska Fisheries proved to be a multimilliondollar bust. Wray said it was relatively easy to know how many chickens could be
produced to meet demand. There was no certainty in how many fish could be scooped from the sea. “We just couldn’t make that work,” he said. A year before the Alaska deal, Wray was promoted from chief operating officer to company president. He held that position until he retired in 2000. He also served on the Tyson Board of Directors between 1994 and 2003. In addition to hiring smart people “who have different specialties,” Wray said part of the success of those several decades was the chemistry between him, Don and Leland. They were similar in age, essentially grew up together in the business and had the opportunity to work several years with company founder John W. Tyson. “Did we always agree? No,” Wray said, adding that Don “could get very mad,” but it was never personal and there never were hard feelings or grudges held. The triumvirate of Don, Leland and Buddy appeared to have ended its run in 2000. Tollett ended his day-to-day work in 1998. Wray retired in 2000. Don had turned over company management to his son, John, in 2000. ‘GET BACK TO THE CULTURE’ With the purchase of beef producer IBP in 2001, several new faces were added to the Tyson management roster. Sales initially boomed for Tyson Foods, but commodity prices, competition and a national recession began to weigh on the company’s bottom line. Deeply in debt, Don called the old-school kids together for one last tour. “Don called Leland. Leland said he would come back if I would,” Wray explained of his 2008 return to the company as executive vice presidentspecial assistant to the president and CEO. That interim CEO was Tollett. One of the first things they did was to bring Donnie Smith into the mix and prep him to become the next CEO. Wray said there were no “major tweaks” required to get the company
Buddy Wray and Leland Tollett
back to profitability. “I did the old walk around,” Wray said when asked how he began the process of getting the company back on its feet. A change in culture removing some measure of authority and responsibility from key managers resulted in what Wray said is the worst thing that can happen in any business. “They were all turtled up,” Wray said, using his body to mimic a person pulling up within a shell. Wray told the story of a mid-level manager coming to him with a problem. Instead of responding to the manager’s request for help, Wray, who with his wife Linda are possibly the biggest fans of Razorback basketball, began to talk about sports. The manager would bring the conversation back to the problem. Wray would again talk sports. Eventually the manager presented his own solution to fix the problem. It was a good solution and it worked. “The people were there. They could get it done. ... You just had to get them to open up,” Wray said. “We just had to back off and let them do it. We had to get back to the culture.” The culture is back. And humming. Wray ended his second run with Tyson in February 2014. On Nov. 17, Tyson Foods blew past market expectations and posted fiscal year revenue of $37.58 billion, well ahead of the $34.374 billion in the previous fiscal year. Annual income of $864 million was up 11.05% over the 2013 fiscal year. Wray does not back away from his belief that corporate success can be as simple as hiring the right people and giving them the tools to succeed. He also had a simple answer when asked how the college graduate of today might become a future business hall of famer. His advice was to work hard, work smart and have fun. “I can honestly say to you that I never dreaded, not one day, never dreaded going to work,” he said. “Now, some days were more fun than the others.” www.talkbusiness.net
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Profiles Service PHOTO COURTESY OF NATIONAL PARK SERVICE
Famed Bathhouse Row Enjoying a Resurgence Hot Springs National Park – the Great American Spa – looks to regain turn-of-the-century glory. By Rex Nelson
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J
osie Fernandez didn’t know what to expect from the Hot Springs National Park Rotary Club on that summer day in 2004, and the members of the Rotary Club didn’t know what to expect from her. The Cuban-born Fernandez had come to Arkansas in March 2004 to follow the popular Roger Giddings as superintendent of Hot Springs National Park. “I was driving in a snowstorm in New York in January 2004 when I received the call that I would be coming to Hot Springs,” Fernandez says while eating lunch at the Superior Bathhouse Brewery & Distillery on Hot Springs’ Bathhouse Row. “Once I got here, I was afraid that I had bitten off more than I could chew because of the complexity of this park. It’s unlike the other national parks. Bathhouse Row is the heart of the community. I’ll admit to you that I was scared. But I ignored the criticism and focused on stabilizing the bathhouses so they would be attractive to private investors. Then I proceeded to become a real estate agent of sorts as we tried to get the bathhouses leased.” She wasted no time raising the rates charged for hot water from the park. Some longtime civic leaders in the insular world of Hot Springs business and politics viewed the diminutive Fernandez as obstinate and overly aggressive. “Every ranger in the nation has a fondness for Hot Springs National Park,” she told the Rotarians. “Our history as a National Park Service is intertwined with the history of this place. I fell in love with Hot Springs National Park without ever having set foot in it. … I’m honored by the challenge to see this park grow and flourish as it ought to. I have big dreams for our national park. “I want to see Bathhouse Row thrive with all of the bathhouses leased and occupied. I want our natural and cultural resources protected. I want to protect our natural resources from dumping and hazards, and I want our cultural resources preserved for future generations. I want visitors to get from this national park what they expect from a national park: Ranger-led tours, clean restrooms and campgrounds, trails that are open and safe for them to take walks.” As a skeptical audience listened, she laid out her thoughts on the large price
increases for the hot water being provided to bathhouse operators: “The only reason we operate a thermal-water cooling system and four reservoirs is to provide thermal water for commercial purposes. The cost to operate the system is about $200,000 a year, and the funds come out of our annual operating budget. The park is reimbursed about $24,000 for that service. If the system fails or breaks, the cost for repairs comes out of the park budget. There’s no capital improvement fund to maintain and upgrade the system. Federal laws and directives as well as National Park Service policy require me to recover the full cost or market price for the service. … The increase from 25 cents per thousand gallons to $2.70 indeed represents a 1,000-plus percent hike to the rate established in 1948, but let’s put those numbers in context. The average price per bath is $20. Based on 25 cents per thousand gallons, the cost for water per bath is merely 8 cents. With the rate increase, the cost for water per bath jumps to 91 cents.” ‘RUN IT LIKE A BUSINESS’ Fernandez noted that letters she received in her first months on the job described her as “rigid, confrontational, abrasive and lacking in even the appearance of cooperation.” Then, she looked down from the podium at the Rotarians and said: “Let us be clear. I was hired to make decisions, not to make nice. If the two happen to coincide, the better. But leaders must lead and oftentimes they must lead under duress. Their decisions are not always well-received. This happens to be one of those tough circumstances. “I didn’t come to Hot Springs National Park to run people out of business. Rather I came to this Hot Springs National Park to run it like a business and to give its stockholders – the people of the United States – their money’s worth. … I have to jump in the water with both feet. There are too many things to accomplish here for me to be timid. The people who hired me placed their confidence in me because they knew I would not be afraid to do the right thing, even when many people would dislike me for it. They knew that I would come here to get in hot water, not to fear it or avoid it. After all, I came here to protect it.” Just more than a decade later, Fernandez proudly notes that only one of the eight
bathhouses along what in Hot Springs is sometimes just called The Row is still searching for a future use. “We’ve gone from six empty buildings when I got here to just one,” she says as she looks out the front windows of the Superior at the visitors walking along Central Avenue. “We had to make tough decisions right at the start. We were underwriting private businesses, and at the same time these buildings were falling apart. I was convinced that I could come up with a good business model that was compatible with the goals of the National Park Service.” Fernandez says her main rules for bathhouse leases are no gambling, no private residences and nothing related to adult entertainment. Outside of that, she’s open to examining proposals from the private sector. “Bathhouse Row has become the architectural core for downtown Hot Springs,” the Encyclopedia of Arkansas History & Culture states. “The first structures in the area to take advantage of the thermal springs were likely the sweat lodges of local Native Americans, which were followed by an unplanned conglomeration of buildings subject to fires, floods and rot. At one time, the area was subject to numerous claims that eventually had to be settled by the U.S. Supreme Court. For 80 years, the government improved the spring area by containing the creek, filling and widening the narrow valley and constructing the spa landscape. Ornate and numerous wooden bathhouses gave way to large and impressive masonry structures.” The encyclopedia notes that “a common thread came from capitalizing on the legendary visit of Spanish explorer Hernando de Soto to the springs (most historians now discredit the legend). Mostly built in the 1910s and 1920s era, design consideration had to take into account all perspectives adjacent to the formal entrance and the Maurice historic spring. In addition, the elevation of first floors for flood resistance called for basements, ramps and steps while fireproofing the structures called for using brick (often veneered with stucco), sawed stone, concrete, marble and tile. Long sunrooms and lobbies and great numbers of windows allowed ingenious manipulations to produce varied appearances and tasteful and artful qualities inside and out.” www.talkbusiness.net
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Profile: Bathhouse Row TESTING THE WATERS The Superior is an example of what Fernandez is hoping for when it comes to adaptive reuse. In March 2013, Rose Cranson signed a lease with the National Park Service allowing her to operate a microbrewery and restaurant in the bathhouse closest to the Arlington Hotel. Cranson is an Illinois native who moved to Hot Springs when her former husband was hired to direct the Hot Springs Music Festival. Cranson had brewed beer as a hobby and dreamed of opening a commercial operation. The Superior, which opened in 1916 on the site of an earlier bathhouse with the same name, is the smallest of the eight buildings on Bathhouse Row. It was designed by Hot Springs architect Harvey C. Schwebke and has been empty since 1983. “The big reason I wanted to use the bathhouse is because I would have access to the spring water,” Cranson says. Built by L.C. Young and Robert Proctor, the Superior has 11,000 square feet and cost $68,000 to construct. Cranson said she began testing the waters – which she calls “favorable for making beer” – soon after moving to Hot Springs in 2011. Next door at the Hale Bathhouse, a group known as the Muses Creative Artistry Project began operating a café and bookstore in the lobby in 2011. A year later, the group announced plans to use the rest of the building for performing arts spaces; studios for the study of music, art and dance; meeting spaces; an artist-in-residence apartment; and a wellness room for guests to experience the baths. Fundraising efforts fell short, however, and in May 2013 it was announced that the Muses had withdrawn the proposal to lease the Hale. Enter Pat McCabe and his wife, Ellen. In June, the McCabes announced plans to open a boutique hotel and restaurant in the Hale, leaving only the Maurice unoccupied along Bathhouse Row. When Fernandez came to Hot Springs in 2004, only the Fordyce and Buckstaff were being used. The McCabes hope to have nine rooms for rent on the second level, two of which will be suites. The first level will have a restaurant. Built in 1892, the Hale is the oldest sur-
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viving bathhouse and has 12,000 square feet on two main floors. One of the hot springs was captured in a tiled enclosure in the building’s basement. That feature is still in place. The building was remodeled in 1914 and was redesigned again in 1939 in the Mission Revival style by the firm Sanders Thompson & Ginocchio. The red brick was covered in stucco. Named for early bathhouse owner John Hale, it was at least the fourth bathhouse to use the Hale name. The Hale closed on Halloween 1978. The National Park Service spent more than $1.5 million to preserve the building, including updating the heating and air conditioning system. As part of those rehabilitation efforts, lead paint and asbestos were removed. The Josie Fernandez
original hardwood floors are still on the second level, part of which were buffed and sanded by NPS personnel to show the potential. “I really think the downtown is going to blossom again,” Pat McCabe said on the day it was announced that lease negotiations had begun. “We’re getting to a point where there’s only one bathhouse that’s empty, and the buildings across the street are now being developed. A lot of good is being done downtown.” QUAPAW RAISES CAPACITY Just down The Row, the operators of the Quapaw announced in November that they had increased their capacity to serve clients
TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
by 60 percent. The bathhouse is operated by Hot Springs architects Anthony Taylor and Bob Kempkes along with general manager Don Harper. The Quapaw was renovated and reopened in 2008. About 75 percent of its business comes from tourists. It has been instrumental in the rebirth of Bathhouse Row. “They’ve been the leaders in the effort to reopen Bathhouse Row and to start the renaissance I’ve been talking about for years,” Fernandez says. Steve Arrison, the chief executive officer of Visit Hot Springs, the city’s convention and visitors’ arm, puts it even more directly: “Bob Kempkes, Anthony Taylor and Don Harper were the pioneers in redeveloping Bathhouse Row into a major attraction for visitors and residents alike. Quapaw Baths & Spa has become an internationally recognized destination. … The expansion of the spa facility will further enhance the attraction of our city.” Because of its mosaic-tiled dome, many people consider the Quapaw to be the most beautiful bathhouse on The Row. The building opened in 1922 and closed in 1984, only to be brought back to life by Kempkes and Taylor. The Quapaw sits on the site of two previous bathhouses, the Horseshoe and Magnesia. It was built in the Spanish Colonial style. The Buckstaff, meanwhile, is the only bathhouse that has been in continuous operation since it opened. Designed by Frank W. Gibb & Co., the Buckstaff replaced the Rammelsberg Bathhouse and opened on Feb. 1, 1912. The men’s baths are on the first floor, and the women receive spa treatments on the second floor. Earlier this year, Kempkes and Taylor joined forces with Hot Springs financial adviser Robert Zunick and announced plans to renovate the Thompson Building and the Dugan-Stuart Building across Central Avenue from Bathhouse Row into boutique hotels. “I want to see it like it was when I was a little girl and came here to shop,” says Suzanne Davidson, the Hot Springs city director whose district includes downtown. “We’ve already seen a positive start. … It’s a moral issue to save these magnificent build-
ings and showcase their beauty. It will be the legacy of the leaders of this community.”
parks across the country. The Lamar was named for a former Supreme Court justice, Lucius Quintus Cincinnatus Lamar. He was the secretary of the interior when the first bathhouse was built in 1888. The Lamar, which opened in 1923 and closed in late 1985, was considered unique because it offered a range of tub lengths for people of various heights. If you want proof that the federal government can do some things right, the Fordyce is it. As the bathing business declined during the late 1950s and early 1960s, the Fordyce became the first of the eight current bathhouses to go out of business when it closed on June 30, 1962. In 1989, after having been padlocked for 27 years, it was
Fernandez wasted little time. She convinced the nonprofit group Friends of Hot Springs National Park to operate the Ozark as the home of the park’s own art collection as well as a venue for various events. The building reopened in March. That leaves the Maurice, which opened on Jan. 1, 1912. Designed by architect George Gleim, Jr., it was built by Billy Maurice to replace an existing Victorian-style bathhouse. It had a gymnasium, a roof garden, twin elevators and even a therapeutic pool in the basement. It closed in 1974. Fernandez would like to have the Maurice leased by 2016, the centennial of the national parks. “People are seeing the success and realizing the potential,” she says. “They’re going to realize there’s only one bathhouse left. I’m hoping by the time our centennial rolls around, we’ll see all the bathhouses filled. U.S. flags fly over the bathhouses that are in use. Fernandez has a flag ready for whoever leases the Maurice.
NEW DIRECTION Courtney Crouch, who heads Selected Funeral & Life Insurance Co. of Hot Springs, has long been interested in historic preservation. His offices are in the city’s old post office building. Crouch is part of a group that makes an annual trip to Saratoga Springs in upstate New York, an old resort that still attracts the rich and famous from New York City each August in search of cooler temperatures and thoroughbred racing. “You know, Hot Springs has more to work with from an architectural standpoint than Saratoga Springs has,” Quapaw bathhouse renovation Crouch says. During a speech to the National Park Rotary Club in July, Crouch said: “We’re on a new path. We’re seeing a lot of things develop. We’re headed in a new direction. I hope we can see this become the great American spa it was back around the turn of the century.” ‘GREAT EXPERIENCE’ Crouch said that in his The peak of bathing at Quapaw stained glass more than four decades Hot Springs came in 1946, renovation in Hot Springs, he has when more than 1 million watched “downtown take baths were taken. Bathhouse steps forward and backward. Row was well into its decline Hopefully we’re at a point when it was placed on the Renovated Quapaw bathhouse where we’ll see major efforts National Register of Historic toward the restoration of downtown. These extensively renovated. Another renovation Places in 1974. It was made a National buildings possess architectural features that occurred last year. The Fordyce had opened Historic Landmark in 1987. you’ll never see again if they are left to be on March 1, 1915, as the largest bathhouse “When I applied for consideration to destroyed.” on The Row and remains one of the state’s become the superintendent of Hot Springs In December 2011, the Eastern National best-known buildings. National Park, I did so because I wanted to bookstore and gift shop that had been a Little Rock architects George Mann and come here and make a difference,” Fernansmall part of the main NPS visitors’ center Eugene Stern designed the Ozark Bathdez told the Rotary Club on that summer in the Fordyce moved to the Lamar. What’s house, and it opened just a few months day in 2004. “In 1832, the U.S. Congress set known as the Bathhouse Row Emporium after the Quapaw in 1922. It’s stately on the aside this land for the people of the United is a joint project of Eastern National and outside with its Spanish Colonial style, but States, and a concept was born, a concept of the National Park Service. The U.S. Forest it was considered a no-frills bathhouse on conservation and preservation that lives to Service had once considered moving its the inside. It closed in 1977 but was brought this date in the form of national parks and Ouachita National Forest headquarters into back to life in 2009 as the home of the Munational forests and many other land areas the Lamar but decided against the move. seum of Contemporary Art. protected by the federal government.” Fernandez then pitched the idea of an The museum closed in October 2013 due She now says: “When I latch onto a bone, expanded store to Eastern National, a nonto financial difficulties, and the permanent I don’t let loose. It has been a great experiprofit association that runs stores at national art collection was moved to Paragould. ence. And I’m still learning every day.” www.talkbusiness.net
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Profiles Service PHOTOS COURTESY OF THE CITY WIRE
U.S. Attorney Conner Eldridge (at the podium) addresses the media during a press conference regarding the Brandon Barber financial fraud case.
