Forest NewsWatch is pleased to present this Leadership Interview with Tom Stephens, the Chairman and CEO of Boise Cascade, a position he has held since November 2004. One of the most prominent positions he held prior to that was President and CEO of MacMillan Bloedel in Canada. In this interview, Mr. Stephens begins with the highlights of his time at MacMillan Bloedel and the lessons learned from working with environmental organizations, and how those experiences carried over to Boise Cascade. He discusses his company’s choice of SFI for certification and shares his perspective on the future development of certification schemes. He talks about his recent testimony before Congress in relation to climate change, how Boise Cascade is addressing the issue, and why he believes in contributing to the fight against climate change. Mr. Stephens explains why he believes the transition to TIMOs and REITs was inevitable and then talks about the Softwood Lumber Agreement, explaining why it was a poor move, and comments on the US-Canada trade relations. Looking at his career at Boise, Tom Stephens concludes by describing his Business Savvy training and Employee Advisory Committee initiatives and why he strongly believes in personal and professional development in the workplace.
Mr. Stephens, what brought you to work in the forestry sector?
I grew up in the business. My family had a forestry business down in Arkansas and I started driving in logging trucks when I was about 14 years old.
Your career saw you become the CEO of MacMillan Bloedel. Can you retrospectively comment on this experience, particularly the decision to move towards variable retention logging?
It was one of the high points of my life. I thoroughly enjoyed the opportunity to work in Canada and work with the people at MacMillan Bloedel. There were some unique issues that we had the opportunity to deal with, and that was something I will always remember and cherish. Regarding variable retention, we put together a team of professionals to look at the alternatives for logging in the unique forests of British Columbia. It was amazing that the right economic solution and the right environmental solution happened to overlap. So no, once we had the facts down on the table and the team made their recommendation, it was one of the easiest decisions I’ve ever had to make.
How did you secure the buy-in from environmentalists for this new logging regime while there was some skepticism around from professional foresters?
It was very easy. One of my favourite phrases is that "communication is the key to resolving conflicts." The ultimate form of communication is participation. We asked the environmentalists, the government, and all the stakeholders to participate up front and give us their points of view and perspectives. Having asked for their input rather than doing our study in our own teepee and then telling people what the conclusion was, this was the way to engage all the interested parties up front.
Are there any other lessons you can draw from that particular experience with MacMillan Bloedel?
Yes. Within the first few weeks after I joined Boise Cascade, we made a tour of all the key environmental groups and I introduced myself: "Hello, I’m Tom Stephens. I’m the new CEO at Boise Cascade. What are your thought on the principles and values that we should address as we put together our business plan?" We asked them what their views were before we actually began the planning process. When we did finish our 45-day business plan, they had already had the opportunity to give us their guidance. I think being a good listener is the key to resolving most differences of opinion.
What kind of effect did the agreement reached with Rainforest Action Network have on the day-to-day operations of Boise Cascade?
Actually, that was before I joined the company, so I don’t think it would be appropriate for me to comment on it. Yet, I’m not necessarily sure I would call it an "agreement." I’m not aware of any agreement between the two parties, either before I came or after. I can assure you that since I joined the company, we have tried very hard to listen to all interested parties.
Now that Boise Cascade no longer owns forestlands, do you think that SFI is a better system for the needs of Boise Cascade than FSC?
Both systems of certification, I think, appropriately address the issues. It’s important to think of the certification systems as in a constant state of evolution. Both systems are driven by, and will evolve based on, expectations. They’re not static. Certainly a huge amount of work has gone into SFI, and Boise has been a major contributor to that process. It has evolved, matured, and grown to a new level of independence. The early issues with SFI were primarily not about the science, but about its independence. That’s now been addressed with its new organization.
Can you comment in relation to the emergence of a "family forest" under FSC and the potential for Tree Farm to address the needs of small- to medium-sized holdings?
I think it’s all part of the natural evolution. I think ten years from now, you will be able to throw a blanket over the different systems and there frankly won’t be a material difference.
Do you think that the PEFC endorsement of SFI brought any tangible benefits?
Yes. I think the bigger the tent, the more acceptance there will be.
How do you see the current environmental campaigns in the forest and paper sector, for example, those targeting the catalog industry?
