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click here for freelancing tutoring sitesNucor Corporation 1995: after 30 years of success, what next?

The Nucor story is about how a nearly bankrupt enterprise became the most productive and

profitable company in the U.S. steel industry. It is also a story of how the two top managers of

Nucor Corporation set a standard of personal and corporate behavior that continues to inspire

social and economic civility within and beyond U.S. borders.

The change in fortunes for the company began in the summer of 1965, when the new Chairman

of the Board, Donald Lillis, asked the financial manager Sam Siegel to stay on rather than quit.

Siegel responded with two conditions: appoint Ken Iverson president and himself, Sam Siegel,

treasurer and secretary. The Board agreed, and the new top management team of Iverson and

Siegel came into being. They believed that customers ought to receive good value and

productive employees ought to be rewarded, and they saw to it that this happened. By 1974, just

nine years from almost certain bankruptcy, the two top managers sensed the company would

become “unstoppable”. However, it would be another 20 years before Nucor was recognized as

a “great” company with amazing returns (Collins 2001). For example, between 1965 and 1995

Nucor returned 3 times more on invested capital than General Electric under “super manager”

Jack Welch (Appendix 1, p.27 summarizes Nucor’s financial position in 1965 and 1995).

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According to Samuel Siegel, the greatest difference between 1965 and 1995 was not in the

financial figures but, rather, in the recommendation for top manager. In 1965, Sam Siegel had

no doubt about his recommendation to Donald Lillis, Chairman of the Board, that Ken Iverson

be appointed top manager. Sadly, in 1995 he had no such confidence about the person who most

likely would be recommended as Ken Iverson’s successor. As a member of the Board, Siegel

was obligated to offer his opinion. What would he say? * This case study on the Nucor Corporation was written with the valuable assistance of Samuel Siegel, retired vice-chairman, chief financial officer, treasurer and secretary, Nucor Corporation for purposes of research, theory development and classroom discussion. It was written by Bryan Poulin, associate professor in strategy and ethical leadership, Faculty of Business Administration, Lakehead University, Ontario, Canada. Thanks go to people interviewed, and who reviewed earlier versions, namely: James M. Coblin, vice-president of human resources, Nucor Corporation; Ted Kelly, retired lead man, Darlington, South Carolina rolling mill shop, Nucor Corporation, and his wife, Alice Kelly, homemaker; Betsy Liberman, secretary-receptionist, Nucor Corporation; and Samuel Siegel, retired vice-chairman and chief financial officer, Nucor Corporation. Finally thanks go to Robert Willis for his early review and suggestions, to Arlene Smith and Lauree Poulin for the many days spent drafting and redrafting the manuscript, and to students at Lakehead University who first tested this Nucor case (latest revision September 2008, 210). Copyright held by author

Background

The story of Nucor can be traced to 1891 when Ransom E. Olds was awarded a patent for his

steam engine. In 1893 Olds was first to export a U.S. made automobile, his steam-powered

Oldsmobile, to a London firm. In 1904 the company he founded, Olds Motors Works, had

become the largest automobile manufacturer in the U.S. This was the same year that R. E. Olds

sold his shares in Olds Motor Works and he began manufacturing cars with the Reo (from his

initials) Motor Car Company. The Oldsmobile brand was later sold to General Motors in 1908.

R.E. Olds filed for bankruptcy in 1938, near the end of the Great Depression, and the Reo Motor

Car Company was reorganized under Reo Motors to manufacture light trucks named “Reo

Speedwagons”. Demand for light trucks was driven by U.S defense contracts, first during World

War II and again during the Korean War. Demand fell when the Korean War ended in 1953. In

1954 Reo Motors was sold to Diamond Trucks and truck manufacturing carried on under the

“Diamond Reo” brand. A new company, Reo Holdings, was formed to hold the proceeds of the

sale and distribute these proceeds to the shareholders of Reo Motors.

Nuclear Corporation of America, later renamed Nucor, came into being with the 1955 merger of

what remained of Reo Holdings – before all proceeds had been distributed – and a company

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called Nuclear Consultants. Nuclear Consultants had been “… vaguely formed to capitalize on

the possibilities of nuclear power” (Rodengen, 1997, p. 16). The merged Nuclear Corporation of

America drifted along until the Board chose Dave Thomas, a flashy and articulate manager of

questionable standards, to head the company in 1960. Thomas traveled about the country in

style in his own private plane that he leased to the company. He soon arranged a move of the

company headquarters from the small office in New Jersey to spacious offices in Phoenix,

Arizona. Thomas then set about directing the 31-year old certified public accountant Sam

Siegel, hired in 1961, to acquire businesses in rapid succession, following the “growth by

acquisition” folly of the 1960s. However, only one acquisition proved worthwhile and that was

Vulcraft, a South Carolina company that manufactured steel joists, the assemblies that support

the floors and roofs of industrial and commercial buildings. Thomas knew nothing about joists

but, fortunately, Nuclear Corporation hired Ken Iverson.

Ken Iverson was the engineer who conducted the feasibility study on the Vulcraft steel joist plant

and who recommended its purchase in 1962. Ken Iverson then was hired to manage the joist

plant. At Vulcraft, Iverson found a company that cared for employees, with an incentive plan to

encourage productivity. This was in direct contrast with his experience, especially with large

companies. For example, Iverson had been disgusted early in his career by the exploitive

attitudes of top managers of the large, integrated steel mills, or “Big Steel” toward customers and

employees. He was similarly disgusted by how the bosses of large, militant steel unions often

protected the least productive, least flexible and least creative workers. Iverson was determined

to do things differently, and this was his chance.

Iverson quickly learned about the manufacture of steel joists and, importantly, brought along a

keen interest in good management practice. For example, he was struck by Peter Drucker’s

(1954) notion that a minimum number of organizational levels should separate top managers

from the people who do most of the work – front line employees (Iverson, 1998). So when

Iverson moved from New Jersey to South Carolina, he saw to it that workers continued to have

good reason to work hard and work smart, without the need for unions and bloated numbers of

supervisors. He did this by continuing the incentives already in place and by setting clear goals,

stating, “We must perfect not only production but every department at Vulcraft” (Vulcraft News,

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1962). He also demonstrated his conviction about fairness by knocking out walls separating

black and white workers’ toilets, a progressive initiative in South Carolina in the 1960s. Iverson

soon gained a reputation as an effective manager.

In 1964, Nuclear Corporation was comprised of seven businesses, each with a different product

or service: the Vulcraft steel joist business, a nuclear measuring equipment business, a rare earth

chemicals business, an electronics business, a sheet metal business, an electrostatic copiers

business, and a leasing business. The Vulcraft steel joist business, managed by Ken Iverson,

made an impressive $927 thousand in profits in 1964 while the other six businesses, together,

lost $864 thousand, leaving a net profit of only $63 thousand. Worse, these six businesses were

projected to make huge combined losses in 1965, and the company would soon be bankrupt.

Shortly after that, Ken Iverson and Sam Siegel accidentally bumped into each other in the

Phoenix, Arizona post office. Iverson and Siegel were both carrying a stack of job applications.

Things at Nuclear Corporation had become that desperate. Siegel (2004c) would later recall,

“We looked at each other, and had a good laugh.”

Sam Siegel offered his resignation in 1965, just before the company was rescued from

bankruptcy by investor Donald Lillis, who purchased 22 percent of the common stock from

Martin Marietta Corporation for a mere $72,000. Martin Marietta did not want to be associated

with a bankrupt company and wanted out. As an interesting aside, the Board of Directors

continued to go along with the inept Thomas, right up to the time of Donald Lillis’ appointment

as the new Chair of the Board. Lillis personally loaned the company $250,000. A $3.85 million

dollar line of credit was also arranged. The Lillis-controlled Board then made Sam Siegel an

offer to stay on with the company.

Siegel’s reply came in the form of his famous Phoenix to New York telegram, sent on 30 July

1965. In it, Siegel stated that he would only agree to stay on, “if (1) Ken Iverson is given an

employment contract as President of Nuclear, and (2) I am given an employment contract as

treasurer and controller of Nuclear.”

