The King of the Forest
If you inherited a family tradition, a million-acre forest, and a business, how would you decide which one to preserve? Meet Arthur Temple…
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Arthur Temple had moved away from the rest of the Texas timber industry in his business and civic practices; now he would follow the same course in politics. It didn’t happen right away; like other lumbermen, he supported conservative Allan Shivers over liberal Ralph Yarborough in the bitter 1954 governor’s race. He even raised money for the Republican party. In the 1960 Democratic primary he voted against a young liberal candidate for state representative named Charlie Wilson, and in the fall he wrote the Diboll paper that a pro-Kennedy column written by his cousin Latané Temple did not represent his own views. But on election night he told Latané that he’d voted for Kennedy after all. And when a former mayor of Houston named Neal Pickett walked into his office in 1962, Arthur Temple was ready to listen.
Pickett was the head of the Houston regional office at the Federal Housing Administration, a Kennedy appointee. He’d been all over East Texas trying to sell cities on low-cost housing. No luck. East Texans regarded federal money as a carrot to lessen their resistance to the stick of integration. But Arthur Temple was immediately enthusiastic. “He knew the minute I went in there the first time what he wanted,” Pickett recalls.
What Temple wanted was to get out of the landlord business. He’d tried to sell company houses to employees on a rental-purchase plan, but the employees had been taken care of by the company for so long that many were afraid to give up their security. Some workers did buy their homes; the rest Neal Pickett built houses for. By 1964 federal dollars had underwritten the construction of 210 new housing units in a town that had started with around 800. The remaining shacks from the old days were razed. Fifteen years earlier Diboll hadn’t had a paved street; suddenly it didn’t have an old house.
In 1967 Neal Pickett left the FHA to become executive director of the Deep East Texas Development Council. It was an Arthur Temple show all the way. He had decided that federal largess could transform East Texas the way it had changed Diboll, and he told Pickett that it was time for East Texas to “join the twentieth century.” After the example set by Diboll, the stigma attached to taking federal funds was disappearing. The purpose of the new organization was to hustle the money. (It didn’t hurt that Pickett was married to the sister of Ralph Yarborough, then a U.S. senator able to pour cash into Texas.) Temple Industries gave the fledgling organization an office, a telephone, utilities, the use of an airplane, its first president (Charlie Wilson, by then a state senator and a Temple employee), and the help of Arthur Temple if some public official in another county needed persuading or if a project got in trouble. In five years Pickett brought $130 million into a thirteen-county rural area—more money than some of the counties were used to seeing in a decade.
If the federal grants indeed helped East Texas join the twentieth century, not everyone welcomed the affiliation. Temple’s politics had long been suspect in Lufkin. He had integrated the Diboll schools in 1948—six years before the Supreme Court’s Brown decision. He did the same for public accommodations before the Civil Rights Act of 1964. One day he got a telephone call in his office from the proprietor of the Pine Bough, a local café the company had established so there would be a nice place in town to eat. Black freedom riders were blitzing East Texas, she said, going into segregated restaurants and staging sit-ins after they were refused service. What should she do if they came to Diboll? “Serve ‘em,” he said. If the staff wasn’t comfortable about it, he added, he’d come over and work the cash register and bring his wife to wait tables. When the riders showed up, the staff handled it alone.
His Lufkin foes viewed Arthur Temple’s involvement with federal funds as motivated by something more than benign idealism. He was, they said, letting the taxpayers of the United States finance the growth of his business. Pineland got a new water system that, according to the grant announcement, enabled Temple Industries to expand three divisions. In Diboll, lack of housing had held back the company’s growth, but after a final total of $4 million and 404 new public housing units by 1972, there was no problem filling the jobs created by expanding the fiberboard and particle board plants.
The rancor over federal funds led to one final confrontation between Arthur Temple and the old Kurth camp. Temple made an offer to the Lufkin Country Club: if it would trade him its land and nine-hole golf course, he’d build its members a luxury club and eighteen-hole golf course. The Southland crowd charged that Temple wanted the country club land so he could build public housing in Lufkin. They also resented that Temple planned to sell lots around the new golf course; they weren’t about to let Arthur Temple make money off them. The membership turned down Temple’s offer by a single vote. Battle won…but war lost. The day after the balloting, the leaders of the opposition lost the prize hunting lease on Temple lands that they had enjoyed since Arthur Senior had run the company—it was one of the few times Arthur Temple used his power purely for personal satisfaction. And when Temple built the club, which he called Crown Colony, anyway, it was too nice to resist: his old opponents left the Lufkin Country Club to join Crown Colony, and they paid a lot more money to do it.
