by Coll, Steve;
“I’m aware that forty percent is forty percent,” Gordon had told Petersen before the annual meeting. “It’s not the same as fifty-one percent. I’m also aware that even if I have a ninety-nine percent controlling interest, I still have to control the company according to the best interests of all the stockholders, not just the ninety-nine percent controlling interest.”
Such caveats and assurances from Gordon about the importance of “all the stockholders” did not comfort Sidney Petersen. He hoped that over dinner with Moses Lasky that Tuesday evening, May 18, he would obtain a more concrete understanding of Gordon’s intentions as well as assurances that Lasky would help Petersen keep Gordon under control in the months ahead. By the time their dinner meeting was over, however, Petersen was more concerned than he had ever been before.
The evening began with an inauspicious conversation between Lasky, Tim Cohler, and Dave Copley in Copley’s office at Getty Oil headquarters. A worried, white-haired man who had spent nearly his entire career as a Getty Oil lawyer, Copley had spent years as the company’s top in-house lawyer, but he had been denied the dignity of his new title, general counsel, because Lansing Hays did not want any confusion about who was Getty Oil’s most important attorney. A graduate of the Colorado School of Mines and the University of Denver Law School, Copley had spent far too much time, he felt, at the mercy of Lansing’s bullying. Now that Lansing was gone, Copley was finally in a position to direct the company’s legal strategy.
Tim Cohler had flown down from San Francisco to accompany Lasky to dinner with Petersen; Lasky was already in Los Angeles, since he was then trying the Oakland Raiders’ antitrust suit against the National Football League on the Raiders’ behalf. Before joining Petersen for dinner at the Los Angeles Club, which was on the top floor of the Getty Oil headquarters building at the corner of Wilshire and Western, Cohler and Lasky decided to drop in on Copley to talk about Gordon Getty’s new role at the company.
“It might be appropriate if Mr. Getty was named chairman of the company,” Lasky said not long after they got under way. “It would be more of an honorary title—Gordon is not interested in running the company day-to-day. But the title would be helpful in relations with management.” Lasky went on to say that Gordon might also consider assignment to some of the board of directors’ important committees, such as the nominating committee and the executive compensation committee.
Copley was surprised by Lasky’s suggestion—Getty Oil already had a chairman, Sid Petersen. “It’s my view,” Copley said, “that if Mr. Getty presses to be chairman of the board, I anticipate there might be some resignations on the board. Our board members are by and large men of independent means and have successful careers and are truly independent board members.”
Lasky countered. “It is both Mr. Getty’s and Mrs. Getty’s view that Gordon should assume a role of more significance at the company. More respect should be given to his position now that he is sole trustee.”
“The directors are courteous to Gordon,” Copley answered. “But it presents problems at times. Gordon will make proposals that catch them by surprise. Also, Mr. Getty’s punctuality leaves something to be desired at times.”
“I hope the board members will not show or reflect their feelings about Mr. Getty’s proposals. If they don’t think the proposals are prudent, I hope they won’t respond to him in a manner where he would sense disrespect. That might cause friction,” Lasky said.
“I think the Getty Oil directors are gentlemen, and they conduct themselves as such. But Mr. Getty’s apparent lack of concern for business routine and etiquette can cause problems, too. That can lead to friction itself.”
Lasky agreed with Copley that Gordon didn’t have much appreciation for what Lasky called “the day-to-day routine of business.” But the lawyer emphasized to Copley that really, the issue with Gordon was not control of Getty Oil’s operations, but one of respect. If Petersen and Copley and the company’s directors would just treat Gordon carefully, deferentially, and not be rude to him, then Gordon would not become a problem. The tone of the conversation was collegial and professional; they were all friends. The implication from Lasky was that if the company would only cooperate, he could help them manage Gordon.