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On 12 August 1965, the Board agreed to Siegel’s demands, and Ken Iverson was appointed

president and Sam Siegel was elected treasurer, secretary, and vice-president, finance. Together

the two men formed a complementary top management team, one that transformed the hodge-

podge that was Nuclear Corporation of America into Nucor Corporation, a company of

extraordinary achievements. (See Appendix 2, p. 27 for highlights from 1965 to 1995.)

The Rise of Nucor in the Steel Industry

Immediately after taking the reins in 1965, Iverson and Siegel began selling facilities that would

not fit with the company in the future. In 1966, they moved headquarters from the over-spacious

Phoenix offices to a modest, rented office in Charlotte, North Carolina to be close to the Vulcraft

steel joist plant in South Carolina. The company would build its future from this small head

office in North Carolina and the Vulcraft joist plant in South Carolina.

The first priority in 1965 was to increase the number of steel joist plants, which was done over

the next several years. In 1967 Iverson and Siegel also began planning the construction of an

electric-arc mini-mill, to supply the steel rods, angles and bars that were used to make the

Vulcraft steel joists. Mini-mills had at least five advantages not enjoyed by the integrated mills

of Big Steel and these are summarized in the following Figure 1.

Figure 1: Five Advantages of Mini-mills over Integrated Steel Mills (source: various)

1. A mini-mill uses a three-step instead of the six-step process of an integrated steel mill. In mini-mills, scrap metal is simply melted in an electric-arc furnace, castings or billets are formed and these billets are rolled to the final shapes of steel rods, angles and channels.

2. Mini-mills cost less to construct on a ton of steel produced basis, and are able to operate efficiently at 10% of the size of integrated mills (so-called because the integrated mills went all the way from raw iron-ore to finished steel products).

3. Technological upgrades and plant refurbishing are much easier with the small mini-mills, as compared to the huge integrated steel mills.

4. Many locations near local markets potentially allow the mini-mills to serve customers better and keep employees productive and satisfied.

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5. Finally, mini-mill steel plants, once perfected, are profitable enough to allow construction of additional facilities with internal rather than debt financing.

As with the joist plants, Nucor’s mini-mill facilities would be constructed and operated at low

cost, using incentives for employees.

Nucor deliberately chose to locate facilities in non-urban centers among states that had tax

structures favorable to business and that would allow Nucor to remain non-union (Siegel,

2004b). The locations attracted the hard-working, goal-oriented people who Nucor sought out.

The demanding nature of the work meant turnover was usually high in the early stages, dropping

to near zero after the first year as employees made a commitment to dig in for the long haul.

By 1995 Nucor operated eight business divisions, all in the steel industry, with each division

making the range of steel products indicated in the listing shown in the following Figure 2.

Figure 2: Nucor Divisions and Products in 1995 (source: The Nucor Story)

1. Nucor Steel (Products: Steel sheet, bars, angles, structural beams, plate-carbon and alloy steels)

2. Nucor Cold Finish (Products: Cold finished steel products for shafting and precision machining)

3. Nucor Grinding Balls (Products: Steel grinding balls, used by mining industry to process ores)

4. Nucor Fastener (Products: Steel cap-screws, structural and finished bolts, nuts & locknuts)

5. Nucor Building Systems (Products: Metal buildings and metal building components)

6. Vulcraft (Products: Steel joists, joist girders and steel deck for building construction parts)

7. Nucor-Yamato Steel Co. (Products: Wide flange steel beams, pilings and heavy structural steel)

8. Nucor Bearing Products, Inc. (Products: Machined and forged steel bearing components)

Nucor’s 8 divisions operated from 25 facilities in 8 states, including its head office in Charlotte,

North Carolina. (See Appendix 3, p. 28 for the location of each of these 25 facilities.)

Nucor’s People-focused Philosophy, Principles and Culture

Nucor expressed its philosophy in easy to understand, strategic terms. It was simply “to build

facilities economically and operate them effectively” (Nucor Story, Iverson 1998). However this

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philosophy went beyond simply a written statement to become part to the culture by “principles”

in action. One such principle, reciprocal fairness, was reflected in the “gain-sharing” plan where

extra-ordinary profits were shared with employees and managers, when times were good and in

the no-lay-off “pain-sharing” plan, during downturns such with the 1981 and 1982 recession.

Siegel (2005) explained how pain-sharing and gain-sharing worked:

Nucor’s business was primarily geared to the construction and capital goods areas of the economy. These areas are very cyclical. During the declining times, there was often insufficient work for a full 5-day week for hourly employees. This resulted in less pay, and more pain (for employees). Nucor’s management decided that officers (including top managers) should also share in this pain by having their base pay reduced, to set a company-wide example. Of course, in good times all employees shared in the gain, including officers.

Nucor also looked out for its customers in the same fair way that it looked out for its employees.

For example, all customers, regardless of the size of their orders, received the same pricing and

the same prompt deliveries, made in just the quantities that customers needed. This reduced

customers’ inventory costs and built loyalty, contrasting sharply with Big Steel that stuck to its

policies of differential pricing and order quantity inflexibility.

Nucor’s philosophy of reciprocal fairness also led to the development of its inclusive culture.

Decisions were made with the intention of being as “equitable, right and practical” as possible

(Iverson 1998, p.172). Customers benefited by dealing with Nucor people who were rewarded

for coming up with better solutions for them. For example, Nucor’s policy of one unit price for

all customers, regardless of the size of order, required more invoices and, thus, higher

administrative costs. Nucor people responded to the challenge and computerized the process,

reducing the cost of each transaction, and so it became practical as well as equitable and ‘right’

to treat small and large customers alike.

Rewards at Nucor were based upon merit and discrimination was discouraged. For example,

merit-based remuneration plans were developed for managers and employees and the most

productive employees could out-earn supervisors. Of course, supervisors and managers

normally earned more than other workers, as a reward for their extra responsibility. Fairness

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also meant that all managers traveled economy class, parking spaces were on a first come basis

for managers and employees; and hard hats were the same color for everyone except for those in

maintenance crews who had to be identified promptly. Also everyone had an opportunity to earn

higher pay and career advancement, supported as this was by Nucor’s simple structure.

Nucor’s Structure and Guiding Principles

The minimalist structure of Nucor was consistent with top management’s philosophy of fair

play and Drucker’s (1954) advice on keeping to a minimum number of layers. This was

advice that so struck Iverson and accorded with Siegel’s thinking on keeping things fair,

simple and understandable. The result was that there were only four management layers

between hourly employees and president, as indicated in the following Figure 3.

Figure 3: Structure at Nucor (source: The Nucor Story; see also Appendix 4,

p. 29 for a more conventional representation of Nucor’s structure)

Chairman/Vice Chairman/President

Vice President/General Manager

Department Manager

Supervisor/Professional

Hourly Employee

The head office in Charlotte, North Carolina was intentionally kept small with only 22

people in 1995. Divisions only reported critical information such as weekly sales, production

and backlog to Charlotte headquarters. Day-to-day operating decisions were made at each

facility, without reporting to headquarters, subject to regular financial reporting. The simple

structure and reporting kept lines of communication open, and these were consistent with the

four clear principles of employee-employer relations outlined in the following Figure 4.

Figure 4: Principles of Employer-Employee Relations at Nucor (source: the Nucor Story)

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1. Management is obligated to manage Nucor in such a way that employees will have

the opportunity to earn according to their productivity.

2. Employees should feel confident that if they do their jobs properly, they would have a

job tomorrow.

3. Employees have the right to be treated fairly and must believe that they will.

4. Employees must have avenue of appeal when they believe they are being treated

unfairly.

Employees at each facility were encouraged to submit ideas for improvements to the general

manager who operated the facility as an independent business. If any employee felt unfairly

treated, he or she could appeal through the simple hierarchy, all the way to general manager

of a division. If not satisfied, the top managers at headquarters were available for appeal.

Job satisfaction surveys were conducted every 3 years to see where improvements might be

made. The application of these basic principles, together with the simple structure and

feedback reporting system, came to be known as “egalitarian meritocracy”.

Management at Nucor

Managers were usually appointed from the ranks within Nucor, although there were a few

exceptions. One exception was with James M. (“Jim”) Coblin, first hired as Nucor’s

personnel manager, later promoted to Vice-president, Human Resources.

