THE END OF EASY OIL
“One Right Answer”
Sidney J. Reso was typical of the men who rose into Exxon’s senior leadership ranks: an engineer by academic training; an Exxon employee for life; married for thirty-seven years to his wife, Patricia; and quietly appreciative of his privileges as his wealth grew. He maintained a membership at the Spring Brook Country Club near his office in New Jersey and owned a vacation condominium by the shore in Florida. He was not a man given to radical decisions or departures.
It did not augur well, then, when a neighbor discovered his car idling with the driver-side door open at the end of his 250-foot driveway on a wooded cul-de-sac in Morris Township at 8:00 a.m. on the morning of April 29, 1992. Reso had passed through the front door of his large brick-and-clapboard home as usual at 7:30 a.m. that Thursday morning to make the fifteen-minute drive to his office in Florham Park. There he served as the president of a large international Exxon division responsible for oil and gas exploration and production outside of North America. Police quickly circulated fliers seeking information about a missing white man, five feet ten inches tall, 180 pounds, with blue eyes and gray hair showing a reddish tint.
Lawrence G. Rawl, Exxon’s soon-to-retire chief executive, and his successor, Lee Raymond, were together at an Exxon board of directors meeting in Dallas. The annual shareholder meeting would soon begin; each year, the board held a meeting beforehand. Resolutions and board member election voting passed in a ritualized, scripted session. A senior executive in Exxon’s security department entered and leaned over Lee Raymond’s shoulder as he read out to the room from prepared materials. “I’ve got to talk to you,” he said. “Right now.”
Raymond excused himself and returned a few minutes later to report, “Sid’s been kidnapped.”
The board sat in silence. Kidnappings were a periodic threat; attempts against executives came and went in waves. In 1974, Exxon had paid $14 million to free one of its executives, Victor Samuelson, from the Marxist People’s Revolutionary Army in Argentina. The feeling in the room was, “Not another one.” Rawl was upset; Reso had worked directly for him for years.
A telephone caller had already issued a ransom demand to the corporation, security reported. Rawl called in the Federal Bureau of Investigation. Its director, William Sessions, began to call Raymond each morning to deliver updates. Running their investigation out of Newark, F.B.I. agents required several days to conclude that the initial caller seemed to be authentic. A ransom note demanded that Exxon gather $18.5 million in old one-hundred-dollar bills, load them into laundry bags, and prepare for a drop. The demand came from the Fernando Pereira Brigade, Warriors of the Rainbow. The name referred to the freelance photographer who drowned in the Pacific Ocean in 1985 when French intelligence agents sank the Rainbow Warrior, a vessel belonging to Greenpeace, the environmental crusaders, as it led a seaborne protest against nuclear weapons testing in French Polynesia. Since the Exxon Valdez spill, Greenpeace had made Exxon a prominent target of its anti-oil campaigning, but the group propounded nonviolence and civil disobedience, not kidnapping. (“This tragic allegation does a real disservice to legitimate environmental organizations working to protect our global environment,” its executive director, Steve D’Esposito, told a reporter while denying any involvement.)
The kidnappers communicated sporadically after their initial ransom demand. The F.B.I.’s agents spread out across New Jersey to conduct a massive investigation. Patricia Reso twice appeared on television to issue appeals on behalf of her family. (“Wherever he is, I wonder if he’s cold,” she said of her husband, “because his overcoat was in the car.”) As the weeks passed, the kidnappers threatened a wider war against Exxon. “If you choose not to pay, Reso will die in 24 hours,” a letter delivered in early June declared. “If you interfere in any way with the [money] delivery prior to Reso’s release we will strike at our selected targets. These people will not be seized [that is, kidnapped] but will be treated as soldiers in war.”
