As I left the subway station at 72nd Street, to my surprise and shock, I could clearly smell the smoke and fire even though I was miles away from the stricken towers. My anxiety rose as I got closer to home, so I ran the last few blocks. I was exhausted but enormously relieved when I walked into our apartment to find Heather and the children, anxious but safe. It had taken me nearly six hours to get home from the airport.
In the aftermath, like most Americans, I followed closely the news reports on the events of 9/11. As the scope and horror became clear, I shared the pain and sorrow of the victims and their families. But I had no idea that I soon would be directly involved. In late November I received a telephone call from Berl Bernhard, a close friend and a founder of the law firm at which I was then a partner. He told me that, through their connections to Dartmouth College, he had been a longtime friend of David McLaughlin, the chairman of the board of the American Red Cross. Immediately after 9/11 the Red Cross had begun assisting the victims and had simultaneously launched the Liberty Disaster Relief Fund, a major fundraising drive. As the money poured in, controversy developed over allegations that the Red Cross planned to use some of the funds for blood banks, community outreach, and other needs not directly related to the attacks. McLaughlin, Chief Executive Officer Harold Decker, and the board were searching for someone to serve as an independent overseer of those funds, which were already substantial and rising rapidly. Berl had suggested they ask me. He is an old and extremely close friend. Unless it was physically impossible for me to accept, there was little chance that I would say no to him on this or any other request. Besides, I wanted to do it. I welcomed the chance to help people who had suffered so much.
My responsibilities, as McLaughlin and Decker later spelled out, were to help the Red Cross devise the most effective way to distribute the Liberty Disaster Relief funds and services to those affected by the 9/11 attacks in response to the numerous demands. There were many interests to consider: the intent of countless donors from across the country and around the world, the immediate and long-term needs of recipients, and the appropriate role for the Red Cross to play given the involvement of many other charities and government programs. I accepted on condition that I would have full access to all relevant information and complete independence in making my recommendations, conditions that the Red Cross agreed to and then adhered to throughout the process. I did not require the Red Cross to agree in advance to adopt my recommendations, only that I would have full independence in making them and that the Red Cross would give them serious consideration. As it turned out, they did accept and adopt all of my recommendations.
In early December I began meeting with representatives of victims’ organizations, other donors, Red Cross officials, first responders, and many individuals and families that had been directly affected by the 9/11 attacks. I was determined to hear from and give primary consideration to the views of those who were most directly affected. Over the next two months I listened to hundreds of people tell me their personal stories. They were all moving, some deeply heart-wrenching, and they brought home to me again the variety and complexity of human life.
As I listened to their stories it became increasingly difficult to figure out what was fair. The word has many meanings; I learned in this process that it had a different meaning for almost every victim of 9/11. To cite but one of many examples: one of my meetings was with a group of women whose husbands had been killed. We were seated close together in a small circle. The women were serious, even somber; they were all well-informed and articulate. I asked each of them to tell me what she thought was fair. The first to speak was a tall, well-dressed, well-spoken woman, who said that she thought the money should be distributed in equal amounts to the families of those killed in the attacks. That sounded fair. But the woman seated next to her said that she had a child, so she thought she should get more than the widows who had no children. That too sounded fair. Another woman said she had four children, so she should get four times as much as the woman with one child. Yet another said she had only two children but one of them was severely disabled, so she should get more for that. They all sounded fair. Another said that her husband had been a waiter at the restaurant in one of the towers; that should be taken into account in providing her with a larger payment than the woman whose husband had been a wealthy investment banker and had left her with a large savings account and a generous life insurance policy. So it went, for hours, as each struggled with her grief, her needs, her embarrassment at talking about money with a man she had just met and a group of women she barely knew.
As complicated as it was, the discussion didn’t even touch on many related problems: What about those who were injured but not killed? What about those who were neither killed nor injured but suffered property damage or loss of income? The questions piled up much faster than the answers. The effort was complicated by the proximity to Christmas; most of the discussions took place in December and January, when many of the families were experiencing their first Christmas and New Year without their loved ones and emotions were high.
I had parallel meetings with as many donor groups as possible—they were giving money and deserved some say in how it was used—and also with representatives of other service organizations to try to come to grips with the inevitable problem of overlap and inefficiency. Finally we confronted one of the most difficult challenges: striking the right balance between getting the money to those who needed it as quickly as possible and doing so in a way that minimized the inevitable fraud from false or inflated claims.
The learning process was intense and emotional, but also very informative and rewarding. By late January I was ready to act. Four months had passed since the attacks, two months since I was asked to get involved. I benefited enormously from the assistance of several members of our firm, DLA Piper, especially Berl Bernhard and Jim Pickup. Jim is a Californian who moved to Washington to serve on the staff of a member of Congress, then entered the private practice of law. He is calm, methodical, and extremely bright—perfect qualities for the difficult task we faced.
