Ivey leaves behind a legacy that stretches beyond the boardroom

Susan Ivey took over Reynolds American Inc. in July 2004 as an industry insider from Brown and Williamson Tobacco Corp., but an outsider to the culture of Reynolds and Forsyth County.

She retires Monday as chief executive and president after 61/2 years, leaving behind not just the transformation of Reynolds into an innovative "total tobacco company," but a legacy that will linger in the larger community, particularly upon the next generation of female community leaders.

Mayor Allen Joines said that Ivey "has been an extraordinary leader at Reynolds and in our community. She has made an enormous difference in the economic and social condition of Winston-Salem, and I will miss working with her."

Ivey said that it would not have been her nature to merely view Winston-Salem from her 15th-floor corner office. "From day one, I was made to feel welcome, and I've thoroughly enjoyed participating in community activities," Ivey said.

Stories abound about Ivey's energetic contributions to nonprofit organizations as large as United Way of Forsyth County, the Winston-Salem YWCA and Salem College, and as small as Senior Services Inc. and the Stokes County Arts Council.

But perhaps Ivey's most hands-on effort was establishing the Women's Leadership Council of the local United Way chapter in 2007, which has about 850 participants.

Jean Adams, the chairwoman of the initiative, said that by providing volunteer, education and network opportunities to its members, the council "allows women to be connected to their giving."

It has raised more than $1.5 million to support United Way programs aimed at boosting the county graduation rate to 90 percent by 2018 by targeting the needs of middle school students.

Ivey encouraged the R.J. Reynolds Foundation to provide $200,000 a year for five years to motivate council participants to put their money where their hearts were. After Reynolds offers a $500 match for a $500 gift in year one, participants are asked to provide $100 more as Reynolds decreases by $100 until they get to a $1,000 gift.

"I was so pleasantly surprised how Susan embraced this community given she's leading a Fortune 500 company," said Sallye Liner, the chief clinical officer at Novant Health Inc. and the 2011 chairwoman for the United Way community campaign.

"She didn't view her role as doing the work for us," Liner said. "Instead, she facilitated, invited, encouraged and spoke."

The council is establishing an award in Ivey's honor for her seed-planting efforts.

Ivey said that she has "taken great pleasure" in establishing the council. "Our goal has been to inspire women to fulfill their potential," she said.

Ivey said she recognized quickly that her biggest challenge at Reynolds went beyond just merging two competitors — R.J. Reynolds Tobacco Co. and Brown and Williamson. She also would have to stitch together two proud corporate cultures.

"I'm an optimistic person, and I felt the employees could do it," Ivey said. "But we were asking them to dream that it would work even though there was no evidence it would."

What helped smooth the transition, Ivey said, was creating a Reynolds culture from the best of both companies rather than "smash them together."

"We wanted to create a culture that was forward-looking and energized, as well as productive and efficient and growing earnings in a very competitive marketplace," Ivey said. "That culture has enabled Reynolds to compete successfully and profitably across the tobacco spectrum. That has been very satisfying."

Ivey acknowledged the decision to focus Reynolds on four key brands — Camel and Pall Mall in cigarettes, Grizzly in moist snuff and Natural American Spirit in additive-free tobacco — "made a lot of people nervous."

"They would say, 'What if you pick the wrong ones?' Yet, each of those brands ended 2010 with record-high market shares, and our earnings are very strong."

Daniel "Daan" Delen, who takes over as chief executive and president Tuesday, said that Ivey "painted a positive, optimistic vision for the future that employees could understand."

"Like in many mergers, we may have had 20 percent of the employees there at the beginning. But day in and day out, that number kept growing until it literally infected the whole company."

A lot of mergers fail "because management ignores culture," Ivey said.

"We spent a long time revamping all the reward systems, all the performance appraisals, all the succession planning systems. We only have two assets as a consumer-goods business — brands and people, and people run the brands, so we spent a lot of time building up leadership and accountability."

* * * * *

Ivey also spurred Reynolds' attempt to gain a reputation — once unthinkable for a tobacco manufacturer — as an innovator of products that could be less harmful to consumers than cigarettes. The topper so far has been buying a company, Niconovum, that specializes in smoking-cessation products.

Ivey's legacy is not all positive for the community, as the company continued a 28-year effort to pare its work force to balance consumer demand for its products.

But even though Reynolds had an 18 percent loss of local jobs, or about 600, during her years as chief executive, she slowed the pace of cuts compared with the loss of 12,100 jobs from 1983 to 2004. The manufacturing component will decrease again this spring.

* * * * *Ivey also led Reynolds in establishing "guiding principles" in 2007 that acknowledged that "smoking causes serious disease," "nicotine in tobacco products is addictive, but not considered a significant threat to health," "no tobacco product has been shown to be safe," and "an individual's level of risk for serious disease is significantly affected by the type of tobacco products used, as well as the manner and frequency of use."

"Tobacco companies used to be able to say 'No' to questions and not engage," Ivey said. "That's not society's view any longer. We have been very clear about our principles and the risks of using tobacco, particularly in our external communications. Employees embraced that because that's the real world."

Stephen Pope, an industry analyst and the managing partner of Spotlight Ideas in England, said that Ivey's legacy "will be the shrewd move to transition Reynolds away from typical, standard products into smokeless offerings that have reached out to a whole new audience."

Jeff Middleswart, the portfolio manager for the Vice Fund of USA Mutuals, also pointed to the acquisition of smokeless-products leader Conwood as pivotal to Reynolds' financial health and future prospects.

"She has been able to negotiate through some of the largest increases in excise taxes, as well as legislation that make it nearly impossible for people to smoke as often as they would like," Middleswart said.

"In the last five years, Reynolds shareholders have been rewarded with solid dividend growth and share repurchases, and debt remains very low. She is leaving it in solid shape to explore almost any opportunity it would like."

After spending her initial retirement months traveling with husband Russell Cameron and family, Ivey said she wants to join another corporate board and expand her efforts with women's leadership and philanthropy.

"I look at retirement as just the next chapter in my life to explore with gusto," she said. "I didn't want to leave before the employees could see the vision really working, and that meant gaining market share.

"Going out on a high note is very rewarding. My timing couldn't be better, and Daan and his team are more than ready to lead onward."

rcraver@wsjournal.com

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