Rawl and Raymond visited the F.B.I.’s task force in Newark and were impressed by the scale of the effort. In this age before cell phones, the bureau’s investigators hypothesized that the kidnapper would use a public pay phone to communicate. They also figured he was probably still in the area. The task force rounded up enough agents to stake out every pay phone within a twenty-mile radius of the kidnapping site. On the night of June 18, one of these F.B.I. surveillance teams watched a blond man wearing gloves make a telephone call at a pay phone at a New Jersey shopping mall. The agents followed the caller’s Oldsmobile and arrested the man shortly after midnight. In the car they found laundry bags and a briefcase containing a 1985 directory of the home addresses of Exxon executives. Sessions called Raymond: “I think we got him.”
Arthur Seale grew up as the son of a policeman in Hillside, New Jersey, a middle-class town of about twenty thousand. At twenty-one he married a wealthy town girl, Jackie Szarko, whose parents owned properties, a liquor store, and a delicatessen. Arthur followed his father onto the Hillside police force but was suspended twice and fined three times in six years for defying orders and drawing his gun inappropriately. He later resigned with a $10,000 annual injury pension and took a job in Exxon’s security department in the New York area. He worked initially as a chauffeur. Whether Exxon knew of his trouble in Hillside before it hired him is not clear, but Seale performed well enough to move up to a corporate security position in Florham Park, where he earned as much as $60,000 in salary. He became angry, however, when former F.B.I. agents were promoted ahead of him, and in 1987, Exxon dismissed him. He nurtured a grudge against the oil company and the F.B.I.
Arthur and Jackie Seale moved to Hilton Head, South Carolina, where they purchased a furniture store, bought a marsh-front house in an exclusive neighborhood, enrolled their children in private schools, and seemed to have reestablished themselves. After a little more than a year, however, they hastily moved away from South Carolina, evading $715,000 in debts and court claims. Before long they had returned to New Jersey to live with Arthur’s parents.
According to court records, in December 1991, Arthur and Jackie had started to covertly survey Sidney Reso’s cul-de-sac and to plot a kidnapping scheme. The couple constructed a wooden box six feet four inches in length and three feet six inches in width and placed it in a rented storage locker. Arthur consulted bankers in the Bahamas about how he might avoid taxes if he came into a large pile of cash.
On that Thursday spring morning at the base of his driveway, when Sidney Reso stopped as usual to pick up his newspaper, Arthur Seale grabbed him by the collar, wrestled him toward a white van, and in the scuffle, accidentally fired a .45-caliber pistol, wounding Reso in the forearm. Seale said later that his wife treated the wound with hydrogen peroxide and that the victim called him “sir” as he bound and gagged him with duct tape and placed him in the prefabricated wooden box. In Seale’s estimation the container was “much larger than a coffin . . . more like a closet.”
On the afternoon of May 2, the kidnapper and his wife inspected their container and discovered that Reso had died. They hauled his body to a state forest in southern New Jersey and buried him. Afterward they continued to demand ransom from Exxon until the F.B.I. arrested them.
The Exxon Valdez accident had been preventable. It exposed the risks that arise when industrial systems of enormous scale and consequence are entrusted to imperfect human beings without adequate safeguards. Sidney Reso’s death three years later was of a different character and perhaps not preventable at all. Like the spill in Prince William Sound, however, it shocked Exxon’s leaders and employees. Lawrence Rawl was crushed by the loss of his colleague. The kidnapping reinforced a broader sense within the corporation, reeling from criticism and lawsuits over the Valdez, that it was under siege. It reinforced, too, a sense that Exxon’s leaders might need to find new ways to exert greater control over the world in which they operated—to seek a “rebalancing,” in Lee Raymond’s phrase, of the management of risk. The changes that Raymond would soon impose on Exxon would alter the experience of every employee and manager who worked at the corporation in the years to come.
During the early 1990s, Exxon increasingly became Lee Raymond’s company. Lawrence Rawl retired as chairman in 1993 at age sixty-five, but the practical transfer of power had begun earlier. After the Exxon Valdez grounding, at the corporation’s monthly board meetings, it was Raymond who reported to the board about the results of his investigations into the accident’s causes and about his assessment of what corporate policies should be changed in response. His updates and recommendations for reform, linked to the Valdez investigations, were part of “every board meeting for probably two and a half years,” he recalled.
