Barbarians at the Gate

by Bryan Burrough

  Finally Johnson could take it no longer. “Henry, you can take it and shove it,” he said, and hung up.

  The breech was now total, and that afternoon Johnson phoned two of the board’s most powerful members to tell them so. “Look, I’m gone,” he told Ellmore (“Pat”) Patterson, chairman of Morgan Guaranty Trust. “This guy is completely mad. I figured I could hold it and hold it, but I can’t anymore.” He made the same speech to Earle McLaughlin, chairman of the Royal Bank of Canada, who had championed Johnson’s rise at Standard Brands. “Well, we figured it would happen,” McLaughlin said, but urged him not to move precipitously. When a special board meeting was set to discuss the matter, Johnson agreed not to resign and circulated the same message to his coconspirators. “Keep your powder dry,” he said.

  Then, less than two weeks before the board meeting, a popular Standard Brands executive named Bill Shaw dropped dead of a heart attack. The cause, everybody believed, was extended overexposure to Henry Weigl, and while that postmortem was medically dubious, Shaw’s death did manage to crystallize the rebellion. “Ross, you’ve got to do something,” said Bob Carbonell, who ran research and development. “If you don’t do something,” sputtered Emmett, “we’re all gone.”

  It all came to a head on a Friday morning in mid-May, when the directors convened. As Johnson waited outside, Weigl recited the litany of abuses his auditors had found. Weigl concluded by proposing a two-year extension of his contract.

  As his cronies wandered Central Park, Johnson was ushered in to address the board. He admitted to minor expense-account violations, but said he wasn’t going to fight Weigl any longer; the man was impossible to work for. “Gentlemen,” he said, “all I can tell you is I’m resigning.” What other executives would do, only they could say. Then he offered up the bleak analysis of Standard Brands that he and his pals had prepared. “The shit is going to hit the fan within twenty-four months,” he predicted.

  Johnson left the room while the board caucused, and when he returned, Weigl was no longer in the chairman’s spot at the head of the table. Instead he was sitting partway down it, white as a ghost. “Ross, here’s what we’re planning to do,” a board member said. “Henry will continue as chairman and chief executive officer, and you will be made the president and chief executive in another year, when he retires.”

  Johnson should have been thrilled. Instead, he said, “That won’t fly.” He stepped out, then returned to a new offer: Weigl would remain chairman until his retirement, and Johnson would become chief executive immediately. Johnson approved, “with one provision: that Henry’s office won’t be in the headquarters building.”

  That bit of hardball brought Johnson command of a New York Stock Exchange company. Afterward he and the Merry Men toasted their victory with martinis late into the night. It had, they agreed, been a splendid coup. It wouldn’t be their last.

  Henry Weigl ultimately exacted a small measure of revenge. Some time later Johnson, looking for a Florida vacation home, bought a splashy yellow villa in the exclusive Lost Tree community in Palm Beach. Life at Lost Tree revolved around its country club, but by the time Johnson applied for admission, Weigl, also a Lost Tree resident, had begun a campaign to blackball him. Embarrassed, Johnson withdrew his application and ultimately moved up the coast to a town named Jupiter, where he bought and combined a pair of oceanside condominiums. A Johnson supporter in the coup, the director Andrew Sage, bought his Lost Tree home. “When Henry is dead and buried thirty years I’m still not going near his grave,” Johnson said years later, “because I just know a hand is going to reach up through the ground and grab me by the throat.”

  After Weigl’s ouster staid old Standard Brands became Phi Delta Johnson. Out the door went the linoleum and steel decor. Gone, too, was the prohibition on first-class travel. In no time, Johnson leased a corporate jet and acquired a company-owned Jaguar. Overnight the corporate culture was transformed into a facsimile of Johnson’s flip, breezy manner. Now when Standard Brands managers met, the sessions were laced with outrageous profanity and raucous challenges. “All right,” Johnson liked to convene problem-solving meetings, “whose cock is on the anvil on this one?” The fraternity house mien extended to all levels. Standard Brands executives didn’t say, “I beg to differ,” they said, “You have no fucking idea what you’re talking about.” Standard Brands executives had no use for reports and slide shows; they were expected to cut to the heart of the matter. To do otherwise invited Johnson’s favorite withering line: “That was a blinding glimpse of the obvious” (sometimes shortened to simply “a BGO”).