We knew that no matter what we did, it was inevitable and understandable that not everyone would be fully satisfied. Therefore our objective was to distribute the available funds in a way that was most fair and best met the needs of those who had suffered a loss. We sought to achieve four objectives:
• Meet the needs of those who suffered losses.
• Honor the intent of the donors.
• Provide assistance in a manner consistent with the mission and traditions of the Red Cross.
• Ensure that all the money donated to the Liberty Fund would go to those who suffered loss on September 11.
• • •
We were also mindful that needs, logistics, and financial realities change over time, particularly in the first year, so we were flexible with respect to specific targets, although our broad goals remained constant. We later monitored implementation closely, and through the year 2002 submitted four quarterly reports on our progress toward meeting the plan’s objectives, which were substantially achieved.
By the time I made and announced my decision on how to distribute the funds, the Red Cross had raised about $850 million, some of which had already been distributed. We estimated that almost three thousand people had loved ones who were killed or seriously injured; those families each received about $109,000. About fifty-five thousand people had been directly affected; they received assistance in accordance with their needs. The previous bombing tragedy in Oklahoma City had demonstrated that mental health needs arise over time, so we held back $80 million, to be combined with donations from other charities, to provide long-term assistance.
I was deeply gratified when my recommendations received broad support from the victims’ organizations, the donors, other service providers, and the press and public. As contributions continued to arrive, the amount distributed by the Red Cross ultimately exceeded $1 billion. I maintained close supervision for nearly a year, an
d our quarterly reports, all of which were released publicly, were well received.
My experience with the Red Cross gave me a better insight into the many good works performed by that noble organization. Because I met so many of those affected by 9/11, and hopefully provided them with some assistance, the event continues to hold special meaning for me. It provided glimpses of the worst and the best of human behavior.
DISNEY
I thought it would be like the many other fundraising events I’d attended over the previous two decades: a prayer, a greeting, a short presentation by an official of the organization, then I would stand and talk about the contribution this organization was making to the community, the nation, possibly the world. I always tried to make my presentation relevant and interesting by telling a few stories and commenting on current national affairs, but my mission was clear and unchanging: to support the host organization.
But this event was different. Other than my speech, few words were spoken. Instead there was entertainment: songs, dances, video clips, all involving well-known stars affiliated with the Walt Disney Company. I was surprised and impressed. As I applauded with the rest of the large, appreciative crowd, I reflected on how I, a senator from Maine, had come to be at a well-decorated hotel ballroom in Los Angeles speaking in behalf of the University of Southern California.
In March 1994 I announced that I would not seek reelection to the Senate. I then received many calls and letters from friends and supporters. Most simply thanked me and wished me well; a few asked me to endorse causes in which they were interested, and some invited me to attend a wide variety of events. Whenever I could, I responded favorably. One such call was from Yoshi Honkawa, a nationally known leader in health care policy. I had gotten to know him well in the health care debates that year. He also was then serving on the board of trustees of USC. He implored me to come to Los Angeles to speak at the university’s annual dinner.
To my pleasant surprise, it turned out to be an enjoyable engagement, not at all a chore. The Disney entertainment was arranged by Stanley Gold, another member of the university’s board who also was a member of the board of directors of the Walt Disney Company. When we met and shook hands that evening I could not have known that over the next dozen years I would become deeply involved with him, and with Disney.
Several Disney executives were at the dinner, among them the company’s chief executive, Michael Eisner. He was one of the most highly regarded business leaders in the country, well known for his creativity and innovation. In our brief meeting he made a strong first impression; tall, outgoing, articulate, with a lively sense of humor, he radiated confidence, authority, and success.
Just a few days later, back at my desk in Washington, I received a phone call from Eisner, asking if we could meet on his next trip to Washington. We did so, and a series of meetings followed, with him and then with several members of the company’s board of directors. One such meeting was held at a dinner at Stanley Gold’s home.
Earlier that year the president of the Walt Disney Company, Frank Wells, had died in a helicopter crash. An outstanding lawyer and business executive, Wells had been a steady and trusted partner to Eisner. Now, to my surprise, Eisner, with the backing of the board, offered me the position of president of the company when I left the Senate. I told him that I needed time to talk with Heather and to think about the offer. It was flattering, and financially attractive, but I had several concerns. In the last few months of my Senate service, I received a large number of offers, from law firms, banks, other businesses, and universities, so I wasn’t thinking about the Disney offer in isolation. I wanted to wait until the Senate adjourned for the year before making a decision; I didn’t want there to be the fact or perception of any favoritism on my part to a future employer. Also Heather and I were to be married in December. Where we would live depended on where I would work; that was the subject of much discussion between us.