The Valdez wreck and soft global oil prices, which argued for cost cutting beyond the steep reductions of the 1980s, offered an opportunity to push through sweeping management reforms within Exxon at a pace that would have been difficult to achieve without the rationale of crisis. Even before the accident, Rawl had been trying to shake up Exxon’s bureaucratic ways. The 1980s had been a painful decade for oil corporations. Two Arab embargoes during the previous decade (designed to punish the United States for its support of Israel), followed by the 1979 Iranian Revolution, had driven crude prices to unprecedented highs, but by late 1985, prices had collapsed steeply. The unexpected drop squeezed cash flow so badly that for a short period Exxon borrowed money to pay its shareholder dividend. According to Raymond, Rawl, the former marine sergeant, believed that Exxon was “top heavy” and “didn’t have the accountability it needed. . . . We had committees on committees.” Advancing his mentor’s drive to tear up the old Exxon organization charts and march forward in double time, Raymond drove home an operating philosophy in which managers would be measured more directly for their performances, and safety systems would be driven relentlessly toward zero defects.
Raymond set up a program for every Exxon division and affiliate worldwide to “reappraise risk.” Many large industrial corporations sought to emphasize worker safety, but after the Valdez and Reso episodes, Exxon’s system became deeper and more pervasive than that of any of its peers. To encourage internal whistle-blowing about safety, fraud, or discipline problems, Raymond established a “hotline or anonymous post office box” where employees could report violations. He oversaw changes in Exxon’s drug and alcohol policy: He scrutinized every job category and named about 13 percent of them as “designated safety positions” that would henceforth be subject to special rules—these positions included not only oil tanker captains, but also gasoline delivery truck drivers and equipment operators in refineries and chemical plants. In the future, if an employee voluntarily entered drug or alcohol rehabilitation, he or she would not lose employment at Exxon but would be prohibited from ever working again in one of the designated safety jobs. A new drug- and alcohol-testing program took hold, affecting both those who had sought treatment and all of those who worked in the designated safety jobs, irrespective of their personal histories. Raymond decided that the latter category should include the corporation’s top three hundred executives, even if all they did was push paper; this edict became known as the Raymond Rule. The rules seemed more likely to drive alcoholism among senior executives into the shadows than to ensure sobriety at the top, but the emphasis now was on universal, mechanical systems.
To revamp its internal Global Security organization and prevent any recurrence of a crime like the Reso kidnapping, Exxon hired Joseph R. Carlon, a former assistant director for investigations and intelligence at the United States Secret Service. Soon Exxon’s senior executives enjoyed personal protection regimes similar to those of American presidential candidates or holders of high national office. If a board member participated in a confidential discussion by telephone in his or her home, corporate security vetted the caller’s houseguests and surveyed the number of telephone extensions, to prevent anyone from sneaking onto the line.
The corporation’s revitalized safety and risk management drive increasingly took on the trappings of a cult. Exxon departments worldwide organized regular safety meetings and competitions. Groups of employees that had no reportable accidents or safety incidents might win gift cards to Walmart or blue safety jackets with the names of the winning employees stitched onto the breast pockets. The prize-chasing worker collectives ensured that office clerks did not leave their file drawers open, lest someone bump against them. Failing to turn off a coffeepot might draw a written reprimand. Cars had to be backed in to parking spaces, so that in case of an emergency, the driver could see clearly while speeding away and would not inadvertently injure colleagues. “You would not believe the number of hours we listened to them talk about driving slowly in the parking garage,” a former manager recalled. To discourage speeding down long plant driveways, the corporation installed electric signs linked to radar guns.
