Barbarians at the Gate (14 page)

Behind his back Johnson made fun of Wilson, whom he called “Jigger-balls.” Nobody knew what that meant exactly, but it clearly didn’t fall into the category of affectionate nicknames. On trips to New York, Johnson spun great tales of Wilson and the faltering tobacco business for his despondent chums. “Why, if you listened to our guys, you’d think we were kicking the shit out of Philip Morris,” Johnson told them. “It reminds me of the boxer who’s getting beat up something awful and going back to his corner at the end of the round saying, ‘He never laid a glove on me.’ The trainer says, ‘Well, keep an eye on the referee, because somebody’s kicking the shit out of you.’”

After eight months in Winston-Salem, Johnson was dying for a dose of the old glitz, and he arranged to get a double shot that March in Palm Springs. For the Reynolds executives and directors, their first Dinah Shore was a mindblower. Attendees gained admission to events by flashing the $1,500 Gucci watch each was given. That year’s “Night with Dinah” gala featured Frank Sinatra crooning, Bob Hope joking, and Don Meredith emceeing. “That’s an awful leak you’ve got out there,” cracked Meredith, referring to the fountain out front. “But don’t worry; Ross will throw enough money at it to fix it.” Albert Butler, the Winston-Salem patrician, found himself paired with golf star Pat Bradley and baseball legend Johnny Bench and prayed he wouldn’t shank the ball in the crowd à la former president Gerald Ford, who was also playing.

The Reynolds crowd had never seen anything like it. Over the years
the company had sponsored sporting events, but it leaned toward stock-car racing. The weeklong orgy of golf and glamour concluded with more gifts—Nabisco golf shoes and tennis shirts, Polaroid cameras, and compact disc players—all that each invitee’s complimentary suitcase could carry. “We were all flabbergasted,” recalled Butler. It was at the Dinah Shore that the strained relationship between Wilson and Sticht finally fell apart when Sticht was unable to land a seat on an RJR jet home. He blamed Wilson. Sticht was still simmering three months later when, on a morning drive into his downtown Winston-Salem office, he noticed a new building going up near the Whitaker Park cigarette plant. “What’s that?” Sticht asked his driver, Eddie.

“That’s where they’re going to work on that smokeless cigarette,” Eddie said.

“What?” Sticht asked in amazement.

Sticht immediately confronted Wilson, who admitted the company had been secretly trying to develop a breakthrough product, a new high-tech, “smokeless” cigarette. Wilson said he had been planning to mention it to the board soon. Sticht was aghast; that such a product could be developed without consulting the board was unthinkable.

“How long have you been doing this?” he asked.

“Since 1981,” said Wilson. Five years.

“Why didn’t you come to the board with it sooner?” asked Sticht.

“Because it’s had to go through years and years of testing to get to the point where we could even think about its being viable,” Wilson replied.

What Wilson didn’t say was that he hadn’t trusted the board to keep the project secret. Nor did he mention that he had funded its development by dribbling out appropriations in increments small enough to avoid having to obtain the board’s approval.

Project Spa, as it was code-named, was indeed a revolutionary product. Later named Premier, the smokeless cigarette was Wilson’s secret weapon to turn the tide on the antismoking movement, smite Marlboro, and reverse the tobacco industry’s decline. Premier itself resembled a normal cigarette. Inside, though, it held only a smidgen of tobacco. A smoker lit a carbon tip on the end, heating, not burning, the tobacco and “flavor beads” inside. The process produced almost no smoke and no tar at all—only a fraction, in fact, of the compounds that had been linked to cancer. Wilson hoped it would keep smokers from quitting and draw ex-smokers back to Reynolds.

Whatever its chances of success, the board was incensed that Wilson would attempt such a mammoth undertaking without its approval. He was summoned to explain himself at a July 1986 board meeting in New York. Wilson came fully armed, his tobacco executives giving a full presentation on all of Premier’s features. Wilson offered to let the directors smoke one. Albert Butler did, and didn’t think it tasted or smelled very good. But it soon became apparent Wilson had bigger problems than foul-smelling cigarettes.

“Why didn’t you tell us about this sooner?” Juanita Kreps demanded. Wilson repeated the explanation he had given Sticht, but Kreps didn’t buy it. “You trust hundreds of company people working on this project; you trust dozens of people at an ad agency you’re working with; you trust outside suppliers and scientists; but you don’t trust us,” she said. “I, for one, absolutely resent that.”

