Private Empire: ExxonMobil and American Power (7 page)

Exxon recruited heavily from the petroleum engineering departments of the public universities of America’s South, Southwest, and Midwest. By locating its headquarters in Texas, the corporation placed itself in the landscape to which many of its long-tenured American employees belonged. Exxon maintained “kind of a 1950s southern religious culture,” said an executive who served on the corporation’s board of directors during the Raymond era. “They’re all engineers, mostly white males, mostly from the South. . . . They shared a belief in the One Right Answer, that you would solve the equation and that would be the answer, and it didn’t need to be debated.”

The executive was startled to discover at one point that the corporation’s top five leaders, all white males, were the fathers, combined, of fourteen sons and zero daughters. The mathematical probability that such a quirk had no basis in the corporation’s social mores was low. “What is there in the culture here that promotes people with sons?” he wondered. Sports? Hunting? He could not figure it out, if there was indeed something other than a fluke to discern.
²³

Lee Raymond, a son of the working-class Great Plains, considered himself unabashedly to be a “free-market capitalist” and resisted government intervention and regulation instinctively; Dallas suited him. When Raymond found himself in a public battle with gay rights organizations over his decision to deny corporate benefits to same-sex partners of his employees, a board member challenged him to at least make a public statement saying the corporation did not discriminate on the basis of sexual orientation. Raymond declined. He told colleagues that he did not pay much attention to matters such as sexual preference, but he was not going to make an announcement.

“Do you discriminate against people based on sexual preference?” the director asked.

“Of course not,” Raymond answered.

“Then why don’t you say it?”

“Well, it’s not required by law.”

“But it’s a freebie,” the director persisted, speaking later to one of Raymond’s lieutenants.

The executive retorted: “What’s next? Polygamy?”
²⁴

The Exxon way included an updated version of a decades-old employee ranking system in which each year all managers were required to assign a number rating to all personnel under their supervision, ranking those of similar pay grade from best to worst, and to recommend high performers for assignments that would groom them for later leadership. The evaluations covered judgment, creativity, leadership, competence, sensitivity, and other subjective qualities, but there was no grading on a curve; supervisors were required to distribute outstanding and inadequate grades in even proportions. Those initially ranked in the top tier were then promoted into a group of similarly ranked high performers to determine which of those would emerge as the best of the best. The winners could expect to be promoted quickly, but also to have to pick up and move every few years. The system, analogous to natural selection, hardened Exxon’s culture and wrote the corporation’s D.N.A.: It was driven by numbers, focused tightly on performance, and in many ways inflexible. “The forced ranking system was poisonous,” said one manager who went through it successfully. “It created feelings of distrust with your coworkers because of the competition and the zero-sum consequences.” Amid cost reductions, reassignments, demotions, salary reductions, and job cuts, the pressure only intensified. A former executive once described the ranking system as “dog-eat-dog competition under the patina of working together.”

Even before the
Valdez,
Exxon had been a place that emphasized procedure and cultivated orthodoxy; with the inauguration of O.I.M.S., the i-dotters and t-crossers rose to predominant authority. Because of the nature of its business, Exxon’s recruitment was biased toward engineers, scientists, accountants, and personalities who were comfortable with rules—people who were pleased, even eager, to work for one company all their lives, and to move from place to place in its service. Senior executives noticed that employees tracking for management tended to reach a point—somewhere around four to seven years after joining the corporation—when they either committed to Exxon or left. Those who stayed did not find O.I.M.S. ironic or extreme; they
liked
the culture of discipline and accountability. Restless free thinkers and habitual dissenters who accidentally got hired (often as scientists) tended to decide quickly that they would be happier elsewhere. The result was a corporation led in its upper management ranks by people who were not only supporters of the O.I.M.S. reforms, but true believers.
²⁵