Jim Coblin was a graduate of Wake Forest University, with a law degree from the University

of Kentucky. He had first worked in a union workplace for 6 years at General Electric (GE)

in labor relations (e.g., contract negotiations, dispute arbitration, grievance resolution). After

that, he worked 10 years at Ingersoll Rand, the air compressor manufacturer, 5 of these 10

years in non-union assignments as Human Resource Manager of North Carolina area plants

before joining Nucor in 1986. Even with all his training and 16 years of industry experience,

Coblin was unprepared for how things were done at Nucor as he explained:

I thought I had decent training, and it was a bit of a shock to come to Nucor. My colleagues at GE were all top-notch professionals; the same at Ingersoll Rand. Both

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used the same terminology, the same policies. The two companies actually shared the same corporate office in Manhattan for many years, before GE moved to Fairfield. Ingersoll Rand was a little GE. However, what I found at Nucor was issues handled 180 degrees differently than at GE and Ingersoll Rand (Coblin, 2004).

Jim Coblin knew that the GE method – driving employees hard – worked; he had witnessed

this at GE and IR for 16 years prior to joining Nucor. When he joined Nucor in 1986, he

found that Nucor’s method also worked, and even better. This came about when Dave

Aycock, who two years earlier had been appointed President and Chief Operating Officer,

asked him to visit each Nucor facility. Coblin recalled arriving at each Nucor facility and

meeting the manager who would introduce him to the “very best Nucor supervisor” in the

plant. Each supervisor would conduct Coblin on a three-hour tour, followed by lunch with

the supervisor and plant manager.

This is the way Coblin (2004) explained how surprised he was at what he found in his Nucor

plant tours:

Whoever gave us the tour, what I started hearing was language that I never, ever heard of in my years at GE or Ingersoll Rand. It was so contrasting that I started to keep a little notebook. I still have that little notebook filled with sayings. The very first one was, “Slow down”, followed by, “Take it easy, now let’s take a break, remember you can’t get it all done in a day, be safe, be careful, what do you need? How is it doing? Is it too hot in here?” They were slow-down, cautioning-type things.

Whereas in GE’s Appliance Plant Park in Louisville Kentucky – where 22,000 people worked in 6 divisions on 3 shifts – 26,000 major appliances were made each day (laundry washers and dryers, cooking ranges, refrigerators, freezers, air-conditioners), it was, “Let’s get busy, come on, you can do a little more, break’s over; who can work overtime? It’s not that hot in here, come on fellows you don’t need a break”, that sort of thing … push, push, push, push.

Coblin added, “Nucor had figured out something here. Non-union, in a heavily unionized

industry, it had among the highest paid steel workers in the U.S. and on planet Earth, among

the lowest labor costs per ton of steel produced, and people are told not to work so hard.

That’s a fairly unique combination to have.”

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One of the stories that Coblin told to illustrate employee relations at Nucor was about an

employee who was no longer pulling his weight in a work group, and who went absent.

Instead of complaining, his employee group put in extra effort to keep productivity at the

same level. This was because the employee had been a productive part of the group for

seven years, and his personal problems, with his divorce, resonated with his teammates.

When called to task by their supervisor, his workmates still supported him, and reminded the

supervisor that the employee had already lost his bonuses. Despite objections of his team,

the supervisor gave the employee a warning that remained in effect for one year. The final

outcome was that, with the support of his team, the employee was soon able to become the

productive employee that he had been for the seven previous years.

Coblin’s next story illustrates how things worked out differently for “Freddy”, one of the few

unmotivated, non-goal-oriented employees who found themselves at Nucor.

Unmotivated Freddy and Nucor’s Response (source: Coblin 2004)

A group of employees came to a supervisor to say, “You have to fire Freddy (not his real name) because he is not pulling his weight and he has almost had a serious accident and he almost hurt us.”

The superior replied, “Freddy has only been here a month and I am not going to consider firing him, since no one performs well after only a month.” The group came back at the end of the second month with the same complaint, and added, “… what’s worse, in the last 2 weeks Freddy’s been gone to a national guard summer camp, and you did not give us a replacement and we had to fill in for him ourselves, and we made higher bonus without him. Now he’s back, he’s slowing us down again.” The supervisor again said, “Freddy’s only been here for 2 months. I’m not going to consider getting rid of him, since he has been gone for 2 weeks of the second month, and he hasn’t had time to train properly.”

At the end of the third month, the employees came back with the same complaint and the supervisor said, “Let us review it.” At the end of 90 days from the initial complaint, the supervisor terminated the employee. The crew was then overheard in the break room talking among themselves, saying, “Dang old Nucor management; they drag their feet, and finally have done now what we told them to do 3 months ago. Now they better get us someone who can really work with us, someone who really wants to work!”

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Jim Coblin had this to say about the story: “This fits exactly into my ‘theory of opposites’

because, had that exact same thing happened at either Ingersoll Rand or GE, the employees

would have gone to the fired employee and said, ‘Mean old management were tough in firing

you. We will help you and file a complaint and, hopefully, get management to bring you

back to work.’ They would have been on the employee’s side.” The Nucor incentive

system encouraged self-correcting teams. Jim Coblin advised: “The temptation is for

managers and supervisors to try to adjudicate every little single issue. Management needs to

let this informal justice system operate.”

Perhaps Coblin’s most dramatic story on the effectiveness of incentives came about with his

own situation, in 1986, when he was hired as Personnel Manager and charged with visiting

the Nucor plants for the first time by the then President and Chief Operating manager, Dave

Aycock. The story of his meeting with Nucor manager Tom Garrison is reproduced in first

person, to capture the moment Coblin discovered, for himself, how things worked at Nucor,

and how different this was from his many years of experience with two other major

companies.

Newcomer Coblin meets Nucor Manager Garrison (source: Coblin 2004)

After the plant tour, I asked Tom Garrison, the plant manager the usual questions, starting with, “What are the biggest issues or concerns with running your department? What stresses you? What work-issues keep you up at night?” Garrison responded, “Nothing, I don’t have any concerns or issues.” I was unsatisfied. “Really, you are the production manager, you have 2 shifts and a small, third shift on maintenance, and you are currently working 6 days a week with over 200 guys out here in your organization; you’ve got to have some issues.” Garrison replied, “Not really, this place is automatic. We’ve been sitting here for half an hour, small talking. Have you heard my phone ring? Has anyone knocked on my door? These guys are working; these guys know exactly what to do.” I was still not satisfied. “Pick one thing. You have to have something!” Garrison said, “O.K., I’ll tell you. This has come up recently and we are about to nip it in the bud. The second shift ends at midnight and everybody goes home. What happens is that there are a couple of groups of employees that go out and stay in the parking lot at midnight. After everybody leaves, they’ll sneak back in and they keep working. They are off the clock and not getting paid. What they are doing is building up their parts pool, and this makes their bonus higher. I

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have told their supervisors that this fowls up our bonus calculations. Now the supervisors and I pretend to be leaving and, when these guys try to come back, we run them off.”

At the time of the plant visit in 1986, Jim Coblin commented to Tom Garrison, “It’s a serious

problem, but it is almost humorous – employees sneaking back in to work for free”. He

added, “That is a high class problem that would never, ever, happen at GE.” Coblin was not

alone in being pleasantly surprised by what he found at Nucor.

In 1969, at age 39, Ted Kelly left the well-known Dixie cup company, to become part of the

original crew that constructed Nucor’s very first mini-mill in Darlington, South Carolina,

home of the Darlington racetrack. Kelly had this to say about leaving Dixie for Nucor:

Dixie was a good company and I only left because I thought I would prefer not to be on rotating shift work. I was hired by manager John Doherty to help build and then repair the Swedish “jump mill” (so-called because the platform raised or lowered, as steel passed from one level to another to take its shape). When I got to Nucor, I worked 60 hours per week, and sometimes more. I liked the challenge. Every week, we had to take apart and replace the bearings to keep the rolling mill going, or the whole steel mill would shut down, so I could be called out any time, sometimes with only 2 or 3 hours sleep, or no sleep at all.

I kept a little black book where I would write things down, which I still have. The service manual stated it would take 36 hours to tear down and rebuild the mill. We got that down to 24 hours, and then down to 12 hours by figuring out exactly what was needed, and where exactly to find it when it was needed.

At this point in the interview, Ted Kelly went into a room of his original family home, and

brought out the well-worn, very tidy, little black book which displayed, in amazing detail, the

rolling mill and hand-written notes on parts required to rebuild the entire mill.