Legal Labor of Love His role as United States Attorney for the Western District of Arkansas is a job Conner Eldridge finds challenging and rewarding. By Michael Tilley COURTESY OF THE CITY WIRE
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
I
f you ask Conner Eldridge about his political future, don’t expect an answer. The 37-year-old United States Attorney for the Western District of Arkansas responds to political questions with a wide grin, twinkling eyes and initial silence. One gets the sense he is flattered by the question but the political animal inside that may one day propel him to other heights has the discipline to convert the lull of flattery into the safety of sincerity. “I am focused on doing this job every single day. I love this job. I wish I could do it for a long, long time,” Eldridge said. “I will probably have another job in my career. But whatever job that is, I think that I will always consider my time here to be so rewarding, and I hopefully have a lot of time left here.” You want to believe him. He’s got that eastern Arkansas way of speaking – a little bit of long draw on the consonants and vowels with a reassuring lilt that almost places the listener in a mental beach hammock. Others possessing similar linguistic subtleties include Messrs. Pryor (David), Clinton and Huckabee. Just a few days before the interview for this story, Eldridge sat across a federal court room from a lawyer who not only once held his job, but was just a few days away from being elected the next governor of Arkansas. Gov.-elect Asa Hutchinson was 31 when he became the U.S. Attorney for the Western District of Arkansas. Eldridge was 33, and his background is considerably more political, and possibly broader, than was that of the young Hutchinson.
from the UA School of Law.) After law school, Eldridge was a clerk for U.S. District Judge G. Thomas Eisele of the United States District Court for the Eastern District of Arkansas. He interned for then-U.S. Sen. David Pryor, D-Ark. and worked on the Senate campaign of former Sen. Blanche Lincoln, D-Ark. He also worked with Congressman Marion Berry. Other short clerking stints include those with the prosecuting attorney for Washington County and the prominent law firms of Wright, Lindsey and Jennings, and Mitchell Williams. Eldridge also worked as a special deputy prosecutor for the Clark County prosecuting attorney’s office. After marrying into the Ross Whipple family with a controlling interest in
represent the government in a 34-county district. Eldridge said he worked hard to know as much as possible about the office prior to taking the job in December 2010. “There is no time for on-the-job-training with this job,” Eldridge said. Some of his priorities as the top prosecutor for the district were to “cultivate a culture that does the right thing,” to be aware of all the cases handled by the office and to also be the lead attorney on some of the cases. Many U.S. attorneys do not handle cases. “That was really important to me, particularly coming in relatively young, I wanted everybody to know I was here, and am here, to work cases alongside everybody here and not just to be a figurehead. I’m here to be a prosecutor.” Eldridge said he was not fully prepared for all aspects of the job. “You don’t really understand the weight and the greatness of the responsibility that comes with being a federal prosecutor,” Eldridge said. “And that cuts both ways. Great and weighty in that you’ve got to make a decision about whether to charge somebody or not. And the way you stay true is making that for the right reasons like we discussed earlier.”
“You don’t really understand the weight and the greatness of the responsibility that comes with being a federal prosecutor.” – Conner Eldridge
A BRIEF BIO William Conner Eldridge, Jr., was born in Fayetteville in 1977. He lived in Augusta through the sixth grade. Mary Tull and Bill Eldridge then moved the family to Lonoke, where Conner would complete high school. He graduated from Davidson College – a private, Presbyterian institution in North Carolina – in 1999 with a bachelor’s degree in English. He earned his juris doctorate in 2003 from the University of Arkansas School of Law. (Hutchinson graduated from Bob Jones University, a private evangelical college in South Carolina, before graduating
Arkadelphia-based Summit Bancorp, Eldridge worked at Summit Bank and would become the bank’s CEO in 2008 – a year before being nominated by Democratic Sens. Lincoln and Mark Pryor for Western District prosecutor. Not only did he pack much activity into the years between graduating Davidson and becoming a U.S. attorney, but each step expanded his connections to Arkansas’ upper echelon of business and politics. And in Arkansas it’s safe to add to his political resume his passion for duck and deer hunting. THE FEDERAL JOB He’s now four years into a job that has him and 20 assistant U.S. attorneys – and a total staff of around 45 – responsible to
DEALING WITH ‘THE HORRIBLE THINGS’ He’s also “astounded” at the number of pedophile cases and “the horrible things that people do to little, little kids.” While a prosecutor’s office may be seen as reactive, Eldridge said his office will work in 2015 to be proactive with respect to pushing back against child abuse in the district. He said the office is “uniquely positioned” to provide info to parents about how to protect their children and to be an advocate for the communities on child abuse. The effort will include tough conversations with the public, because “as gruesome as the details can be” the public needs to know what people are capable of. He also plans to help people detect child abuse situations, Eldridge said. “When you see (videos) of small children being raped and that stuff put on the Internet … those cases really are tough but I feel very convicted about them. It’s www.talkbusiness.net
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Profile: Conner Eldridge not enough for us to go throw the person in jail for the rest of their life, that’s our primary responsibility … but also we need to go out and really tell those stories.” Those stories hit close to home. Eldridge and his wife, Mary Elizabeth, have three boys – Will (7), Henry (3) and Tull (2). But Eldridge has an advantage over other parents. While the acts against children do anger him, he is able to redirect that anger. “It’s hard to prosecute a child pornography case and go home. That’s tough, and to think about what somebody has done to some other kid that’s the same age as one of my kids. … But the great part of this job is you get to be convicted and say, ‘You know what? Not only do I think that’s one of the worst crimes I’ve ever seen, but I get to wake up and do something about that.’ … So, you channel it [anger] into aggressively prosecuting those folks who commit those crimes.” THE BARBER CASE To Eldridge’s chagrin, the media was more attentive to the financial fraud case involving Brandon Barber than they have been with the child abuse cases. Barber, once a high-profile and popular developer during the heady days of seemingly non-stop Northwest Arkansas commercial development, was arrested March 20, 2013, on several federal charges. Barber in July 2013 admitted guilt in various schemes to prop up his Northwest Arkansas real estate and development company between 2005 and 2009. The charges Barber pleaded guilty to included conspiracy to commit bankruptcy fraud, conspiracy to commit bank fraud and money laundering. He was sentenced in October 2014 to five years and five months in prison. The sentence was almost half of what Eldridge’s office sought. Based on possible reductions in the sentence and his
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time served, Barber’s sentence could fall to a little more than three years. Eldridge said his time as a bank officer – rare among federal prosecutors – served him well during the Barber investigation. “Having worked at the bank allowed me to really look in and see what happened with each of these loans, really pinpoint the fraud in each of those situations. So I definitely feel like that was a great strength,” Eldridge
said. “There is a lot of financial evidence and you really have to get into the minutiae of how loans are approved, how developers function. Because our job is not to prosecute folks, who, for whatever reason have a bad business deal. Our job is to prosecute crime, and there is a huge difference. You’ve got to be really intellectually honest to parse that difference.” Barber’s actions did not make him popular in Arkansas’ banking circles, but Eldridge said he never felt pressure from banker friends to go hard after Barber. He said the people “who know me will know that I’m going to shut that [pressure] down pretty quick.” NO JERSEYS While Eldridge’s political work has been with Democrats, his historic role model in the legal world is Abraham Lincoln. And two prominent Republicans, Gov.-elect Hutchinson and former Eastern District of Arkansas U.S. Attorney Bud Cummins, have been among those he has sought out for advice. “I’ve definitely developed a good relationship with him [Hutchinson] the couple of years before coming here, and we
TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
had a number of conversations about the approach to the job,” Eldridge said. “You know, no one has done more in federal law enforcement in our state’s history, I’d venture to say, than him. I mean, with running DEA and being at Homeland Security, so he not only had a perspective on this job, but also a perspective on those law-enforcement agencies. And that was really helpful to me as I thought about what I was going to do.” Politics has never been a part of the support he received before and during his latest job. He said there is a political process to get the job, but that’s where it stops. “You have all this political talk about we need to check the jerseys at the door,” he said. “The jerseys really are checked at the door in this job. They really are, and they should be. … It is completely apolitical. It is completely intellectually honest. And like I’ve said, that is really rewarding work. For folks that care about making a difference and don’t care about all the rigamarole that comes with the bickering that goes on, there is probably no environment better than this for really looking at, and I know I’m sounding like a broken record, but looking at the facts, looking at the law and then doing what’s right.” He said part of the great environment also includes getting to know law-enforcement officials and community leaders in the 34 counties in the district. “That is incredible work to me. … To be able to do that, I don’t want to take a day of that for granted. I cannot overemphasize that I really love this job,” he said. Several years of work of building connections in the 34 counties also sounds like a great way to build a political base for future careers. Eldridge doesn’t take the bait with the question. His body language is open but his mouth is closed. He just grins. He may be quiet about his future, but his future is likely to be anything but.
New EPA rules hurt Arkansans just like you. It’s time for the truth. You may have heard that Arkansas is “well-positioned” to implement new Environmental Protection Agency (EPA) rules restricting coal energy. But here’s the truth: 1. The new regulations will force our most economical and reliable power plants to shut down. 2. Replacing coal plants with natural gas plants will increase your electric bills by up to 30%. 3. Despite the enormous cost of implementing these new EPA rules, the result will be less than a 1% reduction of CO2 gasses globally.
The proposed EPA rules are unfair to Arkansans. Help us send that message to the EPA at www.tellepa.com.
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Insights
© ORIGIN WIND FARM PHOTOS BY TIM NAUMAN
Going With the Wind Wind power, generation diversity and a greener energy portfolio are all a part of an agreement the Arkansas Electric Cooperative Corp. announced in late November 2014 with the Origin Wind Farm. Through a long-term power purchase deal, the Oklahoma farm will provide AECC with 150 megawatts (MW) of potential wind energy. The cooperative also has a long-term power purchase agreement with BP and Sempra U.S. Gas and Power for 51 MW from the Flat Ridge 2 South Wind Farm in Kansas. Here’s a brief look at these farms, AECC and wind power.
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75
The number of electric distribution cooperatives in the Electric Cooperatives of Arkansas organization, which also includes Arkansas Electric Cooperatives, Inc. (AECI), a Little Rock-based cooperative that provides services to the distribution cooperatives, and AECC, a generation and transmission cooperative.
Number of turbines on the Origin Wind Farm, which is located in Murray and Carter counties in Southeast Oklahoma.
17,600
The number of acres of land that make up the Origin Wind Farm.
66,000 500,000
213
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– Duane Highley, AECC President & CEO
“AECC has a diverse mix of energy including coal, natural gas, hydroelectric, biomass and wind to shield our members from potential spikes in generation fuel costs.” – Andrew Lachowsky, vice president of planning, rates and market operations for AECC.
Q&A How does wind energy generate electricity? Wind is created by the unequal heating of the Earth’s surface by the sun. When the wind spins the wind turbine’s blades, a rotor captures the kinetic energy of the wind and converts it into rotary motion to drive the generator. In this way, wind turbines convert the kinetic energy in wind into clean electricity. The height in feet of the 294 GE 1.6-100 turbines at the Flat Ridge 2 Wind Farm. The facility was initially planned for a capacity of 419 MW but later expanded by 51 MW. The rotor diameter of the turbines is 271 feet. They have a capacity of 1.6 MW each. – Power-Technology.com
The acreage at the Flat Ridge 2 Wind Farm in Barber, Harper, Kingman and Sumner counties in South-Central Kansas, approximately 43 miles southwest of Wichita.
650,000
“With the addition of this wind energy, AECC has 201 megawatts of wind energy in its generation assets. AECC has access to more than 459 megawatts of energy via hydroelectric generating stations and power purchase agreements in addition to our baseload assets.”
The number of homes, farms and businesses in Arkansas and surrounding states served by the Electric Cooperatives of Arkansas distribution cooperatives.
The expected annual output in megawatt-hours of the Origin Wind Farm. That’s approximately enough energy to serve 50,000 homes.
TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
How do wind turbines work? A wind turbine works like a fan, but in reverse. Instead of using electricity to make wind, like a fan, wind turbines use wind to make electricity. The wind turns the turbine’s blades, which spin a shaft connected to a generator to make electricity. – Wind Energy Foundation
U.S. No. 1 According to the Global Wind Energy Council, the United States has more wind energy powering its grid than any other country in the world. That’s based on the total amount of electricity – measured in kilowatt-hours (kWh) – that each country produces from wind and delivers to customers each year. Wind power, the Wind Energy Foundation says, is currently the fastest-growing source of energy in the world.
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Feature: Politics PHOTO COURTESY OF ARKANSAS SECRETARY OF STATE
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
2015 Legislative Preview
Red, Red & Blue
Republicans will nearly outpace Democrats by a 2-to-1 margin in the 90th General Assembly. Which legislators are likely to be most influential and why? What issues will dominate the 2015 regular session? By Talk Business & Politics Staff
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hen the 90th General Assembly convenes in January, the ghosts of Arkansas’ political past won’t recognize the party makeup of the state Capitol. Republicans will control 23 of 35 seats in the state Senate, 64 of the 100 seats in the Arkansas House and all seven of the state’s constitutional offices, including the most powerful position in state government, governor. Asa Hutchinson will be sworn in on Jan. 13 as the state’s 46th governor – a position that will allow the former congressman to eventually control thousands of appointments, the reins of nearly all state agencies, and a platform to promote a legislative agenda to shape the next four years of public policy. With near supermajorities for GOP control in both chambers of the state Legislature, Hutchinson should have an easy time passing a conservative agenda. Already, legislative leaders are deferring their leadership agenda to the new governor similar to how Democratic majorities allowed their Democratic governors to set the tempo for statewide public goals. Thankfully for Hutchinson, he has a good rapport with Senate President Jonathan Dismang, R-Beebe, and Speaker of the House Jeremy Gillam, R-Judsonia. So what issues are likely to garner the most attention this session? Start with these. ECONOMY Hutchinson campaigned to be the “jobs governor” and the respective leaders of the Legislature say the economy is a top priority for the session. This wide-open topic nets a
variety of subject matter: the state budget, tax cuts, the private option and education reform to name a few. More specifically, expect big pieces of this public policy to focus on Hutchinson’s goal for $100 million in tax cuts for the middle class. It was the biggest promise he made in his campaign and he’ll have to deliver to maintain credibility. So far, lawmakers appear solidly behind him, even if it means not passing other smaller tax cuts that are of importance to local interests. Workforce education will be another crucial element in efforts to push the economy forward. State leaders have been reviewing these programs for potential changes – many of which may be made at the executive level – in order to match job applicants with the skills needed for available jobs. Optimizing these programs for the best results is the state equivalent of the Da Vinci code – unlock the puzzle and unemployment could set a record low. Other crucial debates that will center on economic development likely entail the salary for the next director of the Arkansas Economic Development Commission, the agency charged with recruiting and expanding jobs. Currently, the salary level is $130,000, but times have changed and other states are in an arms race to recruit the best – much like college football coaches. Hutchinson has suggested raising the salary to $200,000, supplemented by private foundation funding, but the pay may need more tacked on to compete. With a change in gubernatorial leadership, there will likely be a thorough review of the state’s economic development incen-
tives. With another superproject waiting in the wings and other projects in the pipeline, Arkansas will have to do its best to keep up with the Joneses, those other states who are willing to go pretty far with enticements to recruit the next jobs producer to its borders. PRIVATE OPTION It will be different, but no one can really paint the full picture of what Private Option 2.0 will look like. For starters, the political wrangling may determine various aspects of the PO’s final reveal. Shrouded in controversy since its inception in 2013, the private option takes federal Medicaid expansion dollars and allows the state to use it for private health insurance for lower income workers. It is much more complicated than that distilled concept, but lawmakers will need a threefourths vote from both chambers of the legislature to fund its continuation. Other states have emulated Arkansas’ novel approach and have tailored it with additional conservative elements, such as tying insurance availability to searching for work. Look for a robust debate and a plethora of proposed changes from lawmakers eager to find a way to keep the program’s money in place while implementing conservative health-care reforms. The PO is crucial to the state’s balanced budget projections and with many Republican newcomers having campaigned to shut down or at least drastically reform the program, the politics on this subject will be fascinating and a huge challenge for Hutchinson and legislative leaders. www.talkbusiness.net
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Feature: Legislative Preview PRISONS Estimates suggest that a new $80-$100 million state prison needs to be built to house overflowing lock-up facilities and overcrowded county jails. But this isn’t your father’s Legislature. With a more conservative bent, spending money to lock up criminals isn’t going to be the first choice for lawmakers to consider. Already a study has come back that offers a blueprint for what legislators and the governor may propose. In late November, the Bureau of Legislative Research returned a report that suggests a review of Act 570, which altered sentencing guidelines. There is interest in privatizing corrections management in an effort to save money as well as utilizing intervention and re-entry programs. And, lawmakers are exploring an expansion of the highly successful drug court program. “At the end of the day, the bad people need to go to jail,” said state Sen. Eddie Joe Williams, R-Cabot, a leader on the issue. “If we try these alternatives and we still need a 1,000-bed facility, then we’ll take
that up. But until we look at alternatives to our current process, if we build a 1,000-bed facility, guess what we’re going to do? We’re going to fill it up. And then we’re going to want another 1,000 beds and another 1,000 beds.” EDUCATION Education issues abound in the 90th General Assembly. In addition to the aforementioned workforce education reorganization that could take place, K-12 and higher education account for nearly 70% of state tax dollars spent. Controversy is brewing among supporters and detractors of Common Core, a set of common standards in math and in English language arts that were at one time adapted by 45 states. Business leaders approve of the goals, while a growing number of disbelievers view it as taking away from local control. Lawmakers will have their hands full with both sides of the Common Core argument. Look for emotional and heated committee meetings on the subject.