  Often, it took only a short colloquy with Johnson to dispatch a bad idea. Once, a Planters executive came in with a proposal for a regional advertising test. “Could you afford to do this sort of thing nationally?” asked Johnson. “No,” the fellow replied. “Then what the fuck are you doing it for?” asked Johnson. End of story. In a company filled with creatively profane people, no one was more profane than Johnson. Even when he gave interviews for publication, they came tumbling out. A woman who transcribed one of them handed the completed Q & A back to the interviewer, saying, “Here’s the fucking transcript.”

  Johnson had no use for long meetings when short ones would do, or when he was due on a golf course. For that matter, he had no use for traditional business hours. “He would call you at five o’clock and say he wanted to meet you at midnight,” recalled John Murray, who headed the Standard Brands sales force. “Or he would get together with you for dinner at seven P.M. and you’d wind up rambling until five A.M.” Johnson firmly believed that true inspiration and insight happened only after hours. “Babies,” he said, “are only born at night.”

  On a typical evening, Johnson and his Merry Men would knock off around seven-thirty and head out en masse for the night shift. They would stake out a table at Manuche’s and drink until it closed, convening afterward at Johnson’s new company-owned apartment, where they would order out for pizza or Chinese. When most other Fortune 500 executives were long asleep, Johnson’s band would change into rumpled sweatsuits and settle back for a long night of drinking, talking business, and kicking around ideas. By the wee hours, those still conscious would collapse into the twin beds in the two bedrooms or onto the living room couch. In the morning Peter Rogers would fix breakfast, and they would be off to the races again. “It was,” recalled Johnson, “like Boys Town.”

  Johnson’s life began to resemble nothing so much as an endless buddy movie. The nicknames just kept coming: Carbonell, the Salvadoran R&D chief, was “El Supremo”; Ferdie Falk, who headed the liquor business, was “The Fonz”; Mike Masterpool, a public relations officer brought in from General Electric, was “M3”; and Ward Miller, the finicky corporate secretary, was “Vice President of Worry.” If Johnson didn’t have a nickname for someone, he addressed them with the generic “pards,” as in “pardner.” His closest partner became Emmett, who now replaced Johnson as head of international. Martini and Rossi were constant companions, conferring in their own personal shorthand. Johnson lavished gifts on Emmett, including a luxurious corporate apartment and an unlimited expense account. Other members of Johnson’s fraternity wondered, in their crude way, how The Big E managed to get so close to The Pope. “Martin,” one quipped, “must have a picture of Ross fucking a pig.”

  Yet Johnson could be fickle. He tended to get high on people, only to drop them. Sometimes he simply tired of a person’s company, like an eight-year-old who moves on to a new playmate. Ruben Gutoff lasted only seventeen months as president of Standard Brands. His crime, it seemed, was that he moved too slowly: He wanted to hold monthly meetings of a commodities committee when commodities decisions had to be made hourly. He wanted to see tear sheets of every Standard Brands ad, when there were thousands of them a month. Johnson fired Gutoff with no remorse, as he did a number of other young executives who fell from his favor.

  “Ross, you’re a rotten fuck,” a member of his entourage told Johnson after a particularly tough
firing.

  Johnson smiled. “You’re one of the few people who know me,” he replied.

  Andy Sage, the board member who rescued Johnson’s Florida real estate, proved equally helpful as chairman of Standard Brands’s compensation committee. When Johnson took power, Weigl had been making $200,000, Johnson $130,000. With Sage’s help, Johnson pushed his own salary to $480,000. Many executives saw their salaries doubled. Pay at Standard Brands went from the bottom of the industry barrel to the top of the heap.

  Johnson didn’t stop there. Top executives were also ensconced in company apartments, enjoyed a private box at Madison Square Garden, and got country-club memberships. At one new country club in Connecticut—whose founders were lucky enough to be friends of Johnson—twenty-four Standard Brands managers had memberships. Johnson also kept himself stocked with “whip money”—large bills to be whipped out of his suit pocket. Shortly before Christmas—peak tipping season—he was heard telling his secretary, “Get me an inch of fifties, will you?”