Around an industry conference table, Exxon’s delegation usually dominated. “You don’t like them, but you respect them a lot because you know that they’re really smart,” said a competing executive. An Exxon delegate to an industry committee meeting typically arrived with a binder full of research, colorful PowerPoint slides, and carefully outlined remarks that reinforced the impression that he was “the smartest guy in the room.” Exxon’s sheer size meant it enjoyed advantages of research and scale; if Mobil dispatched one lawyer to an industry conference, he might arrive to see two or three from Exxon across the table, shuffling through the papers they had spent many hours preparing as a team.
²⁶

The ultimate measure (and the chief purpose) of this management culture was Exxon’s financial performance. Even during the early Lee Raymond era, a time when oil prices gyrated disruptively and at one point fell to historic lows, the corporation’s performance was superior from quarter to quarter and year to year. Exxon earned $6.47 billion in profit in 1996 on $110 billion in revenue, more profit than any American corporation that year except General Electric and General Motors. Mobil, the next-largest American oil competitor, posted about half of Exxon’s profit margin. Exxon made more profit on each dollar it invested than any of its American or international competitors. Its exceptional ability to complete massive, complex drilling and construction projects on time and under budget meant that, in comparison to industry peers, it remained exceptionally profitable in recessions and boom times alike, when oil prices were high and when prices were low.
²⁷

The Exxon way came across as arrogance to many outsiders. Raymond once stepped before a large conference of Wall Street analysts and announced, “What you’re hearing today may seem boring. . . . You’ll just have to live with outstanding, consistent financial and operating performance.” As to the performance of Exxon’s competitors at Chevron, Royal Dutch Shell, and British Petroleum, Raymond added, “I have to [say] I am surprised at the apparent lack of focus.”
²⁸

“Exxon’s attitude toward the other majors has always been, ‘We are Oil—the rest of you are kids,’” said a long-tenured executive at a competing company. Exxon became such an oft-cited antagonist in this oilman’s household that once, when the industry seemed troubled, his daughter asked him, “Dad, do you think things will get so bad that you’d go to work for Exxon?” (“No, I sure hope not,” he answered.) Rockefeller Goodwin, a descendant of the founding family who became a critic of modern Exxon management, acknowledged that the company enjoyed a “strong corporate culture. . . . Unfortunately, it includes a lack of interest in listening to outsiders, an assumption that they know the answers.” The shareholder activist Robert Monks, another persistent critic, found Exxon managers “self-referential” and “good operators [but] not good citizens.” A senior civil servant who worked on international energy issues at the White House recalled, “It doesn’t take you more than five minutes dealing with Exxon people to kind of get the full two-by-four-across-the-head sense of some of their culture,” because of their blunt directness.
²⁹

Engineers and financial controllers influenced the corporation more than its global business strategists or brand marketers did. The latter tended toward habits of dreamy ambition and improvisation difficult to reconcile with O.I.M.S. By the mid-1990s, Exxon operated in almost two hundred countries with about eighty thousand regular employees; overseas, 98 percent of its employees were non-American. To operate such a business in proximity to the sorts of daily risks illuminated by the
Exxon Valdez
grounding did require discipline.

“We don’t run this company on emotions,” Lee Raymond liked to say. “We run it on science and principles.” He sought “the relentless pursuit of efficiency,” he once said.
³⁰
As Standard Oil had discovered a century earlier, however, the larger, more profitable, and more powerful Exxon became, the more it attracted attention as a political actor. And in politics, discipline, performance-to-budget, and error-free design were not common qualities; instead there was a surfeit of “Human Factors,” in the O.I.M.S. vernacular. As Exxon rose to greater global influence in the early twenty-first century, the corporation’s leaders persistently struggled to find a supple human touch.