Well, that has been the standard procedure for quite some time now—rather than attack the producer, you attack the producer’s customer. That’s been a major part of the environmental groups’ work for some time and I don’t see it changing. It’s just a way of applying pressure.
Does it affect your business at this point?
We pay very close attention to those issues and we work with our customers to make sure they understand what we’re doing to be an appropriate and environmentally-friendly supplier. We listen very carefully to what our customers ask of us and do our very best to comply. But again, this is an evolving situation. As an example, I testified to Congress in Washington, D.C. two weeks ago on climate change and urged the government to move ahead. One Congressman asked me why a paper company would take such an aggressive stance, and I told him it was because of three reasons: 1) Our customers were asking us what our climate change principles were, 2) My employees thought we should be part of a solution to the problem and not ignore it, and 3) My grandchildren asked me, "Granddad, what are you doing about climate change?" Like most businesses, we are driven and we are part of an economic system and want to do our part to stay in safety and retain our social license.
You mentioned during your testimony that your ambition is a 10% further decrease in greenhouse gas emissions. Do you think that eventually Boise Cascade could do more by embracing, for example, biofuels like cellulosic ethanol, taking into account that your timeframe is by 2014?
Yes, that’s part of our business plan. Obviously, though, this takes a huge amount of capital investment, so we’re in the process today of doing more detailed engineering to underpin those goals and objectives. But yes, biomass fuels will be a major part of our plan.
How do you qualify your partnership with the EPA’s Climate Leaders program?
It’s part of our philosophy—rather than ignoring a problem, aggressively get out ahead of it and work with all of our stakeholders. Obviously the regulators are major stakeholders, whether it’s climate change or workplace safety. You always want to be upfront and work with the regulator, not against the regulator.
Do you feel supported at the state and federal levels regarding climate change-related actions?
I think it’s very confusing, but it’s evolving very quickly right now. I think the knowledge base of government is doubling weekly, as committee hearings occur and as the facts are put on the table. Climate change is an issue that’s moving faster than any other issue I’ve seen in my career. The recent study by the experts saying that it’s highly probable that greenhouse gases are having an effect on the climate has certainly changed public opinions. In fact, it’s changed my personal opinion. Rather than talking about greenhouse gases as being a "possible" cause of climate change, I’m now using the word "probable." It’s our evolving science, and now we’re in the process of our political understanding.
Recent years have seen the emergence of TIMOs and REITs on the forest and paper landscape. What is your take on this transformation?
If you look at it from an economic perspective, it was inevitable that the assets of different forest products companies be divided into different parts. The return on capital is our industry has not been that equipped for quite some time, and timberland is unique in that it has a high return on value to the long-term investor looking for capital appreciation rather than short-term income. Having funds and long-term investors owning timberlands is a more logical economic combination. On the other hand, manufacturers are on the shorter-term capital horizon and need to focus on deploying their capital in that way. I think it’s a natural outcome after too many years of not earning an adequate return based on the potential value of the underlying assets.
Can you comment on the Softwood Lumber Agreement and the trade relationship with Canada?
A subject on which I have spent a lot of time! I would say this: the Agreement is highly flawed, with the major flaw being the assumption that you could create a formula that is a substitute for a free market. Nobody is smart enough to devise a pricing formula that would substitute for an efficient market. I’m not surprised at all that people are beginning to rattle their sabers and beat their drums between Canada and the US over softwood again—it was inevitable. Nobody is smart enough to design a pricing system for that commodity.
Isn’t it correct that there have been attempts for approximately 60 years to regulate this trade? The outcomes of these negotiations are always pricing arrangements with export levies or similar systems? From your perspective, what would it take to have a solution that would entail free trade?
That’s a very complicated question over which a lot has been written and said, and it’s very hard to simplify. But this is what I used to tell my friends in Canada: "There’s nothing Canada can do to make a US lumber producer feel good about Canadian lumber coming across the border." That’s just impossible. I also told my Canadian friends that they were negotiating with the wrong person—never negotiate with your competitor. You need to resolve the issue with your customer. That has not yet happened, but the problem will not go away. The Softwood Lumber Agreement did not solve the problem and in many respects only made it worse.