PHOTO COURTESY OF ASA HUTCHINSON
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
ARE-ON is another education related subject that will enlist controversy. ARE-ON is the Arkansas Research Education Optical Network, a private network used by universities and hospitals but prohibited by Act 1050 of 2011 from being used by public schools. A group of broadband expansion supporters want the law changed to allow K-12 access to ARE-ON, while another coalition of broadband expansion supporters that includes the state’s Internet companies claims the shortfalls are exaggerated and that private industry solutions exist that would be more costeffective. Hutchinson should get a signature piece of education legislation through the General Assembly. He campaigned to expand computer coding in the state’s public schools – you may remember his granddaughter Ella Beth’s commercial – and lawmakers are likely to pass a bill with little controversy. The price tag is expected to be low, the goal is worthy and the logistics for implementation should be achievable. The other high-profile education issue
New Gov. Asa Hutchinson will set the agenda for the 90th General Assembly.
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Feature: Legislative Preview that should stir further controversy involves the insurance program for the state’s public school employees. Already, lawmakers have met twice in a special session to make changes to the program that was in serious financial jeopardy. Additional alterations are being contemplated, including subsidizing new teacher insurance plans, but the system is in better shape due to fewer catastrophic claims. Lawmakers will still want to go further, but with Democrats controlling 10 of the 20 seats on the House Education Committee and the House Insurance and Commerce Committee, they will have some muscle to make sure that any changes have bipartisan support. LOTTERY State Sen. Jimmy Hickey, R-Texarkana, has been leading the charge to change the state’s scholarship lottery. He and other lawmakers have been frustrated by declining lottery revenues, and therefore, declining scholarships. The independent nature of
the Arkansas Scholarship Lottery and its governance board has also compounded the situation despite legislative oversight. Recent legislative reports on the lottery have criticized its lack of business planning, its marketing decisions and its underperformance compared to other states. Lottery officials say they are making changes and pushing reforms, but it doesn’t seem to be quick enough to meet legislative demands.
wait for that months-long rulemaking process (that now has to be approved by the Legislature) to unfold. The bottom line: the rules of engagement will be unclear at the state Capitol during the 2015 regular session. Add to the mix the fact that the Ethics Commission was already seeking more funding as its investigatory duties have grown in recent years and you have a recipe for a variety of ethics debates.
ETHICS, ISSUE 3 The newly passed Issue No. 3, an ethics and term-limits measure, has caused tremendous consternation for the existing Capitol culture. Many legislators and lobbyists are confused as to how extensive the new rules apply, what is prohibited during a legislative session, and no one wants to get fined or reprimanded. But the amendment passed by voters doesn’t spell out all the answers to questions raised. Legislators will have to pass enabling legislation, defer rulemaking to the Arkansas Ethics Commission, and possibly
AGRICULTURE The Turner Grain debacle this summer sent shockwaves through the state’s agricultural community. The controversy centered on Turner Grain Merchandising, a commodities dealer located in Brinkley. Turner did not pay or delayed payments on crops to farmers that it was supposed to process, leaving many farmers to find alternative brokerage sources or walk away from their yields. Arkansas has no laws pertaining to grain dealers. It does have laws pertaining to warehouses, but warehouse owners can choose to be certified by state or federal authorities. Look for an effort to be made to put inspectors in the field to try to identify “Turner Grain” problems before they reach the widespread proportions they did in 2014.
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
PRESIDENTIAL PRIMARY A number of Deep South states are looking to move up their presidential primaries to March 1, 2016, in an effort to create a “Southern Super Tuesday,” which would come on the heels of early primaries and caucuses in Iowa, New Hampshire, South Carolina and Nevada. The state tried this in 2008, but it was an effort to force more attention on Arkansas as a primary state. It didn’t work well and the law was reversed in the next session. In 2016 there could be benefit for a GOP candidate, particularly one with ties to the South, for an early Southern primary. With Republicans in control of the state Legislature, it should be an easy deal, some in the GOP will object to the costs to the state. However, if Democrats want to throw a monkey wrench in the plan, they hold half
the seats in the Senate State Agencies Committee, which would likely be the committee that would debate the issue.
state, has hired a full-time employee to work on tort reform at the grassroots level. There is plenty of legislative sentiment for
HIGHWAYS There will be talk of highway funding in the 90th General Assembly, but there is no early consensus on what might occur. Traditionally, state highway money largely comes from sales taxes collected on motor fuels, but that’s been a declining revenue source thanks to better fuel efficiencies. Some highway supporters have advocated taking growth revenue from general revenues tied to auto-related products and services and earmarking that money for road funding. But no one has taken a leadership role on this issue with enough sway to lead it through the Legislature. TORT REFORM This is a big business issue for the next regular session. The Arkansas State Chamber of Commerce, one of the most AHCA ad half page horizontal.pdf powerful business lobbying groups in the
PHOTO COURTESY OF SECRETARY OF STATE
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curtailing judicial activism and the penalties that get levied on businesses through the courts. 12/16/14 9:55 AM Hutchinson said he wanted to lead on tort
Arkansas nursing homes provide round-the-clock quality care for 20,000 patients and residents in over 230 skilled nursing facilities throughout our state. What’s more, nursing
reform during the campaign, so there is a good chance the subject gets hotly debated. However, Democrats have largely opposed tort reform efforts – arguing that it is overreaching and takes away from due process. To reinforce their positioning on this, they could prevent a constitutional amendment from clearing the Senate State Agencies Committee where they hold four of the eight seats. They also stacked an alternative committee, the Senate Judiciary, with four of eight members. LEGAL CONTROVERSIES A number of non-economic issues will likely dominate the early days of the session. They include social issues impacting abortion, gun control, voter ID, and samesex marriage. All of these issues were raised in lawsuits or the threat of lawsuits in the interim between the 2013 session and the coming one. They are hot-button issues with Republican voters – and some Democrats – so expect them to come fast and furious in 2015.
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Feature: Legislative Preview
Top 10 Legislators To Watch By Talk Business & Politics Staff
E
very session brings a mix of old and new legislators to the table with some of the veterans hitting their grooves, while some surprises in the interim rise to the challenge. The 90th General Assembly will see an unprecedented amount of power concentrated in the GOP with near supermajorities in both chambers. The Senate will house 23 Republicans versus 11 Democrats (there is a special election to fill a vacancy in one seat), and in the House Republicans will rule Democrats 64-36. By virtue of their positions, two leaders will naturally be the center of attention in the regular session: Speaker of the House Jeremy Gillam, R-Judsonia, and Senate President Pro Tempore Jonathan Dismang, R-Beebe. Gillam, a berry Speaker of the House farmer, has garnered Jeremy Gillam, R-Judsonia the respect of his colleagues on three sides of the aisle: returning Republicans, rookie Republicans and the Democratic caucus. He’s easy-going but assertive, and has the reputation for exceptional attention to detail. He’ll also operate in a bipartisan
fashion on many issues, saying he intends to keep a promise to appoint Democrats to chairs and vice-chairs in a representative fashion. Gillam and his Senate counterpart, Sen. Dismang, have agreed to aim for an 85-day session and the two chamber leaders appear to be in pretty lockstep on many issues.
architects of the PO, Dismang says it’s too early to tell what modifications may come. He survived a small leadership coup in November after the historic elections, but no one questions that he’s in charge of the upper chamber. Dismang also has a close relationship with Gov. Asa Hutchinson, his chief of staff and former State Senator
Senate President Pro Tempore Jonathan Dismang, R-Beebe
Dismang, an accountant by trade, knows his numbers. He won’t have to worry much about them on floor votes with such a big majority in the Senate with the exception of the private option. As one of the chief
Michael Lamoureux, and his budget director and former State Rep. Duncan Baird. Dismang’s and Gillam’s voices will be the legislative equivalent of “market moving.” When they speak, their words will be www.talkbusiness.net
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Feature: Legislative Preview dissected for clues and certainly front page material. Here are our Top 10 Legislators To Watch plus our Honorable Mention list:
own as a leader and potential swing vote on key issues. With Uncle Asa in the governor’s office, he will become a crucial floor leader on many important issues in the Senate.
SENATE: Joyce Elliott D-Little Rock One of the few liberal voices in the Legislature, look for Elliott to have a big platform when she chooses to argue against a number of conservative causes. She’s likely to lose many of those battles, but she’s respected for her against-the-grain thinking and her willingness to take on a good fight.
Bryan King R-Green Forest King likes to buck leadership whether Democrats or Republicans are in charge. With nearly eight years of legislative experience, he is one of the veterans at the capitol and he knows his way around. King is often a voice of pure conservatism, not always known for compromise, and with stronger ranks from the Republican right, expect King to have more sway than ever.
Jane English R-North Little Rock A leader in workforce education, English was the swing vote on the private option funding in the Senate in the 2014 fiscal session. The tradeoff was a massive overhaul in workforce training logic. This session, the efforts of the last year are expected to result in legislation and leadership from English. Jim Hendren R-Gravette He’s been a crusader on reforms to the public school employees insurance program – a huge issue to continue to tackle in 2015. Hendren is also coming into his
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David Sanders R-Little Rock Active on many issues – including the private option, other health care issues, prison reform, taxes, the budget, and economic development – Sanders wades deep on public policy subjects. He’s persuasive behind-the-scenes and charismatic in public forums. Look for Sanders to do a lot of heavy lifting in crafting legislation on many big topics in the session. Larry Teague D-Nashville Up for another stint as Joint Budget Committee Chairman, Teague brings a wealth of experience on budget matters to the table. He
TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
operates in a pretty non-partisan manner, which will serve him well now that Democrats are in the major minority. Balancing a budget with tax cuts, the private option, and big needs for items like prisons, Teague’s experience will be useful. HOUSE: Ken Bragg R-Sheridan. The House Majority Leader will have his hands full with 34 new GOP members in the Arkansas House, and just because Republicans have 64 in the 100-member chamber, there will be some battles, particularly over private option funding. But on the biggest of issues tied to the Republican platform, Bragg should have a pretty easy time keeping party members in line. Charlie Collins R-Fayetteville Active on tax reform issues, Collins will be influential on a number of other topics too. Heading into his third term, younger members will find him an oracle of observations and advice. Collins studies the issues and loves the art of the debate, which should serve him and the House well in 2015. Warwick Sabin D-Little Rock Sabin represents one of the most liberal districts in Arkansas, and he’ll vote accordingly on several issues. He also has
been knee-deep in ethics reform and he’ll be pivotal on bipartisan issues. Expect him to hold a high-profile (along with Senate co-sponsor Jon Woods, R-Springdale) on the legislation to enact Issue No. 3, the ethics reform and term limits extension measure passed by voters in November. Marshall Wright D-Forrest City The chairman of the House Judiciary Committee under Speaker Davy Carter, R-Cabot, Wright has worked across party lines often. He’s also a close personal friend of incoming Speaker Gillam. Look for Wright to be called upon as a leader of the Democratic caucus and the House at large. HONORABLE MENTION: State Rep. Eddie Armstrong D-North Little Rock State Rep. Nate Bell R-Mena State Rep. Joe Farrer R-Austin State Sen. Jake Files R-Fort Smith State Sen. Jeremy Hutchinson R-Little Rock State Sen. Missy Irvin R-Mountain View State Rep. Lane Jean R-Magnolia State Rep. Joe Jett D-Success State Rep. Reginald Murdock D-Marianna State Rep. Matthew Shepherd R-El Dorado State Sen. Eddie Joe Williams R-Cabot State Sen. Jon Woods R-Springdale
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Feature: Legislative Preview
The Times They Are a Changin’ It’s definitely a new chapter for the Arkansas Legislature when comparing the membership of this year’s General Assembly with that of 30 years earlier. By John Brummett The author of this article is a regular columnist for the Arkansas Democrat-Gazette. t first it sounded like an arbitrary idea – this one coming from the publisher. Why would we compare and contrast data from the Arkansas General Assembly of 1985 with data from the legislative body that will assemble post-tidal wave this month? Other than the nicely rounded figure of a 30-year interval, what was the supposed context? That was before the data spoke for itself and loudly. And what it shouted was that the Arkansas General Assembly was a certain species in 1985 and is an entirely different species in 2015. Evolution has met revolution. The result is that this is not your father’s state legislature.
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QUITE A CHANGE First thing first, to put on the table something we already know but which is startling to behold just the same: The 75th General Assembly of 1985, meeting in the heyday of Bill Clinton’s governorship and one-party Democratic rule, contained 126 Democrats and nine Republicans. The Legislature gathering this month will be composed of 47 Democrats and 87 Republicans. Let’s put that another way: There will be 79 fewer Democrats than in 1985 and 78 more Republicans (and 79 as soon as Pope County voters get around to the special election to replace Asa Hutchinson’s chief of staff, former state Sen. Michael Lamoureux.) The second thing, also already known but as startling to behold: The 1985 General Assembly met seven years before Arkansas passed the most restrictive term
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limits amendment in the country, one relaxed in the recent election. So it happens that the 75th General Assembly of 1985 reveled not only in the heyday of one-party Democratic rule, but also in the latter days of old-timer rule. The average service of a legislator in 1985 was 9.27 years. The average service arising from term limits as blended with the tidal wave of Nov. 4 is 2.8 years. Committee chairmanships in 1985 represented self-perpetuating legacies of veterans – Sens. Max Howell with 38 years of experience and Clarence Bell and Knox Nelson with 28 and Ben Allen and Bud Canada with 26 and Doug Brandon with 22; and Reps. Charles Stewart and Jim Shaver with 30 and Ode Maddox with 28 and John Miller and Nap Murphy with 26 and Bill Foster with 24 and Lacy Landers and Lloyd George and John Paul Capps and B.G. Hendrix with 22. Senior Republican members, not simply the senior members, generally fill Senate chairmanships now. House chairmanships are the unilateral purview of the House speaker – Republican Jeremy Gillam of Judsonia, a mild-mannered farmer possessed himself of four whole years of experience. The speaker now builds and installs his own team and functions with infinitely more autocratic authority than did the mostly ceremonial speaker of 1985 – Lacy Landers, memorable as speaker mostly for saying hundreds of times: “Prepare the machines, Mr. Clerk; let’s everone (sic) vote.” MORE SMALL BUSINESS OWNERS The most obvious occupational/profes-
TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
sional shift in legislative membership from the term-unlimited Democratic days of 1985 to the term-limited Republican ones of 2015 is interesting and significant. It’s from lawyers to persons running their own small businesses. There were 21 attorneys in the 1985 legislative body. There are 13 now. There were 37 small business owners in 1985. There are 52 now. In fact, a majority of the state Senate – 18 of the 35 – held law degrees in 1991. That’s compared to four now. Why has that changed so starkly? As it happens, a good person to ask would be Morrill Harriman. He was, in 1985, a 33-year-old freshman Democratic state senator from Van Buren. Now he departs state government this month after serving as chief of staff to his best friend, the outgoing governor, Mike Beebe. The latter role required him to work closely with this revolutionized modern Republican legislature. For good measure, he is a lawyer. The explanation, Harriman said, is that both legislating and lawyering have changed. Harriman paused, searching for a better way to put what he eventually went ahead and expressed as it first occurred to him: The practice of law is now more consumed, he said, with “CYA,” meaning covering your posterior, which requires lawyers to ride herd more personally on matters rather than delegate as generously to executive assistants as they once did. At the same time, Harriman said, the changing culture of legislating has made legislative service more time-consuming. So lawyers are eschewing legislative service in droves.