As was usual practice at Nucor, Ted Kelly was first hired to construct the facility, and then

remained to operate the facility after it was constructed. Unlike most employees, he had some

specialist training prior to coming to Nucor, in his case training as a millwright. Ted Kelly

became lead man over the rolling mill shop, second only to the rolling mill foreman, who

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became Ted Kelly’s lifelong friend. Ted Kelly liked working for Nucor in Darlington and

he appreciated the benefits that Nucor offered, as he explained:

Like the others, I wasn’t late because I would lose bonus for the day. I didn’t miss a day or I would lose bonus for the week. The bonus was good and it didn’t take me long to figure out what the bonus was at the end of the week. The pay, including bonus, was a lot better than at Dixie, twice more. Then there was the profit sharing plan where everyone would share in Nucor’s profits. I also bought all the Nucor stock I could; Nucor put in 10¢ for every dollar of stock we bought so we couldn’t lose. I would tell a lot of people, ‘You automatically make 10% on your money’, but many didn’t listen. Then there were the special bonuses of $500 when Nucor did especially well, the 401k-retirement plan, and the stock given to us for long-term service.

Ted Kelly added about Nucor, “They treated employees so well that when a union vote was

taken (in the 1970s), the result was so lop-sided that the union just quit. The union would

have cut out our pay and benefits. People would have to be crazy to vote for a union.” He

also talked enthusiastically about the yearly company dinners when Ken Iverson would

attend. Ted Kelly final comments were about his son obtaining his college degree through

Nucor’s college program and about his son-in-law who now works for Nucor.

However, it was Alice Kelly, Ted Kelly’s wife of 45 years, who had the final word on life at

Nucor for the Kelly’s, and how effective were Nucor’s incentives for goal-oriented

employees like Ted Kelly:

Fifteen hours a day, supper on the table – cold – and with that little black book of Ted’s, they would call him up at all times of the night, 7 days at week. I quit Dixie when Ted began working for Nucor, because he needed me home, with all the time he spent at Nucor. Ted said this made sense because he made more bonus in a week than I made at Dixie in a month. But I lost my medical plan. Now my pension goes to medical premiums, which went way up when I was found with cancer 6 years ago and, on top of that, there is the deductible.

Ted did benefit from working at Nucor, and his job got easier later. Our son and daughter were provided for in ways other children were not, and they turned out real well. So it was a good life. But there were times when Ted was needed at home for me and the kids, and he wasn’t here (A. Kelly 2004).

Incentives and Compensation Plans

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Nucor’s unusual dedication to its employees was reinforced in 1975 with the Nucor

Foundation that was established to provide tertiary education for the children of Nucor

workers. The Foundation program originated when two employees died in an on-the-job

accident and managers came up with the idea of education as one way to help the employees’

surviving children. Later the program was expanded to cover all children of all employees

except officers. By 1995, scholarships had been increased to about $2,000 per year for four

years ($8,000) of vocational training or higher education beyond high school. One new

employee, with many children to support, broke into tears on finding out that all his children

would qualify, no matter what form of higher education they might choose to pursue.

The scholarship plan was one of a range of plans developed to reward Nucor employees.

Nucor offered medical and dental and life and accident insurance plans. Nucor also

supported the profit-sharing plan that impressed Ted Kelly, where a minimum of 10% of pre-

tax profits were contributed to employees below the officer level, with 15-20% paid as cash

and the remainder placed in trust. After seven years service, employees became fully vested

and entitled to their own contributions and all contributions by the company to the plan, plus

any gains. These funds were held in trust and paid to employees when they left the employ

of Nucor or retired. Special benefits included awards for service such as the 25 shares of

Nucor common stock that Ted Kelly also mentioned: 5 shares of Nucor common stock for

each of 5 year’s service. Finally, the money that employees made in the form of base pay

and bonus made Nucor employees the highest paid workers in the steel industry. (See

Figure 4 for a summary of Nucor’s compensation plans.)

Figure 4: Nucor’s Compensation Plans (source: The Nucor Story)

1. Production Incentive Plan – applied to most employees, including production supervisors and the employees they supervised in the manufacture of all Nucor products. Bonuses were paid weekly to work groups, based upon preset, non-discretionary production goals that were designed to create peer pressure to meet goals and attendance and tardiness standards. No bonus was given out if the machines stood idle, to ensure that all machines were regularly serviced and well maintained. Bonuses averaged 80% -150 % of base wage. Regular posting of charts in the cafeteria apprised employees of their bonus level.

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2. Department Manager Incentive Plan – incentive bonuses based upon return on assets of the facilities. These bonuses were as much as 80% of base salary and strictly based on pre-set calculations and thus non-discretionary.

3. Non-production and Non-department Manager Incentive Plan – incentive bonuses for employees other than ‘1’ and ‘2’ above, including accountants, engineers and secretaries. Yearly bonuses were as much as 25% of salary.

4. Senior Officers Incentive Plan – with base salaries set at less than comparable companies, bonuses were based on return on stockholders’ equity, above a minimum earnings target. A portion of pretax earnings was divided among senior officers, typically 40% stock and 60% cash.

That is not to suggest perfection at Nucor. For example, engineers’ total pay was much closer

to the industry average and at times there were difficulties with their recruitment and retention.

The Relative Importance of Technology and Culture

Nucor was known for technological leadership, and managers and employees became skilled

at adopting the most useful technology when constructing and operating facilities, safely, at

lowest possible cost with highest possible output. The right technology was important, and

Nucor people learned to perfect the technology supplied by others and, in this way, make it

their own. However, more important than technology was that Nucor remain a place where

people were treated fairly and with respect. Ken Iverson (1998) explained the relative

importance of technology to the success of Nucor: “I’m often asked: ‘How do you explain

Nucor’s success?’ My stock reply: ‘It is 70% culture and 30% technology.’ Without a

doubt Nucor’s culture is its most important source of competitive advantage, and always will

be” (p.75 and p.76). One person who mirrored the culture was Betsy Liberman.

Betsy Liberman was one of two secretaries hired in 1967, shortly after Iverson and Siegel set

up the office in Charlotte in 1966. In 1983, after spending a few years away in another part

of the country, she returned to Charlotte and Nucor “to be back home” (Liberman, 2004).

There she remained, proud to do her very best, every hour of every day for Nucor. Recently,

Betsy Liberman (2005) wrote a letter to explain how she saw things at Nucor:

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We all worked with/for each other. It was a wonderful, hard-working, and caring group. When I came back in 1983, my title became “Secretary-Receptionist” and that remains to this day.

Mr. Iverson was a dynamic person who cared deeply for all of his employees and any one of them could call and talk to him ANYTIME. Even to this day, employees have an admiration and respect for him that is rare for CEOs of top companies in this country…. Mr. Siegel was the financial genius and certainly helped to make important decisions (whether good or bad) that are part of the success of Nucor. Mr. Iverson was the man the employees worshipped because of his “down to earth” nature and a personality to top all.… His dedication to Nucor employees continues to motivate workers to this day!

People mattered at Nucor. As a prime example, Nucor entered the steel fastener market after

domestic U.S. producers had given up to foreign suppliers to retain jobs in America, and to

show that Americans were capable of competing on even, not subsidized, terms.

In short, top managers set the example in progressively looking at the world and in dealing

with others fairly. They encouraged others including Nucor partner firms, technology-

suppliers, and managers and employees, to pull together to accomplish things that were

considered impossible by competing firms. Two such projects were the Nucor-Yamato joint

venture and the Crawfordsville thin slab project.

The Nucor-Yamato Joint Venture and the Crawfordsville Thin Slab Project

Both the Nucor-Yamato joint venture and Crawfordsville thin slab project took Nucor into

the last remaining territories of Big Steel. The first venture required Nucor (51%) and its

partner, Yamato Kogyo (49%), to transfer Japanese steel technology and perfect it in the U.S.

The project tested Nucor on its technical ability, and on its ability to partner with a foreign

steel-maker. The Nucor-Yamato project would allow Nucor to become the first mini-mill in

North America to produce the large section steel beams and columns that are used by

builders of high-rise steel towers, about 7% of the 100 million ton a year, total U.S. steel

market. Agreement to build the 650 thousand ton per year facility was reached in 1986 and

construction on the Nucor-Yamato facility began in 1988. It was operational in 1989, fast

enough to impress the Japanese. By 1995, Nucor-Yamato facility was producing three times

the original design capacity, about 2 million tons of large-section, structural steel annually.

