Barbarians at the Gate (17 page)

The jets were also a symbol of the increasingly fuzzy line between what constituted proper use of a corporate asset and what constituted abuse. Some thought the case of Johnson’s German shepherd, Rocco, fell in the latter category. At the Dinah Shore that year, Rocco bit a security guard, setting off a flurry of concern in the Johnson household.

Would he be seized by the authorities and quarantined, or worse? Rocco, it was decided, had to go on the lam. He was smuggled onto a corporate jet and secretly flown out of Palm Springs to Winston-Salem, one jump ahead of the law. Escorted by a senior vice president named Dennis Durden, Rocco was listed on the passenger manifold as “G. Shepherd.” It wasn’t the only Rocco adventure: The company would later pay an insurance claim for a bite inflicted on the Johnsons’ gardener.
*

The RJR Air Force was Johnson’s ticket to the high life. Each weekend the planes disgorged Don Meredith from Santa Fe, or Bobby Orr from Boston, or the Mulroneys from Canada. The jocks of Team Nabisco were frequent flyers on Air Johnson. The Pope took excellent care of them, paying more for occasional public appearances than for an average senior vice president: Meredith got $500,000 a year, Gifford $413,000 (plus a New York office and apartment), golfer Ben Crenshaw $400,000, and golfer Fuzzy Zoeller $300,000. The king was Jack Nicklaus, who commanded a $1 million a year.

Johnson claimed his jocks yielded big benefits in wooing supermarket people, but the line between corporate and personal services was a blurry one at RJR Nabisco. LPGA pro Judy Dickenson gave Laurie Johnson golf lessons. Gifford emceed benefits for Johnson’s favorite charities like the
New York Boys Club. A pair of retired New York Giant fullbacks, Alex Webster and Tucker Frederickson, maintained offices at the Team Nabisco office in Jupiter, Florida; Frederickson ran an investment counseling business from his.

For all the money Johnson doled out for Team Nabisco, some of the athletes weren’t easily managed. Nicklaus was notoriously difficult. For one thing, he didn’t like playing golf with Johnson’s best customers, which was his highest and best use. And he considered himself above the task of working the room solo at some Nabisco function. Although he was making more money than anyone at RJR Nabisco except Johnson and Horrigan, the “Golden Bear” growled at doing more than a half-dozen appearances a year. After several run-ins with subordinates, an arrangement was struck where only Johnson and Horrigan could personally tap Nicklaus’s services.

Then there was the O. J. Simpson problem. Simpson, the football star and sometime sports announcer, was being paid $250,000 a year, but was a perennial no-show at Team Nabisco events. So was Don Mattingly of the New York Yankees, who also pulled down a quarter million. Johnson didn’t care. Subordinates took care of those and most other problems. He was having a grand time.
“A few million dollars,”
he always said,
“are lost in the sands of time.”

At his annual Bohemian Grove outing in August 1987, Sticht was openly critical of Johnson with every corporate titan there who would listen. “Hipshooter” was the word he kept using. He also groused to fellow directors and Grove denizens John Macomber and Vernon Jordan. Maybe it was time for another change of command, he suggested. Macomber was all ears. He had just sold Celanese to the German company Hoechst and had time on his hands. He would always deny it when asked, but he seemed forever intrigued with the idea of running RJR.

Johnson moved swiftly to quash the possibility of a coup. On August 31, he met with Sticht. “Look, Paul, you’re turning seventy in October; this isn’t working out,” he said. “I’m going to make a change.” Always alert to shifting political winds, Johnson sensed that Sticht’s power was finally waning. Just as he had earlier wooed him, Johnson now cut Sticht off at the knees. After he was removed as chairman, the aviation department was told that if Sticht asked for a jet, it would have to be personally authorized by Johnson. When Sticht found out, he stopped asking.

True to Johnson’s instincts, there was no ground swell of protest from Sticht’s board allies. In contrast to their treatment under Wilson, the directors found that all their needs were now attended to in detail. Bill Anderson of NCR slid into Sticht’s chairmanship of the International Advisory Board and was slipped an $80,000 contract for his services. Johnson disbanded RJR Nabisco’s shareholder services department and contracted its work out to John Medlin’s Wachovia Bank. Juanita Kreps was given $2 million to endow two chairs at Duke, one of them named after herself. For another $2 million, Duke’s business school named a wing of a new building “Horrigan Hall.” (Johnson was named a Duke trustee.) Ron Grierson was also being fussed over lovingly; on his visits to Atlanta, Grierson spent so much time on the phone Johnson took an alcove and marked it “Ronnie Grierson’s office.”

Holdovers from Johnson’s Nabisco board did especially well. Bob Schaeberle was given a six-year, $180,000-a-year consulting contract for ill-defined duties. Andy Sage received $250,000 a year for his efforts with financial R&D. In an unusual move, Charlie Hugel took Sticht’s post as the ceremonial “nonexecutive” chairman of RJR Nabisco, for which he received a $150,000 contract. By naming him chairman, Johnson hoped Hugel would cement his increasingly close ties with the board.