The meeting ended cordially, and Lasky and Cohler rode the elevator up to Petersen’s office. Unaware of the suggestions that had been made to his general counsel just moments before, Petersen accompanied the two lawyers upstairs to the Los Angeles Club. The restaurant commanded a striking view of the city: to the north was the Hollywood sign resting in the hills, to the east was downtown’s clump of steel-and-glass skyscrapers, and to the west, hidden in the haze, lay the Pacific Ocean.
The dinner lasted two hours, and through its courses Lasky repeated to Petersen the message he had just delivered to his general counsel, Copley. The company now had to be very, very careful about its manner and attitude toward Gordon, and somehow, it had to recognize Gordon’s new power. For one thing, Lasky said, Getty Oil had to find a new title that would satisfy both Gordon and Ann. Chairman of the board was one possibility. Though it was not the case at Getty Oil, in some companies the chairman’s title was considered more decorative than authoritative. If Gordon was named chairman under this scheme, then Petersen, who was now called chairman and chief executive officer, would have his title changed to president and chief executive officer. Robert Miller, now Getty Oil’s president and chief operating officer and the executive second in command to Petersen, would surrender the title of president to Petersen. But there were other possibilities, too, Lasky said. Certainly, Gordon needed to have his board committee assignments changed as a gesture of respect—he was now on the unprestigious employee benefits committee, and he wanted off that one. Perhaps they could call him chairman of the executive committee of the board of directors. At the least, Lasky indicated, Petersen should shift Gordon to whatever new board committees he wanted to serve on.
“Look, if you fellows just drop these ideas that you have about Gordon, recognize that he does represent ownership of a large part of the company, and if you don’t treat him with disdain, you’re going to have no trouble at all,” Lasky said. “Mr. Getty is not interested in running this company day-to-day, but he does own the company. Gordon does not want your job, Sid. In my judgment, that shouldn’t even cross anybody’s mind.”
At one point, Petersen asked Lasky, “Don’t you think appointing a cotrustee to serve with Gordon would be a good idea? If something were to happen to Gordon, the whole future of the trust would be in doubt.”
“No,” Lasky answered. “If you tried to appoint a cotrustee, you’d just be inviting Ronald to seek the appointment. That’s the last thing anybody wants.”
Petersen, of course, did not have Ronald in mind. He was thinking about Security Pacific National Bank as a possible cotrustee. Petersen was not convinced that Lasky’s “be afraid of Ronald theory,” as he later characterized it, was really such a frightening specter. His general counsel, Copley, had told him, as Lasky himself had told Gordon, that Ronald had no legitimate right to be cotrustee and no sound basis for a lawsuit seeking an appointment. Still, Petersen did not press his cotrustee proposal; Lasky’s dismissal of the idea was insistent.
As it had been in the meeting with Copley earlier, the tone of the conversation over dinner that evening was cordial and relaxed. There was an affinity between the three of them. As they watched Petersen, listened to his comments, and answered his questions, Lasky and his partner Cohler thought that Sid understood their message, that Gordon posed no threat to Getty Oil so long as management treated him properly. When the meal was concluded, they left the table confident that their mission had been successful.
In fact, as the dinner went along, Sid Petersen became more and more alarmed. As he listened and watched, he thought he saw the wheels turning in Moses Lasky’s head: Lasky, Petersen believed, was out to be the new power behind the throne at Getty Oil. He was going to try to replace Lansing Hays as the man
who controlled Gordon’s wealth and power and, through Gordon, controlled the company. Whereas he had first regarded Lasky as a potentially positive force, someone who could help management restrain Gordon’s erratic impulses, by the time dinner was over, Petersen looked on Lasky and his partner Cohler with suspicion and concern. At the same time, though, Petersen was not in a panic about Gordon Getty’s new role. Like Lasky himself, Petersen believed that with patience and diplomacy and a little toughness, he could work with Gordon. It might be an exasperating, aggravating effort, Petersen thought, but it could be done. Gordon Getty could be controlled, neutralized. Lansing had done it. Lasky was suggesting that he would do it. Sid Petersen believed that he, too, could control Gordon Getty on his own.