Two

“Iron Ass”

L
ee Raymond lived and worked within a bubble of privilege. He traveled the world with round-the-clock support from the corporation’s Aviation Services and Global Security departments. If his day began at his 8,642 square-foot, five-bedroom brick-façade home in Dallas, then his longtime chauffeur and bodyguard, a retired New York City police officer, would meet him there and usher him into a dark sedan. Raymond rarely drove himself anywhere. Nor did the indignities of commercial airline travel encroach on him. Citing kidnapping and other security threats, the corporation’s board of directors had decided that its chief executive should not fly on commercial carriers. Raymond had use of Exxon’s corporate planes for both personal and professional travel. Aviation Services managed about nine jets—around the turn of the decade, the inventory included several Gulfstream aircraft, a Bombardier Challenger, and two Bombardier Global Express jets. Lee Raymond’s principal plane—a ten-passenger G-IV, and later an eleven-passenger Global Express, each with sleeping and mess facilities, satellite telephones, a defibrillator, and CPR-trained flight attendants—bore a tail number expressive of his position: N-100-A, or as it was referred to by corporate aviation personnel, “November One Hundred Alpha.”

The crews catered to Raymond’s onboard tastes: a glass of milk with popcorn in it, within arm’s reach of his executive chair. Aviation Services’s approximately two dozen pilots and several dozen additional support staff also tended to his wife, Charlene, who often traveled with the chairman and who favored bowls of wrapped chocolates. “When you take care of her, you take care of me,” Raymond told them.
¹

Lee and Charlene Babette Raymond were inseparable. By the late 1990s, the couple had developed a typical annual migration: a late-January trip to Pebble Beach, California, where Lee sometimes played in the pro-am golf tournament with the likes of P.G.A. professional Ronnie Black; an April sojourn to Augusta, Georgia, to attend the Masters golf tournament, where Lee might catch up with his friend Phil Mickelson or have dinner with Tom Watson; and then Easter at their winter home in Palm City, Florida. Golf was Raymond’s most discernible passion away from the office—he regularly joined in corporate tournaments. When Raymond had business in Asia, he and Charlene sometimes managed to fit in a vacation break in Hawaii on the way out or the way back. In the autumn he often spent Thanksgiving at the Augusta golf club again and might include a stag trip to Exxon’s vast, corporate-owned bird-hunting ranch in southeastern Texas, near the town of Alice. At Christmas the Raymonds typically retreated again to Palm City, Florida.

Throughout the year they made weeks-long international trips on which the Exxon chief might negotiate for or ratify the final terms of new oil production contracts, attend a ribbon cutting at a new refinery, deliver a speech at an industry conference, or chair a board meeting. On a trip to London in 1997, the couple picked up an expensive painting; panicked Aviation Services and Global Security employees, fearing theft, guarded the artwork for nearly two weeks aboard November One Hundred Alpha as the Raymonds hopped on Exxon business from city to city. As their wealth grew, they collected not only art, but real estate. They added a $3.8 million house in the desert near Palm Springs, California, and a $7 million home in Scottsdale, Arizona.
²

Raymond and Charlene had both grown up in modest circumstances in the American heartland. Both were devout Christians. Raymond’s Plains-bred parents had raised him as a member of the Evangelical United Brethren in Watertown, South Dakota, a denomination that later became part of the United Methodist Church. Charlene came of age in a German Catholic family from Kohler, Wisconsin. They met at the University of Wisconsin and married when Raymond was twenty-three. Raymond converted to Catholicism and thereafter rarely missed a mass; in Saudi Arabia, which banned Christian churches, he attended services inside the U.S. embassy.

Although Charlene had earned a college degree in journalism, when she gave birth to triplet boys, she devoted herself to them and to her husband. Even at home, Raymond worried about discipline. After he rose within Exxon, he tried to control his family’s use of corporate jets—he barred his triplet sons from flying on them, fearing that if he allowed them the privilege, it would encourage lax behavior by other Exxon executives. Charlene could be as demanding as her husband, and she could also be extremely frugal, as if clinging to lessons imparted during the Depression-influenced era of her youth. Deplaning in Berlin or Paris, she might fill a bag with snacks while complaining about the prices charged for breakfast in the luxury hotels where she and her husband stayed.
³

Aviation Services staff talked among themselves about which ExxonMobil executives with jet privileges were the most arrogant or prone to temper over petty problems. The capacity of some of Exxon’s multimillionaire leaders to become abusively angry over delays caused by bad weather, pilot changes, or mechanical problems never ceased to amaze their more modestly salaried crews.