One by one, the other directors echoed Kreps’s concerns, and added more of their own. Stuart Watson of Heublein, for example, was steamed that Wilson was planning to sell Kentucky Fried Chicken. He didn’t feel the board had been consulted on that, either. “Don’t you trust us?” Watson asked. “Don’t you trust us?”

A pair of Sticht allies, Ron Grierson and John Macomber, chimed in from their perches on the audit committee. The $68 million Wilson had secretly authorized for Premier’s development far exceeded his spending limit set by the board. Why, the two asked, hadn’t it been brought to the audit committee? Soon Sticht jumped in personally to deliver his licks, as well. The meeting droned on so long that New York police ordered the directors’ limousines, which were lined up along Grand Army Plaza, to pull away. When the session finally ended, Project Spa had tentative approval to proceed—it had gone so far it hardly seemed worth canceling—and Tylee Wilson had used up what little political capital he retained with his board of directors.

After a year of working elbow-to-elbow with Wilson, Johnson now struck like lightning. Out of the blue he telephoned several directors and told them he planned to leave RJR Nabisco, possibly to head a British food company, Beecham PLC. No, Johnson told each board member, don’t try to stop me. There wasn’t anything they could do; he felt his work was done after having successfully merged the two companies. Only one man could be chief executive, Johnson suggested coyly, and Wilson was clearly the board’s choice. It was time to move on.

“Not so fast,” said one director, Charlie Hugel, just as Johnson knew he would. “Maybe you can run this place.”

Hugel invited Ross and Laurie Johnson to his New Hampshire summer place on Lake Winnipesaukee. The two men sat on the back porch nearly all night talking. They examined all Johnson’s options. They analyzed each board member. They sipped drinks. They decided, at 4
A.M.,
that Johnson should take a run at Tylee Wilson.

The following weekend, Hugel invited over Paul Sticht, who had a nearby home. They, too, had a long heart-to-heart on the back porch. Hugel wasn’t surprised to find Sticht receptive. Johnson made a personal pilgrimage to follow up with Sticht, flying to New Hampshire in a borrowed American Express jet to avoid alerting Wilson. “Well,” said Sticht when Johnson walked in, “we’ve wondered why it took you so long to get here.”

Soon Sticht enlisted Macomber, who thought Wilson’s ouster a positively bully idea. He and Sticht would pursue Johnson’s case with other old-line board members. Hugel would work the Nabisco side of the aisle, though the likes of Andy Sage, Bob Schaeberle, and Jim Welch hardly needed convincing. They were old Johnson partisans.

Having planted the seed, Johnson laid back to watch. Sticht and Macomber dutifully carried his case to the other directors. “We can’t afford to lose Ross,” Macomber said, pointing out that without Johnson the company had only Ed Horrigan to fall back on in an emergency. “How could we ever fire Ty if we did that?” Then, in the first week of August, Johnson told Wilson he planned to resign. Wilson was alarmed, although for the wrong reasons. He, too, hated to lose Johnson. Thinking fast, Wilson noted a compensation committee meeting the following week, where, he said, he would be glad to discuss moving up his retirement date to the middle of 1988, the end of 1987 if necessary. Then, satisfied the matter would hold a week, Wilson flew to his Florida Keys home for a few days off.

There Wilson began receiving disquieting calls from allies in Winston-Salem. His enemies, he heard, were massing for an assault, which would install Johnson. Worried, Wilson called John Medlin, the chairman of Wachovia Bank, one of only two directors Wilson had put on the board. “Yes, something’s going on,” Medlin said. “I wish I could help, but you’ve got a problem.”

Wilson next called Hugel, who he knew was orchestrating the pro-Johnson movement. Should he call Sticht? Wilson wondered.

“He’s not going to be any help,” Hugel said cryptically.

Macomber? “There’s no point in it,” Hugel said. He gave it to Wilson straight: “You don’t have the votes.”

Wilson tried one last call to Vernon Jordan, but it was no use. “This one’s lost,” Jordan said. “You’d better cut yourself a deal and get out.”