Self-employed persons or small business owners are replacing them. They seem better able to arrange their own schedules, delegate to others and manage from a distance. In ’85, Harriman said, the Senate adjourned at noon most Thursdays. Now it often works beyond that. In ’85, he said, interim committees – those meeting at the Capitol when the Legislature was not actually in session – were dominated by a few old-timers. Today, the interim committee culture is more active and dramatically more inclusive. Interim committees meet with greater frequency nowadays on the logical assertion that the inexperienced legislators of the term limits era need more time to get educated on state government. Expenses now get reimbursed to non-members of interim committees who show up essentially to audit these meetings and presumably educate themselves. It is a system that is more costly in the payout of legislative expenses, and, as such, it stands vulnerable to abuse. But it also makes conceptual sense
that term-limited legislators need to be encouraged to engage more deeply to learn more and faster. For that matter, a byproduct of restrictive term limits is that legislators have reached for a greater government role, producing an irony: Their purpose seems to be protecting the legislative branch from the natural weakening of inexperienced membership – or compensating for that weakness. But the effect has been for the inexperienced legislature to wrest power questionably and ominously from the other conceptually co-equal branches. LEGISLATIVE CONTROL By a new amendment voters approved on Nov. 4, this new legislature will take charge of approving – not merely reviewing – all state agency rules and regulations. That is a rather dramatic legislative usurpation of traditional executive discretion. Meanwhile, efforts are ongoing to effect some kind of so-called tort reform by which the judicial article of the state Constitution
might be rewritten in a way that would lessen the judiciary’s independence from the legislature. But what is the day-to-day effect on a legislative session of reduced engagement by lawyers? A good person to ask is David Matthews. He was a rising 33-year-old second-term Democratic state representative from Benton County in 1985. In those days, David Pryor extolled Matthews – engaging and smart and gifted in oratory in a Baptist pulpit kind of way – as the future of the Democratic Party. After a fashion, that’s what Matthews turned out to be. Along the way he abandoned electoral politics to practice law and occasionally lobby for the Southwestern Electric Power Company. And along the way, Arkansas voters abandoned Democrats. Matthews, who spent eight years in the House in the 1980s, said there was one thing that was true in his day and remains true now: The key to legislative success is to have more knowledge than the next guy
Trucking
The facts tell the story 83,000 jobs in Arkansas — 1 in every 11 working people. $3.5 billion in wages annually — wages that support Arkansas families. $448 million to Arkansas in fuel taxes alone — funding to maintain our highways and bridges, our critical infrastructure. The Arkansas trucking industry’s impact is felt everywhere. A strong trucking industry is a stronger, more competitive Arkansas.
arkansastrucking.com Source: American Transportation Research Institute
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Feature: Legislative Preview on the intricacies of the state budget and the esoterica of parliamentary and other rules of the legislative process. He said lawyers have the advantage of more relevant professional training, at least for mastering the rules and esoteric procedure. By 1985 in his second term, Matthews was already applauded for his legislative skills. By 1987, in his second term, Harriman was shepherding legislation to pass a complete rewriting of the state’s corporate code of laws. Clearly, influence and expertise can be achieved quickly, even within strict term limits, if, that is, one is talented and ambitious and well connected . . . and perhaps a lawyer, though not necessarily. State Sen. Jonathan Dismang, the incoming Senate president pro tempore, and state Sen. David Sanders, key architects in the term limits era of the private option form of Medicaid expansion, are not lawyers. Nor was former state Rep. John Burris, prominently in league with them. MORE MINORITIES, MORE WOMEN There are two clearly positive developments since 1985: The Legislature then had 10 women and five African-Americans while the Legislature convening this month contains 27 women and 15 AfricanAmericans. The gain in female membership seems to be a mix of factors. Term limits have opened more opportunities more regularly. The women’s political movement has made advances. And the heightened investment of time needed for legislating in the term limits era has deterred a few male professionals from interrupting their career work for a short exercise in public service. That has opened doors in a few cases for politically active women who had more time to devote more readily to running and serving. As for heightened African-American representation since 1985, that mostly has to do with a lawsuit resulting in a federal court ruling in 1989 that the state was arbitrarily diluting black voting strength. The court ordered the creation of new legislative districts, called “majority minority districts,” that consolidated black voting strength.
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PLAYING CHARADES What does all this change mean and portend on substance and policy? Maybe less than meets the eye. Maybe exactly as much as meets the eye. “No one could say that any Arkansas legislative body in our time was anything other than extremely conservative,” Harriman said. The difference, he said, is that the extreme conservatives of 1985 were nominally Democratic and inclined to go along with their Democratic governor on compromised solutions – and able in the comfort of one-party dominance to act on occasion to put the general interests of the state above personal political worry. Conversely, the extreme conservatives of 2015 are Republicans tending to fret for their re-elections less about Democratic opponents than about challengers from their right flanks in Republican primaries. In 1985, the most contentious issue was an increase in motor fuel taxes for a rural road program. Clinton felt a political need to veto the bill to keep a promise not to raise taxes. But he essentially acquiesced to a pre-ordained legislative override of his veto. It was a bit of a charade. Some things don’t change much. In 2015, Gov. Asa Hutchinson needs to pass reauthorization of the private option form of Medicaid expansion. But he will have to re-brand the proposal somehow if he is to have any hope of support from legislators of his own party who vowed to vote against it. It likely will present a bit of a charade as well. What will certainly change, Harriman said, is that the last vestiges of institutional memory are now at last retiring from active roles in state government. He means himself, Beebe and veteran bureaucrats at the state Department of Finance and Administration like Richard Weiss, who served governors named Clinton, Frank White, Jim Guy Tucker, Mike Huckabee and Beebe. “So the full effect of term limits, whatever that full effect is going to be . . . we’re now going to see it,” Harriman said. More than that, we’re now going to see a powerful seeming dichotomy: We’ll have an uncommonly inexperienced Legislature,
TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
which would seem to enhance the reliance on, and power of, veteran special interest lobbyists. But voters approved a constitutional amendment in November outlawing the traditional practice of lobbyists spending to entertain legislators with food and drink and favors. And what might be the effect of that combined dynamic? Matthews – occasionally a registered utility lobbyist– takes this stab at an answer: He said people don’t begin to understand how busy a legislator’s day can get during sessions. He said the oft-demonized practice by which registered business lobbyists took legislators to dinner in the evenings to explain the complexities of business-related legislation – which could indeed be abused by some, he admits – was, more often than not, valuable toward an orderly and informed legislative process. In that vacuum, Matthews said, we should fear the rise of a general influence of superficial and ideological groups like the Tea Party. Harriman, who did a stint as the state’s leading poultry lobbyist . . . well, he agreed with Matthews, though he seemed to think lobbyists would come to rely on providing dinners not for one or two legislators at a time, which would be unconstitutional, but through invitations to entire committee memberships, thus legitimate government bodies. Those would be permissible – and, on the House side, rather expensive. Those are large committees, big enough to mount a run on Sonny Williams’s sirloin-strip supply. The thing about vacuums is that power abhors them, or so they say. There was no vacuum in 1985. Power was vested in old-time legislators and a wily young Democratic governor. But, in 2015, we have a rookie governor served by rookie bureaucrats working with rookie legislators who will be lobbied by the only veterans in the state Capitol’s cast of characters. But those veterans won’t be able to take the rookie legislators to dinner per usual. All of that is to say that a veteran state Capitol observer from the press can more easily remember 1985 than he can imagine 2015.
SENATE & HOUSE 2015 vs. 1985 AVERAGE YEARS OF EXPERIENCE
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126 Democrats/9 Republicans
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107 male/27 female 150
125 male/10 female ETHNICITY
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90
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119 white/15 black
130 white/5 black www.talkbusiness.net
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Insights
Pay Up
J.R. Carroll (left) was on hand on a cold November day in Cleveland to see his client, former Razorback Ryan Mallet, make his first NFL start. Mallett completed 20 of 30 passes for 211 yards and two touchdowns to lead the Houston Texans to a 23-7 victory over the Cleveland Browns.
Sport agent and attorney J.R. Carroll believes college athletes will soon be paid stipends. By Steve Brawner Paying college athletes a small stipend in addition to their scholarships is inevitable, the sports agent for former Arkansas quarterback Ryan Mallett said during a speech before the Clinton School of Public Service in early December. J.R. Carroll, a partner at the Fayetteville office of the Kutak Rock law firm and one of two Arkansas-based agents representing NFL players, said the NCAA will no longer be able to rely on the justifications it has used in the past to avoid paying players. It calls players “student-athletes” when they really are college employees, and it uses their likenesses and names without compensating them. Meanwhile, the economics of college sports demands that the athletes be paid. “The money has gotten to be so big and the pie has gotten to be so big that at some point, you’re going to have to give a piece of that pie to the individuals who are actually generating that income,” Carroll said. He predicted that it will be commonplace for athletes to be paid small stipends to help them pay for the full cost of college, including incidentals, since practice demands preclude players from working paying jobs. However, Carroll said stipends will remain relatively low because the universities will collude to prevent an “arms race.” He said schools will have to pay stipends to both male and female athletes to comply with Title IX, a federal law requiring gender equity in educational programs receiving federal funds. Carroll traced the current situation back to the 1950s, when Walter Byers, the first NCAA president, coined the term “student-athlete” so the NCAA and its member schools could avoid paying for workers’ compensation. In a case involving a football player who died in a game, a judge ruled that players were not under contract, that universities are not in the football business and that no university could profit from a football team –
arguments that don’t apply now, Carroll said. Furthermore, he said, two legal decisions in 2014 weakened the NCAA’s case. When Northwestern University’s players asked to be allowed to unionize, a National Labor Relations Board regional director ruled that scholarships are a contract and athletes are employees. Then a judge ruled in a lawsuit brought by former basketball player Ed O’Bannon and others that the NCAA could not prohibit member schools from offering players a limited share of sports revenues. The ruling in the O’Bannon case will not apply until 2016, but Carroll said some schools have already begun to discuss the kinds of financial rewards they will offer. Carroll pointed to the University of Alabama to show how athletics is tied to the overall operation of the university. Since Nick Saban became head football coach in 2006 – and guided the Crimson Tide to national titles in 2009, 2011 and 2012 – Athletic Department revenue has increased by 112 percent, the school has received more than $600 million in private donations, the student population has increased by 51% percent and 62% of the school’s students are from out of state, bringing in an extra $300 million just in out-of-state tuition. Meanwhile, the University of Florida, whose football team has been mediocre in recent years, has seen a 1% percent drop in its student population. Referring to the coach’s salary, Carroll said “$7 million a year seems like a pretty good bargain for Nick Saban.”
UPDATE
Blackwell, Sabin Earn National Recognition As we start a new year, we thought it might be worthwhile to check on some of the people we featured in Talk Business & Politics in 2014 and provide a bit of an update. Marlon Blackwell has been named one of the “30 most admired educators” in the nation for 2015 by DesignIntelligence. The publication praised him for being both an award-winning practicing architect and a distinguished professor and chairman of the Architecture Department at the University of Arkansas’ Fay Jones School of Architecture. “He balances a career as an accomplished architect who creates memorable work with the role of a dedicated educator,” DesignIntelligence said. “He brings a strong design orientation and always provides good criticism; it is evident that he is truly interested in advancing design through both teaching and practice.” State Rep. Warwick Sabin has also received national recognition, being
tabbed as one the nation’s “rising political stars” after being one of 24 people selected to receive the Aspen Institute’s prestigious Rodel Fellowship. The institute says the fellowship is “designed to bring together elected officials who have demonstrated an outstanding ability to work Ma responsibly across partisan Blackwrleon ll divisions and bring greater ON ARCH ITECTUR E & LIFE civility to public discourse.” Both men were featured in our September/October issue. September/
October
Mark Pry or Their Mos & Tom Cotton t Importa nt Issues Asa Hutchin son vs. Mik The Nex e Ros t Arkans as Govern s or Does Ark ans A Workfor as Need ce Czar? Beyond The Private Opt ion Women In ProfessionaBusiness l Choices The History The Fayette Of ville Squ are
Insights is compiled by Talk Business & Politics Editor Bill Paddack. Possible items for inclusion can be sent to him at wbp17@comcast.net.
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2014
Entergy Arkansas’ rates are lower than the state and national averages. And here’s our plan to keep them low.
At Entergy Arkansas, we work not only to ensure reliable power, but also to make sure that power remains affordable. That’s why Entergy Arkansas customers have rates below the average for Arkansas and the nation – and why we are committed to keeping costs down while creating value for customers now and for years to come.
1. Providing reliable power. Our plan includes strengthening the electric grid from transmission lines to substations to transformers – to prevent storm outages by planning and maintaining a more robust network.
2. Lowering costs. Keeping a balanced mix of energy resources is an important ingredient to providing customers with clean, reliable, and affordable electricity. Entergy Arkansas also joined the Midcontinent Independent System Operator (MISO) several months ago. And we’re already seeing monthly savings by having access to a large power market that allows us to further reduce costs.
3. Generating jobs. Entergy Arkansas is reaching out to major companies around the world to put Arkansas on the top of their lists for new facilities. Then we work with them to make sure we have the infrastructure they need to power their business – adding more customers to share costs and putting more Arkansans to work.
4. Investing in sustainable communities. The health of our local communities drives our quality of life as a state. Training, education and infrastructure are vital not only for economic development, but also for building a stable society for generations to come. We’re committed to helping our state grow, strengthening communities, supporting non-profits and improving education.
To learn more, visit EntergyArkansas.com.
A message from Entergy Arkansas, Inc. ©2014 Entergy Services, Inc. All Rights Reserved.
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Industry PHOTOS OF STUDENTS COURTESY OF SACC AND UACCB
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
Name Dropping Arkansas Association of Two-Year Colleges becomes Arkansas Community Colleges to better reflect its mission. By Jeanni Brosius
Y
ou don’t have to spend four years at a well-known university to find a rewarding, good-paying job. In fact, within the next five years, jobs requiring only an associate degree will grow by 35%. That’s why, perhaps now more than ever before, students are checking out community colleges and finding these schools can provide the skills needed to go directly into the workforce. Community colleges also play an important role in the economic development and social mobility of Arkansas. By conforming to the needs of the local workforce, community colleges across the state offer training and education that meet those specific needs. Since 1989, the Arkansas Association of Two-Year Colleges (AATYC) has been a nonprofit association representing 22 public two-year community colleges in Arkansas. In October at its annual conference in Hot Springs, the association officially changed its name to Arkansas Community Colleges (ACC). The name may have changed, but the mission hasn’t. “The association facilitates the sharing of ideas, resources and opportunities among its members, and advocates on behalf of members’ students,” Executive Director Bill Stovall said of the association. “ACC has a long and successful history of collaborating with government agencies, educational institutions, private foundations and others on projects that improve the ability of member colleges to
meet the needs of their students, as well as the needs of their local business and industry leaders. As a result, Arkansas is hailed nationally as a model for student success and workforce training initiatives.” TARGETING INDUSTRY NEEDS The mission of the community colleges is to reach out to the workforce around the
Systems to train nurses and other staff. Frazier said the school also revamped its welding program to include specific skills that are needed in the local industry. “We can fill the niches, and we respond to the needs of the community,” Frazier said. By partnering with nearby public school systems, Frazier said UACCB can have students career ready upon high school graduation. South Arkansas Community College in El Dorado also serves its community with a focus in health care, manufacturing, service, criminal justice/law enforcement, business, information technology, performance and media arts, education and general education for university transfer. “There is a high demand for healthcare professionals not just in South Arkansas, but throughout the state,” said Barbara Jones, president of SACC and ACC chairwoman of the board. “We offer 14 different health-care programs. … SouthArk is part of the Arkansas Registered Nursing Education Consortium (ARNEC), comprised of eight community colleges in rural areas of the state.” The ARNEC program graduates more than 250 registered nurses each year in Arkansas. Jones said 280 were accepted in the January 2014 program, and that class graduated in December. “Our member colleges offer a variety of educational and technical training programs,” Stovall said. “While we do offer associate degrees that represent the first two years of a bachelor’s degree, we also offer certificates that can be completed in one year or even a few months. The community
“Arkansas community colleges have formed regional and industryspecific partnerships to maximize resources and collaborate on job-creation approaches that are productive for their region.” – ACC Executive Director
Bill Stovall particular college and target those needs, and the name change reflects that. “We have the ability to respond to the local community,” said Deborah Frazier, chancellor at the University of Arkansas Community College at Batesville. “The name change reflects more clearly who we are.” UACCB partners with White River Health
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Industry: Arkansas Community Colleges college mission is to provide local access to higher education and technical training programs that meet the needs of business and industry. We changed our association name to Arkansas Community Colleges to better reflect that mission.” Stovall said the colleges do a great job of fulfilling the mission, and he hopes the name change helps to communicate to the general public what the community colleges are all about. INDUSTRY-SPECIFIC PARTNERSHIPS The majority of students at Arkansas’ community colleges are nontraditional in age, and many times, they are the first one in their family to attend college. These students have to juggle work, family and school, so the colleges can tailor classes to fit their schedules. “Without our state’s community colleges, many Arkansans would not have local
Arkansas Community College Facts:
• The average age of an Arkansas community college student is 26, and 62% of Arkansas community college students are female while 58% are low income. • Arkansans with associate degrees and technical certificates earn on average $27,631 annually, compared to $12,499 for those with a high school diploma or less. • By 2020, jobs requiring an associate degree will grow by 35 percent. This compares to an overall job growth rate of only 14 percent. • Arkansas community colleges provide customized education and training to more than 2,500 businesses each year. • For every $1 that state and local governments invest in Arkansas community colleges, they see a $20.70 return on investment in added taxable income and avoided social costs.