Lee Raymond could be sharp-tongued, but he was not the worst offender in that regard. He tried to maintain a cordial formality with his travel crews and won respect, if not affection, from some of them. That was about the most that could be said of the reputation Raymond enjoyed among Exxon executives and employees more generally: He was respected. He was also feared.

Some managers who had worked in other corporations, even notably hierarchical and disciplined ones, found striking the atmosphere of terror and deference Raymond generated in the minds of many who worked for him. Although it was possible to locate people who would say that Raymond was not insulting or mean to them personally, even these exceptional people acknowledged that he was often unpleasant to large numbers of others. Some of those who knew Raymond well, and liked him overall, felt he badgered colleagues in part to keep people away from him. If this was his strategy, it worked. He won the nickname “Iron Ass” among some employees. Behind his desk in the God Pod hung a painting of a fierce tiger.

He calculated that in a corporation as large and diverse as Exxon, with tens of thousands of employees scattered in offices, refineries, and oil production compounds worldwide, the only way a chief executive could hope to extract disciplined results was to overdo it—that is, unless Raymond used his bully pulpit at Irving to pound hard and even intimidate his employees, the natural drift and compromising tendencies of such a large workforce would produce mediocre results.

In a small group or a social setting, Raymond could be relaxed and pleasant company. There was a South Dakota–bred reticence about him that could be confused with coldness. His manner masked a streak of sentimentality. He could be fiercely loyal to ExxonMobil colleagues and sometimes wept openly when subordinates faced illnesses or other personal struggles. At a retirement party for his longtime assistant Adrienne Hurtt, Raymond recounted that he had been on a business trip when his mother died, and that Adrienne had called and imparted the news with perfect grace. As he told the story, Raymond broke down and cried before his colleagues.
⁴

He worked hard. When in Dallas, he typically left the Irving headquarters around 5:30 p.m. with a bulging, battered-looking, soft Hartmann briefcase and a pair of plastic legal binders full of memos and reports. At home, he and Charlene kept separate bedrooms, in part because Raymond snored, but mainly because he stayed up until about midnight to read and mark up his files. “His life was the company,” said a former member of the board of directors. Beyond Charlene, Raymond’s friendships were mainly drawn from a small clan of retired and serving chief executives of international oil companies. Traveling in Europe, Raymond would take Charlene to dinner with Lodewijk van Wachem, a retired chairman of Royal Dutch Shell, and his wife. Long dinners where the men could trade stories about the global industry were often Raymond’s idea of evening entertainment. As to hobbies, “Golf was about it,” the former director said.

Before larger audiences and workplace groups, Raymond often seemed to go looking for a fight. It seemed the worst thing an Exxon manager could be in Raymond’s eyes was dishonest, but the second-worst thing was to be stupid. He could be withering with senior executives, Wall Street analysts, journalists, and dissident shareholders who asked what he considered to be a dumb question or who disappointed him with the quality of their analyses. “Stupid shits” was one of the direct phrases by which he conveyed his judgments.