And for a time at least, it seemed that Petersen was right. Spring yielded to summer, and the confusion, concern, and confrontation that had followed Lansing Hays’ death subsided. Lasky went on trying the Raiders case in Los Angeles. Cohler returned to San Francisco to attend to other business. In the first weeks after the dinner with Lasky, an effort was made to shift Gordon’s committee assignments. There was a bit of discomfort over that, but no more than Petersen would expect from Gordon. The board committees rotated annually in September. There was no problem with adding Gordon to more prestigious committees before then. But Petersen hoped that in addition, Gordon would stay on the employee benefits committee until new assignments were drawn up in the fall. That way, none of the other directors would be affected by the moves. But Gordon wouldn’t have it—he wanted off of benefits immediately. So Petersen had to call Norman Topping, the retired chancellor of the University of Southern California and a longtime Getty Oil director, to ask if he would mind switching to the benefits committee out of turn. Petersen suspected that the real reason Gordon wanted off the benefits committee was that it met at eight o’clock in the morning before the quarterly board meetings and that Gordon disliked rising early for business meetings. Still, Topping was agreeable to the switch if Petersen thought it was necessary, and the changes were made without incident.
That summer, Gordon and his family rented a beach house in Malibu, just north and west of Los Angeles. He called Petersen and told him that he would like an office at Getty Oil headquarters, some place where he could begin to learn about the company’s finances and operations. Petersen agreed immediately—it was a perfectly reasonable request on its face, though the Getty Oil chairman was a little nervous about what Gordon’s actual intentions might be. An appropriate office was quickly located and secretarial service was arranged. Petersen told several of the company’s top financial executives about Gordon’s plans. He said that they should provide Gordon with whatever documents he needed and answer any questions he had. To Gordon himself, Petersen even suggested that instead of just looking at the company on paper, he might want to tour some of its oil field operations and meet the managers in Bakersfield, Houston, Tulsa, and elsewhere who were responsible for drilling, producing, and processing the company’s vast oil reserves.
“You’re the only one of us with your name on the company,” Petersen said to Gordon. “Why not go out and meet some of the people?”
But Gordon rejected that suggestion. He was on vacation with his family, and besides, he was primarily interested in Getty Oil’s finances, about which he knew and understood very little. He wanted to get a firm grasp that summer of just where the company’s money was invested and what it was invested in. He wanted to look at the cost of drilling, he said, and where the reserves were, and whether the company’s oil operations were “wise,” as he put it later. As for Petersen, Gordon felt that summer an increasing tension between himself and the Getty Oil chairman. He could not understand why Petersen did not make more of an effort to get along with him. Bob Miller, the company’s chief operating officer, a rough oilman who had been bred in the Texas fields, got along with him well, Gordon thought. So had Harold Berg, the oilman who preceded Petersen as chairman. From time to time, it seemed to Gordon that Miller and Berg would blow their stacks and just clear the air with him. But Petersen, he thought, so cold and reticent and calculating, was the sort of man who would just “simmer and fester, fret and fume,” as Gordon said later.
So while Petersen watched apprehensively, Gordon drove into Los Angeles from Malibu each day to learn about the Getty Oil Company. To the Getty Oil finance executives who worked with him, it seemed that Gordon did not have the faintest idea about what he wanted to examine. In a way, they felt some sympathy for him. They would select what they thought might be helpful documents, and then sit in his office and try to explain the company’s operations to him. But Gordon was starting from ground zero, and the executives were surprised at how little he knew about the company or about basic corporate finances. Perhaps someone should have provided Gordon with an outline, a kind of syllabus for learning about the operations of so large a corporation, they thought. But Gordon might not have tolerated such condescension, and anyway, he kept insisting that he wanted to delve into the most complex and arcane aspects of Getty Oil’s finances—cash-flow models, comparative rates of return among oil wells, tax-basis models, and so on. He seemed to grasp little of the material that was presented to him, but he often insisted that the documents he saw weren’t the ones he had wanted in the first place, and that was the cause of his frustration. To the finance executives who endured this tormenting process, Gordon seemed to be floundering. To them, he seemed like a boy who had lived his life in a bubble and now suddenly had been released into harsh, complex reality.
