DeVos, Richard

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DeVos, Richard

(1926-)
Amway International

Overview

Richard DeVos heads one of the most lucrative enterprises in the world. In 1997, his personal wealth was estimated at $3.2 billion, making him one of the wealthiest Americans of the decade. What is more remarkable is that his Michigan-based Amway Corporation, founded in 1959 with his high school friend Jay Van Andel, brings in about $7 billion a year though a simple formula: selling household products and other goods through a vast network of sales people and distributors, many of whom work part-time.

Personal Life

DeVos was born in 1926 in Grand Rapids, Michigan. The southwestern corner of the state had drawn many Dutch immigrants in previous decades, and DeVos, like his next-door neighbor Jay Van Andel, grew up in a close-knit Dutch-American community. Simon DeVos, his father, was an electrician, and the family were devout Christians of the Reform Christian faith.

As teens at Grand Rapids Christian High School, DeVos and Van Andel dreamed of becoming business owners. During World War II, they served in the Army Air Corps, and both later graduated from Grand Rapids' Calvin College. In 1953 DeVos married Helen Van Wesep, and they had four children. Once known as a tireless business traveler for the Amway cause, DeVos underwent triple-bypass heart surgery in 1992, and retired from the day-to-day operations that same year. In 1997, at the age of 71, he had heart-transplant surgery in England.

Despite the immense wealth his company brought him, DeVos continued to call the Grand Rapids area home. He is still active in the LaGrave Avenue Christian Reform Church in the city. DeVos is also the owner of the Orlando Magic basketball team and in his more robust days liked to race ocean-going yachts. Second-generation DeVos and Van Andel family members have taken over some of the top positions in the company and on its board.

Career Details

DeVos and Van Andel saw themselves as entrepreneurs from a young age but had difficulty in finding or creating a solid opportunity. After serving in the Army Air Force, they began a flying school outside of Grand Rapids, Wolverine Air Service. It was unsuccessful, so they then opened a drive-in restaurant. DeVos did the cooking while Van Andel waited on cars. In 1948, they bought a schooner to sail to South America, but neither had much experience and the boat sunk between Cuba and Haiti. Returning home to Grand Rapids once more, they went to work as sales agents for Nutrilite, a California vitamin company. Its products were "directly marketed," that is, not sold in stores, but purchased by sales-people at a discount from the company and then sold to customers. Nutrilite distinguished itself from other direct-marketing companies in that it used what was called a multilevel marketing system. Salespeople received commissions on the products they sold, but could also advance through the ranks by recruiting new salespeople into the company; they then received a commission on the profits of those they brought in.

DeVos, often described as a natural salesperson, was successful at selling the Nutrilite line, and both he and Van Andel rose to prominence in the company. Yet differences with executives led them to break out on their own in 1959. Some sources note that Van Andel was asked to take over company presidency in 1957, but declined; other sources credit DeVos and Van Andel with developing key products in the Nutrilite line. Yet another source explains that Amway was founded when DeVos and Van Andel incorporated new products into the Nutrilite system that they were already selling. Amway did eventually add the Nutrilite vitamins and food supplements to its product line.

What is not in dispute is the founding of Amway in early 1959 and the modeling of its employee hierarchy on the same multilevel, commission-based idea as Nutrilite. "We call our company Amway because the American way of private ownership and free enterprise is the best way," DeVos told recruits early on. The company began in the basements of the DeVos and Van Andel homes in Ada, Michigan, outside of Grand Rapids and is still headquartered in Ada.

The first Amway products were household cleaners, including a biodegradable soap called "L.O.C." DeVos and Van Andel had bought the recipe from a chemist in Detroit. Together, the co-founders created and refined a complex and sometimes controversial corporate structure for Amway. A person enters the sales force after being "sponsored" by a present member. These salespeople can be known for their enthusiastic tactics that often appeal to average-income families struggling to make ends meet. "How would you like to make an extra $1000 a month?" begins the typical Amway recruitment pitch, and new salespeople are encouraged to tape pictures of things that they would like to own such as a summer cottage or a luxury car to their refrigerator to encourage them in meeting their goals. Once a person has purchased a starter kit and a number of Amway household products, they are encouraged to recruit others. What is known in Amway terminology as the "downline" is then created; this is the number of recruits a person has signed up. After a certain number, they become a "distributor" and then get a percentage of every product sold by members on their down-line. This sales force keeps in touch with one another via Amvox, a voice-mail system they rent from the company.

Amway also sells their sales force motivational tapes, many recorded by DeVos himself. Amway sellers are also encouraged to buy these tapes to sell to others. Many recruits burn out after a few months, and find that their friends and extended family members shun them after too many sales pitches and recruitment efforts.

Though many top distributors do indeed become rich by selling Amway and recruiting new members, according to a disclaimer required by Federal Trade Commission, the average Amway distributor earns about $88 a month. Such tactics led to investigations by the FTC beginning in the 1970s. Amway was cautioned for its recruitment techniques, but not found guilty of fraud. Canadian authorities were more persistent, and uncovered a scheme detailed in executive memos between DeVos, Van Andel, and other top Amway officers that pointed to a conspiracy to undervalue their Amway goods through a system of dummy invoices and fake transactions. In 1982 Canadian customs officials brought formal criminal charges against DeVos, Van Andel, and two other executives. Between 1965 and 1980, Canada claimed, Amway had underpaid about $23 million in customs duties. In response, Amway declared that Canadian customs officials had long been aware of the company's practices and they attempted to have the case moved to U.S. courts. They refused to appear in Canada to answer for the charges, saying they were unwilling to give up the constitutional protections that American citizens on American soil enjoyed. In 1983, DeVos and the other executives entered a guilty plea and agreed to pay a $25 million fine.