At the same time, the number of board meetings was slashed, and directors’ fees were boosted to $50,000. Wilson had allowed board members to use company jets only for official business. Johnson encouraged them to use the RJR Air Force anytime, anywhere, at no charge. “I sometimes feel like the director of transportation,” he once sighed after arranging yet another director’s flight. “But I know if I’m there for them they’ll be there for me.”

At one point, Johnson badly wanted to sell Heublein, mostly because a British conglomerate, Grand Metropolitan PLC, had offered $1.2 billion for it. The problem was Stuart Watson. The retired Heublein chairman,
still on RJR Nabisco’s board, had balked at selling Kentucky Fried Chicken and would no doubt raise a ruckus at the idea of selling his old company to the Brits. Heublein’s chief executive, Jack Powers, was in Winston-Salem for meetings one week, and Johnson took him out for dinner at the Old Town Club.

“Jack,” he asked, “what does Stuart Watson want more than anything in the world?”

Powers thought a moment. Watson was retiring from the board in several months and would hate to give up the trappings of corporate power. “More than anything?” Powers asked. “An office and a secretary.”

“You tell him he has an office and secretary wherever he wants it,” Johnson replied. “Zaire; you name it.” The Heublein sale went through without a hitch.

Johnson thought he had the board in the palm of his hand, but Horrigan wasn’t so sure. He saw how, when Johnson’s language turned blue, their heads sometimes jerked back as though they had been slapped in the face. He wished Johnson would quit wearing gold necklaces and open-collar shirts at board social occasions. Horrigan finally warned him. Maybe it was just his “natural Irish suspicion,” Horrigan said. “But this isn’t your board, Ross. They’re just waiting for you to make a mistake.”

For a year after moving to Atlanta, Johnson made do trimming RJR Nabisco, selling Heublein and a host of small companies. Out went the venerable Prince Albert pipe tobacco, Mr. RJ’s first national product, along with the rest of the Reynolds pipe tobaccos, Carter Hall, Apple, and Royal Comfort. A line of cigars called Winchester was also sold. In Canada, Emmett was selling businesses as fast as they could go: a half-dozen divisions for $350 million.

As money from these and other divestitures poured into RJR Nabisco’s coffers, Johnson used it only to pay down bank debt. Investment bankers pestered him constantly to put the funds to better use. Buy something,
they urged. Put your imprint on the company. But Johnson wasn’t interested in building anything.

One recurrent rumor had him buying part of Beatrice, the Chicago food giant taken private in 1986 by the leading LBO boutique, Kohlberg Kravis Roberts & Co. Johnson, in fact, was mildly drawn to Beatrice’s Hunt Wesson unit, because some of its businesses would be a snug fit with Del Monte. And Beatrice’s La Choy Chinese food might fit well with Nabisco’s Chun King. But his interest was desultory at best.

Johnson knew Beatrice’s chief, a witty Irishman from Chicago’s South Side named Don Kelly. Kelly had transformed the old Swift meat-packing business into a high-flying conglomerate known as Esmark. He had sold out to Beatrice, then reemerged as that company’s chief executive after Kohlberg Kravis took the company private. The $3 billion profit they projected to turn had stunned the financial world. Johnson was getting tired of hearing Kelly brag about how rich they all were becoming.

Eric Gleacher, an investment banker who headed Morgan Stanley & Co.’s merger department, had been badgering Johnson for months to meet with Kelly and the lead partner at Kohlberg Kravis, Henry Kravis. Finally, Johnson agreed. But when Gleacher arrived at RJR Nabisco’s New York offices at Nine West Fifty-seventh on the appointed morning, he found Johnson had changed his mind.

“We’re not going to do it, Eric,” Johnson said. “It’s such crap we’re not even interested. We don’t want to embarrass Henry, but these are marginal businesses at best. Why waste their time and ours?”

“Then why have you been going through the motions?” Gleacher wondered.

Johnson said he was just trying to be polite to Kelly. “Anybody that buys this stuff from Kelly is going to be a real fool,” he told Gleacher. “I’m not going to be Don Kelly’s patsy.”

Then Ira Harris came into the picture. Harris was the dean of Chicago investment bankers, and had known both Johnson and Kelly for years. A poor kid from the Bronx, Harris had risen through the ranks of stockbrokers to become one of America’s premier deal makers. He was rotund, always fighting a weight problem, and loved to play golf. For years, as Salomon Brothers’s man in Chicago, he had played matchmaker to the Windy City’s biggest companies. After a falling out with Salomon Chairman John Gutfreund, he had quit for a spell of leisure, ending it in 1987 to join another Wall Street firm, Lazard Freres & Co.

Now, as the summer wound down, Harris called Johnson and suggested a round of golf at one of Johnson’s favorite clubs, Deepdale, on Long Island. Kelly had never played there and wanted to see it, Harris said, and Johnson agreed. They hit the links at a quarter past twelve one day in the first week of September, three big spenders playing a $3 Nassau. With his ten handicap, Johnson was the best golfer of the group. But Kelly made good use of the extra strokes his fourteen handicap afforded and won the entire $9 pot.

Afterward they sat on the clubhouse terrace, downing a round of drinks while Kelly talked about the incredible benefits of LBOs, especially one with Henry Kravis. “Ross,” he said, “you’d be doing exactly what you’re doing as a CEO, but you’re making a helluva lot more money.”