Book: Private Empire: ExxonMobil and American Power

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Ten

 

“It’s Not Quite as Bad as It Sounds”

 

Raymond had promoted Ken Cohen to vice president of public affairs at the time of the Mobil merger. His predecessor, Tony Atkiss, had been “a workmanlike hand, but I think the perception was that we needed to have a little different view,” an executive involved recalled. At the time, Cohen was a forty-eight-year-old in-house lawyer with no direct professional background in lobbying, media, or public relations. “There wasn’t a long list of candidates,” the executive remembered. “Being the head of public affairs for Exxon is probably not viewed as one of the more desirable jobs in the world. . . . The Exxon culture just doesn’t generate a lot of people who would a) be very good at it and b) like it. . . . The perception was that Ken was reasonably articulate and would bring a different view.”

Exxon in-house lawyers had founded the public affairs department; the corporation was heavily regulated in the United States and abroad, so its lawyers often had the most direct knowledge of the public policy issues that affected the bottom line. Still, Cohen did not possess an obvious background for corporate image management. In his previous position, he had served as a senior lawyer at Exxon Chemical Company, a division that litigated continually with regulators and environmental campaigners. Cohen had been conditioned to think that anything he or other Exxon executives said in public could be used against them in a court of law. He inherited a public affairs department whose core media strategy was to say “no comment” in fifty different languages, as an in-house joke had it.

Cohen kept a black notebook binder on a shelf in his second-floor office on the Irving campus. He distributed copies to members of ExxonMobil’s Management Committee and other senior executives. The first page carried the title “Public Policy Issues.” A list of about two dozen subjects followed, from climate change to energy pricing to alternative fuels. The Management Committee updated and approved the list annually as part of ExxonMobil’s Srategic Planning process. Cohen’s aides wrote a summary of the current policy debate under each subject heading and then a description of ExxonMobil’s position. Cohen also reviewed the notebook’s contents with a special public policy committee of the corporation’s board of directors, which met nine times each year.

If the corporation’s management ever changed its thinking about a public policy matter, the change would be vetted through the Strategic Planning process and then inscribed into Ken Cohen’s notebook and reviewed with the board committee. “Issues managers” and “issues teams”—some in Irving, some in Washington, some in Fairfax, and some in Houston—monitored and updated the listed public policy debates throughout the year, reporting to Cohen and, through him, to the Management Committee. The issues managers ensured that the language used worldwide to describe ExxonMobil’s position on any policy question was consistent. The language on PowerPoint slides presented to Chinese Communist Party functionaries in Beijing about, say, the regulation of ethanol was essentially the same as the language on PowerPoint slides left behind in the offices of first-term congressmen in Washington. ExxonMobil lobbied the same way it ran refineries—it employed a top-down, Global System, vetted at the highest levels of the corporation, and it expected all of its managers to follow that system exactly.

The issues management system, as it was known, displayed ExxonMobil’s signature internal discipline, but it could also be as rigid, slow, and inflexible as a Soviet five-year agricultural plan. The specific policy positions that emerged in the final draft of the annually updated black binder were sometimes vague and abstract, and might be of limited use to a former senator under contract to the ExxonMobil K Street office to sway votes in a Capitol Hill legislative conference. Legislative deal making was a fluid, adaptive process, involving more improvisation than Exxon’s engineering-led culture often knew how to manage. Public affairs dispatched an internal newsletter on the fifth of every month describing what political and policy developments it had been monitoring since the tenth of the previous month; its analysis was often out of date. In the lobbyist’s art, personal relationships and spontaneous compromises shaped success, not prepackaged analysis.

Ken Cohen had grown up in a placid Midwest community in the postwar era as one of four sons in an achievement-oriented, education-driven family. His grandfather had fled anti-Semitic pogroms in Ukraine and immigrated to the United States; the relatives on which he relied drew him to Illinois. He settled in iconic Peoria and opened a dry goods store. Cohen’s father attended Northwestern University and became a medical doctor. Ken also enrolled at Northwestern, but left after his third year and enrolled at Baylor University’s law school, in Waco, Texas; Baylor was one of a relatively small number of law schools willing to accept students who had not finished their college degree. Cohen loved the law, particularly its pedagogy, but he concluded that he should practice before taking up a teaching career. He joined Exxon in 1977, at twenty-six, and never left.

