by Steve Coll
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”
Lee 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
Raymond 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.
“This is going to be a tough meeting; you ought to take two patience pills,” Peter Townsend, the vice president for investor relations and corporate secretary, would warn him before these sessions.
“No, three.”9
If Raymond began his answer to an analyst’s question with “Frankly” or “To be candid with you,” it was a signal to duck. He started one meeting at the New York Stock Exchange by noting that executives from The Walt Disney Company were also present in the building that morning: “I don’t think Mickey or his friend Goofy are going to join us, but I may have to hold my judgment on that until after the Q&A session.”10
Raymond served in effect as the corporation’s chief financial officer, in possession of all of the critical numbers. By the time he became chairman, he had also served for years as a director at J.P. Morgan, the Wall Street investment bank. During the mid-1980s, Exxon’s financial performance looked respectable but undistinguished, in comparison with its oil industry peers. Rawl’s cost cutting and reorganization campaign was intended to force improvements. In 1987, Rawl began to place heavy emphasis on a metric called “return on capital employed” or R.O.C.E. (often spoken of as “row-see”).
This was a performance measure that sought to show how well a particular Exxon business unit—and overall, the corporation—used the cash it borrowed or recycled from earnings to reap returns from new projects. After he took charge, Raymond campaigned on Wall Street to have his particular measure of R.O.C.E. recognized as the premiere number by which oil corporations should be judged. He argued repeatedly to analysts that oil companies were very long-term busine
sses that consumed a great deal of capital, and that, ultimately, they should be judged not by quarterly profits or share-price fluctuations, but by how well they managed their investments—whether, for example, they regularly destroyed capital by leasing unproductive oil fields, going over budget on huge drilling projects, or by building unprofitable refineries.
The deep cost cutting continued by Raymond raised Exxon’s rates of return on capital. So did the drive Raymond advanced to improve Exxon’s relatively low-profit divisions, particularly gasoline refining. The “downstream” divisions of integrated oil companies like Exxon were generally much less profitable than the “upstream” units that found, pumped, and sold crude oil and gas. (“Downstream” was an industry term that referred to what took place after oil was pumped from the ground: the refining of oil into gasoline or aviation fuel, and retail sales to motorists at thousands of Exxon-branded gasoline stations across the United States.) Exxon had long tolerated low downstream profit margins and even occasional losses because having huge refineries worldwide gave the corporation a built-in market for its own oil sales. In effect, upstream profits subsidized the downstream. By maintaining a focus on R.O.C.E. inside Exxon and preaching about it on Wall Street, and by tying performance on that number to promotions and bonuses for Exxon managers, Raymond hoped to create change.