Debbie Frazier
access to opportunities to improve their careers and paychecks,” Stovall said. “Helping families to better support themselves financially is a huge economic benefit to the entire state.” Community colleges have an interest in developing their local economies. By working closely with the Arkansas Department of Workforce Services and the local business and industry leaders, the colleges can be proactive in customizing the training to meet the demands of the particular workforce. “Additionally, Arkansas community colleges have formed regional and industryspecific partnerships to maximize resources and collaborate on job-creation approaches that are productive for their region,” Stovall said. In October 2013, the seven community colleges of the South West Arkansas Community College Consortium (SWACCC) were awarded an $8.4 million U.S. Department of Labor (DOL)
Information provided by Arkansas Community Colleges
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
Barbara Jones
Bill Stovall
Employment and Training Administration Trade Adjustment Assistance Community College and Career Training (TAACCCT) grant that focused on building a stronger workforce for the advanced manufacturing sector in the southwest quadrant of Arkansas. “Through this funding, member colleges are revising and developing courses and programs of study that are industry-driven and that will result not only in college credentials but nationally recognized industry credentials as well,” Jones said. “These valuable credentials can be a first step to a good-paying, local job and the first rung on the ladder of success for students who have the desire to improve their skills in crafts such as welding, industrial technology and logistics.” Through the collaboration of employers, stakeholders, educational partners and the financial resources of the grant, the colleges are better equipped to train a skilled workforce. The process technology degree program at South Arkansas Community College is designed to train refinery operators, chemical operators and process technicians for local industry jobs.
Named “Outstanding Southern Community College for Work Force Training” by Southern Business & Development magazine.
Connecting Education and Job Skills in the Mid-South Mid-South Community College is on the forefront of reforming the state’s workforce education system. With innovative alternative partnerships in education and business, the College is playing a key role in designing the education and training needed to fill current and future jobs. These programs teach skills to meet the need for a trained and educated workforce in the future and align education, workforce and economic development assets to create clear pathways to lifelong learning.
www.midsouthcc.edu
For more information on Mid-South Community College’s Workforce Development initiatives, call 870.733.6852.
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Hometown, Arkansas Fort Smith Convention Center
Fort Smith Convention Center
National Historic Site
National Historic Site
Arkansas River Valley Nature Center
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
A statue of Bass Reeves, one of the first African-American Deputy U.S. Marshals
Holiday Lights
National Historic Site
National Historic Site
Fort Smith: On the Rebound Arkansas’ second largest city is working to make itself a more attractive place to live, work and visit. By Steve Brawner
PHOTOS COURTESY OF ARKANSAS PARKS & TOURISM, FORT SMITH REGIONAL CHAMBER OF COMMERCE, UAFS AND U.S. MARSHALS MUSEUM
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Hometown: Fort Smith
F
or Fort Smith, the long goodbye finally ended on June 29, 2012. The previous year, Whirlpool, a city fixture since 1966, had announced that its manufacturing facility would close, and the last of its 1,000 jobs would go away. As late as 2006, the company had employed more than 4,500. As Whirlpool downsized, so did suppliers. What a difference two years can make. According to Mayor Sandy Sanders, 3,200
new jobs have been announced with no major losses in 2013-14. Arkansas’ biggest job announcement in 2014 involved Fort Smith’s ArcBest, which said it was adding 975 positions for a new logistics facility at Chafee Crossing in the south part of town. Still, employment woes are a reality. Like other metro areas around the state, the Fort Smith workforce has been declining, particularly in the critical manufacturing sector. In Fort Smith’s metropolitan
Fort Chaffee barbershop where Elvis Presley once received a haircut
statistical area, manufacturing jobs have fallen by nearly 8,600 in the last seven years. But as Sanders explained, “The history of Fort Smith has been rebounds.” From military drawdowns at Fort Chaffee to the rise and fall of its furniture manufacturing segment, Fort Smith has seen its ups and downs. Now, once again, the state’s second largest city is hoping to make a comeback. Manufacturing prospects look promising.
Industrial Development at Fort Chaffee
ArcBest Corporation
Old Fort Days Rodeo
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Fort Smith Museum of History
It’s become a medical destination for people in western Arkansas and eastern Oklahoma. It has a strong local university that works well with its employers. And it’s offering an array of attractions for locals and tourists. CHAFFEE CROSSING In 2004, Chaffee Crossing was little more than 7,000 acres of undeveloped land donated to the community from Fort Chaffee by the federal government. Sanders was head of the Fort Chaffee Redevelopment Authority and charged with doing something with that acreage, while Tim Allen, now executive director of the Fort Smith Regional Chamber of Commerce, then was working for the Arkansas Economic Development Commission. Even though the area was still undeveloped, it had huge potential. If one employer made Chaffee Crossing its home, others would follow. That one employer was Graphic Packaging, a package manufacturer that announced it would build a 300,000-squarefoot facility. Others have followed, including Mars Petcare, which makes pet food and announced a $50 million capital investment in 2013; firearms manufacturers Umarex and Walther Arms; and Phoenix Metals, which fabricates steel for restaurant uses. The Arkansas College of Osteopathic Medicine is building its $30 million facility there. Residential housing has been constructed in what is being designed as a walkable, bicycle-friendly community. Mitsubishi constructed a $100 million, 200,000-square-foot facility on 92 acres to produce wind turbines, but the entire project ground to a halt after GE filed a patent lawsuit and then the market tanked. It’s disappointing, but the Chamber’s Allen is optimistic that either Mitsubishi or another employer eventually will occupy the site. “At the end of the day, here’s what we’ve got: We’ve got the finest spec building in the state of Arkansas – maybe in the entire South,” he said.
Fort Smith, Van Buren: Neighbors and Allies Fort Smith and its neighbor to the north, Van Buren, are in different counties, but their futures are tied closely together, so it’s no surprise that the cities’ chambers of commerce and advertising and promotions commissions work closely together. “Fort Smith gets regionalism,” said Tim Allen, executive director of the Fort Smith Regional Chamber of Commerce. “We actually locate companies in Van Buren, so we don’t see the river as a divider. Getting them in the region is as big as getting them in Fort Smith.” Jackie Krutsch, executive director of the Van Buren Chamber of Commerce, and Maryl Koeth, director of the Van Buren Advertising and Promotion Commission, said the two cities’ industries and businesses complement each other. Even Friday night football games between the cities are relatively tame affairs. The big rivalries are Fort Smith Northside vs. Fort Smith Southside, and Van Buren vs. Alma. That wasn’t always the case, Krutsch, said, but, “I feel like that we have been lucky enough to have some key leaders who looked around and said, ‘We can grow our pie bigger; we can do more if we’ll work together.’” Founded in 1818, Van Buren has a long and rich heritage and offers plenty for visitors to do, including boutique shops, the King Opera House, and the Arkansas & Missouri Railroad, an excursion train that takes passengers on a 70-mile round trip from Van Buren to Winslow. Van Buren is positioned to grow as Fort Smith grows. HIghway 59, the truck route leading to I-40 from Fort Smith’s main industrial park at Chaffee Crossing, passes through Van Buren. The region’s proposed intermodal port on the Arkansas River would be located in that city, and Van Buren has abundant, untapped land. “Greenfields for logistics certainly will be in our future. ... Warehousing, logistics, those types of things have a great deal of potential here,” Krutsch said. Fort Smith/Van Buren Welcome Center
Arkansas Missouri Railroad
Downtown Van Buren
MAJOR INDUSTRIES Numerous other employers call the rest of Fort Smith home. Here’s just a sample. www.talkbusiness.net
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Hometown: Fort Smith Baldor Electric Co. produces electric motors for distributors and manufacturers in more than 70 countries. The city’s largest employer is OK Foods, a poultry processing plant that has its corporate headquarters in Fort Smith. Gerber in 2013 announced a $150 million investment at its plant producing baby food products. Trane produces residential HVAC
equipment, while Rheem manufactures the same equipment for commercial clients. GNB Industrial Power makes batteries for submarines. Weldon, Williams & Lick prints tickets for major sporting and entertainment events. Spartan Logistics has purchased Whirlpool’s old 620,000-square-foot distribution center and plans to rent out the excess. The Air National Guard’s 188th
Wing, once a base for A-10 Warthogs, has a new role: drone piloting, targeting and analysis. According to Sanders, the number of jobs will be equivalent, but they’ll produce high-tech and highly employable workers. Geographically, Fort Smith is ideally situated – in the center of the country, along the Arkansas River, and at the planned PHOTOS BELOW BY BILL PADDACK
Chaffee Crossing, which in the future will be home to the Arkansas College of Osteopathic Medicine, has already attracted a number of businesses. These include Umarex USA-Walther Arms, Graphic Packaging and Mars Petcare. They join Rheem, a longtime stalwart of the local economy located on Old Greenwood Road, as major Fort Smith employers.
O.K. Foods Headquarters
Weldon Williams & Lick
Inside Baldor Electric’s factory
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TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
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Hometown: Fort Smith crossroads of I-40 and I-49. It’s the regional hub for western Arkansas and eastern Oklahoma, which means lots of people come in and lots go out. One hour to the north is booming Northwest Arkansas. Sam Sicard, president of First National Bank of Fort Smith, said the regions are becoming more interconnected economically. Many businesses, including Sicard’s bank, have
operations in both markets. “Northwest Arkansas has gotten most of the attention, and there probably is some envy, but the growth and prosperity of Northwest Arkansas is good for Fort Smith,” Sicard said. MEDICAL DESTINATION Its location is one reason Fort Smith is
becoming a medical destination, ensuring a steady, stable source of high-paying, recession-resistant jobs. Fort Smith is home to two hospitals, Sparks Regional Medical Center and Mercy Hospital Fort Smith, and the Cooper Clinic, which has physicians in 25 specialties. Mercy is spending $192 million over five to seven years as part of an expansion that Mercy Hospital
UAFS Lion
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UAFS Bell Tower
has included the construction of Mercy Orthopedic Hospital and the opening of three freestanding clinics out in the community. Shared Services Center employs about 500 telephone professionals supporting hospitals, including Sparks, that are owned by its parent, Community Health Systems. The center is located in the previously empty Phoenix Village Mall, “in a part of town that hadn’t seen a lot of success in a very long time,” Allen said. Perhaps nothing will have a bigger effect on Fort Smith’s future than the coming Arkansas College of Osteopathic Medicine. The college is being funded primarily by The Degen Foundation, funded by leftover money from the sale of Sparks to its original buyer, Health Management Associates. Foundation Chairman Kyle Parker said an osteopathic school was chosen as a project because that medical discipline produces mostly primary care physicians, a skill in severe shortage throughout Arkansas and the Fort Smith area. The initial investment will be $80 million, with $60 million of that coming from the foundation and another $14 million coming from an anonymous donor. The Fort Chaffee Redevelopment Authority donated 200 acres in Chaffee Crossing for the school’s location. The first class of 150 students will enter school in August 2016. According to Parker, the school will employ about 100 with average salaries of $100,000, not counting adjunct professors. Overall, it’s expected to have a $100 million annual economic impact, and it will supply doctors to the area’s medical providers for many years to come. “The beauty is, medical schools don’t get up and move. Unlike Whirlpool, they’re not going to leave once they’re established here,” Parker said. The investment – and its returns – eventually could be much larger. A physician assistant school is planned for 2018. The first building will sit on a 27-acre area that can handle three more and will be known as “The Quad.” For now, Parker and other organizers are focusing on the osteopathic school, but he points out that Arkansas lacks schools in disciplines such as dentistry and veterinary science.
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Hometown: Fort Smith “Its parent is the Arkansas Colleges of Health Education. The word ‘Colleges’ with an ‘s’ on it denotes plural,” he said. WESTARK NOW UAFS The University of Arkansas’ flagship university is only an hour away in Fayetteville, but many students have no reason to make the commute. The 6,800-student University of Arkansas at Fort Smith offers 45 majors and a variety of certificates. Formerly Westark College, it became a four-year university in 2002, but it hasn’t forgotten its roots as a community college. “We’re not creating any degrees that do not have a next step connected to them, whether it is a job or further education. ... We teach philosophy, but we don’t have a major in it,” said the school’s chancellor, Dr. Paul Beran. Beran takes pride in his university’s responsiveness to local needs. The Center for Business and Professional Development teaches both hard and soft skills for “probably a hundred industries,” he said. A robotics program was created after a survey of local industries revealed the need for training in that area. When industries came to the school saying they needed training in SAP business
software, UAFS retooled some of its courses rather than create a new program so it could respond quickly. Responding to demand from the city’s health-care employers, the school is adding a master’s degree in health-care administration. Beran hopes to create a program that funnels UAFS pre-med students into the osteopathic school. “The relationship between that university and this community is unbelievable because they know who they are,” the Chamber’s Allen said. “They have never forgotten who they are, and when we bring a prospect to the table, and once Dr. Beran understands what they need in a worker, he says, ‘I’ll develop a program around it.’ And he does.” WESTERN HERITAGE Locally, the city is working to make itself a more attractive place to live and visit. Construction is well underway on a $10 million water park being funded by an existing sales tax. A five-mile walking trail along the Arkansas River will tie into existing trails and should be built in 2015. Softball and soccer complexes are being constructed. The Fort Smith Convention and Visitors Bureau says the city is “Where the New
South Meets the Old West.” The city’s Western heritage makes it a tourist destination – so much so that True West magazine ranked it the nation’s Top True Western Town of 2013. The past is celebrated at the Fort Smith National Historic Site and the Fort Smith Museum of History, but the big attraction is still in the works. Ground has been broken on the U.S. Marshals Museum – still tens of millions of dollars short of its fundraising goals, but with big plans to serve as one of Arkansas’ most important museums. That heritage isn’t just a tourist attraction. It flows through the city’s lifeblood. As Allen points out, at one time Fort Smith’s residents “were actually living on the edge of the U.S.” Even though the years have passed, Allen said that mindset remains. “We have more of a renegade mentality,” he said. “We’re really not a follower. We don’t just get in lockstep with the rest of the state. Little bit of a risk-taker sometimes, but that just comes with our heritage. If you think about it, to relate the old days to the new, think about the people that came to Fort Smith. In the truest sense of the word back in the 1800s, those were entrepreneurs. We have to figure out how we become new entrepreneurs again in the 21st century.”
Artist’s renderings of the U.S. Marshals Museum.
PHOTOS COURTESY OF U.S. MARSHALS MUSEUM
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U.S. Marshals Commemorative Coin silver edition with featured “Wanted in Fort Smith” will be available for purchase in early 2015.