He was a mild-looking man of modest height with a full head of salt-and-pepper hair, which he parted near the middle, a choice that gave him a slightly old-fashioned air. He owned a condominium in the upscale Turtle Creek area of Dallas. He was married to a former colleague from the Exxon public affairs department, Darcie A. Bundy, who in midlife entered into the interior home design business in Dallas and in the town where the couple summered, Kennebunk, Maine. Cohen did not think of himself as possessing a political ideology, but as he stayed and rose at Exxon, he adopted the corporation’s official skepticism toward regulators and its preferences for free-market policies. He was quiet and calm, professional, but intensely competitive. He could master a new subject quickly and he organized concise briefings about public policy issues for his colleagues in management. Like many in the corporation’s upper ranks who had lived through the post-Valdez years, Cohen had developed a defensive posture. The attitude he and his colleagues projected came across as arrogance, but if it was that, it was conditioned by mistrust of outsiders, especially of environmental campaigners and journalists. “We’ve had our hearts broken so many times,” Cohen told his colleagues.

Each year, Lee Raymond held a private retreat for ExxonMobil’s most senior executives. At the first such conference after the merger, Raymond told the assembled, “ExxonMobil is different than either Exxon or Mobil—it will occupy a different position in the economy and the industry.” Raymond was referring obliquely to his intention to use the merger to reinvent Exxon. It would have been easiest for Raymond to have managed the absorption of Mobil by just taking the acquired company apart and then bolt the pieces onto Exxon’s existing divisions, while seeking cost efficiencies. Raymond had rejected that approach. He intended to use the merger to restructure Exxon itself. “Everybody is going to have a new job,” he announced. As the merger proceeded, more people from Exxon than from Mobil departed or were let go, accounting for their relative size before the deal. With his withering inquisitions and his relentless push for financial excellence, Raymond managed to some extent by using insecurity as a motivation tool. It was up to the senior department heads to interpret his dogma about ExxonMobil’s being different from either of its predecessor companies; Raymond would judge the result. In public affairs, Cohen understood the chief executive’s edict as an invitation to rethink the corporation’s brand position.

ExxonMobil spent very little money on advertising or image building for a company of its size. Typically, in previous decades, oil companies had mainly invested their advertising and marketing budgets in their highly competitive retail gasoline businesses. Exxon’s version of this marketing campaign had centered on the “Put a tiger in your tank” slogan, until Kellogg’s, the corporate home of Tony the Tiger, of Frosted Flakes renown, persuaded Exxon to drop the tiger as part of a trademark infringement settlement. (The Greenpeace protesters in tiger suits were out of date.) The truth about gasoline, however, was that it was basically all the same. Each of the major oil companies blended in a few unique chemical additives to improve the fuel’s performance and then spent large sums of money on ads promoting the supposed superiority of its magic formula. Convenience stores, credit cards, and membership point schemes later enhanced these campaigns for retail market share. “We’re drivers too” was the bland slogan that ExxonMobil adopted after it lost its tiger.

Given the corporation’s business performance—it returned to the top of the Fortune 500 in April 2001 and earned $15 billion in profits that year, more than any corporation in America—it was not obvious what strategy of image building ExxonMobil required. After the merger with Mobil, Raymond cut about twenty thousand jobs and reduced operating costs by a further $8 billion after initially promising investors that he would save only about $3 billion. The extra $5 billion in savings partly reflected what Raymond had believed all along: that it would be possible to achieve more cuts than he had advertised publicly when the merger was announced. After the deal closed, Raymond told his top two executives, Harry Longwell and Rene Dahan, that he wanted the combined company, within three or four years, to be no larger than Exxon had been before the merger, without counting the additional people who would be necessary to run new refineries or chemical plants. Raymond’s goal reflected his long-standing conviction that Exxon’s management was underutilized and had the capacity to take on harder problems.

Raymond’s financial strategy was clear, but it was less obvious how spending on public policy, image advertising, and lobbying could help. Raymond had made up his mind about global warming policy and environmental policy, and he was not about to revisit his thinking on those issues to appease activists or uncompromising Democrats. In any event, big, highly profitable oil companies were not likely ever to enjoy wide enthusiasm in the populist-influenced United States—or anywhere else, for that matter. Worldwide, Cohen’s private opinion surveys showed, ExxonMobil enjoyed a top reputation among oil companies in only one country: Singapore, a tiny, authoritarian, free-trading state where the corporation was a big investor, and a country whose top-down conformist culture resembled that found in Irving.