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The thin slab plant in Crawfordsville, Indiana was also approved in 1986. It would use an

entirely new and revolutionary German process that was only in the prototype stage at the

time of the approval. The process was about as close possible to making the casting process

continuous – the age-old, steel-makers’ dream – since this would eliminate the expensive,

separate steps of having to form, reheat and roll billets to make the steel shapes. It also

would allow Nucor to enter the final 40% of the total steel market at a projected cost 20%

below that of Big Steel. Capacity would be about 2 million tons annually.

Like all major innovations by Nucor, the thin slab project would use technology developed

by others. Unlike all previous ventures, this would be more pioneering than perfecting

technology by Nucor engineers, managers and operators. The German equipment maker,

SMS Concast, had only tested a scale model plant, and had yet to conduct tests at full scale.

The first challenge was the dangerous tendency of the extremely hot metal to re-liquefy

under the additional pressure of the thin extrusion process, spewing out molten metal

everywhere. The second challenge was quality, since the thin steel sheeting would be used

for automobile bodies and enameled white ware (e.g., fridges and stoves) where quality of

finish was paramount and each buyer was large with particular specifications.

Executives at Big Steel believed that Nucor’s commitment to two large projects at the same

time, one involving a foreign partner and the other involving untried technology, would spell

the end for Nucor. The predicted doom of Big Steel may have been wishful thinking. In

1987 the Wall Street Journal ventured that, if Nucor was successful, “it would be a new

frontier in the battle with Big Steel” (p.6).

Big Steel and Foreign Competition

The largest integrated steel makers or Big Steel once controlled the U.S. steel market. Over

the past 20 years, combined market share of the three largest integrated steel makers in the

U.S. had fallen significantly, and this trend showed no sign of turning around. Big Steel

blamed its woes on imports, crying for more U.S. Government protection by way of

increased tariffs on steel coming from Japan and Korea and other Asian countries.

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The real problem, according to Nucor top managers, was Big Steel’s poor management

practices, bloated number of supervisors and technological obsolescence. Big Steel plants

were old, and only Bethlehem Steel had a mill constructed later than the 1950s, and it was

already more than a quarter century old by 1995. Adding insult to injury, Nucor managers

pointed out that steel was heavy and expensive to ship, and so U.S. steel-makers were not

disadvantaged, compared to foreign steel-makers (Iverson, 1998).

By the 1990s, even Canada had made inroads with shipping steel to the U.S. (Exhibit 6: U.S.

and Canadian, indicates net tons of steel, exported and imported, 1991 to 1995.)

Exhibit 6: Imported Steel and Steel Production in the U.S. and Canada, 1991 to 1995(source: American Iron and Steel Institute, annual statistical reports)

United States Classification 1995 1994 1993 1992 1991

Production(millions of net tons)

Total Raw Steel 104.9 100.6 97.9 92.0 87.9Basic Oxygen 62.5 61.0 59.4 57.6 52.7Electric 42.4 39.6 38.4 35.3 33.8

Shipments, Major Products, All Grades (millions of net tons)

Sheets and Strip 47.8 47.1 44.1 39.8 36.6Bars and Tool Steel 16.1 15.6 14.5 13.2 12.8Shapes, Plates and Piling 15.3 14.5 12.9 12.6 12.6Tin Mill Products 3.9 4.1 4.1 3.9 4.0Pipe and Tubing 5.4 5.0 4.4 4.2 4.5Wire 0.7 0.8 0.8 0.9 1.0

Foreign Trade(millions of net tons)

Steel Imports 24.4 30.1 19.5 17.1 15.8Steel Exports 7.1 3.8 4.0 4.3 6.3

Canada Classification 1995 1994 1993 1992 1991

Production(millions of net tons)

Total Raw Steel 15.7 15.2 15.8 15.3 14.2 Basic Oxygen 9.7 9.3 10.1 10.2 9.6 Electric 6.1 5.9 5.6 5.0 4.6

Foreign Trade(millions of net tons)

Steel Imports 5.7 5.6 3.6 2.6 2.7 Steel Exports 5.1 4.9 5.4 5.4 5.1

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Nucor’s Top Management Team

CEO Ken Iverson was technically and managerially astute, and he knew the steel industry

well. He was also ‘fast on his feet’, could adjust to most any situation, and he was friendly,

easy to approach and a fine spokesman for Nucor. If he had any weakness – and this was not

weakness in most instances – Iverson tended to be optimistic and give people the ‘benefit of

the doubt’. CFO Samuel Siegel was also managerially astute and knowledgeable. His

weakness was a tendency towards impulsiveness though, over the years, he became more

deliberate to balance Ken Iverson’s optimism, as he explained:

Iverson, with his usual optimism, was going to start the first mini (steel) mill in Darlington, South Carolina by a certain time, and it didn’t work out. When the plant was first built, it was losing money big time, and I was tearing my hair out. Later, I learned to adjust for his normal optimism on large capital projects (Siegel (2004b).

Siegel was not the public speaker that Iverson was, but he was a very good negotiator and, by

quiet determination, ensured that the terms and conditions of any negotiations were fair to

Nucor’s interests. Siegel had this to say about what had made them so effective as a team:

Ken Iverson and I never tried to figure out what made us an effective team. What it came down to was following good, basic principles. The area continually emphasized at Nucor was productivity and, in that regard, what was used was a lot of incentives. It wasn’t complicated. You had to tell your employees what was important: productivity, profitability, safety and employee relations. Ken was very big on employee relations and the college program is one example (Siegel, 2004b).

Top managers Iverson and Siegel let their sense of fair play ‘do the talking’, working hard at

not becoming seduced by their success or others’ praise, as Ken Iverson (1998) stated:

Each day, we all face situations that require us to exercise our own moral judgment. In fact, all the primary rewards in business – prestige, power, money – appeal to our base cravings…. For all those reasons and more, behaving ethically in business can be very hard work. But it is work you must take (p. 171 and p. 175).

Nucor News (1999) reported Sam Siegel expressing similar sentiments to those of Iverson:

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I’ve always tried to be fair to the employees, customers, suppliers and stakeholders of Nucor because they’ve been invaluable to the company. I’ve tried hard to set a high ethical example for others. Nucor has been successful because we’ve always emphasized good basic business practices. We’ve never been too fancy. We’ve kept things simple.

Fancy they may not have been, but Nucor top managers were unafraid to stick with their

principles and, only then, ask their employees to do the same. For example, in 1991 when

Nucor profits fell 14%, Ken Iverson earned $368,000. This was 30% less than he made

during 1988, a year of record profits. During very bad years, such as in 1982, Iverson’s

compensation was reduced to $110,000, probably making him the lowest paid Fortune 500

CEO in the country that year.

Iverson was happy to tell people about his salary cut, because it set an example for

employees who had their compensation drop to base pay or less, as the work week was

reduced from five to four days to keep the Nucor “no lay-off” policy in place. Siegel

matched Iverson’s reductions in percentage terms and took even less. Iverson and Siegel

were not preoccupied with compensation but concerned with doing a good job and that

meant, among other things, financial statements had to be simple and understandable. By

1995, Siegel had reduced Nucor’s financial statements to only four pages, including notes,

the fewest of any company he had seen. No more was needed, he contended (Siegel, 2004c).

Iverson deferred to Siegel in financial matters and listened to Siegel on managerial matters.

In turn, Siegel generally left new capital project decisions to Iverson and listened to Iverson

on financial matters. As Siegel pointed out, “I became a better manager for having known

Ken Iverson and, Ken became a better manager for having known me” (Siegel, 2004b).

The top managers of Nucor simply followed their basic, egalitarian philosophy of treating

others, and themselves as they deserved to be treated – fairly – and not treating others as did

not deserve to be treated – unfairly or worse. All this might be interpreted as based on

religious ideas. However, Ken Iverson was not an overtly religious man. He considered his

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self-discipline and principles as a natural consequence of the caring family he grew up in,

and the responsibility expected of him by his father (Iverson, 1998).