Every meeting at every Exxon office, no matter the agenda and no matter the personnel assembled, had to begin with a “safety minute,” akin to a blessing before a meal, in which a randomly chosen employee would speak briefly about one safety issue or another. “Please take note of the Exit sign in the hallway,” the briefer might say, “and note that the stairway to the outdoor plaza lies to the left of the meeting room door.” If a group of employees worked together for years in the same office and held a lot of meetings, it could be very difficult to come up with a fresh safety minute, and so the briefings could become as repetitive as the routines of commercial flight attendants before takeoff. Safety minutes gradually became commonplace at many corporations engaged in dangerous industrial operations, but few companies enforced them like Exxon. (Chevron Corporation and British Petroleum later adopted the safety minute idea, and a scientist at one of the competitors reported to a friend at Exxon, “They’ve been assimilated into the Exxon Borg.”) Reportable injuries tracked in statistical reports would soon include food poisoning, bee stings, stapler pricks, and paper cuts. As one of the corporation’s senior safety managers would later explain: “If we have a whole lot of paper cuts going on, we have to ask ourselves, ‘Well, what do we do to avoid paper cuts? Do we ask people to use gloves when they use the copy machine?’”
The group safety confessionals at Exxon offices and plants covered conduct beyond the workplace: The correct use of a ladder while cleaning gutters at home might be discussed, or the imperative of wearing seat belts during the daily commute, or the danger of getting too much sun on a beach vacation. At these meetings employees stood and shared with their colleagues stories of “near-misses,” as in a 12-step recovery program. One twenty-eight-year manager recalled listening to a colleague confess that an object had flown out of his lawn mower while he was cutting the grass at home and had struck him in the leg.
On Exxon billboards, office walls, and corporate vehicles worldwide the company would ubiquitously post a motto adopted from its oil drilling division: “Nobody Gets Hurt.” In Africa, workers were required to submit to blood tests to prove that they had taken their antimalaria medication, Malarone; if they failed the test, the workers could be fired and sent home on a plane ticket they paid for themselves. Particularly in poorer countries without traffic enforcement, if accidents became a chronic problem, Exxon would install electronic monitoring systems in its vehicles to track drivers’ whereabouts remotely, to ensure they did not exceed the company’s own imposed speed limit. Managers purchased radar guns and dispatched oil workers onto rudimentary clay African roads to monitor their colleagues’ speeds. Drivers might be fired for a single violation.
Raymond integrated the new corporate safety rules into an intensified top-down culture of command management emanating from Exxon’s headquarters. At his yearly meeting with Wall Street analysts, he conspicuously announced Exxon’s safety record before enumerating the corporation’s profit performance. He described his safety drive as a proxy for more far-reaching changes that would ultimately manifest themselves on the bottom line: “The only way you can be successful in the area of safety is through disciplined commitment and day-to-day management of the business.”
In 1992, the year of Sidney Reso’s death, Exxon unveiled to its employees and executives a universal new management regime, the Operations Integrity Management System, or O.I.M.S., “more vinyl binders than you can possibly imagine, every single goddamn aspect of how we operate,” as a former executive put it. “So there could be no excuses.” O.I.M.S. involved “Framework Expectations” about eleven “Elements.” These included the basic challenge of risk assessment and management. O.I.M.S. section 2.1 declared, “Risk is managed by identifying hazards, assessing consequences, and probabilities.” Five subsections of the rule outlined how to achieve this goal through the use of data, documentation, and outside evaluators.
The system also addressed human frailty in the workplace. Section 5.5 prescribed that Exxon employees should “routinely identify and eliminate their at-risk behaviors and those of their co-workers” while ensuring that “Human Factors, workforce engagement, and leadership behaviors are addressed.”
The legacy of catastrophic failure in Prince William Sound proved nonetheless to be persistent. Fortune had ranked the corporation as America’s sixth most admired before the accident; afterward, it fell to one hundred and tenth. Telephone operators in the Exxon credit card department heard so much abuse from angry customers who used the Valdez accident to vent their spleens that the corporation made counselors available to console its employees. Many years after the grounding, the corporation’s public affairs department organized focus groups with North American opinion leaders. When the moderator pronounced the word “Exxon” and asked for a free-association response, more than half of the participants blurted out, “Valdez.”