Ken Cohen and his public affairs team researched the history of Standard Oil and successor companies’ ad campaigns during the twentieth century and they reviewed the public opinion results those campaigns achieved. The numbers fluctuated between terrible and tolerable, but Cohen’s group could find no evidence of a golden age of oil company popularity.

ExxonMobil could not afford to accept low public esteem as a given, however. Engineering and scientific talent in the United States was in high demand. The corporation competed with other super-majors to recruit the most talented geophysicists and geologists at the world’s top schools. Scientists who agreed to join entered a two-year training program—a kind of free graduate school in which ExxonMobil invested tens of thousands of dollars to advance their skills in applied settings. The children of the baby boomer generation had been reared during an age of environmentalism, and it would be difficult to recruit and retain the best and brightest of them if working at ExxonMobil seemed a morally compromised choice. “There’s a big population of liberal young folks in the company,” a former manager recalled. These left-leaning employees wrestled among themselves with how they could be liberals and still work at ExxonMobil. Some of them pushed for paternity benefits and nursing rooms at the office—and succeeded. But these were incremental achievements and the ambivalence remained.

The difference between excellent and mediocre geologists could be the difference between finding oil and failing to do so. Scientists could be an independent-minded lot. Young ExxonMobil geologists often received “poaching” recruitment offers after four or five years of employment. Salaries at ExxonMobil were modest by industry standards, except for the very best performers, who were well rewarded. British Petroleum’s pay scale, for example, meant that it could often offer significant raises to geological scientists, $20,000 or more annually. After the merger, ExxonMobil became concerned about unusually high attrition rates in these talent wars; the corporation seemed to have particular difficulty holding on to women. Senior management organized “listening post” meetings with invited groups of department leaders and asked them, “Are you proud of your experience” at the corporation? “What do we need to do to keep you here?” Some of the rising managers were frank: “Look, we have a really bad reputation as a company.” Informally, “the employees talked about it all the time,” a manager who participated recalled.

There were other measurable costs to being despised. Late in 2000, an Alabama state jury deliberating a civil fraud case handed down a $3.42 billion punitive damages verdict against ExxonMobil for allegedly cheating the state out of natural gas royalties. Ken Cohen and other lawyers at the company were adamant that the verdict would be thrown out on appeal (and it was), but the case offered a reminder, if one was needed after the Exxon Valdez jury trial, that public skepticism toward the company could easily present itself in a courtroom in the form of hostile jurors.

Cohen’s group commissioned public opinion surveys, opinion leader focus groups, and other elaborate research endeavors designed to map the ways in which ExxonMobil was hated. Engineers ran the company, and only numbers could persuade them. Even so, some of the corporation’s executives, including Raymond, received the insights from these “scientific” surveys and focus groups with undisguised skepticism about their usefulness.

If a survey reported progress in ExxonMobil’s reputation in comparison to, say, Chevron, Raymond would comment, “Just remember: Chevron is having the same meeting today and their guys are saying exactly the opposite of what you just said.”

The more he learned about the details of public opinion surveying—how, for example, survey questions had to be asked exactly in the same form for the results to be truly comparable—the more Raymond doubted its validity as science. He did not want to ignore it entirely, and he budgeted for continual opinion surveys, but he declared that it would not drive his decision making. “If you start to play to that kind of thing, where does that end?” All oil companies saw their reputations rise and fall mainly as a function of whether retail gasoline prices were high or low, Raymond believed; the rest was just noise.

Cohen accepted that the public’s sense of being vulnerable to volatile gasoline prices and, more generally, to the political power of big oil corporations, was nearly universal. The implication, he concluded, was that ExxonMobil should seek to be credible rather than popular. The corporation’s communications should be clear, consistent, and fact based. ExxonMobil’s leaders and employees should accept that there would be many people who did not like what they had to say about public issues, but some of the company’s skeptics might nonetheless be persuaded to accept that the corporation’s positions were the product of empirical analysis. Global oil production was indispensable to the American economy—in that respect it was very different from, say, the manufacture of addictive tobacco products or the promotion of a particular image of a youthful lifestyle through the sale of soft drinks. The resurrection of ExxonMobil’s reputation could not be regarded as a marketing goal, equivalent to the establishment of a new soft drink brand, Cohen told his colleagues; it should be seen as an outcome of consistent, credible communication, in the face of predictable and persistent public skepticism.