Perhaps Siegel was the more religious but he did not consider himself strictly bound by

religious tradition either. Together, they searched out matters for themselves, with open

minds. They were determined to arrive at fair and practical decisions and they would adjust

as necessary. One example of a fair and practical decision was with Nucor’s settlement with

the State of Arizona on a pollution claim with a Nucor subsidiary, many years after Nucor

had sold the subsidiary. Siegel explained the situation and its resolution this way:

The payment to the State of Arizona for pollution was made in the early 1990s. At that time, Nucor was the only corporation to do so. We believed that it was better to furnish funds to the State to help take care of the problem rather than (like most other companies) spend funds for attorneys and consultants (personal correspondence, 2005).

In 1984, with Siegel’s support, Iverson appointed Dave Aycock as President and Chief

Operating Officer (COO), to share the increasing management workload and to address a

growing concern of the Board of Directors about succession.

Dave Aycock was known as an exceptionally talented production manager. He began his

career in 1954 as a welding fabricator on the shop floor of the Vulcraft steel joist plant in

Florence, South Carolina. His promotions, first to sales manager, then to manager of the

Norfolk joist plant in Nebraska and, finally, to President and COO were evidence that any

employee might find a career in Nucor. The new arrangement worked out well until Aycock

retired in 1991. That same year Ken Iverson asked John Correnti to replace Dave Aycock.

John Correnti joined Nucor in 1981, after being a construction manager at U.S. Steel. He

was manager of Nucor’s Blythville, Arkansas plant when appointed President and COO in

1991. Correnti was charming, well educated, knowledgeable, and an excellent talker. In

1990, the year before John Correnti’s promotion to President, Siegel raised concern with

Iverson over Correnti’s standards. However, John Correnti had become like a second son to

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Ken Iverson and Iverson would not listen to Siegel on the matter. From then on, Siegel

offered less advice. It was in this context that the Iron Carbide Project took shape.

The Iron Carbide Plant in Trinidad

In 1992 Ken Iverson championed the iron carbide project in Trinidad. Iron carbide was a

new product that might replace the scrap metal that was becoming more expensive to source

in the U.S. The project seemed timely. It also went against some of Nucor’s policies.

First, the project depended on foreign supply of cheap natural gas, and foreign government

subsidies. Nucor had a policy of not depending on government support or subsidies, though

there were exceptions. For example, Nucor managers worked with government for benefits

that were in the interest of Nucor, and the community or state at large, such as with tax

credits for investing in less than the most favorable locations. These were rare.

Secondly, experience suggested that Nucor did less well when it strayed away from its

policies on keeping people of strong work ethic, working productively. Even the Plymouth,

Utah location posed problems in attracting the most productive employees, supervisors and

managers. How would experienced managers, supervisors and employees be attracted to

Trinidad and, importantly, how would they keep new employees productive in a country not

known for its work ethic? Thirdly, there were the complex logistics of designing and

constructing an entirely new plant in this foreign country, and exporting the semi-finished

iron carbide product to the U.S.

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By the end of 1995 the project was in trouble on many fronts, managerially and technically.

The first iron carbide product was shipped in 1995, and costs proved prohibitive. Things

continued not to go as planned and the plant even turned out to be designed and constructed

“all wrong”. There was now no chance of making a cost-effective, iron carbide product with

this plant, even if possible elsewhere. Fortunately Sam Siegel had started a reserve fund as

soon as the project was begun, to cushion losses the company might incur if the project failed.

The Day of Decision

Nucor would soon be the biggest as well as the most productive and profitable steel company

in the U.S. Ken Iverson, the brilliant manager and CEO for more than a quarter century, was

69 in 1995, and had been in ill health for 5 years Siegel continued to look out for the

company’s interest at every opportunity but by 1995 he was 65 and planned to retire within the

next several years. By the end of 1995 the decision on Iverson’s replacement as CEO could no

longer be put off and would rest with a vote of the Board. Iverson insisted on remaining as

Chairman of the Board for as long as he could.

In 1995 the Board of Directors of Nucor was an “insider board” of mainly experienced Nucor

managers who had served the interests of Nucor for decades. They knew how to make

decisions, not “rubber-stamp” just any recommendation. They also knew how to judge

things, though their experience was mostly about new projects and with other large capital

decisions. None, except Siegel, had been in a position to judge the potential of a vibrant and

healthy Ken Iverson, Siegel’s high standard for the office of CEO.

For the first time in decades, Sam Siegel sensed that Nucor was drifting. The present record-

setting performance was a result of the momentum of a developed culture. Anything less

than the highest levels of diligence would place at risk what Ken Iverson and he and so many

others at Nucor had worked so hard to achieve. As Sam Siegel walked toward the

Boardroom, a famous lament came to mind, “The lesson of history is that we do not learn

from the lessons of history.” (Nucor’s history is summarized in Appendix 5 and highlights

from the careers of Iverson and Siegel are shown in Appendix 6.)

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Suggested questions regarding leadership, strategy and culture

What was it about the strategy and culture that made Nucor so uniquely effective in the steel industry over the 30-year period of the case? (One approach: look to the simplicity of the strategy combined with the top management team’s sense of ethics behind the Nucor culture.)

Why did Siegel feel that Nucor was “drifting” and how might the Board of Directors prevent this in facing up to the leadership succession challenge?

Why did the Iverson-Siegel leadership-management style work so well at Nucor and to what extent might this work in other companies/industries?

Suggested questions regarding business, government and society

How might model corporations such as Nucor advance democratic society in terms of both increasing wealth and civility?

How might evidence from public sources on a contrary corporation, such as Enron or WorldCom, indicate contrary effects for society?

What are the implications for business and society of both model cases such as Nucor and contrary cases such as Enron? (Note that Adam Smith’s 1776 Wealth of Nations advances an often-overlooked duality: enough freedom to create wealth and enough responsibility to sustain it for the benefit of democratic societies.)

Postscript

Ken Iverson passed away in 2002. Needless to say, Sam Siegel, like all who knew Ken

Iverson, was very saddened. Though the decision of 1995, and the few years leading up to it,

remained disappointing to Siegel, it was time to consider all that Iverson and he, and so many

others, had accomplished together.

First, Sam Siegel was grateful to have known and worked with Ken Iverson, knowing that they

had both built their careers on setting a high standard of responsibility at Nucor. Iverson had

been most proud of the way Nucor people were treated and what they accomplished, together.

Both believed that Nucor would truly benefit when all stakeholders benefited: customers,

employees, managers, suppliers, shareholders, communities and country.

Secondly, Sam Siegel was glad to have played his part, including seeing to it that all Nucor

people were acknowledged, in alphabetical order, on the cover of Nucor’s annual report; that

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Nucor accounts were easy to understand; and that transactions were fairly made, clearly

accounted for, and clearly and simply reported. Making things fair, and simple, took hard

work but, as Ken Iverson had stated, “this was work worth doing.”

Finally, Sam Siegel was proud of the way Nucor took responsibility, especially when things

went wrong. On 11 September 2004, Sam Siegel shared some thoughts in an open lecture

titled “current issues in business”, attended by university students, administrators, and

community and business managers in Ontario Canada. Siegel (2004c) recollected:

I guess it was a year and a half ago; I wrote a note to Warren Buffet, the chairman of Berkshire Hathaway. Berkshire Hathaway, from time to time, had owned stock of Nucor. Part of what I mentioned in the note was this: “The Board's Chairman and Vice-chairman should not be CEO. I could grant you exceptions could be made. (Buffet is chairman of Berkshire Hathaway and I didn't want to rankle him.) The Board's independent compensation committee should hire and utilize its own compensation consultants, in addition to management's. The Board should hire and utilize its own legal counsel, in addition to management’s.

The Board's audit committee should hire and utilize its own outside accountants, not a big four firm; the reason for not a big four firm is that, if they do work for the Board, they are big enough to be a threat to the existing audit firm. They should go down a notch, and not use such a large firm. That’s in addition to the regular auditors. These acts alone would not necessarily eliminate today’s rampant Board rubber stamp-ism, but it may help.”

Well surprisingly, Buffet wrote me right back, the next day, and said, "I really appreciate your note; what you and Ken Iverson accomplished in a very tough industry was absolutely miraculous! I've been an admirer of Nucor for decades.”

References:

American Iron and Steel Institute 1996. Annual statistical reports 1991-1995.