Business Forecast PRESENTED BY: THE CENTER FOR BUSINESS AND ECONOMIC RESEARCH
Moderator: John James, Founder, Acumen Brands
International Speaker: Carl Tannenbaum, Chief Economist, Northern Trust
Domestic Speaker: John Silvia, Managing Director & Chief Economist, Wells Fargo
Regional Speaker: Kathy Deck, Director, Center for Business and Economic Research
Don’t miss Business Forecast 2015. Friday, January 30, 2015 11:30 a.m. - 1:30 p.m. John Q. Hammons Convention Center World Trade Center District Rogers, Arkansas REGISTER TODAY! For more information or to register, contact the Center for Business and Economic Research at 479-575-4151, cber@walton.uark.edu or cber.uark.edu.
www.talkbusiness.net
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Regional: Northwest Arkansas
Innovative Machinery; Unorthodox Internships UAFS students are working with Amerigreen Wordwide on pioneering pallet-forming machine. By The City Wire Staff
COURTESY OF THE CITY WIRE
Mike Kindellan is changing the world working in industry. at the company,” Taber said. “With us as the one cardboard pallet at a time. And he’s “They were a little leery at first. But we supervisors, we know what they’ve learned hiring University of Arkansas at Fort Smith convinced them that we have the expertise and what they should know. So we’re able to students to help him do it. and we have the background,” said Dr. tie in what they learned in the classroom to Kindellan, the managing partner of the Kerrie Taber, project manager for the the work they’re doing.” Missouri-based environmental ‘VALUABLE LEARNING company Amerigreen WorldEXPERIENCE’ wide, created a machine that It also provides hands-on manufactures cardboard pallets experience for students like – a cheaper, environmental alterSurls, who values the chance native to their wooden counto work in a real-world environterparts – after working three ment. decades in the logistics field. “This is a very valuable “I have a 30-year background learning experience. I will be with Tyson Foods, and my bigdoing a lot of things with the gest problem was pallets. They software that will help me in not weighed too much, they hurt only this experience but with people and they also damaged PHOTO COURTESY OF UAFS future jobs, too,” Surls said. products,” Kindellan said. “Our The machinery, which is housed in Fort Smith and owned by Amerigreen Worldwide, “It’s not every day that you see cardboard pallet weighs five to has the potential to transform the logistics industry. something like this done. 10 pounds versus a regular hardMachines like this are normally put on wood pallet that weighs roughly 80 pounds. venture and interim department head of the paper first then built, but this is the other And they won’t ever hurt you. The worst you applied science and organizational leaderway around. I’m doing something that not can do is get a paper cut.” ship programs at UAFS. many people get to do and something that I The result was four students – Shirley enjoy at the same time. CREATING DOCUMENTATION Carter of Fort Smith, Dalen Surls of “I hope to find a job with a national The concept has the potential to transCedarville, Luede Yang of Booneville and company using the skills I’ve learned,” he form the logistics industry, with cost-savings Ntxuzone Yang of Fort Smith – working added. in the millions for companies that make the internships to create documentation and The 16-week project is the first in what switch from wooden to cardboard. There safety recommendations for the machine, Taber hopes is a series of jobs UAFS was only one problem: the machine that which is housed in Fort Smith. The internstudents will complete for Amerigreen created the pallets wasn’t functional, and it ships are unorthodox because of their Worldwide and other companies. didn’t have drawings or documentation. format, which has the students working for “UAFS has a history of responding to the That’s where UAFS came in. The university the company but with UAFS faculty serving needs of industry, and creating partnerships met with Amerigreen Worldwide and conas the supervisors, an arrangement that is for students to work with those companies vinced them that UAFS had the resources the best of both worlds for students. is a new and exciting development for us,” to assist them with the project, including “Normally they work for the company Taber said. several faculty members with experience and the supervisor overseeing their work is
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Regional: Northwest Arkansas
Positive Trends Report shows a good third quarter for Arkansas’ three largest metropolitan areas. By The City Wire Staff
COURTESY OF THE CITY WIRE
While not broad, improvements in employment, sales tax collections and tourism sector employment helped push positive economic trends during the third quarter of 2014 for Arkansas’ three largest metro areas. Data gathered and analyzed as part of The Compass Report showed gains and stability during the third quarter of 2014 compared to the same period in 2013. The quarterly Compass Report is managed by The City Wire. The report is the only independent analysis of economic conditions in Arkansas’ three largest metro areas. Compared to the third quarter of 2013, economic conditions were improved in Northwest Arkansas and the Fort Smith metro area, and unchanged (stable) in Central Arkansas. To underscore the impact of the three largest metro areas, for June of this year the unemployment rate for the rest of the state was 6.4%, down 1.7% from September 2013. The statewide unemployment rate with the three largest metros added back in was 5.7%, down 1.5% September-on-September. SLOW BUT STEADY Jeff Collins, economist for The City Wire, said Arkansas’ metro areas should benefit from “slow but steady” improvement in the U.S. economy. “With the mid-term elections over, we have the presidential election season to look forward to, with the New Hampshire
primary and Iowa caucuses only 14 months away,” Collins noted. “In the meantime, most Americans will enjoy lower gas prices, and slow but steady improvement in employment and housing markets. The
quarter of 2013.
most important government policy action impacting the economy will continue to come from the Federal Reserve. The greatest risk appears to come from slow international growth impacting exports.”
FORT SMITH REGION The Compass Report for the Fort Smith area posted a C+ grade for the third quarter, better than the C in the second quarter of 2014 and unchanged compared to the third quarter of 2013. Holding back the improving trend continues to be relatively flat employment gains in the yearover-year period, and a decline in sales tax collections. Non-farm employment in the metro area hit 116,600 in September, up slightly from 116,500 in June 2013. County sales tax collections in the four-county area totaled $10.302 million in the third quarter, down from $10.34 million in the 2013 quarter.
NORTHWEST ARKANSAS Continued employment gains and increases in sales tax collections are signs of a metro economy on a clear growth trend. The third quarter 2014 grade of B+ for Northwest Arkansas was better than the B in the second quarter of 2014 and unchanged compared to the third quarter of 2013. The grade of B+ indicates an economy that is growing. Non-farm employment in the region was 219,800 in September, well ahead of the 216,800 in September 2013. Countywide sales tax collections in the three-county metro area totaled $21.982 million in the quarter, ahead of the $20.889 million in the third
CENTRAL ARKANSAS Economic conditions in Central Arkansas, the state’s largest metro area, received a grade of C in the third quarter, unchanged compared to the second quarter but better than the C- in the third quarter of 2013. Improvements in overall employment and ongoing gains in the construction sector helped maintain the C grade. Nonfarm employment stood at 348,900 in September, better than the 345,900 in September 2013. There were an estimated 18,500 jobs in the region’s construction sector in September, well ahead of the 16,600 in September 2013. www.talkbusiness.net
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Regional: Northeast Arkansas
Obama’s Cuban Order Arkansas’ agriculture community is generally upbeat about normalizing relations with Cuba, but political opinions vary. By Michael Wilkey Agricultural opinions are upbeat about President Obama’s plan to move toward normalizing relations between the United States and Cuba, but political attitudes are a bit mixed. When Obama announced in December an executive order to re-establish some diplomatic and economic ties between the U.S. and the communist island nation, he also listed possible changes to improve relations between Cuba and the U.S. These include trade issues, but the U.S. trade embargo to Cuba – in place since the early 1960s – would have to be repealed by Congress. AGRICULTURAL SUPPORT The possible change in the 54-year old policy could have an impact on Arkansas agriculture. “The announcement that the United States is moving to normalize trade relations with Cuba is good news for Arkansas’ farmers and ranchers,” said Zac Bradley, director of public policy-national affairs for the Arkansas Farm Bureau. “For years, Arkansas Farm Bureau has sought an easing of trade restrictions with Cuba. This announcement should make it easier for this important market to purchase Arkansas agricultural products, in particular, rice and poultry.” Bradley said it has been a hardship for U.S. farmers to compete with other countries because American exporters have to use third-party banking resources to transact deals, while other countries can deal directly with Cuba. A normalization of relations could alter that detrimental factor. “Arkansas leads the nation in rice production and is a leading producer of poultry products, two commodities that are an
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important part of the Cuban diet. We did a good amount of trade with Cuba before the embargo and would stand to regain a foothold there when trade is normalized,” he said. The president of the Poultry Federation, Marvin Childers, agreed the policy change could create a much more efficient, less expensive way to trade. Childers, a former
“Congress must proceed with caution and deliberation in response to the president’s decision.” – Congressman Rick Crawford
Republican state representative from Blytheville, said producers have been able to trade with Cuba since 2001, either through third-parties or paying up front. He said on average that at least 9 million pounds of poultry is sent to Cuba each month. Dow Brantley, an Arkansas rice producer and chairman of both the Arkansas Rice
TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
Federation and national USA Rice Federation, called the president’s announcement “good news” for both Americans and Cubans. “We’ll be looking for ways to tap into potential markets there to help people on both sides of the equation,” he said. “Arkansas produces 50% of the U.S. rice crop and we are looking forward to reintroducing the Cuban people to top quality rice,” added Ben Noble, executive director of the Arkansas Rice Federation. Lee Powell, Delta Grassroots Caucus director, said while his group does not support the authoritarian policies of Cuba, the American embargo has not worked and it is time for new thinking. “The embargo has done absolutely nothing to change Cuba’s authoritarian regime, and when a policy has not worked for 50 years it’s just common sense that it’s time for a change,” Powell said. “Once capitalism starts infiltrating Cuba, this will undermine the communist regime.” ELECTED OFFICIALS RESPOND Arkansas’ new U.S. senator-elect, Tom Cotton, said a possible change in policy would be troubling, but his counterpart, Sen. John Boozman, said the announcement was a “step in the right direction.” Congressman Rick Crawford, R-Jonesboro, took a wait-and-see approach. “While I welcome the restoration of trade between the U.S. and Cuba on behalf of Arkansas agriculture and manufacturers, Congress must proceed with caution and deliberation in response to the president’s decision,” Crawford said. “I pledge to lend my voice and the voice of Arkansas businesses to what promises to be a thorough and robust debate.”
Regional: Northeast Arkansas
‘Bittersweet’ Decision Mid-South Community College president leaving, but he will continue to tackle workforce training issues in his new role. By Michael Wilkey An opportunity to leave a job he has held for more than two decades proved difficult for Dr. Glen Fenter, president of Mid-South Community College. And it comes at a time when MSCC is part of another change. “It is bittersweet,” Fenter said after announcing that he would be leaving his post to head up the Greater Memphis Alliance for a Competitive Workforce. “The people here are my family.” Fenter noted, however, that the next chapter of his life would give him an opportunity to continue working on something he has enjoyed throughout his career: workforce training. On July 1, Fenter will start work at the alliance, a 501(c)(3) nonprofit that will work on regional workforce development and narrowing the so-called skills gap. In the past year or so, Fenter said the region has seen a lot of opportunities to build on those issues. Among them is the possible merger of MSCC into the Arkansas State University System as well as the announcement of Big River Steel building a $1.3 billion steel mill south of Osceola. “The merger agreement is important. It is important to give our community the additional resources to help our community progress,” Fenter said. “With Big River Steel and the growth in Mississippi County, it will create more opportunities. It will create every possible way for a better quality of life.” Fenter said the merger would benefit both ASU and MSCC in multiple ways, including strengthening the workforce in the Memphis Metropolitan Statistical Area. “It will create a level of synergy,” he said. “The agreement will be a mutually beneficial relationship that will benefit everybody
involved. I can see the partnership develop and it can be beneficial in eastern Arkansas.” MID-SOUTH EXPANSION Fenter, who became president of the MSCC in 1992, has seen the institution grow exponentially during his tenure. The college, which one time offered science classes at nearby West Memphis High School in the mid-to-late 1990s due to a lack of classroom space, now has a renewable energy center named after former Congressman Marion Berry. It also works with several other two-year colleges in Arkansas in a multi-county workforce training program called the Arkansas Delta Training and Education Consortium (ADTEC), as well as with other universities on programs. One of those programs – a teacher education program with ASU – has provided a major foundation for advancing education and careers in the region. “We have 50 teachers in classrooms in Crittenden County due to that program,” Fenter said. “It is a life-changing opportunity for the teacher. It is definitely a life-changing opportunity for the kids. And I would like to see many more like it.”
“If you do not believe God works miracles, you need to go to Mid-South Community College. We take pride in what has been accomplished. The merger with ASU and the synergy with Memphis can create an opportunity for Crittenden County that would have never happened,” Fenter said. “There is a lot of uncertainty and angst [about my leaving] but it is the right thing to do for this institution. My
“The merger with ASU and the synergy with Memphis can create an opportunity for Crittenden County that would have never happened.” – Dr. Glen Fenter
‘THE RIGHT THING TO DO’ Fenter said the college has been blessed with good, strong results and the changes under way currently could serve as a further catalyst for advancement.
being in Memphis will strengthen the opportunities available and ASU will open the doors for the region as well.” The merger, if approved by both MSCC and ASU, would be a win-win situation for both, Fenter told the college’s board of trustees. Supporters of the plan have said a merger would help the ASU System expand its brand further into eastern Arkansas and Memphis, while MSCC would benefit from possible expanded funding for its workforce training and other programs. www.talkbusiness.net
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Feature PHOTO: DOLLARPHOTOCLUB
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Politics
2014: Year in Review A Republican sweep, ethics scandals, successful ballot issues, legal challenges and the private option made for a newsy 12 months. By Talk Business & Politics Staff
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t was a banner year for business and politics capped by an epic U.S. Senate race that brought tens of millions of dollars into Arkansas and a wave of Republican rule that could stand for many cycles to come. Talk Business & Politics’ writers and editors combed through the news stories of the last year to pull the top stories of the year, so without further ado, here they are: GOP SWEEPS IN NOVEMBER Led by resounding victories at the top of the ticket, Republicans made unprecedented gains at the federal, state and local levels in November 2014. Congressman Tom Cotton, R-Dardanelle, trounced incumbent Sen. Mark Pryor, D-Arkansas, capping off a grueling 18-month battle that saw tens of millions of dollars spent by in-state and out-of-state groups. For more than a year, the race was positioned to tip control of the U.S. Senate into one party’s control. In the end, Cotton won by more than 17 points as the last month proved pivotal for opening up his lead after the national mood toward President Obama and Washington, D.C., swung solidly in the Republican column. The top of the ticket was also aided by a near-flawless campaign from Gov.-elect Asa Hutchinson, R-Arkansas, who also easily defeated former Congressman Mike Ross, D-Prescott. The governor’s race also saw unprecedented spending from inside and outside the state, although not nearly of the magnitude as the Senate race. Republicans easily won all four congressional seats, giving them control of all of the federal offices in Arkansas. Congressmen Steve Womack, R-Rogers, and Rick Crawford, R-Jonesboro, cruised to easy re-election victories, while newcomers French Hill,
R-Little Rock, and state Rep. Bruce Westerman, R-Hot Springs, won open seats by defeating solid Democratic rivals. The GOP gains filtered down-ballot with Republicans taking commanding control of the state house. Republicans increased their margins in the 100-member House of Representatives from 51 seats to 64 seats, and in the 35-member state Senate from 22 to 24 seats. They also won all of the remaining constitutional offices - including lieutenant governor, attorney general, secretary of state, auditor, treasurer and commissioner of state lands – giving Republicans the title of “majority party,” which includes controlling local election commissions in all 75 counties. ETHICS SCANDALS The year didn’t start off great for Republicans as its highest-ranking state official, Lt. Gov. Mark Darr resigned from office in January after an ethics scandal detailed problematic spending between his office, campaign and personal expenses. His resignation took away a talking point for the GOP against Democrats, who had been struggling with ethics scandals involving Treasurer Martha Shoffner and state Sen. Paul Bookout, D-Jonesboro. Shoffner was convicted in March on six counts of extortion under color of official right, one count of attempted extortion under color of official right and seven counts of receipt of a bribe by an agent of a state government receiving federal funds. In November, federal prosecutors dropped mail fraud charges against Shoffner claiming a conviction would not greatly extend her sentencing from the previous charges.
4 OF 5 BALLOT ISSUES PASS Four of five ballot issues were passed by Arkansas voters on Election Day 2014. The measures instituted legislative oversight of the executive branch, raising the minimum wage, new ethics rules and an extension of term limits. A proposal to expand alcohol sales failed. Issue No. 1 allows the state Legislature to review and approve regulations submitted by executive agencies. It cleared voter approval handily by a 60-40% margin. Issue No. 2, which altered how ballot signatures are reviewed by the secretary of state’s office, passed 53-47%. Issue No. 3 changed a variety of ethics rules for state officeholders and also extended term limits to 16 years in either legislative chamber. It passed 52-48%. One provision of the measure’s passage would prohibit corporate contributions to candidates for office. Issue No. 4, which would have expanded alcohol sales to all 75 counties, failed by a 57-43% margin. Issue No. 5, which raises the minimum wage to $8.50 per hour by 2017, passed 66-34%. PRIVATE OPTION The politics of the private option has been ongoing since its inception in 2013 and it promises to continue to be a political battle in 2015. The GOP-crafted, bipartisan-supported legislation created a health-insurance exchange that allows federal Medicaid expansion funding from the Affordable Care Act to be used to supplement private health insurance for lower-income workers. In 2014, the private option survived its first test for funding in the fiscal session. www.talkbusiness.net
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Feature: Year in Review With three-fourths votes needed by both chambers of the Arkansas legislature, the PO barely cleared the hurdle and only after intense negotiations and multiple tries. GOP gubernatorial candidate Asa Hutchinson described the PO as a “pilot program” during his campaign. Since his victory in November, he’s said he is studying the private option. Two days after his win, Hutchinson said he would work with leaders in the Legislature and in state government to look at benefits and costs and to determine if the program should be continued and, if so, what changes should be made. He said he would not commit to a decision “at least through the end of January.” Many legislative candidates, particularly conservative Republicans, campaigned against the private option in the general election. Those candidates’ victories have many suspecting that a major reshaping of the private option is in the works for 2015 if supporters and Gov.-elect Hutchinson want to keep the federal funding coming. The Legislature could choose to eliminate the program altogether and wind it down before the state has to pick up a larger share of its costs. AGENCY TURNOVERS & HOLDOVERS State government will not only see a major makeover from the newly elected Republican officials who won office in November 2014, but Gov.-elect Asa Hutchinson will put his imprint on the state through a reshaping of agency leaders. By year’s end, Hutchinson had already rattled off a litany of new agency directors and said he would keep several from the Beebe administration. Notably, Hutchinson will keep Department of Human Services director John Selig and Sheila Sharp at the Department of Community Correction. He plans to replace Arkansas Economic Development Commission director Grant Tennille after a nationwide search for a replacement and a possible increase in salary for the position. Other replacements include Daryl Bassett to Workforce Services, Allen Kerr as insurance commissioner, and Brig. Gen. Mark H. Berry as 52nd adjutant general of the Arkansas National Guard.