  The hallmark of Johnson’s reign was the personal touch. He had an overriding rule he felt free to invoke at any time: The chief executive can do whatever he wants. When a friend, Manhattan restaurateur Michael Manuche, went out of business, Johnson took him on in public relations; later he put him in charge of the Dinah Shore LPGA golf tournament. Johnson gave Frank Gifford an expanded contract and an office at Standard Brands. Johnson liked having Gifford around so much he decided to bring on a whole stable of athletes, including Bobby Orr and tennis star Rod Laver, to help with promotions.

  The jocks were also called on to play an occasional round of golf with the supermarket executives so important to the Standard Brands sales force. Many seemed to really be Johnson’s courtiers, primarily, a fact that puzzled some of the stars themselves. Alex Webster, the former New York Giants fullback, recalled bumping into Johnson in an elevator in 1978 and being introduced by their mutual friend Gifford. The next day, Gifford called Webster to say that Johnson wanted him to go to Montreal to address a grocers’ group. “But I don’t know anything about Standard Brands,” Webster protested. “Just tell them some stories and thank them for their business,” Gifford advised. Webster would keep doing it for Johnson for more than a decade.

  Jocks were just the beginning. As head of Standard Brands, Johnson became the King of Schmooze, cultivating friendships with corporate chieftains such as Martin Davis of Gulf + Western and James Robinson of American Express as well as other big names, such as the fashion designer Oleg Cassini. Johnson did it with generosity. “You had to be careful never to say you liked his sweater, because he’d take it off his back and give it to you,” recalled one Standard Brands executive. He did it with a carefully cultivated sense of style, including the grand entrance. Johnson arrived twenty minutes late, punctually, to everything. “If you’re on time, no one notices you,” he would say. “If you’re late, they pay attention.” And he did it with his usual good humor, telling the best dirty jokes in the club car each morning and being the most convivial partner on the golf course.

  Johnson’s immediate business challenge was to keep Standard Brands from collapsing. No sooner had he taken the helm in 1976 than sugar prices fell, hammering Standard Brands’s key corn sweetener market and leaving the company with operating profit declines for two straight years. Johnson had his young controller, Ed Robinson, put together what he called a “bad things” report, highlighting all the company’s rotten corners. One was the liquor division, which held huge inventories of wine. Johnson met with the “bottle kissers,” as he called the vintner-managers there. “Oh, Meester Johnson, this eez too good to sell,” they said of the wine, as Johnson later related the story. His response: “Cut the price in half and move it.”

  A former accountant, Johnson camouflaged the company’s poor results with an occasional bit of financial sleight of hand, sometimes stretching generally accepted accounting principles to their generally accepted limits. Even when Standard Brands was posting profit declines, however, Johnson couldn’t muster any interest in cutting costs. “Give me the guy who can spend creatively,” Johnson would say, “not the one who’s trying to squeeze the last nickel out of the budget.” (The public relations department, which took care of entertainment and extravaganzas, was headed by a man Johnson liked to call, among other things, “Numero Uno.” Mike Masterpool, he said admiringly, is “the only man who can take an unlimited budget and exceed it.”) But line managers had to scramble from quarter to quarter to make their numbers. The unofficial motto of the day was “Get through the night.”

  Johnson tried to compensate for the company’s poor showing by devising jazzy new products, an effort that led to what one analyst called “some of the most celebrated failures in the food industry.” The first was Smooth ’N Easy, an instant gravy mix sold in the form of a margarine bar, which could be melted in a skillet and whipped into chicken gravy, white sauce, and brown gravy flavors. The result of Johnson’s all-night brainstorming sessions, it bombed in the supermarket. Johnson’s move into Mexican foods flopped, too, crushed by the marketing muscle of a competitor, Frito-Lay.