Coblin, J. 2004. Interview, Charlotte, North Carolina, 23 July.

Collins, J. 2001. Good to Great, New York: Harper Collins.

Drucker, P. F. 1954. The Practice of Management , New York: Harper and Row.

Iverson, K. 1998. Plain talk, New York:Wiley.

Kelly, A. 2004. Interview, South Carolina, 22 July.

Kelly, T. 2004. Interview, South Carolina, 22 July.

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Liberman, B. 2004. Interview, 23 July.

Liberman, B. 2005. Letter, January 3.

Nucor Annual Reports, various years. Nucor Corporation, Charlotte, North Carolina.

Nucor News. 1999. So who’s counting? After 38 years, Siegel set to retire.

Nucor Story. 1995. Nucor Corporation, Charlotte North Carolina.

Rodengen, J. L. 1997. The Legend of Nucor Corporation, Write Stuff Enterprises: Fort Lauderdale, Florida.

Siegel, S. 2004a. Telephone discussions and fax correspondence, April and May 2004.

Siegel, S. 2004b. Interviews, 21 and 23 July.

Siegel, S. 2004c. Current Issues in Business: J. W. McConnell Lecture in Strategic Management, sponsored by Schulich School of Business, York University, and Faculty of Business Administration, Lakehead University, 11 September 2004.

Siegel, S. 2005. Fax correspondence, May.

Smith, A. 1812, first published in 1776. An inquiry into the nature and causes of the wealth of nations. London: Ward, Lock and Co. Ltd.

Vulcraft News. 1962. Company Newsletter, Florence, North Carolina

Wall Street Journal. 1987. January 8, p. 6.

Walker, D. 2005. Organizational Structures: Comparison of real structures and Henry Minzberg’s ideals, unpublished research report, Masters of Management Program, Lakehead University, Ontario

Appendix 1: Summary Financial Statements for 1965 and 1995

1965 1995For the Year Net sales ………………………………………….. $ 22,310,595 $3,462,045,648Costs and expenses:

Cost of products sold …………………………… 19,509,507 2,900,168,171Marketing, administrative and other expenses …. 2,785,728 130,677,162Interest expense (income) ……………………… 446,373 (1,134,190)

Total costs and expenses………………………….. $ 22,741,608 3,029,711,143Earnings before federal income taxes (loss)……… ( 431,013) 432,334,505Federal income taxes ……………………………... ____none___ 157,800,000

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Net earnings (loss)……………………………….. ( 431,013) 274,534,505Net earnings per share (negative)………………… (0.07) 3.14*Special charges …………………………………. 1,803,748 noneNet earnings (loss) after special charges …………. ( 2,234,761) 274,534,505Dividends declared per share …………………….. none .28Percentage of earnings to sales …………………... negative 7.9%Return on average equity ………………………… negative 21.9%Capital expenditures ……………………………… not relevant 263,421,786Depreciation ……………………………………… not relevant 173,887,657Sales per employee ……………………………….. 37,200 570,353At Year EndCurrent assets …………………………………….. $ 5,458,694 $ 830,741,318Current liabilities …………………………………. 3,674,148 447,136,311Working capital …………………………………... 1,784,546 383,605,007 Current ratio ……………………………………. 1.2 1.9Property, plant and equipment …………………… 1,114,159 1,465,400,015Total assets ……………………………………….. 6,572,843 2,296,141,333Long-term debt and other liabilities …………… 2,500,723 106,850,000 Percentage of debt to capital …………………… 38.0% 6.2%Stockholders’ equity ……………………………... 762,880 1,382,112,159 Per share ……………………………………….. 0.11 15.78Shares outstanding ……………………………….. 6,654,871 87,598,517Stockholders ……………………………………… 30,000 39,000Employees ……………………………………….. 600 6,200*Special Charges in 1965:Termination settlement with former President US$ 180,269Abnormal contract loss 251,844Loss on liquidation of Electromechanical Division 161,028Loss on sale of Valley Sheet Metal Division 578,298Loss on sale of U.S. Semcor Division 632,309

Total: $1,803,748

Appendix 2: Highlights of Nucor’s Rise from 1965 to 1995 (source: various)

1965 Management ChangeSiegel refused to stay on unless Iverson was appointed president and Siegel treasurer & secretary. Board agreed. Line of credit used to pay debt. Divisions were sold that did not fit with future plans.

1966 Corporate MoveCompany headquarters was moved from Phoenix Arizona to Charlotte, North Carolina. Iverson and Siegel conceived of an incentive-based culture, where hard work and fair rewards were rules and not the exceptions. Net income increased from -$431,013 to +$698,900 from 1965 to 1966.

1967 Ethical Decision-makingNucor was on its way to capture 25% of U.S. steel joist market. Management came up with a simplified criteria – “equitability, rightness and practicality” – to make good, long-term decisions.

1968 Innovative Mini-mill

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Nucor’s planned its first automated, steel making mini-mill for Darlington, South Carolina, adapting the innovative Swedish “jumping mill” technology.

1969 Responsibility to Employees The Darlington mini-mill was made productive and profitable. All facilities remained union-free, as workers received higher pay and greater freedom and responsibility than union shops.

1970 – 1974 Early RecognitionIn 1971, Board agreed to Sam Siegel’s suggestion on name change to Nucor Corporation from Nuclear Corporation of America. In 1972 Nucor planned second mini-mill for Norfolk, Nebraska and 5th steel joist plant went into operation in St. Joe, Indiana. Designed by Siegel, the 1972 Annual Report was named best in category by Financial World. In 1972, Nucor’s employee incentive-plans were judged best in industry. By 1974, Iverson and Siegel sensed Nucor would be “unstoppable”.

1975 – 1979 Employee IncentivesBy 1975, Nucor had 2,300 employees, net sales of $121 million and net earnings of $7.6 million. In 1975, Siegel placed names of all employees on front cover of its annual report. In 1978, Nucor gave employees a special bonus for “better-than-expected” profits, as part of “gain-sharing” plan.

1980 – 1984 Business without Greed or FearIn 1982, recession hit the steel industry. Nucor extended its “gain-sharing” plan to include no lay-off “pain-sharing”. Profitability fell from $35 to $22 million. In contrast, Big Steel had massive lay-offs, recording losses in $billions. By 1984, Nucor revenues and profits rebounded.

1985-1989 Alliances and InnovationIn 1986, Nucor made alliance with Japanese steel-maker, Yamato Kogyo, to build a U.S. mini-mill to make large steel beams and columns, products available only through integrated mills. Nucor Board also approved “world first”, thin slab mini-mill for Crawfordsville, Indiana that would allow Nucor to enter final 40% of market and compete with Big Steel in all categories.

1990 –1995 Success and SuccessionBy 1990, both the Nucor-Yamato and Crawfordsville plants were in operation. By 1994, Nucor was the most productive and profitable, and poised to become the largest, steel-maker in the U.S. In 1995, Iverson stepped down as CEO because of heart and related health problems.

Appendix 3: Location of Nucor Facilities (source: The Nucor Story, p.8 & p.9)

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1.NUCOR STEELDarlington, South Carolina Norfolk, Nebraska Jewett, TexasPlymouth, Utah Crawfordsville, Indiana Hickman, Arkansas Berkeley, South Carolina Hertford, North Carolina

2. NUCOR COLD FINISH Darlington, South Carolina Norfolk, Nebraska Brigham City, Utah

3. NUCOR GRINDING BALLS Brigham City, Utah

4. NUCOR FASTENER

5. NUCOR BUILDING SYSTEMS Waterloo, Indiana Swansea, South Carolina

6. VULCRAFT Florence, South Carolina Norfolk, NebraskaFort Payne, Alabama Grapeland, Texas Saint Joe, Indiana Brigham City, Utah

7. NUCOR - YAMATO STEEL COMPANY Blytheville, Arkansas

8. NUCOR BEARING PRODUCTS, INC. Wilson, North Carolina

NUCOR CORPORATE HEADQUARTERS Charlotte, North Carolina

Saint Joe, Indiana Conway, Arkansas

Appendix 4: Nucor’s Organizational Structure in 1995 (source: D. Walker 2005)

31

Nucor Building SystemsWaterlooSwansea

Planning

Nucor Steel

DarlingtonNorfolk

Vulcraft

FlorenceNorfolk

Fort Payne

Nucor Cold Finish

DarlingtonNorfolk

Brigham City

Hertford

Vice President

and General Manager

Typical Divisional Structure, shown for Norfolk Facility

Construction Coordinator Maintenance SalesControllerMelting &

Casting

Melting Supervisor

Accounts Supervisor

Board of Directors

Personnel Finance

President & COOChairman & CEO

Berkeley

Nucor Grinding Balls

Brigham City

Nucor FastenerSaint JoeConway

CrawfordsvillePlymouth

Jewett

Nucor-Yamato Steel Company

Blytheville

Rolling & Finishing

Vice Chairman & CFO

GrapelandSaint Joe

Brigham City

Nucor Bearing Products, Inc.