Another FTC investigation found that Amway recruiters had overstated earning potential, and in 1986 the company paid a $100,000 fine. By the 1990s, there was a class-action suit against the company in a Pennsylvania district court that was open to anyone who had been an Amway distributor between 1990 and 1996 and bought its motivational tapes or books. Despite such setbacks, Amway has grown into a hugely successful company. It posted record growth in the 1980s and 1990s, and in 1997 had a sales force of 2.5 million in 80 countries around the world. Asian markets have been especially receptive to the free-enterprise credo of Amway. The company launched operations in Japan in late 1970s, and they later spun off the subsidiaries Amway Japan and Amway Asia Pacific into publicly-held companies with stock offerings on Wall Street. In Japan, it is estimated that almost 1 percent of the population is involved in the Amway network.

Chronology: Richard DeVos

1926: Born.

1944: Enlisted in U.S. Army Air Force.

1953: Married Helen Van Wesep.

1959: Cofounded Amway Corporation.

1969: Company rebounded after fire destroyed plant and offices.

1979: Launched Amway in Japan.

1983: Charged with customs fraud in Canada; paid $25 million fine.

1989: Amway received Environmental Programme Achievement Award from the United Nations.

1992: Retired from Amway.

1997: Underwent heart transplant.

Social and Economic Impact

From its beginnings, Amway attempted to create and market products that did not harm the environment. Its first product, L.O.C., contained no phosphates or solvents; only in the 1970s did major manufacturers begin trumpeting the biodegradable features of their soaps and cleaning products. As DeVos recalled in CompassionateCapitalism, he and Van Andel "grew up fishing, swimming, and playing in . . . lakes and streams" around Grand Rapids, but were dismayed when they realized how polluted the waterways of western Michigan were becoming. In the 1990s, almost all of the Amway products are biodegradable, packaging is usually paper, a soybean derivative is used as carton filler instead of Styrofoam, and no products are tested on animals. For their long commitment to the "green revolution," Amway was awarded the Environmental Programme Achievement Award from the United Nations in 1989.

The influence of Amway as a corporate philanthropist began in downtown Grand Rapids. In the 1970s, as their company grew successful, DeVos and Van Andel donated millions of dollars to revitalize the declining city center. Today, there is the Amway Grand Plaza Hotel, and the Van Andel Museum Center/Public Museum of Grand Rapids.

DeVos and Van Andel became known for their support of certain conservative issues, such as a stance against a constitutional amendment which would guarantee women's suffrage. Sometimes they paid for full-page newspaper ads to get their views across, and by 1980 owned the nation's largest radio network, Mutual Broadcasting Network. That same year, two Detroit Free Press reporters, Patricia Montemurri and Larry Werner, wrote a series of articles for the paper called "Amway: Profits and Politics," in which they wrote of "the emergence of Amway as a conservative social movement."

In the series, a prominent business person in Grand Rapids who wished to remain anonymous told Montemurri and Werner that "there isn't a great deal of difference between what Amway is saying and what (Ronald) Reagan is saying." At the time, Reagan was campaigning to win the Republican nomination for the presidency and would later that year win that election as well as a second term four years later. The values Reagan spoke of in his campaign speeches hearkened back to a simpler era and appealed to many Americans' sense of patriotism: America is a great country, capitalism works, and if a person has not achieved material success, it is likely due to their own shortcomings. Such messages had long been a staple of the Amway creed.

When the Berlin Wall fell in 1989, and Soviet-style communism in Eastern Europe with it over the next few years, Amway became a presence in those countries and found many eager to join Amway's free-enterprise road to success. A documentary film that presented a frank look at Amway's presence in Poland was suppressed by the company from distribution for several months in 1998. Some of the success that Amway people have achieve in Eastern Europe, however, are detailed in DeVos's 1993 book, Compassionate Capitalism.

DeVos is a major contributor to the Republican Party. During the 1980s he was appointed to a national commission on AIDS by President Reagan. In 1994, he donated $2.5 million, and offered to pay for the television broadcast costs of the Republican Party's national convention in San Diego in the summer of 1996. In the spring of 1997, he sent two checks totaling $1 million to pay for debts stemming from the 1996 election. Jill Abramson of the New York Times noted that by 1997, the company had given almost $4 million to the Republican National Committee in just under four years, and "won a lucrative measure to ease international tax rules on its Asian affiliates in the sweeping tax bill passed by Congress last summer. The measure was championed by the Republican congressional leadership."

Amway's entry into China, which is still technically a Communist nation, is predicted to be its biggest success yet. In 1995, the company spent $100 million for a recruitment campaign and also constructed a massive plant. To accomplish this presence it was necessary to court the Chinese government, and company officials were so successful in this they even won permission to hold Amway rallies.