During the Aceh crisis, Robert Haines, the manager of international government relations who worked for Cohen out of the Washington office, held regular off-the-record meetings with representatives of Human Rights Watch to hear the organization’s concerns and to try to persuade its investigators that ExxonMobil was doing everything it could to control the abuses of the Indonesian military. Haines used the sessions to present ExxonMobil’s brief about the conflict: The corporation was a guest in the country; its security arrangements were a requirement of its contract; ExxonMobil exercised no control over the T.N.I.; and the corporation did not condone human rights violations. Yet Cohen and Lee Raymond had still not signed the Voluntary Principles on Security and Human Rights developed in 2000 by the Clinton administration and the Blair government in Great Britain. They may have wondered whether the Bush administration would abandon the initiative, but as it turned out, Bush developed a strong interest in human rights issues, and in 2002, his administration formally embraced the Voluntary Principles as official policy. Around that time, Ken Cohen decided that he should revisit ExxonMobil’s own decision about the Voluntary Principles and begin to think more deeply about how the corporation could improve its credibility on human rights questions.

On one of his regular trips to Washington, Cohen invited Mike Jendrzejczyk, the director of Asia advocacy at Human Rights Watch, and his colleague Arvind Ganesan to dinner at the Four Seasons hotel in Georgetown. Ganesan was a lawyer; Jendrzejczyk, as one of his colleagues put it, had “the charm of a con man, the energy of a five-year-old, and the persistence of a used-car salesman.” That was not exactly the personality profile cultivated by ExxonMobil in its lifelong employees, but Cohen had learned to accept human rights and environmental activists as he found them. The violence in Aceh was continuing. Cohen refused to discuss the specifics of ExxonMobil’s natural gas operations there; the lawsuit filed on behalf of some of the province’s torture victims was now pending in federal court, and Ganesan and other activists had learned that if they raised Aceh specifically in private meetings with Exxon officials, they received silence and a “meeting over” look. On global human rights more generally, however, Cohen saw the Four Seasons dinner as an opportunity to open a dialogue. His message was, as Ganesan recalled it, “We’re doing a great job, but we think we need to be more engaged.”

Cohen invited Ganesan to speak at an off-site retreat for about seventy-five rising ExxonMobil managers. The executives were senior enough to have earned an internal designation as “gold-” or “platinum-” level leaders; their reward was a multiday public relations boot camp at a corporate retreat center in Norwalk, Connecticut. Other corporations retreated to semitropical golf resorts; at ExxonMobil, there was Norwalk. Ganesan traveled there on October 27, 2002. He had attended corporate retreats before, but the ExxonMobil event struck him as “one of the strangest” in his experience. He felt that he was in a classified facility. He was not allowed to enter the meeting room until his speaking time arrived and he was ushered out immediately afterward; the atmosphere seemed “clinical.” Later, he was told that he had been invited not only so that the managers could hear his views about oil corporations and human rights, but also so that he could provide a kind of live exercise in how to deal with a social activist.

Ganesan reviewed for the assembled managers the history of Human Rights Watch. He described why he and other activists believed that oil production hurt poor countries more than it helped them: “Energy wealth does not necessarily lead to better standards of living, increased democratic participation in government, or a better climate for human rights. Instead, economic, social, and political conditions may stagnate or even deteriorate.” He described the appalling human rights records of the governments that were major oil and gas producers, starting with Saudi Arabia, a business partner of ExxonMobil’s in the refinery and chemical industries. The Saudi monarchy, Ganesan pointed out, “executes prisoners, engages in torture, curtails due process rights, and uses barbaric forms of punishment such as amputations and beheadings.” Nor was its record unique. Seven members of O.P.E.C.—Algeria, Iran, Iraq, Kuwait, Libya, Qatar, and the U.A.E.—were “undemocratic with poor human rights records and limited economic diversification.” Three others—Indonesia, Nigeria, and Venezuela—were “nominally democratic but plagued with widespread corruption and poor human rights records.” New oil exporters such as Angola, Azerbaijan, and Kazakhstan were becoming “models of corruption, mismanagement, and human rights violations.” ExxonMobil operated in many of these countries and collaborated with the governments Ganesan found so wanting. He then turned to the reputation of ExxonMobil itself. He had decided not to spare the managers’ feelings.