The lumber business, Arthur Senior had frequently lamented to his son, is either feast or famine. Everything about the company had changed in the years since his death, and yet nothing had changed. Every time the housing industry hit a slump, so did Temple Industries.
The solutions were complicated and, for Arthur Temple, as much a matter of emotion as dollars and cents. On the one hand, he could build a paper mill. Short of a general economic collapse, paper was recession-proof. But there was a problem. A paper mill required an immense land base, and the price of timberland had shot up since Ernest Kurth started. Southland with $7 million in 1938. By the early fifties, when he first got interested in paper, the price tag was up to $40 million. Another decade and there was another zero to contend with: $200 million by the mid-sixties.
That was big money for a family-held corporation to raise—too big. A short-term bank loan would imperil its financial position. A long-term bond issue was out of the question for a family business: no investor would touch thirty-year paper of an enterprise that depended on one man. Another choice was selling stock, but to raise enough for a paper mill, the family would have to surrender so many shares to outside investors that it might lose control of the company.
Another possible solution was a merger. That meant an even greater chance of losing control of the company, but at least there were compensations. If Arthur picked the right partner, the family’s security (and his own) would be guaranteed. For him, a merger offered the possibilities every successful entrepreneur thinks about: new boardrooms, new deals, new businesses, the big leagues. For three generations the Temples had always thought of the family and the family company as identical, but now Arthur Temple could not protect the future of one without risking the future of the other.
It was not the sort of decision that could be put off. The largest stockholders in the company were from his father’s generation. When they died, their estates would be required to pay taxes on their holdings. Some of the stock would have to be sold over the counter to raise the money. If the family didn’t buy it, an outsider would. So even if Arthur Temple didn’t build a paper mill, he needed capital to keep the company in the family.
But keep it for whom? By 1967 there were no other Temples of his generation left in the business. Latané, who had been a director and one of three members of the executive committee, departed after his retail division collapsed in 1963 because of poor credit practices. Carrol Allen, married to Arthur’s sister, quit in a huff when Joe Denman got Latané’s old title of executive vice president.
That left Buddy. It had always been—and for that matter still is—Arthur’s hope that Buddy would take over the business someday. Buddy had trained to be a Temple. He went to board meetings while still a child. He went to the office on Saturday mornings, when the townspeople dropped by and told Arthur their troubles. Afterward, when the workers had gone, he saw his father cry. He went along on the Sunday tours of the plant when his father, dry-eyed, carried a notebook, making lists of anything out of place, even a stray Coke bottle. He grew up, he says, always assuming he’d take over.
Starting at the company in sales in 1964, he peddled lumber to railroads for boxcar linings and later handled special projects such as monitoring costs at the fiberboard plant. But like his father before him, he quickly grew restless and wanted to make his own money. He still hoped to follow his forebears into the business, but, he says, “I felt I’d be accepted more if I made it on my own.”
So he left the business to do his own deals. He got a bank loan and, with two partners, developed a string of Holiday Inns in East Texas. Two ventures in Diboll were successful. In the meantime, his father wanted to expand his own outside business deals. He had started a family company he called Exeter Investment, offering friends the chance to invest (“as long as you understand there aren’t going to be any stockholders’ meetings,” he told them); then he put Buddy in charge. Exeter invested successfully in banks and shopping centers. But with Buddy out of the timber business and making no move to get back in, the company was down to its last Temple.
Arthur Temple was discovering a fundamental truth about modern American business: it is almost impossible for a successful family company to stay that way. To stand still is to die, to play Ernest Kurth to someone else’s Arthur Temple. To grow defies the realities of capital markets, tax laws, and family diversity. A few companies, very few, have beaten the odds (Bechtel, the construction giant, being a notable example), but the list is far longer of those that have passed into the hands of professional management. Only an enormous amount of sentiment, drive, vision, and commitment to an idea, all on the part of an entire family, can compensate for the inexorable logic of economics. For the first time, Arthur Temple began to think seriously about a merger.
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