Wilson saw the writing on the wall. At the following week’s meeting, he resigned. To go quietly, Wilson received a princely pact: a lump-sum payment of $3.25 million, continuation of his annual salary and bonus of $1.3 million until his official retirement at the end of 1987, and annual retirement pay totaling about $600,000 thereafter. The directors even threw in some perks: an office and secretary, a security system for his house, a car phone, and use of corporate apartments. Directors concocted a cover story for the public announcement. His departure, they announced, was in keeping with Wilson’s long-standing desire for early retirement.

Following the meeting, the full board made the change official in a conference call. After the slightest of efforts, Ross Johnson was named chief executive of RJR Nabisco, America’s nineteenth largest industrial company. “Well,” Tylee Wilson muttered afterward, “they got me.”

But in sleepy Winston-Salem Johnson was a Ferrari revving in a badly clogged parking lot. Under Wilson he had kept a low profile and avoided stirring up the locals. After he took control of RJR Nabisco in the fall of 1986, Johnson’s honeymoon proved short. One of his first moves was dealing with Ed Horrigan. Just days after Johnson took the top post, Horrigan walked into his office and offered to resign. After a year of internal sniping, he figured he would quit before Johnson fired him. Johnson shocked Horrigan by refusing to accept the resignation. “No,” Johnson said, “I need you.”

Because Johnson still knew next to nothing about tobacco, he had to have a man who did and, whatever their past disagreements, he was determined it would be Horrigan. Horrigan had raged about the luxurious New York apartments Johnson’s Nabisco chums had; Johnson now made
sure Horrigan got the most luxurious of all, in the Museum Tower above the Museum of Modern Art. Wilson had made Horrigan pay for his weekend excursions to Palm Springs. Not only would RJR Nabisco foot the bill for the trips, but Johnson gave Horrigan his own personal Gulfstream G-3 jet, the top of the line in corporate aircraft, to use as he wished. Johnson even encouraged Horrigan to lease a company car in Palm Springs, and Horrigan happily obliged, selecting a Rolls Royce. Horrigan was given free rein to run Reynolds Tobacco and, to the shock of local gossipmongers, appeared to become fast friends with Johnson.

Next Johnson began to purge the ranks of the Reynolds Old Guard. Gwain Gillespie was fired as chief financial officer and replaced by Ed Robinson of Nabisco. John Dowdle, the treasurer, accepted an early retirement package and was replaced by Nabisco’s Mack Baines. Rodney Austin was fired as personnel chief and replaced by Andrew Barrett of Nabisco. Public relations chief Ron Sustana thought he was a survivor when Johnson told him he would move to New York to better oversee the entire company. But Horrigan despised Sustana, and when Johnson found out, he had Sustana fired. Mike Masterpool of Nabisco replaced him. All down the line, Reynolds people were thrown into the streets to make room for Johnson’s Nabisco cronies.

Johnson’s troubles began when Winston-Salem began to notice the strange goings-on. Things the locals hadn’t paid attention to when he was Wilson’s number two were now held against him. No Reynolds executive in history had had a bodyguard, but at Old Town and Bermuda Run they whispered that Johnson hired one. He did. His name was Frank Mancini, a stocky ex-New York cop. The natives called him “Lurch.”

Mancini was merely the vanguard of Johnson’s effort to beef up Reynolds security. Tylee Wilson was alarmed one day to see a man with a gun on his hip skulking around in front of his home. When Wilson demanded an explanation, the man said he was an off-duty policeman handling security in the area, where Paul Sticht also lived. “Well, I don’t like you parked out in front of my house,” said Wilson. “I’m not scared of anything.” Those who knew of the incident were baffled. Winston-Salem just wasn’t that tough a town.

As Johnson consolidated his control, he shed his small-town poses and reverted to the Johnson of old. Most every weekend he jetted off to some far-flung golf club, tended to his tan in Florida, or hit Manhattan with Frank Gifford and other friends. Sticht had begun the process, but under
Johnson RJR Nabisco was finally torn loose from the old-fashioned Reynolds value system. Out went Moravian: Make way for bacchanalian.

Over the years the unassuming largess of Reynolds senior executives had created institutions such as the Bowman Gray School of Medicine. Johnson’s idea of good works was the Pro-Am Golf Tournament he organized to benefit the Wake Forest golf team. He brought in Dinah Shore and Don Meredith to kick off the local United Way drive. He went on the North Carolina Zoological Society’s board and headed a fundraising campaign. But he raised eyebrows by descending on a function there in a helicopter: this in a town where Cadillacs were considered ostentatious. In a community of seersucker, Johnson pranced about with a puff handkerchief peeking jauntily from his jacket pocket.

