CEBC IN THE NEWS

Neal St. Anthony on Business

Doing Reell Good 
- Company's Patience Pays Off

Published Friday, January 24, 2003 in the Star Tribune.

By Neal St. Anthony

Management and workers at Reell Precision Manufacturing Corp. in suburban St. Paul continue to demonstrate that fairness is good for business.

In fiscal 2001, the Vadnais Heights company weathered a severe downturn in its core business of springs and hinges for laptop computers, incurring a $200,000 loss. Rather than lay off anyone, managers and workers -- most of whom have a stake in the private company -- elected to take wage cuts. The cuts ranged from 17 percent among the best-paid managers to 7 percent for hourly workers. Those who made less than $11.40 per hour were exempt.

The privately held, 32-year-old Reell rebounded in 2002 to a $1.5 million net profit on a more than 25 percent gain in revenue to $38 million. The wage cuts were restored early in 2002, and pay raises last fall averaged 3 percent. The company also granted year-end bonuses, retirement and stock-purchase contributions.

What's more, employment grew from 260 to 305 at Reell and Vadnais Technologies Corp., a smaller, fast-growing subsidiary that makes pacemaker leads and catheter parts for the medical-parts industry.

To top off the rebound, Reell -- last year recognized in Minnesota by the Center for Ethical Business Cultures -- this month was named the small-business category winner of the American Business Ethics Award given by the Society of Financial Service Professionals.

The award, established in 1994, recognizes U.S. companies that exemplify high standards of ethical behavior routinely and in response to crises.

"It's a superb company, and it should serve as a role model," said Fred Zimmerman, a University of St. Thomas professor of engineering and technology management.

Zimmerman, also a veteran corporate manager, has served on 16 corporate boards in 30-plus years.

"I've been through their plant and I know the people. Their ethics are integrated into their success. . . . And there are no issues of excessive executive pay," he said.

Reell's two senior executives, Steve Wikstrom and Bob Carlson, limit themselves to pay of about $130,000 -- or roughly seven times that of an entry-level worker. Hourly workers at the shop can top $25 an hour.

That's in contrast to many other companies where CEO pay can top 50 times that of the average worker.

Executive compensation, improved corporate governance and living within the law are hot topics in a corporate America glutted with marquee examples of princely pay for poor performance and boardroom self-dealing.

"We are deeply convinced that people are most likely to behave ethically when the motivation for such behavior comes from within," said Wikstrom, a 20-year Reell vet. "Our efforts focus primarily on providing an environment, policy benefit and relationships that inspire rather than coerce ethical behavior."

This isn't claptrap.

The Center for Ethical Business Cultures, associated with St. Thomas and the University of Minnesota, last year concluded from a review of numerous studies that companies that operate ethically and in the interest of shareholders, employees and other stakeholders and that deal fairly with business downturns are also the best long-term financial performers.

Carlson, 60, a West Point-trained engineer, combat veteran of Vietnam and Ivy League MBA, said he grew frustrated working for larger companies where he saw lip service paid to worker ideas and initiatives as executives grew richer and more distant.

He attributes the rebound at Reell in large part to a motivated sales staff and designers and workers who own a piece of the company and were ready to make the most of a business pickup.

"Business has recovered quite well," Carlson said. "The recovery feels pretty fragile. We don't know how sustainable it is. But it was right to pay out the bonuses and make the employee-stock contributions. They were earned.

"We are growing, and that's nice. . . . We're privately held. But our stock valuation went up 53 percent last year, based on a valuation of Reell we had done by Valuation Counselors."

Kim's two hats

Jay Kim, general counsel to Carl Pohlad's Marquette Financial Companies for a decade, has affiliated with Lindquist & Vennum on an "of counsel" basis.

Kim will continue as part-time general counsel to Marquette. But most of his staff and a lot of the work disappeared with last year's sale of Marquette Banks to Wells Fargo & Co. for an estimated

$1 billion.

"I thought I'd like to get out and use some of the skills and personal capital I've built up. And some of what I'll be doing is working with some of the people who have moved on from Marquette to start new banks, or other financial services organizations," Kim said.

The somewhat unique arrangement will allow Kim to serve his old clients at Marquette as well as generate some new business for the 160-lawyer Lindquist and Kim.

The author

Neal St. Anthony reports on companies, people and trends in the Twin Cities business community. His column appears Tuesdays and Fridays.

© Copyright 2003 Star Tribune. All rights reserved.

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