Raymond “definitely had a sense of humor,” a subordinate recalled, and he “didn’t bother belittling people below a certain level. You had to be up to where you had significant responsibility before you could get both barrels.” In those cases Raymond did not hold back. He had been a champion debater in high school in South Dakota and he took transparent pride in his ability to knock down an opposing speaker. During his rise, Raymond ran Esso Inter-America, the corporation’s Latin American division. There he reshaped an Aruban refinery losing $10 million a month into a $25-million-a-month profit center. He did not fashion this turnaround timidly. In front of the subsidiary’s senior managers and board of directors he once turned on a subordinate whose comment had underwhelmed him: “And what little birdie flew in the window and whispered that dumb-shit idea in your ear?” Later, when he reigned over all of Exxon, he would preside over company town hall meetings and question sessions. Sensitive employees in the amphitheater cringed when, as inevitably happened, some incautious manager stood to ask Raymond an impertinent question about when one or another employee benefit might be granted. Raymond “would look at the person who asked as if he could will death,” another former manager recalled. Raymond believed he had never belittled a colleague in front of others, but belittlement is an experience usually defined by the victim. Raymond admitted, “I’m not known to suffer fools gladly.”

His physical appearance did nothing to soften the impression he made. He wore square wire-framed glasses and kept his straight, side-parted light brown hair closely cropped. He had large ears. He had grown into a fleshy man and the jowls beneath his chin could billow like a bullfrog’s neck. A childhood cleft palate had left him with a prominent harelip. Exxon employees who found themselves on the receiving end of Raymond’s ridicule sometimes referred to him darkly as “the Lip.” The amateur psychologists among them speculated that it might have required a certain learned toughness and even meanness, an ability to tune out taunts, to grow up in a small midwestern town with such a visible defacement: “I can envision [him] as a child being absolutely persecuted by other kids,” recalled a former employee. Raymond obviously got through it, the in-house analysis went, but after he achieved success, perhaps it was not surprising that “he doesn’t take any prisoners.”
⁵

Raymond’s predecessor, Lawrence Rawl, had created an unforgiving climate within Exxon while tearing into the corporation’s bloated cost structure and overseeing a campaign of staff reductions that federal investigators found had contributed to the
Exxon Valdez
fiasco, but which had also protected the corporation from financial distress. Rawl had also belittled colleagues at meetings, engendering an atmosphere in which his principal deputy, Raymond, seemed to believe as he ascended, one executive said, that he should be “out-Rawling Rawl” in toughness.
⁶

R
aymond saw himself as an oil and gas purist. He told colleagues that outside its headquarters the corporation should carve in stone the words, “crude oil.” He felt that it was critical that Exxon “not get confused about what we are trying to do around here.”
⁷
He and Rawl had employed their drill sergeant–inspired ethos to direct a sharp turn in corporate strategy away from an era, during the 1960s and 1970s, when Exxon had tried to adapt itself partially to environmentalism. (Rawl’s predecessor as chairman, Clifton Garvin, a chemical engineer, had gone so far as to install solar panels to heat the swimming pool at his suburban New Jersey home.) Besides cost cutting, they sought to restore Exxon’s focus on its core business.
⁸

Some of his colleagues believed Raymond possessed a one-of-a-kind analytical mind and memory, and that his acuity contributed mightily to Exxon’s superior business and Wall Street performance. At a time of wage stagnation and other rising cost pressures on working and middle-class American families, this success enriched many Exxon employees and increasingly set those located in the United States apart as an economically secure class. Exxon managers had jobs for life if they could hack the corporation’s internal systems and were willing to move from place to place. They enjoyed secure defined-benefit pension plans and restricted stock that would make many middle and upper managers millionaires if they stayed long enough and managed their personal finances carefully. Exxon managers tolerated Raymond’s tirades in part because they understood, as the years passed, that he was making them rich. This was not Silicon Valley: The corporation’s scientists and division chiefs did not walk away with fortunes at thirty-five, but if they conformed and performed, they would rise gradually on a tide of oil profits into an economically privileged elite.

Raymond reserved a particular scorn for the Wall Street analysts who published commentary about Exxon’s business strategy. After years of sporadic efforts to engage with stock commentators, the corporation began to stage an annual meeting with analysts. It was an unusual hearts-and-minds campaign because during the question-and-answer session, it was rare for Raymond to respond to any query without first challenging the analyst’s assumptions or intelligence.