And certainly, Getty Oil was a sprawling and complicated corporation to understand. Though its principal business was oil and natural gas, the company also owned gold and uranium mines in the American West, a copper deposit in Chile, vineyards, orchards, grazing lands, timberlands, refineries, and chemical plants. Besides these natural resource holdings, Getty Oil had acquired in the late 1970s both ERC, the insurance company, and ESPN, a cable network that offered twenty-four hours per day of sports programming. The company’s oil and gas reserves were scattered around the globe in Indonesia, the Neutral Zone, Kuwait, Algeria, Spain, and the North Sea. But nearly two-thirds of its reserves were in the politically secure United States—a fact that distinguished Getty from most other large oil companies. Of its American oil, most lay in the Kern River field of California, near Bakersfield, which was the second-largest known oil deposit in the state. It was a patulous, dusty field where jackhammer wells stretched as far as the eye could see across rolling, barren brown hills. When analysts and oilmen described the Getty Company, they turned their attention quickly to the Kern field and talked about it in a covetous tone. Not only was the field deep and rich, its profit margins were exceptionally high. It was projected that the Kern River field would have a long life, well into the twenty-first century, and in 1982 it was one of the most prized oil properties in America.
Gordon Getty was especially interested in the Kern field, as anyone would be, and he asked the Getty Oil executives who worked with him that summer to explain the financial aspects of the field’s operations. The executives tried, but when the summer waned and Gordon prepared to return to San Francisco, they did not believe that they had succeeded.
Sid Petersen was uncertain whether Gordon’s exercise in learning had been satisfying to the Getty scion, but by the time Gordon left Los Angeles, Petersen had another, more important problem to worry about. At the summer board of directors meeting, which was held in Texas, Petersen met with Gordon privately to see where things stood. There were a number of things that Gordon wanted to talk about, including his committee assignments (“Everyone should understand that I have to be on the executive committee,” he mentioned), and the possibility of selling Getty Oil’s insurance subsidiary, ERC, whose acquisition Gordon had opposed.
“I think we should look at selling ERC and then redeploying the money to avoid high debt levels,” Gordon said. Debt was something of an obsession with Gordon; he disliked it greatly and often suggested unu
sual plans to avoid debt levels other large corporations would regard as small. To Petersen, Gordon’s views about debt were just another example of his lack of sophistication.
Then, out of the blue and in a casual tone, Gordon mentioned that he had met recently with Sid Bass, the immensely rich Texas oilman and corporate takeover specialist. Gordon said that he had talked with Bass about Getty Oil, and particularly about the company’s plan to repurchase its own Getty Oil shares in the open market, thus increasing, in all likelihood, the value of all the other shares not purchased.
“Sid Bass owns two hundred fifty thousand shares of Getty Oil stock, and he thinks the repurchase plan is a great idea,” Gordon said. “I think we really should accelerate our repurchase program. Spending our money on stock—ours or somebody else’s—is better than spending it on finding and developing oil reserves.”
Gordon’s remark was appalling to Petersen. That Gordon would try to sell the chairman on the repurchase plan was itself not surprising, since any open market buy-back of company stock would increase the percentage of the Sarah Getty Trust’s holdings, already at forty percent. Indeed, the trust could conceivably be pushed into a majority, fifty-one percent position if the company bought back and retired enough shares. Naturally, Gordon would be in favor of such a program. But that Gordon would use Sid Bass’s endorsement to sell the plan to Petersen was hard to believe. Bass made his living trying to take over other companies—the fact that he already owned 250,000 shares of Getty Oil was something to be alarmed about, even though it represented only a tiny fraction of the company’s ownership. Why was Gordon, a director of Getty Oil, talking to him about private company business, such as the repurchase of shares?