The capper was his wife. At Old Town, the matrons would draw close at the luncheon table: Have you heard the
latest?
They called her Cupcake. Laurie Johnson was a gorgeous blond in her early thirties. The proper Reynolds wife wore conservative clothes and lots of makeup; Laurie bounced around in jogging suits, looking like the California girl she was. The proper Reynolds wife played bridge; Laurie was an ace golfer who could drive a ball as far as a man.

She tried to fit in. She found some charities as pet causes and became a trustee at the North Carolina School of the Arts. When the International Advisory Board met in Winston-Salem, Laurie led a shopping expedition to the outlet malls in nearby Burlington. The corporate wives from around the world, including a Norwegian princess, came back laden with shopping bags. Trump Tower it wasn’t, but if there was one thing Laurie Johnson was good at, it was shopping.

It was hopeless, and the Johnsons didn’t help matters any by flouting local mores. The gossips had a field day after Johnson took a top Wake Forest golfer under his wing and into his home. When the young golfer moved into the Johnsons’ basement, rumors spread that he and Cupcake had been caught in the Jacuzzi in flagrante. Every time Johnson left on a business trip, tongues wagged that Cupcake was sleeping with the Old Town golf pros. When the rumors got back to the Johnsons, Laurie called her New York friends in tears. A lot of them couldn’t possibly understand the cruelties a small town could inflict. Jim Robinson’s wife, Linda, did. The Robinsons and Johnsons had vacationed together in Roaring Gap, a good place to learn about Winston-Salem’s establishment. “If we don’t like someone in Winston-Salem, we make them sweat,” one Roaring Gap
matron was overheard to say. “We made the Johnsons sweat for everything.”

Tensions flared into the open that November, when a
Winston-Salem Journal
editorial took frowning note of the company’s name change and management upheaval, wondering just who had acquired whom. “Looks as if someone may have underestimated the cookie monster’s appetite,” it said. For Johnson, it was one of the last straws. “I don’t have to take this shit,” he said. Although he had done his best to disguise the fact, he hated small-town life. This wasn’t what he had spent his career struggling to escape the Canadian provinces for. He loathed the petty politics that had sprung up since the merger. Corporate staff at the Glass Menagerie were constantly warring with the tobacco people downtown: Johnson quickly tired of moderating their disputes.

But the worst part was simply living in Winston-Salem. “You keep running into the same people over and over,” he told his New York friends. And few of the locals did Johnson relish seeing. He longed to light up a cigar with Jim Robinson or Marty Davis or Rand Araskog of ITT. Peers. Horrigan was good for a few laughs; at least he could hold his Scotch. And there was John Medlin of Wachovia. But that was it. None of the Merry Men, city-bred Yankees and foreigners, would move south. Their loyalty only went so far.

“You had a town of one hundred and forty thousand people, where you’ve got seventeen thousand people working for the company and ten thousand retirees and you can’t breathe,” Johnson recalled.

To Johnson there seemed only one conclusion: move. Relocating RJR Nabisco’s headquarters would kill Winston-Salem, drive a dagger right through its proud, provincial heart. Johnson knew it, and began laying his groundwork carefully. First a cadre of close advisers began discreetly evaluating new sites. New York was an obvious candidate, although so far afield that it would inevitably jar the board, to whose feelings Johnson remained acutely tuned. Reynolds veterans would never move there, and some had to be retained, if only to avoid alarming the board. Dallas was Johnson’s kind of town, bursting with new money and rootless people and centrally located to Palm Beach and Vail, where Johnson maintained retreats. But he sensed it was a city in decline, what with the oil bust and the Dallas Cowboys beginning to lose football games.

Atlanta also intrigued Johnson. Like Dallas it was nouveau riche and rootless—and deliciously overbuilt. Top-of-the-line office space was going
begging, ready for instant occupancy. It was near enough to Winston-Salem to be politically plausible. Then while in London one evening that fall, Johnson ran into an old acquaintance, Don Keough, the president of Coca-Cola, at a dinner given by Ambassador Charles Price for the Queen. As Keough’s wife shushed them to listen to Her Highness, Keough heartily endorsed Atlanta.