You are aware that some of the customers—I’m talking about the National Association of Home Builders—started to approach other suppliers like Russia. Do you fear this potential outcome of new producers outside the Agreement coming into the market, even potentially at lower prices?
Absolutely—and it’s already happening. Several months ago I was in Baltimore, where we have a major distribution yard, and a significant amount of the dimension lumber was imported not from Canada but from Northern Europe.
So Scandinavia and Russia are the first competitors emerging?
Yes. The idea that your can just deal with Canada in terms of forest products is downright silly. It’s a worldwide market and I think the whole agreement is fundamentally flawed. I was opposed to it.
Talking about the global scene, how do you see North America competing against Latin America and Asia in the medium run?
I think in terms of building materials, we can be very competitive. We have a healthy third forest, so there is a significant amount of timber available to our industry, particularly in the South. In the Pacific Northwest it’s going to be more difficult as most of the land in that area is owned by government entities and logging has been significantly restricted. When you add it all up, we as a country have to have imported lumber; we simply don’t have enough wood to supply the demand. I think that’s the interesting part of the issue. If 35% of your lumber has to come into the US and you artificially price it, it doesn’t make a lot of sense. Certainly with our equipment and our technology we can and should be very competitive, if we have a reasonable chance to buy and to log.
Can you share your perspective on the success of Business Savvy and the Employee Advisory Council you created? In your Sustainability Report, you put a lot of emphasis on personal development and professional development of the workforce, which is not that commonly featured.
Boise is the third company where I’ve had the opportunity to deploy that kind of program, Business Savvy training and having an Employee Advisory Council. At Boise, we’ve taken it one step further with a very comprehensive training program focusing on how we can learn to work together in a more effective way and expand participation in how we run the company. Very importantly, we’re using a technique that we really developed in Canada, and that’s how to deal with breakdowns. Too much of business training and business process has been focused on how to do breakthroughs. The things we learned in Canada include how inevitably, in businesses and in organizations, there are breakdowns, and unless you have a way to manage them, you can never get to the breakthroughs. It’s become part of our approach to the way we run our business. We have a new vocabulary that we all use so that we recognize a breakdown when we see it. Another part of our approach to management that we developed in Canada is the idea of settling old issues. We call them "rackets." They are historical issues, conflicts, or disagreements that need to be put at rest. In order to do this, you have to get 10,000 people using the same vocabulary and having conversations with possibilities. It’s involved an enormous effort on training, but the training was focused on making us more effective working together, whether you’re operating a machine or you’re operating a computer at headquarters.
Are there any other aspects you would like to comment on?
It’s been a delight to work with Boise-Cascade and it’s been fascinating to watch our industry change. Georgia-Pacific is now private, International Paper is selling $11-billion worth of assets, and Weyerhaeuser is getting out of the white paper business. Looking back on what’s happened over the last three years, it’s interesting that Boise is the most stable company of the lot.
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About William Thomas Stephens
William Thomas Stephens was appointed Chairman and Chief Executive Officer of Boise Cascade headquartered in Boise, Idaho, November 1, 2004. Prior to this appointment, he had been retired as the President and Chief Executive Officer of MacMillan Bloedel, Canada’s largest forest products company. MacMillan Bloedel Ltd. merged with Weyerhaeuser in 1999.
From 1986 to 1996, Stephens was Chairman, CEO, and President of Manville Corporation, headquartered in Denver, Colorado. From 1985 to 1986, he was Executive Vice President and Chief Financial Officer for Manville. He started his career with Olinkraft Inc., a predecessor of Riverwood and Manville Forest Products before becoming President and CEO of Manville Forest Products in 1982.
Mr. Stephens is a director of the American Forest & Paper Association, a director of TransCanada PipeLines Ltd., a member of the National Council for Air and Stream Improvement, Inc. (NCASI), and a trustee of The Putnam Funds. Previously, he has served as a director of Xcel Energies, Inc., CRSS, Ball Corporation Riverwood, Stillwater Mining, Norske Skog Canada Limited, Qwest Communications, and Mail-Well, Inc. He also served as a trustee of the Eagle-Pitcher Asbestos Health Trust.
Mr. Stephens has a Masters degree in Industrial Engineering from the University of Arkansas and was recognized as a Distinguished Alumni by that university in 1994.