by Steve Coll
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.”14
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.”15
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.”16
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.”17
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.”18 “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.19
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 se
emed 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.20
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.”21 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.22
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.23
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?”24
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.25
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.26
The ultimate measure (a
nd 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.27
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.”28
“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.29