Atlanta it was. His site chosen, Johnson began working the board. “Corporate and tobacco are armpit to armpit in this town,” he told Albert Butler. “It’s not a healthy situation.” Butler was won over. Johnson also won over John Medlin. Wachovia had just bought a major Atlanta bank and was trying to maintain a jury-rigged two-headquarters setup; Medlin well understood the pros and cons of each city.

The biggest problem figured to be Sticht. The Glass Menagerie was his pride and joy. It was Sticht’s secret hope, Johnson suspected, that the building would one day be named after him. Money could ease the pain; Johnson boosted Sticht’s consulting contract to $250,000 a year from $185,000. Prestige could do the rest. Johnson made Sticht chairman of the International Advisory Board and promised to restore it to its pre-Wilson glory. A $6 million donation for the J. Paul Sticht Center on Aging at the Bowman Gray School of Medicine helped. Sticht soon came around. With the three local directors backing Johnson, the rest of the board’s support seemed assured.

But before the board could make the move official, the
Atlanta Constitution
broke the news, triggering the predictable fire storm in Winston-Salem. The
Winston-Salem Journal
implored the board to stay put, noting that local workers had built the company and local men had led it to greatness. “The corporate soul and mind can flourish only where the heart, the roots, and the heritage are,” said the front-page editorial. “For the soul to survive, the head belongs with the heart.”

Overnight Johnson became a local pariah. One man had brought Reynolds into Winston-Salem on a horse; another would take it away on a Gulfstream jet. A country music station had a local hit with a ballad excoriating Johnson. Hobert Johnson, the factory worker cum major shareholder, marched into Johnson’s office seeking an audience; the steaming-mad octogenarian cooled his heels for half a day before heading home and composing an angry letter. “We built the foundation for this company,” he wrote Johnson, “when you were in your knee pants.”

Johnson tried to defend himself in a speech to the Winston-Salem
Rotary Club. But those who attended didn’t so much remember the words as the aftermath. A phalanx of bodyguards surrounded Johnson and hustled him out on a freight elevator. One word that was remembered was
bucolic,
which was how Johnson described Winston-Salem in an interview with the
Atlanta Constitution.
Bumper stickers began appearing around town: “Honk if you’re bucolic.” Another had “RJR” on the left with a thumbs-up, “Nabisco” on the right with a thumbs-down.

Savage new gossip about the Johnsons made the rounds. Rumors had Ross beaten up by local toughs. Cupcake had run off with a golf pro. Cupcake had run off with a tennis pro. Amid the turmoil, Johnson attempted to do something nice for his embattled wife. The wife of Johnson’s friend Dwayne Andreas, the chairman of Archer Daniels Midland, was a trustee at a small Florida college named Barry University. Johnson arranged for the RJR Nabisco foundation to make a fat donation to Barry for a new gymnasium; in return, the university would bestow Johnson with an honorary doctorate. When Johnson insisted his wife get one, too, Barry agreed. Now the couple’s critics took to calling Laurie “Dr. Cupcake.”

Hundreds of workers who wouldn’t make the move to Atlanta would be fired. Reynolds veterans who never before worried about losing the shelter of their fatherly employer now lived in daily fear of finding pink slips on their desks. In some cases, entire departments were summoned for what amounted to mass executions. The tension was unbearable. “Shoot me between the eyes,” a man in the tax department cried out one day, “but don’t keep me in suspense like this.” The Reynolds work ethic died hard. A group of four secretaries fired one afternoon stayed past midnight to complete a project.

Gallows humor flourished. Bob Carbonell, Johnson’s Latin American hatchet man, was said to have been recruited from a Salvadoran death squad. Photocopying machines worked overtime producing underground cartoons. In one Johnson was depicted climbing the miniature Empire State Building à la King Kong. In another he was depicted as a missing child. The caption: “Happiness is when you wake up and see Ross’s picture on the milk carton.” Among the most bitter was one showing a rat, identified as F. Ross Johnson, feverishly humping another rat, labeled RJR Tobacco, as it lay helplessly pinned in a trap. The trap was labeled Bucolic Traps Inc.; the bait was an Oreo. A group of other rats ran eagerly out of a boardroom to watch. “Hey Ross,” asked one, “what does the ‘F’ mean?”