“I have interacted with ExxonMobil for at least the last five years, and found them to be hostile and unproductive prior to this current effort,” he said. “ExxonMobil seemed like an arrogant, opaque company that was hostile to social responsibility and preferred to go its own way.” He continued: “This is not just my perception of the company, but shared by every NGO and many others. Several company representatives have come to me over the years and have justified their companies’ actions or inactions by saying, ‘At least we’re not ExxonMobil.’”

He did finish on a note of aspiration. There was “another widespread perception” of ExxonMobil, namely, that “once it decides to do something” it will “do it better than anyone else in its industry.” If the corporation would seek to improve its human rights record in a serious way, its leadership in the international oil and gas industry “could have very beneficial effects.” ExxonMobil should expect, however, “a considerable amount of skepticism” if it tried to change its ways.

Ken Cohen did not invite Ganesan back to his retreats. But he did not give up on his outreach campaign to Human Rights Watch. ExxonMobil formally signed up to the Voluntary Principles and gradually began to implement them.

Cohen also turned to Bennett Freeman, the former deputy assistant secretary of state for democracy, human rights, and labor who had helped conceive the Voluntary Principles before returning to a corporate consultancy practice. Freeman, too, attended Cohen’s off-sites at Norwalk. He respected Cohen’s professionalism. He regarded himself as a constructive critic of ExxonMobil, but also a sophisticated thinker about corporate responsibility who was not innately hostile to multinationals. When he appeared at Norwalk conferences or at private “opinion leader dialogues” with ExxonMobil executives elsewhere, Freeman usually broke the ice by remarking that the corporation’s human rights performance reminded him of what a critic once said about the music of Richard Wagner: “It’s not quite as bad as it sounds.”

Over the years, Lee Raymond had told colleagues that he considered Royal Dutch Shell to be Exxon’s most formidable competitor. Royal Dutch had weaknesses, in Raymond’s estimation: a mind-boggling system of split Anglo-Dutch governance, a retirement age of sixty years that created disruptive turnover in corporate leadership, and a thick bureaucracy. Yet Royal Dutch maintained a greater focus on operations and project discipline than many other oil companies, Raymond told his colleagues. Exxon partnered in oil and gas operations with Royal Dutch more than any other company.

In comparison, Raymond and other ExxonMobil executives did not hide their disdain for BP. Increasingly there was a competitive edge to the rivalry. After the dust settled on the Big Oil merger scramble of the late 1990s, ExxonMobil and BP emerged as the nearest equals in size and global ambition, together at the head of the global rankings for shareholder-owned oil corporations. Raymond had admired one of BP’s previous chief executives, David Simon, but he told colleagues that in general, he found the corporation to be bureaucratic, undisciplined, and unreliable.

Raymond was also no Anglophile. ExxonMobil’s operations in Britain had frustrated him. The corporation ran refineries and retail gas stations in the United Kingdom under the Esso brand. In the O.I.M.S. era these divisions had not measured up very well. Raymond traveled to London and complained to his British subordinates: “You guys are really great in poetry. But getting up every morning at 6:30 a.m. and saying, ‘Okay, we are going to have the morning meeting—what’s going on in the refineries?’—that’s just not in your skill set.” He extrapolated the flaws he perceived at Esso to explain the enduring worldwide management weaknesses he saw at BP.