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As of year’s end, Hutchinson was still searching for an Education commissioner, Department of Higher Education director and head for the Department of Finance and Administration. Hutchinson will also name a new highway commissioner and new Public Service Commissioner in January shortly after taking office. LEGAL CHALLENGES Three major legal battles involving abortions, voter ID and same-sex marriages occurred in different stages throughout 2014. The 89th General Assembly passed two major anti-abortion bills in the 2013 regular session over constitutionality objections by Democratic Gov. Mike Beebe. The GOP-led chambers overrode Beebe’s vetoes and in 2014, a legal ruling struck down a portion of one of those laws. In April, federal Judge Susan Webber Wright ruled that a law prohibiting abortion after 12 weeks was unconstitutional and in violation of the 1973 Roe v. Wade decision. Wright’s ruling did leave a provision of the law intact that requires a doctor to notify a pregnant woman when a fetal heartbeat is detected. The lawsuit is on appeal. Democrats and Republicans fought toothand-nail over a law requiring voter IDs to be presented at the polls in the 2013 session. Again, the GOP-led legislature overrode a veto from Beebe. A legal ruling on the state law, however, struck down the controversial measure three weeks before Election Day 2014. The Arkansas Supreme Court determined that the voter ID law did not pass constitutional muster because it required an “additional qualification” beyond four requirements currently in the state’s Constitution. Look for a constitutional referral in 2015. For supporters and opponents of samesex marriage, 2014 was a roller coaster ride. The state’s courts allowed, disallowed and ultimately were still considering the constitutionality of a 2004 voter-approved amendment defining marriage as between a man and a woman. The state Supreme Court had yet to issue its final determination on
TALK BUSINESS & POLITICS | JANUARY/FEBRUARY 2015
the suit by the end of 2014. A concurrent federal lawsuit also worked its way through the court system with U.S. District Judge Kristine Baker determining the law unconstitutional. That ruling is on appeal. BEEBE LEAVES THE SCENE After more than three decades on the political scene, 2014 was the backdrop for Mike Beebe’s farewell tour. The two-term governor completed his last full year in office and said he’d be retiring to his hometown of Searcy with no plans to re-enter politics. Beebe, who leaves office with a high approval rating after eight years as the state’s governor, also served one term as attorney general and more than two decades in the state Senate. Beebe said he hoped to be remembered for two accomplishments. One was the Payment Reform Initiative that he sees as bending the cost curve on health-care costs through an episodic care model versus a feefor-service model. He also said he wanted Arkansas to have a higher self-esteem through his leadership – a “swagger” that would reflect a can-do mindset for the state.“Not a negative Texas one [swagger], but a good positive one,” Beebe said. HILLARY, HUCKABEE IN THE MIX Could Arkansas find itself in the epicenter of another presidential race? There’s a good chance. In 2014, Hillary Clinton became the frontrunner and de facto Democratic nominee for president. The new grandmother had yet to make a decision on the race despite several groups and influential politicians drafting her for the race. The former first lady, U.S. senator, secretary of state and 2008 Presidential candidate said she would make a decision in early 2015. Former Arkansas Gov. Mike Huckabee, who also ran for president in 2008, is considering a 2016 run. Huckabee has done well financially as a radio and television personality. By year’s end, he was laying the foundation to at least test another presidential campaign.
Business
2014: Year in Review In the diverse landscape of business in Arkansas, it was a year of more ups than downs. By Talk Business & Politics Staff
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rkansas’ economy made progress in 2014 with fewer setbacks than in recent years. From public companies to public celebrations, there were more reasons to cheer than boo in business circles statewide. Here are the top picks from Talk Business & Politics’ writers and editors: BANKS ON THE MOVE Arkansas banks churned through another year of restored health and several trendsetters went on a tear with acquisitions. The Federal Deposit Insurance Corp. (FDIC) reported that Arkansas’ banking segment grew its employment to 18,930 fulltime workers in the third quarter, despite more bank consolidation. The state had 111 financial institutions as of Sept. 30, down from 120 reported at the end of 2013. Total assets in Arkansas-based banks grew to $64.94 billion as of Sept. 30, a gain of $2.89 billion or 4.6%. Assets rose 6% since 2012 and 11% since 2011. Other aspects of banks’ balance sheets also improved leading to growth through acquisition for several publicly traded financial institutions. Little Rock-based Bank of the Ozarks nabbed Summit Bank of Arkadelphia in a $216 million deal. Ozarks would later acquire a Florida bank, Intervest Bancshares, in a $228.5 million purchase. Simmons First continued its surprise streak of bank buyouts. While closing on the Metropolitan National Bank deal, Pine Bluff-based Simmons bought Little Rock’s Delta Trust & Bank for $66 million in March. In May, Simmons added two more huge acquisitions to its portfolio, buying Community First Bancshares of Tennessee in a $243.4 million deal and Liberty Bancshares of Springfield, Mo., in a transac-
tion valued at approximately $207 million. Home Bancshares (parent company of Centennial Bank), which has grown its footprint in Arkansas and Florida through acquisitions, was a little more low-profile in 2014. Still, the Conway-based bank bought Broward Financial Holdings, Inc., a financial institution in Fort Lauderdale, Fla., in a $33 million transaction. A fourth Arkansas bank that is publicly traded, Bear State Financial, sent a signal that it intends to be a player on the Arkansas banking scene. Formerly First Federal Bancshares, the name change for the Harrison-based financial institution also marked its intention to raise more capital for growth. With former Alltel Corp. executives Scott Ford and Rick Massey as shareholders and board members, expect to see activity in the near future. PHOTO COURTESY OF WALMART
Doug McMillon, CEO of Wal-Mart Stores, Inc.
WAL-MART RESHUFFLES C-SUITE Doug McMillon officially took over the duties as CEO of Wal-Mart Stores, Inc., on Feb. 1, 2014. The former stock boy for Wal-Mart had risen through the ranks and served in a variety of capacities, including head of the retail giant’s international divi-
sion. The 48-year old CEO quickly began to reshuffle the C-suite at Wal-Mart headquarters, including putting David Cheesewright in charge of the company’s international operations and Greg Foran at the helm of U.S. stores. McMillon also signaled a change for front-line employees. In an interview with CBS’ Charlie Rose, McMillon said he wanted to raise about 6,000 Wal-Mart workers’ pay above the federal minimum wage. “We’re gonna make some changes in a few months that will create a situation where no Wal-Mart associate in the United States makes federal minimum wage. We’ll be ahead of that with our starting wage,” he said. TYSON FOODS’ ACQUISITION In a move to expand its prepared foods segment, Tyson Foods won a bidding war to acquire Hillshire Brands for $8.55 billion. Springdale-based Tyson was in a “food fight” with Pilgrim’s Pride for the coveted Hillshire food company. The $63 per share cash offer was the largest in Tyson Foods’ history, but executives said the megadeal presented efficiencies to be gained from the combined operations, a more streamlined pipeline of raw products to finished products, and more shelf space in front of the American consumer. “This is an exciting time as we integrate Hillshire Brands and Tyson Foods,” said CEO Donnie Smith of the Hillshire deal, “and I believe that when we look back on this merger years from now, we’ll see it as a watershed event.” If the back half of 2014 is any indication, Smith may be right. Tyson Foods topped off 2014 with an $864 million full-year profit on revenue of $37.58 billion. Revenue and net www.talkbusiness.net
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Feature: Year in Review income are poised for growth in 2015, along with the company’s solidly performing stock value. TURNING 10 The Arkansas economy celebrated three major 10-year anniversaries in 2014. In order of their financial impact, the Fayetteville Shale Play, the Clinton Library and the Fayetteville Tech Park all highlighted their contributions to the Arkansas economy during the last decade. The Fayetteville Shale Play, a NorthCentral Arkansas major natural gas region, introduced a new layer into the state’s mining economy with fresh jobs and billions of dollars of investments. A two-year old study conducted by University of Arkansas economist Kathy Deck projected the economic activity from the gas shale play at $12.7 billion from 2008 to 2012. It has accounted for more than 16,000 new jobs – many of which came during the national recession, which kept Arkansas’ economy from cratering. The shale play’s rise also sparked a jump in natural gas production in Arkansas, propelling the Natural State to become the fourth largest shale gas producer in the U.S. behind only Texas, Louisiana and Pennsylvania. The William Jefferson Clinton Presidential Center also turned 10 in 2014. The 42nd president and Arkansas native has been a godsend to tourism and growth in the capital city. Since the Clinton Library was announced, investment in the downtown areas of Little Rock and North Little Rock has totaled $2.46 billion, with a total economic impact of construction at $3.3 billion. The economic impact of construction of the Clinton Center and ongoing operation of the various organizations housed there is more than $346 million. Not only has it done a lot for investment in downtown, it has been a boon for tourism. Travel expenditures in Pulaski County have increased 68% since the library opened. More than 3 million people have visited the Clinton Center in the last 10 years, with increases in annual visitors every year since 2007. Total tourism-related expenditures of visitors to the Clinton
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Center totaled $691 million since 2005. And, travel-generated revenue in Pulaski County has increased by 41% to more than $28 million in 2013, while revenue from the City of Little Rock Advertising and Promotion tax has increased 65% to $11.9 million in 2013. PHOTO COURTESY OF ARKANSAS PARKS & TOURISM
William Jefferson Clinton Presidential Center
The Fayetteville Tech Park has been no slouch. The Arkansas Research and Technology Park, a “town-and-gown” collaborative effort between the city of Fayetteville and University of Arkansas, helped boost the state’s economy by more than $523 million over the past 10 years. The park has 38 public/private affiliate companies with 196 employees and contributes to about 385 jobs statewide. Based
layoffs in 2014, a sign that five years after the recession Arkansas is improving on the jobs front. Major announcements include an expansion at Dassault Falcon Jet in Little Rock and PECO Foods in Northeast Arkansas. The state’s first superproject, Big River Steel, moved forward despite litigation. BRS broke ground in September on the $1.3 billion steel mill that will employ 550 workers in the steel industry. Another 2,000 jobs are expected during the construction phase. And, there are prospects for supplier companies to locate in Northeast Arkansas to support BRS. The city of Osceola is already courting prospects and looking to expand its infrastructure and airport facilities to accommodate. Among the biggest layoffs of the year occurred in Northwest Arkansas. Superior Industries laid off 500 as it closed its Rogers aluminum wheel facility. It shifted some of its work to its Fayetteville plant and a factory in Mexico. Acxiom and Windstream also went through rounds of layoffs in 2014 as both public companies headquartered in Arkansas attempted to cope with changing technology and telecommunications markets.
on expenditures by the tech park’s affiliates for fiscal 2014, which ended June 30, the research park generated $54.7 million in economic activity statewide and $1.8 million in state and local taxes.
JOBLESS RATE FALLS The overall numbers were better, but there were mixed signals in 2014 for the state’s jobless rate. By year’s end, the Arkansas unemployment rate had fallen to 5.8%, more than 1.5 points below its 7.4% level at the end of 2013. Throughout the year, the state’s overall labor force and employment population continued to slide, leading economists to wonder where the workforce was disappearing. Was it baby boomers retiring? Long-term unemployed giving up looking for work? Or workers moving out of state to find employment elsewhere? Likely, it was a combination of all three, but no statistics could quantify the percentages. Still, the declining unemployment rate was welcome news for an economy that had seen high numbers since the recession began.
JOB ANNOUNCEMENTS VS. LAYOFFS There were more job announcements than
HOME SALES HEALTHY Home sales ticked off another strong year
PHOT0: DOLLARPHOTOCLUB
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– the third in a row – thanks to low interest rates, health inventories and stability in the job market. The improvements spelled good news for realtors, bankers and the home construction industry. Through three quarters and some change in 2014, home sales were on track to rise more than 4% for the full year. The value of those home sales were up more than 3%, indicating solid pricing stability. The year-to-date comparisons were up against what was a robust 2013 in terms of Arkansas home sales and sales values. For example, the 2014 year-to-date home sales are up 18.53% over the same period in 2012 and the value of home sales is up 20.12% compared to the same period in 2012. LOWER GAS PRICES Consumers headed into the holidays with extra money in their pockets, checkbooks and bank accounts and that spelled good news for nearly every industry, especially retailers and the tourism business. Since summertime, gasoline prices have fallen across Arkansas and the U.S. by more than a dollar per gallon. Prior to Memorial Day, the price at the pumps was near $3.50 a gallon in parts of the Natural State. By Christmas, it was not hard to find regular unleaded in the $2 range. Falling crude oil prices worldwide were driving the decrease in gas prices, and on the flip side, those low prices were fueling consumer and business confidence thanks to the cash flow it was generating. TURNER GRAIN DEBACLE The state was tipped off to a farming crisis in August when Speaker of the House Davy Carter, R-Cabot, sent a letter asking for lawmakers to look at breached commodity contracts. “If this holds true, literally tens of millions of hard earned dollars that our farm families were expecting will have disappeared into the heavens,” Carter wrote. The controversy centered on Turner Grain Merchandising, a commodities dealer located in Brinkley. Turner did not pay or delayed payments on crops to farmers that it was supposed to process, leaving many farmers to find alternative brokerage sources
or walk away from their yields. Butch Calhoun, Arkansas’ secretary of agriculture, in October estimated at $50 million the total losses by farmers allegedly cheated out of their crops. Individual losses ranged from $30,000 to more than $2 million. Turner Grain became embattled in legal action and the debacle likely will result in state legislation in 2015. Arkansas has no laws pertaining to grain dealers. It does have
laws pertaining to warehouses, but warehouse owners can choose to be certified by state or federal authorities. Acknowledging the widespread ripple effect the crisis could have on the farming community, AEDC director Grant Tennille said, “One thing the world ignores is that farmers bet their entire nest egg on a yearly basis. The whole debate is not unsolvable, but it shakes people to their core.”
Making health care better starts by putting the patient first. Sister Judy Raley, SCN Board Member
At CHI St. Vincent, we’re constantly looking for ways to make health care better for you and your family. We are guided by a philosophy that was simply stated in 1954 by Sister Michaela Duke, SCN, our leader at that time, who said “the patient comes first!” This still drives everything we do today. The exceptional care we provide is easy to recognize. U.S. News & World Report recently named CHI St. Vincent Infirmary the state’s #1 hospital for the second consecutive year. The nursing care we provide is unmatched in Arkansas, as evidenced A Cost Leader by the prestigious Magnet® status and Pathway to Excellence® designations for 1.52 our hospitals in Little Rock and Morrilton, BETTER VALUE respectively. And data from health care AVERAGE .94 .84 COST consultants McKinsey & Company show that we provide this level of care at a lower CHI UAMS BAPTIST cost than anyone else in central Arkansas. ST. VINCENT That’s how we’re continuing to make health care better for Arkansans.
Above Average
Average
Below Average
SOURCE: McKINSEY & COMPANY OPERATING COST INDEX FOR HOSPITALS – MOCHI
Pathway to Excellence® and Magnet® names and logos are registered trademarks of the American Nurses Credentialing Center. All rights reserved.
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Leadership
Sixth Sense:
Most Pressing Issue As we begin a New Year, armed with well-intended resolutions and a list of things to accomplish, review or change, we asked six business leaders to single out the most pressing issue or biggest challenge they face in 2015 and how they plan to tackle it. By Bill Paddack
Ray Dillon
Denise Thomas
Greg M. Joslin
Since residential housing starts drive Deltic’s financial performance, I am hopeful that Gross Domestic Product (GDP) growth in 2015 will continue to expand at an annual pace of 2.5 to 3% and unemployment rates will continue to decrease to the 5% range as mortgage interest remains at or near current levels. This would make residential housing very affordable for buyers that can qualify, resulting in total housing starts of 1.2 to 1.25 million in 2015. Federal government regulatory rules promulgated through the Environmental Protection Agency continue to make manufacturing plant expansions and modifications to enhance productivity and efficiency difficult to justify and execute timely.
As entrepreneurs, we always set goals – to grow our business and capitalize on new opportunities. It is a fact that 97% of your customer base lives outside the continental United States. Africa is the next big frontier and one of the best opportunities to grow your Arkansas-based company. Consider that South African GDP is $350 billion and Nigeria GDP is $521 billion, growing at an average rate of about 4% per year. Africa has an aggressive emerging middle class with a disposable income. Forging a strategy for market entry, fostering new relationships and establishing business partnerships will help your company increase its bottom line and create jobs in both Arkansas and in Africa. The key to getting started is setting clear, measurable, realistic goals, creating a strategic plan and leveraging resources. Africa has a great need for products, services, development, etc., and Arkansas is naturally positioned to be a key strategic partner. Let us help you reach your goals.
We expect the current increase in commercial real estate (CRE) activity in Arkansas to continue throughout 2015. Investors are taking advantage of the inexpensive lending environment and considering CRE as a key component for overall portfolios; and businesses are looking to lock in competitive lease rates. This encouraging up-swing also means the need for increased dedication to time management. In 2015, I plan to implement a simple “1-2-3” method for managing time and maximizing productivity: • Go to the office early at least one day a week. Two uninterrupted hours before co-workers arrive and technology starts are invaluable for focusing on projects and tackling to-do list tasks. • Reach out to two people each week who are not current clients. • Before going to bed, identify the top three things that need to be done the next morning – and then do them before answering e-mails, phone calls or texts. Focusing on these steps will help ensure that I’m not just “putting out fires” every day.