Ultimately I declined the offer from Disney and all others not related to the law. I had been trained as a lawyer and had enjoyed the practice of law; I had been a U.S. attorney and a federal judge. It was a subject I knew, liked, and was comfortable with. So, although the compensation was far less than what Disney and many others offered, I decided to join the Washington firm of Verner, Liipfert, Bernhard, McPherson and Hand.I
But it was with considerable regret that I told Eisner of my decision. I liked him and the other Disney executives and board members I had met, and working at the company, a national icon, would have been challenging. Eisner said he understood, and we parted on cordial terms.
A few weeks later he called me again. By then I was at Verner, Liipfert and at President Clinton’s request had begun my work in Northern Ireland. Eisner said he understood and accepted my decision not to join Disney as a full-time executive, but now there was a vacancy on the board of directors. Would I consider that? I said I would. It didn’t take long. I told Heather of the offer and that I would like to accept. When she agreed I called Eisner. I served on the Disney board from 1995 to 2006. It turned out to be a great and mostly enjoyable experience.
I quickly established a good relationship with other members of the board. I had many warm discussions with Roy Disney, Walt’s nephew, who was also a board member, and his wife, Patty; we shared an interest in and a love for Ireland, where they owned a home and where I was then working much of the time. During that time I also served on other boards for varying periods; each was a unique opportunity and a hugely beneficial education. I learned a great deal about every aspect of operations at large and medium-size businesses. I met, observed, worked with, and learned from several extraordinary executives, men and women who started, created, built, and ran highly successful enterprises. Fred Smith invented the concept of express mail and created Federal Express; he is one of the most talented leaders I have ever met. Tom Stemberg created and built Staples. Barry Sternlicht did the same with Starwood Hotels and Resorts. There were others. And there was Michael Eisner and the Walt Disney Company.
As with most large human institutions, at Disney there were successes and failures. In the early years of my service on the board the successes were many, the failures few. I served for three years on the governance and nominating committee, then for a similar term on the audit committee. The company itself and its operations are interesting, of course, and I enjoyed learning about all aspects of the business side of the entertainment industry. In 2002 I was elected to be the board’s first presiding director. As the title suggests, I presided at the board’s meetings and served as a liaison, to the extent one was needed, between the CEO and the members of the board. Each of the members was highly successful in his or her own life, most of them outside the entertainment industry, so part of the fascination of the job was to meet and learn from a wide range of talented people.
In 1984 Eisner had become the chief executive of a company that was struggling artistically and financially. That year Disney had revenues of $1.45 billion and net income of $98 million. With energy, creativity, and a keen sense of the public’s taste, Eisner led a sharp and successful expansion. By 1995, when I joined the board, revenues had risen to $12.15 billion and net income was $1.38 billion. New theme parks were opened and new attractions added at existing parks. The company entered the cruise ship business, as well as the live stage show business, creating long-running hits like The Lion KingII and Beauty and the Beast. The animated movie division churned out a series of hits, and the live-action movie business flourished. ABC television was acquired in 1996 and with it the spectacularly successful ESPN sports network.
In the first ten years of Eisner’s tenure Disney’s stock price rose by 870 percent. It was a heady period for the company’s executives and the members of the board. To a newcomer to the board and the business, all seemed harmonious. Although Roy Disney rarely spoke at board meetings, Stanley Gold, who represented Roy’s interests, spoke often and at length; Gold was strongly supportive of Eisner’s leadership, and the two men
appeared to be very close personally.
Inevitably the rate of growth and profitability slowed. In the first decade of Eisner’s term revenues had grown at an average annual rate of 21 percent, but in the second decade they fell to 10 percent; average net income growth went from 27.6 to 6 percent. And within that second decade was a stretch of several years when there was little growth. Disney’s net income declined in five of the six years from 1998 through 2003.
When things go badly, especially when they do so quickly, it is human nature that smiles turn to frowns, the happy talk turns angry, and a blame game begins. What in retrospect appears to have been a turning point was Disney’s acquisition of Fox Family Worldwide, the principal asset of which was a Saturday morning cartoon show called Power Rangers. The transaction was announced just days before the tragedy of 9/11; Disney paid $3 billion and assumed $2.3 billion in debt. That turned out to be far more than the acquired assets were worth.
Following that acquisition it became increasingly clear that the acquired assets (subsequently renamed ABC Family), were not performing anywhere near the projections. I do not know whether that was the straw that broke the camel’s back for Roy Disney and Stanley Gold, or whether there were other grievances more important to them. But they turned against Eisner and became increasingly critical of him, first in board meetings and then in public. That in itself was jarring because until then Eisner and Gold seemed so close, professionally and personally. It was clear that the company had overpaid for an underperforming asset, an acquisition that Eisner had conceived and pushed hard for. But the criticism was obviously galling to Eisner, and to other members of the board, because Gold had been such an aggressive supporter of the transaction. He didn’t acknowledge that later, when he went public with his criticism, and to the company’s critics, who included analysts and shareholders, it didn’t matter. What mattered was that the company wasn’t doing well, and when a company doesn’t do well, a natural reaction is to change its leadership.
The Negotiator Page 25