Initially Raymond sought to address the claims of Alaskan fishermen, cannery workers, and small business owners affected by the Valdez spill by handing out $300 million in compensation without asking for legal releases. Soon he chose to defend Exxon’s position by fighting lawsuits filed by the state of Alaska, the federal government, Alaskan businesses, and individuals. Raymond rejected all efforts to extract punitive damages from Exxon. He accepted in principle that his corporation was liable for actual damages in Alaska where such claims could be proven—he settled virtually all of those claims by 1994. But punitive judgments levied as a deterrent or as a source of emotional satisfaction Raymond would fight as long as it took. “It was a very tough time for them,” but increasingly Exxon’s leadership group concluded that the anti-Exxon campaigning after the Valdez spill “was unfair,” recalled Kathleen Cooper, who joined Exxon as its chief economist in 1990. “They paid compensation immediately—sooner than some companies might have. . . . At some point we said, ‘We’ve spent a lot of money, we have done it on a proactive basis, and we just can’t keep going.’ We need to say, ‘This is it.’ That is what Raymond was saying and I think the whole company was behind him.”
The seeming virulence of Exxon’s permanent opposition—Greenpeace and other environmentalists, dissident shareholders, Manhattan and Hollywood liberals, and assorted magical thinkers about wind and solar power (as Exxon executives tended to view those who believed renewable sources could meet America’s energy requirements anytime soon)—strengthened the solidarity among Exxon’s besieged executives. Gradually they returned to the operation of their oil and gas business for the profit of their shareholders. And they found a setting more compatible with their Alamo attitudes: They moved to Texas.
A click, click, click of heels on marble echoed through the vast lobby at intervals as women in charcoal pantsuits and men in dark suits and white shirts slipped through electronically controlled glass security chambers and crossed before a reception desk. The passing Exxon executives politely acknowledged the uniformed guards, who replied in turn with a formal “Mr.” or “Ms.” The corporation’s new campus in the featureless exurban city of Irving resembled a high-end condominium community or a prosperous modern college set amid pine trees, wind-bent mesquite trees, and green lawns. Breezes rippled a small man-made lake. The main building was of modest height and sleekly constructed from granite, smoked glass, and polished marble. On one side of the lobby rose a tall, photo-realistic oil painting of a pristine alpine village on a lake with snowcapped mountains in the distance; opposite was an equally large canvass depicting a desert canyon. Visitors killed time in square-backed leather club chairs beneath the paintings. The aesthetic suggested a Four Seasons hotel without many guests. A second wall of security-controlled glass doors awaited visitors entering the top floor. There, it was necessary to wait for the doors behind to close before access to the inner executive suite—known to employees as the God Pod—would be granted. The God Pod contained about twenty thousand square feet of office space housing just four or five executive suites, including Lee Raymond’s, as well as conference rooms. Inside, it sometimes felt as if a neutron bomb had recently detonated, killing off the local population but leaving the elegant physical facilities intact. The persistent quiet and formality of the headquarters building had an ominous quality; some employees referred to Irving as the “Death Star.”
Until its retreat to Texas in 1993, Exxon had been rooted in Manhattan since 1885, when John D. Rockefeller and his founding partners at Standard Oil of Ohio had moved their headquarters from the city of Cleveland to 26 Broadway. The son of a traveling elixir salesman, Rockefeller had rebelled against his father’s example by following his frugal mother’s advice and growing up to become disciplined, orderly, circumspect, earnest, and religiously devout. As American oil consumption boomed in the late nineteenth century, he and his partners methodically seized control of the industry, destroyed their competitors, innovated with technology, and built the first “integrated” oil company, meaning that they controlled the profitable exploitation of oil from the wellhead through the refining process to the retail sale of gasoline. At its peak Standard Oil controlled 90 percent of the American oil market. From its early days it attracted the same kind of opposition that would shadow Exxon a century later—muckrakers, journalists, trustbusters, and other American factions suspicious of concentrated industrial power. The muckraker Ida Tarbell’s nineteen-part McClure’s Magazine series, published in 1904 as the book The History of the Standard Oil Company, attacked the corporation’s power but acknowledged the strengths of its scientific culture: “From the beginning the Standard Oil Company has studied thoroughly everything connected with the oil business. It has known, not guessed at, conditions. It has had a keen authoritative sight. It has applied itself to its tasks with indefatigable zeal.” “Bringing order to chaos” was the way Rockefeller had once described his monopoly. That ambition had not ebbed within Exxon almost a century later.