President & CEO Deltic Timber Corp. El Dorado
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Director of External Relations World Trade Center Arkansas Rogers
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Principal Irwin Partners Little Rock
Michael B. Hargis, Ph.D.
Mark Waldrip
Harry Hamlin
Our most important task, as a College of Business, is to provide a high-quality business education that prepares students for meaningful careers. We accomplish this by working with industry partners to design programs that are responsive to the needs of the businesses that hire our graduates. We have had great success over the last few years and have introduced a new major in innovation and entrepreneurship; added an emphasis area in supply chain management and logistics; helped launch EPIC residential college focusing on entrepreneurship, public scholarship, innovation and community engagement; and updated our MBA curriculum to allow students to pursue concentrations in finance/banking, health services administration or information management. These changes have been well received and we have seen positive enrollment growth in our academic programs. In 2015, we will continue our efforts to build partnerships with local, regional and national businesses so that we can make sure that our students are prepared for their careers.
We in agri-business must meet the challenge to provide the general public with good information and sound science that support the truth – that genetically enhanced (GM) crops and foods are completely safe. It is incumbent upon us to provide accurate data in order to dispel the misconceptions which exist. The consumer must be informed that, over several decades of study, there has never been one single incident of any adverse impact on human health resulting from the human consumption of genetically enhanced food products. The World Health Organization, as a leading authority on public health, should continue to provide data from years of research, which reinforces the safety of genetically enhanced foods. We cannot expect people to make intelligent decisions until we provide them with accurate information.
The practice of law, as with many other services, is increasingly becoming commoditized. As a business lawyer, the challenge is to deliver additional value to my clients. That means really understanding their business and then partnering with them to solve problems, legal or otherwise. Lawyers are used to being presented with a problem, analyzing the problem and then finding a solution. In order to continue to be successful, we need to train our younger business attorneys to understand that not all legal counsel comes from a book. Whether it’s the practice of law or any other service, differentiating yourself from the next person requires that you bring added value to the table.
Dean & Associate Professor of Management College of Business, UCA Conway
Partner Armor Seed, LLC Moro
Member Mitchell Williams Law Little Rock
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Executive Q&A PHOTOS COURTESY OF SAM M. WALTON COLLEGE OF BUSINESS
Wes Kemp, a former ABF Freight executive, finds it gratifying that University of Arkansas students have embraced his course on capitalism.
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Executive in Residence
Former ABF Freight President and CEO Wes Kemp isn’t spending his retirement years on the golf course. Instead, he’s worked to develop a course that acquaints students with the principles and ethics of free-market capitalism. By Bill Paddack
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t was a simple question. Followed by two more. A little over six years ago, Wes Kemp was speaking to a class of students at the University of Arkansas at Fayetteville, as he often was asked to do while serving as an executive at ABF Freight System, Inc., in Fort Smith. The exchange that took place that day may just be one of the reasons that he’s now spending part of his so-called retirement years as executive in residence at the UA’s Walton College of Business, sharing his years of experience and expertise with the leaders of tomorrow. We’ll let him explain. “I was scheduled to speak to one of Professor John Ozment’s classes in November of 2008 and during the Q&A following my lecture, I was asked three questions that served as a pivotal point, although I really didn’t realize it at the time,” Kemp recalled. “The first question was ‘What keeps you up at night?’ which I had been asked numerous times before. I usually told students that I sleep quite well, which is one of the benefits of surrounding yourself with great people who are responsible and can be relied upon to excel at their work. But, at the particular time of the question, I wasn’t sleeping very well. “I related to them that I was named president of ABF in August of 2008 and six weeks later the bottom fell out of the economy. What became known as the Great Recession was set in motion. By November, we had lost 25 percent of our top-line revenue and frankly had a real mess on our hands. About half the revenue loss was business volume and the other half pricing yield. We were accustomed to dealing with down-cycles in the economy but nothing of this magnitude. “We moved quickly to scale the company
and, as difficult as it was, laid off around 3,000 employees, which was unprecedented in our history. Even though we reduced other discretionary spending categories, we continued to operate at a loss. A large part of our cost structure was fixed and semivariable in nature, which take considerably more time to scale than do the variable categories. “The problems presented by the recession were not of our doing but they had to be dealt with, and it required more than our typical 10 hours per day, five days per week to work our way through them, including some fairly sleepless nights. So, I told the students that the state of the economy was the reason I wasn’t resting well.” MORE QUESTIONS That’s when someone asked Kemp a second question: “What caused the problem?” Kemp said he “described what I believed and still believe was at its root, which was government policy. I described the series of initiatives that frankly made the disaster inevitable. When things are done that distort markets, there will be a price to pay and a day of reckoning at some point. It’s simply a matter of time. The bursting of the ‘housing bubble’ was one such thing. So, I described the government policies and actions that created it. “The third question asked was ‘What should be done to correct and prevent the problem from happening again?’ and I told them that government should stop getting in the way and let the power of free-market capitalism function as intended. “I’ve been greatly influenced by the works of Milton Friedman and Ayn Rand,” Kemp explained, “largely because we’re seeing play
out what they essentially predicted. So, I described to the class what I believe is the proper role of government and how so very important it is to understand, honor and protect what our founders declared. That is our right to life, liberty and the pursuit of happiness. While there will still be downcycles under capitalism, typically they won’t be extreme and nearly as long as those caused by government’s distorting of markets. “Well, the students seemed to perk up and were much more interested in what I had to say about the economy than my lecture on the trucking business. It also occurred to me that I was providing most of the students with information they hadn’t heard before. Since their response was so positive, I made it a regular part of my future lectures. There were a couple of professors in class that November day and they summoned others to attend future lectures. The next thing I know I was asked to deliver the keynote address at a conference on campus the following spring which went well.” Eventually, it wasn’t the students asking the questions of Kemp, but Matthew A. Waller, who is currently the associate dean for executive education at the Walton College and the Garrison Endowed Chair in Supply Chain Management as well as the Supply Chain Management Department Chair. A COURSE IN MIND Waller asked Kemp, who retired from ABF in January 2012, if he would consider teaching a class at the university. And while he was willing to let Kemp teach just about whatever he wanted, he was hoping Kemp would consider building a course around his lecture on capitalism. www.talkbusiness.net
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Executive Q&A: Kemp “Wes Kemp’s 42 years of experience at ABF Freight System, Inc., which culminated as president and CEO, provides a plethora of examples that are useful in the classroom,” Waller said in a press release early in 2014 that announced a $100,000 gift from Kemp and his wife, Sharon, to the university in support of the course. “Wes is studentcentered, and his student evaluations are stellar.” That Kemp – after consideration and conversations with other UA officials – took Waller up on his offer gets us to his career after his career. We caught up with him recently to ask about the response to the course, including the most recent online version, “The Logistics of Capitalism,” his passion for the works of Friedman and Rand and how they’re still applicable, plus his thoughts on the challenges facing the trucking industry today and the state of the nation’s infrastructure. TB&P: So once you agreed to teach the course – which will be offered again next fall – you had to develop it. Tell us a little about that and what the response has been. Kemp: When I retired, I was still incensed by how frequently I heard capitalism being blamed for the recession, which I believe is absolute nonsense. What drives people to hold such an opinion is mostly out of ignorance on the one hand caused by being poorly schooled on the subject, or politics on the other wherein a party attempts to deflect blame away from something in which they have a vested interest. I can’t do much about the politics, but I was being afforded the opportunity to try and do something about the schooling albeit small. So in January of 2012, I went to work as an executive in residence in the Walton College and started building the course primarily around the works of two people. The first is Milton Friedman, Nobel Prize winner in economic sciences and famous for his “Free-to-Choose” PBS TV series in 1980. And, the second is Ayn Rand, noted novelist, philosopher and screenwriter.
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Many consider Miss Rand’s novel “Atlas Shrugged” prophetic. As Dr. Yaron Brook of the Ayn Rand Institute described it, “In ‘Atlas Shrugged,’ Rand tells the story of the U.S. economy crumbling under the weight of crushing government interventions and regulations. Meanwhile, blaming greed and the free market, Washington responds with more controls that only deepen the crisis. Sound familiar?” And there are certainly differences of opinion on these two personalities, Ayn Rand in particular. When I run into folks and mention Ayn Rand’s name, I find they’re either very fond of her work or they absolutely hate her. After inquiring, I usually learn that the haters have done
“Government should stop getting in the way and let the power of free-market capitalism function as intended.” – Wes Kemp very little study of her work. Unfortunately, they’ve usually based their opinion on what they’ve heard from others. The course is based on the fact that capitalism is a socio-economic system deeply rooted in the rights of individuals, including property rights. People have the right to own property and no other person or entity has the right to take that property by force or by fraud. Ownership can only change through free trade wherein two consenting parties agree to exchange value for value. True capitalism limits the role of government to protecting those rights from domestic threats by maintaining an effective police force and from foreign threats by keeping a strong military. Also,
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the government is to maintain the judicial system wherein criminals are prosecuted and our civil disputes are adjudicated in a rational and objective manner. Other than that, government’s role should be limited. The initiation of force is banned under capitalism, reserved only for government use and then only when necessary to protect individual rights. In spring 2012, a young man arrived on campus by the name of Jason Arentz. Jason had just received his Ph.D. in economics from George Mason University. Of course, GMU is renowned for its study of economics and is home to such free-market thinkers as Walter Williams, Russell Roberts, Don Boudreaux and Peter Boettke. Jason had accompanied his wife to the U of A and was seeking employment. So, we started working together on the capitalism project. I had never even written a syllabus before, and he was most helpful in not only guiding me through the course development process, but also sharpening the course content. We ended up teaching the first class as a team. Currently, he teaches the classroom and I teach the online version of the course. The classes have gone very well, and in some respects, students seemed starved for the course’s content. Their interest and reaction have been better than I might have anticipated. Of course, there’s a lot of discussion and debate on redefining terms and rethinking some basic questions such as what is capitalism, what is a right, what is greed, is self-interest bad, what’s selfishness, how do we best help the poor, etc. It’s new ground for students as surveys indicate that there’s little if any duplication of our content in other courses. And, in course evaluations at semesters’ end, a number of students have stated the course tested their critical thinking skills like no other and is the best course they’ve taken so far in college. Jason and I both find this very gratifying. TB&P: I would imagine this is something you’re very passionate about since you’ve long appreciated the works of Rand and
and taxing. With the public so ill informed Friedman. Why is their work still important TB&P: Expand on that a little, if you don’t about true capitalism and the proper role today? mind, and let’s talk about government of government, it’s become a never-ending Kemp: At the root of my concern is the policy and how it affects the economy and process. future of our country, the preserving of our American business. Of course, entitlements are a huge part constitutional republic. Most people that I Kemp: The funding of runaway spending of our runaway spending, and the blame encounter know that the fiscal practices of by government requires taking a disproporis bipartisan as both Republicans and our federal government today simply aren’t tionate amount of money out of the private Democrats have had a hand in expanding sustainable. And when you study and reflect sector where money is spent most producgovernment beyond its means. And, the sad back on Dr. Friedman’s and Miss Rand’s tively. Goods are produced in the private part about it is that it’s mostly done under work and their warning of the dangers of an sector by people working to better themever-expanding, intrusive government, it’s really not surprising. There have to be limitations on our taxing and spending … I believe there’s a day of reckoning coming at some point in time. It may not be in my lifetime, but when it does, we’re going to need someone other than the Keynesian thinkers of today who know what to do. You gain that knowledge by studying Friedman and Rand and others kindred minds. The word “sustainability” is used a lot these days, and usually refers to the environment in one way or another, which is fine. We certainly shouldn’t trash the planet. But I wish I heard more concern about sustaining our republic. Wes Kemp visits with students at the University of Arkansas Walton College of Business. There’s never been a form of government that has the guise of helping people. We all should done more good for more people than our selves. Competition ensures responsible constitutional republic, which freed people spending by private enterprises. When firms be interested in helping people, but I don’t think government does it as efficiently or to pursue their rational self-interests, and depart from that, they fail, and when they effectively as does the private sector. The I believe it’s at risk. It’s at risk because excel, they reinvest their earnings, which best way to help people is to let business we’ve lost our way in terms of how best to results in growth and greater employment, get to the business of business under the tax, spend and govern. We need a strong i.e., more jobs. principles of free-market capitalism. This government but its role must be limited and Government has no competition. We leads to a robust economy wherein there is we’ve departed from that substantially. As rely on elected officials who hold office by so much commerce firms must compete for Dr. Friedman once put it, “It’s turned many pleasing voters, and over the years many employees. When workers are in demand, of us into children.” And, since inequality voters have acquired a sense of entitlement their pay, benefits and work environment seems to be a coming political theme, I to government benefits, diminishing the improve naturally, not by government edict. hope we don’t forget Dr. Friedman’s famous importance of relying on our right to life, quote: “A society that puts equality before liberty and the pursuit of happiness. TB&P: You had a long career with ABF. What freedom will get neither. A society that Consequently, to hold office and maintain do you consider to be your top accomplishputs freedom before equality will get a high their jobs, legislators promise more entitlement and please talk a little bit about degree of both.” ments, which requires even more spending www.talkbusiness.net
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Executive Q&A: Kemp how the industry changed during that time. Kemp: ABF is a source of great pride for me, and I think my work contributed to its success but not any more than a lot of other people. As far as my top accomplishment, I’m not sure I would lay claim to a single thing as I don’t recall anything I did solely on my own. I always had support and assistance from the folks around me. Other than the people I became acquainted with and the ability to provide well for my family, I think I most value and appreciate the company for the learning opportunity it provided. I felt as though I was still learning the business on the day I retired, and that was a blessing as I was never bored. The acquisitions we made over the years were interesting and never easy. I always felt a sense of accomplishment once we survived them and started prospering again. Deregulation of the industry was a big deal not only to ABF but to the industry. That experience actually shaped my opinion on government policy. After its passage and witnessing the good things coming out of it a few years down the road, I learned firsthand the power in freeing markets. I also take considerable pride in the fact that at the end of 2011, my last year with the company, ABF was the sole surviving legacy carrier since the industry was deregulated in 1980 still operating under the same name.
The driver shortage has been a chronic problem for a long time. It peaked for us between 2004 and 2006 as I recall. Even though we paid the top wages and benefits in the industry, we still had trouble finding qualified drivers. That changed for a while after the recession, but I always felt it was but a pause and would raise its ugly head again, and apparently it has. I still believe the problem is fundamentally pay, benefits, working conditions and providing an opportunity for drivers to advance well beyond the base pay when they and their company excel. You’ll always be shorthanded during peak periods so companies need
stood that a person can make a good, honest, dignified living driving a truck. I’ve noted that the drivers who acquire some basic understanding of transportation logistics and supply chain management often take pride in their work as they understand its relevance. Transporting goods from coast-to-coast and border-toborder in a timely, efficient and effective manner is critical to our country’s economy. Those performing the work deserve our respect and they don’t get it often enough. TB&P: From your experience as both a transportation executive and now a business instructor, what are your perspectives on our infrastructure needs and how to pay for them? Kemp: If the reports are correct, and I have no reason to believe they aren’t, we have massive infrastructure in disrepair. Here are the basics. Highways and bridges deteriorate due to time, weather, stress and the quality of construction. Heavier vehicles impose more stress than lighter vehicles. Consequently, trucks likely shorten the life of pavement more than passenger cars and should pay for their fair share in the cost of repair and maintenance. Given that, the only remaining question is what’s the right number? What’s the industry’s fair share of the tax burden? How much is enough? Some of my trucking friends may not like this, but if we’re not paying enough to cover our fair share, then tax us until we are. Just make sure the metrics of that calculation is rooted in sound science and that it’s objectively for the right reasons, not in reaction to the alarmists with hidden agendas and political pull. In addition, privatization should not be ruled out. People fear price gouging by profit seekers under such an arrangement. However, the process of seeking profits in a competitive environment typically produces better products at better prices than does the nonprofit, noncompetitive approach by government. Are highways and bridges really an exception?
“Transporting goods from coast-to-coast and border-to-border in a timely, efficient and effective manner is critical to our country’s economy. Those performing the work deserve our respect and they don’t get it often enough. “ – Wes Kemp
TB&P: The trucking industry faces a number of challenges – such as a shortage of drivers being one of them. What are your thoughts on what trucking companies need to do to meet these challenges? Kemp: I certainly have some opinions but honestly they may be outdated. Bear in mind, I’m not very close to the industry or ABF anymore. I still read and find Transport Topics interesting. And, I have lunch with Robert Young (ArcBest Corp. chairman) every month or so. However, we seldom talk business. We usually spend the time catching up on family matters, talking politics or discussing how the ducks are flying.
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a relief valve of sorts. Employment is not the solution as drivers can’t make a living working only two to three months per year. Expanding the use of intermodal services or owner operators typically help during these times. On the working conditions, the companies that can get their drivers home every day or every other day will improve their odds of recruiting and keeping drivers more than those that don’t. I recall carriers that kept drivers away from home three or four weeks at a time, and they also, not so coincidently, had the greatest turnover and difficulty hiring qualified drivers, which is very costly and disruptive to the business. Also, I’m not sure it’s generally under-
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