BP began to annoy Exxon in the environmental lobbying arena, too. By the end of the 1990s, more of British Petroleum’s assets were located in the United States than anywhere else; American public policy was critical to the company. John Browne, however, did not think about industry issues as Lee Raymond did. To ExxonMobil’s executives, he seemed to be more of a financial engineer than an operations man. Browne was also in tune with the transatlantic center-left politics of the late 1990s. He enjoyed a strong relationship with the newly elected British prime minister, Tony Blair. He had easy access to Bill Clinton’s White House; he was exactly the sort of big business leader Clinton-era Democratic politicians often seemed to value—a thoughtful globalist willing to endorse the principles, at least, of the mainstream environmental, human rights, and public health movements. Browne spoke early about the importance of global warming. He rebranded his company as the letters BP and eliminated all abbreviated and other reference to British Petroleum. He approved the marketing slogan “Beyond Petroleum.” The corporation’s marketing team chose a green-and-yellow logo that looked like the sun, as if BP were moving decisively out of the oil and gas business and into solar power. An ExxonMobil executive at the corporation’s British affiliate took a photograph of a BP retail gas station with a windmill on top and sent it to Lee Raymond with a note: “This is our competitor.”

“Oh,” Raymond said, dismissively. This is just a public relations strategy, he said. There is no substance to it; don’t overreact.

BP did invest in some solar manufacturing in India, China, Australia, and the United States, where its plant was located in Frederick, Maryland, a convenient drive from Washington, D.C., and thus an optimum site for tours by members of Congress or their staffs who might be interested in alternative energy. Yet the scale of BP’s solar investments was minuscule in comparison with its oil and gas operations. The investments were understood within the corporation, according to one former senior executive, as justifiable not so much on business as on marketing grounds—BP Solar returned more to BP in favorable reputation than comparable sums spent on conventional corporate image advertising ever could.

“The oil industry is already detested by people who think we’re indifferent to the environment,” Browne explained. “We must persuade our ultimate customers that this isn’t true.” Smog and other pollution from oil-derived fuels meant that customers “can see it and they can feel it and they can smell it. And they look at oil companies and say, ‘You brought us this.’ And we don’t want to be in that position.” Ken Cohen occasionally seethed in private conversation about BP’s image makeover. First, he pointed out, BP remained fundamentally an oil and gas company—one of the largest in the world. Of course it was “in that position”; how could it pretend otherwise? By 2002, Cohen had also assembled an issue-by-issue chart showing that on public policy controversies from climate change to human rights, the recommendations of BP and ExxonMobil were little different. Yet the public’s impression was that the two companies had diametrically opposed approaches to climate change and corporate responsibility. As a recently minted public affairs strategist, Cohen could appreciate, in professional terms, Lord Browne’s achievements. He knew, too, that BP had the advantages that ExxonMobil lacked—it was not burdened by the high negative ratings caused by the Valdez spill and therefore had much greater scope to reinvent itself in the public mind. BP executives and public affairs strategists looked on ExxonMobil the way many of its competitors did: as self-isolating, stubborn, inscrutable, and behind the corporate times. ExxonMobil executives rationalized their poor reputation, when compared with some of their industry peers, by assuring themselves that they conducted business ethically and operated safely and with financial discipline. They even took pride in their self-image as a corporation that did not try to pretend to be something it was not. Yet Cohen recognized that BP had accomplished something improbable—the cost-effective greening of an oil company. When he was in a more generous mood, he told his colleagues, “Hats off to them.”

The decisions Browne took at BP were not merely cosmetic. In 2002, the corporation announced that it would no longer fund “any political activity or any political party,” a form of neutrality that ExxonMobil could not claim. Browne eventually extended BP’s corporate benefits to the gay and lesbian partners of its employees; Lee Raymond declined to do so. On climate, however, BP dodged and wove during the first Bush term. “The science of global warming is unproven,” Browne said in 2001, a formulation not much different from Lee Raymond’s. “I question whether it will ever be proven. But there is a risk there,” Browne said. This risk was enough to “begin to take steps to begin to make a difference.” Still, the danger was not large enough to justify the costs and the global bargain contemplated by the Kyoto Protocol: The treaty was a “bridge too far,” Browne said. Only very gradually would BP shift toward acceptance of the cap-and-trade system, a regulated, government-imposed marketplace that emerged in Europe to control carbon dioxide emissions and help governments there attempt to keep their commitments under Kyoto. He searched for “the right level of transparency or openness in order to build rather than to undermine trust in a world of suspicious media and single issue N.G.O.s.”

There were some public policy matters where not even the most creative corporate policies or public relations campaigns could make much difference, however. The invasion of oil-laden Iraq was one.

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