Wilson

Hickman

Appendix 5: Nucor Historical Data from 1960 to 1995 (source: Nucor annual reports)

EARNINGS ___________________________________________________

YEAR NET SALES OPERATIONS OTHER NET PER SHARE TOTAL ASSETS

32

PRIOR MANAGEMENT

1960 2,182,204 (367,149) (261,829) (628,978) Loss 1,837,1021961 4,014,418 379,006 (16,021) 362,985 0.01 5,630,1781962 9,100,958 24,095 (683,323) (659,228) Loss 7,184,3951963 15,374,487 260,710 240,000 500,710 0.01 8,324,7591964 17,485,319 33,264 30,000 63,264 0.01 10,337,9551965 22,310,595 (431,013) (1,803,748) (2,234,761) Loss 6,937,251

PRESENT MANAGEMENT

1966 23,006,483 698,900 635,000 1,333,900 0.02 8,109,1901967 23,600,093 822,424 880,832 1,703,256 0.03 11,546,4981968 35,544,913 1,002,954 1,235,982 2,238,936 0.03 16,501,866 1969 46,321,797 1,210,083 1,125,000 2,335,083 0.02 24,655,801 1970 50,750,546 1,140,757 -- 1,140,757 0.02 28,800,1831971 64,761,634 2,740,694 -- 2,740,694 0.04 33,168,0141972 83,576,128 4,668,190 -- 4,668,190 0.07 47,537,2471973 113,193,617 6,009,042 -- 6,009.042 0.09 67,550,1101974 160,416,931 9,680,083 -- 9,680,083 0.14 82,038,7481975 121,467,284 7,581,788 -- 7,581,788 0.10 92,639,413 1976 175,768,479 8,696,891 -- 8,696,891 0.11 119,095,581 1977 212,952,829 12,452,592 -- 12,452,592 0.16 128,010,9821978 306,939,667 25,848,849 -- 25,848,849 0.33 193,454,6931979 428,681,778 42,264,537 -- 42,264,537 0.52 243,111,5141980 482,420,363 45,060,198 -- 45,060,198 0.55 291,221,8671981 544,820,621 34,728,966 -- 34,728966 0.42 384,782,1271982 486,018,162 22,192,064 -- 22,192,064 0.27 371,632,9411983 542,531,431 27,864,308 -- 27,864,308 0.33 425,567,0521984 660,259,922 44,548,451 -- 44,548,451 0.53 482,188,4651985 758,495,374 58,478,352 -- 58,478,352 0.68 560,311,1881986 755,228,939 46,438,888 -- 46,438,888 0.54 571,607,6441987 851,022,039 50,534,450 -- 50,534,450 0.60 654,090,1391988 1,061,364,009 70,881,020 38,558,822 109,439,842 1.29 949,661,7101989 1,269,007,472 57,835,844 -- 57,835,844 0.68 1,033,831,5121990 1,481,630,011 75,065,261 -- 75,065,261 0.88 1,035,886,0601991 1,465,456,566 64,716,499 -- 64,716,499 0.75 1,181,576,7981992 1,619,234,876 79,225,703 -- 79,225,703 0.92 1,507,382,2551993 2,253,738,311 123,509,607 -- 123,509,607 1.42 1,829,268,3221994 2,975,596,456 226,632,844 -- 226,632,844 2.60 2,001,920,1651995 3,462,045,648 274,534,505 -- 274,534,505 3.14 2,296,141,333

Appendix 6: Career Highlights of Two Top Managers at Nucor (source: various)

33

Kenneth Iverson Samuel Siegel

Ken Iverson joined Nucor in 1962 as vice-president and general manager of steel joist division, Vulcraft; he was elected president of Nuclear Corporation of America in 1965, and CEO and Chairman of the Board since.

In 1965, Iverson made decision to move head office from Phoenix Arizona to Charlotte North Carolina and sold off Valley Sheet Metal, U.S. Semcor and the Electro mechanical division, as these did not fit future plans. Large loss posted.

By 1967, Iverson’s lean management and worker-driven productivity set the Vulcraft division on its way to capturing 25% of steel joist market in U.S. and record profits. Iverson’s 1967 recommendation to build first mini steel mill accepted by Board.

In 1980 Iverson named best CEO in mini-mill category by the Wall Street Transcript.

In 1991 Iverson won the National Metal of Technology, the U.S. Congress’s highest honor for innovation, awarded personally by the President of the U.S., “For his concept of producing steel in mini mills using revolutionary slab casting technology that has revitalized the American Steel Industry”.

In 1995 Ken Iverson retired as CEO of Nucor Corporation. He planned to remain as Chairman of the Board beyond 1995.

_______________________________________In 1946, Kenneth Iverson earned a bachelor of science degree in aeronautical engineering from Cornell University in New York. He gained a M.Sc. (master of science) degree in mechanical engineering with a minor concentration in metallurgy from Purdue University in Indiana in 1948. Before joining Nucor, he was research physicist at International Harvester, manager of engineering at Ilium Corporation in Freeport, Illinois, assistant to the vice-president of manufacturing at Indiana Steel, manager of sales and metals at Cannon Muskegon Corporation in Michigan and executive vice-president of Coast Metals in New Jersey. Until his death in 2002, Ken Iverson was an outspoken advocate for business leading the way for progressive change.

Sam Siegel joined the company in 1961and becameController in 1964; Siegel was elected vice-president, finance, and treasurer and secretary in 1965; he was elected director in 1968, executive vice-president in 1986, and vice-chairman of the Board in 1991.

In 1965, Siegel quit and refused to rejoin the company unless Ken Iverson was appointed president and he, Siegel, treasurer and secretary. Board agreed.

In 1971, Siegel proposed name change from Nuclear Corporation of America to simply Nucor.Designed by Siegel, Nucor’s 1972 annual report named best in its category by Financial World.

In 1975, Siegel started the tradition to put all employees’ names on the cover of the annual report. During the early 1980s, Siegel told the Wall Street Journal that layoffs weren’t in Nucor’s plan. That could keep costs up slightly. He added, “We think it’s worth it.”

Siegel’s divestiture of tiny Research Chemicals in 1988 represented net gain of $40 million for Nucor.CFO magazine recognized Siegel as a genius in 1991 for his financial practices.

In 1995 Sam Siegel crafted legislation that brought a recycling partnership with South Carolina that has become model for other states, and this resulted in corporate tax incentives for Nucor that at the time were the highest ever granted in the U.S.

________________________________________In 1952, Samuel Siegel earned a bachelor’s degree in business administration with specializations in management and accounting, from Bernard Baruch College in New York City. He gained his certified public accounting designation in 1961. Before joining Nucor, he was associated with New York offices of: Touche Ross; Dellwood Dairy, Yonkers, Seaporcel Metals, Long Island City; Topps Chewing Gum, Brooklyn, and Swift & Company, Brooklyn. Mr. Samuel Siegel also has been affiliated with the Financial Executives Institute; American Institute of CPAs; the American Society of Corporate Secretaries and, since his retirement in 1999, he has been an invited speaker at universities in the U.S. and Canada. In 2007, Samuel Siegel was inducted into the U.S. Accounting Hall of Fame.

___________________________________________________________________________________________Impressive financial results are part of the Nucor story. From 1965 to 1995, Ken Iverson and Sam Siegel guided Nucor to increased sales of 150 times, from $22.3 million to $3.5 billion, to net earnings from minus $2.2 million to plus $274.5 million and to stockholder’s equity increasing 1,800 times, from $0.76 million to $1.38 billion.