  In 1978 Johnson’s love for sports and knack for marketing disasters combined in the ill-fated Reggie! bar. Named for one of Johnson’s new friends, baseball star Reggie Jackson, the candy was handed to each fan entering Yankee Stadium on opening day that year, and when Jackson swatted a home run, Reggie! bars came raining onto the field. The Reggie! itself was a chocolate-and-peanut-cluster concoction made for years in Fort Wayne, Indiana, and called the Wayne Bun; Johnson had simply renamed it and taken it national. (Its namesake didn’t help any. In promotional appearances Jackson seemed less interested in talking baseball than talking up pretty women.) Sales flagged, and by 1980, Reggie! was sent to the showers. (Jackson, however, was not: For years Johnson kept him ensconced in a company apartment, complete with a company car and a personal-services fee of $400,000 a year.)

  If this all seemed a tad chaotic, Johnson didn’t mind. In fact, he encouraged it. Ever the Pesketteer, he reorganized Standard Brands twice a year, like clockwork, changing people’s jobs, creating and dissolving divisions, reversing strategic fields. To outsiders it seemed like movement for movement’s sake. Johnson framed it as a personal crusade against specialization. “You don’t have a job,” he told the Merry Men, “you have an assignment.”

  “To Ross,” said Paul Kolton, a former Standard Brands director, “the nature of any organization was that it got fat, dumb, and happy. He never took the line, ‘If it ain’t broke, don’t fix it.’ To him, something’s always broke.”

  Through the rough times, the Standard Brands board never rapped its young chief’s knuckles. Johnson, mindful of Weigl’s fate, treated the directors like kings, making certain to throw some of the stardust from his jock stable their way. (“Hey, meet my friend Frank Gifford!”) “One of the most important jobs a CEO has is the care and feeding of the directors,” Johnson said. He had always been good at flattering older men, and he was a genius for putting the best spin on bad news or dissolving a tense situation with a bon mot. When Standard Brands auditors complained to the board for two years running about questionable accounting procedures at their Mexican joint ventures, the board demanded an answer from Johnson. The real answer was that jawboning his Mexican partners into following U.S. accounting rules had been impossible, and Johnson had given up trying. What he told directors was, “Did you ever try steering a motor boat from water skis?” The board dissolved in laughter and pursued it no further.

  Only occasionally would his loud wardrobe or blue language push the board’s limits. Johnson once brought the board word of a new wine he thought would be terrific. It was called French Kiss, Johnson announced. The directors recoiled. Couldn’t we try something a little less explicit? they wondered. Johnson had his way, and when the wine was brought to market, French Kiss lasted about as long as Reggie!

  The party at Standard Brands went on like that for four years: constant upheaval, a
string of marketing disasters, ho-hum profits, but lots of fun, money, and perks for Johnson and his friends. Finally, in 1980, the free-spending environment he fostered got Johnson into serious trouble. One of his senior officers, Bob Schaedler, discovered a stream of unexplained payments flowing from the company’s international operations to what appeared to be a dummy corporation. The shell company, Schaedler learned, was headed by Martin Emmett’s chauffeur and seemed to be billing Standard Brands for thousands of dollars of Emmett’s personal expenses: food, clothes, furniture, carpets, and televisions.

  Schaedler, a rival of Emmett’s, quietly took the matter to Howard Pines, the company’s personnel chief, and Les Applegate. Applegate, who had fallen from Johnson’s favor, was about to step down from the presidency to make way for none other than Emmett himself. The trio agreed the matter couldn’t be taken to Johnson, who would probably bury it—and maybe them as well—to protect his best friend. They decided to go directly to the board.

  Johnson was in fine spirits as the board’s audit committee convened a day before the July directors meeting. Emmett’s promotion to president was to be approved the next day, and Mike Masterpool had already leaked it to Business Week to make the magazine’s early deadline. A pair of directors, Pat Patterson of Morgan Guaranty and Paul Kolton, came in late, grim faced. They had just met with Schaedler, who had shown them a suitcase full of the Emmett receipts. They turned to Johnson. Could he explain it?

  Johnson appeared shocked. He didn’t know what had happened, he told the directors, but he damn sure intended to find out. The next day he reported the beginnings of an answer. For one thing, Emmett’s chauffeur wasn’t a typical chauffeur, but a former Central Intelligence Agency operative who had set himself up in business, with Standard Brands International as his only customer. He bought things at Emmett’s behest, Johnson explained, but Emmett, when confronted, insisted everything was aboveboard. Johnson went to bat for his buddy: Investigate it thoroughly, he said, but allow Emmett to become president now.