Tarbell’s investigation accelerated a movement to break up Standard Oil on antitrust grounds. By the time the United States Supreme Court ordered the company’s dismantlement in 1911, John D. Rockefeller had retired and taken up philanthropy. The largest of the “baby Standards” born from the breakup was Standard Oil of New Jersey. It later marketed itself and its products under the Esso, Enco, and Humble Oil labels before modern branding specialists settled on Exxon in 1973. At the time of the Exxon Valdez spill the corporation remained by far the biggest oil company in the United States—twice the size of the next largest, Mobil Oil, another baby Standard, the successor to Standard Oil of New York; larger still than Chevron, the successor to Standard Oil of California; and ten times the size of the Atlantic Richfield Company, initially born of the Standard monopoly as a refiner.
Exxon hewed most closely to the Rockefeller inheritance of discipline, rigor, technological research, and unsentimental competition. By the 1990s, there were “lots of wrong ways of doing projects—and then there [was] the Exxon way,” as Ed Chow, a longtime Chevron executive, put it. Exxon’s managers and engineers were “very, very prickly as partners . . . and they don’t like to be partners, unless they’re the operator,” a competing executive said. At industry meetings the Exxon participants could be easily identified: conservatively dressed, hairstyles that seemed influenced by military rules, cliquish, secretive, and businesslike. Senior executives who rose through Exxon’s ranks reinforced with one another that they served a corporation whose “fundamentals” traced in important ways all the way back to Rockefeller, as Raymond put it.
Executives at other oil companies tended to regard their Exxon cousins as ruthless, self-isolating, and inscrutable, but also as priggish Presbyterian deacons who proselytized the Sunday school creed Rockefeller had lived by: “We don’t smoke; we don’t chew; we don’t hang with those who do.” Ethics rooted in Judeo-Christian religious tradition were part of the fabric of Exxon. “They encourage you to get married,” a former manager recalled. Such values were “not just a lot of lip service,” said another longtime executive. “J. D. Rockefeller went to church every Sunday and his employees better by God go to church on Sunday or they were not good employees. It is kind of a legacy. When I went to work for the company in the 1970s, managers would have employees join hands around the table and pray for the success of Exxon.” Compared with executives at San Francisco–based Chevron or the international behemoths of British Petroleum and Royal Dutch Shell, a British-Dutch conglomerate, senior executives at Exxon sometimes lacked what bicoastal American or European executives would call worldliness. Many of Exxon’s U.S.-based executives traveled extensively but remained insulated, introverted; when they mingled, it was to golf or hunt with others like themselves.
Manhattan no longer seemed a suitable base. Striving senior executives would typically arrive at Exxon’s modern headquarters, a towering white skyscraper, at around 7:30 a.m., only to find it vacant because there were no early-morning go-getters. Long commutes from the suburbs seemed to deter early birds; in any event, the sense among some executives was that a lethargy had set in. “You could have thrown a bowling ball down the fifty-third floor,” where top executives work, “and it wouldn’t have hit anybody,” recalled one manager. Howard Kauffmann, the corporation’s president at the time, advised the executives he met who were anxious for change: “If you ever get this place in a van, make sure it drives at least two days before it stops.” When Rawl and Raymond decided to move, around 1987, Rawl pulled a map of the United States out of his desk and they quickly drew Xs through one section of the country after another—the West Coast because its taxes were high, the North because it was cold, the far Southwest because it seemed too out of the way. That left them with the Confederacy, essentially. They scouted new headquarters sites in Atlanta, Jacksonville, Charlotte, Houston, Austin, and Dallas; narrowed the choice to Texas; and bought some land in Austin. They ultimately selected Dallas because it was easy to reach from around the world and would keep the headquarters away from the oil provincialism of Houston, where Exxon already had a large presence. They sold the Sixth Avenue building in Manhattan and reaped $477 million.
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.
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?”
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.
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.
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.
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.”
“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.
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. 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.