Dissolved Deal 'Good for Both Sides'

Harman Discusses Business, the Arts and What's on His iPod

Sidney Harman, as his employees like to say, is 89 years young. He is executive chairman of Harman International Industries, a District company he founded in 1952 that makes high-end audio equipment under the JBL, Harman Kardon, Mark Levinson and Infinity brands. A graduate of Baruch College of the City University of New York, Harman is an authority on workplace productivity. He serves on numerous boards and foundations and is known for his generous contributions to the arts. He is married to Rep. Jane Harman (D-Calif.).

In April, Harman negotiated an innovative deal to sell his company for $8 billion to buyout giants Kohlberg Kravis Roberts and Goldman Sachs that would have let shareholders stay invested after the company had gone private. But KKR and Goldman later walked away from the deal as credit markets went sour. In October, KKR and Goldman agreed to lend Harman $400 million, settling the dispute.

Staff writer Thomas Heath caught up with Harman last week:

Q Have you spoken to Henry Kravis since his private-equity firm reneged on its decision to take Harman International private?

A Henry Kravis and I were adversely affected by the same circumstances. One could quarrel with the decision, but I am convinced that in the end it was good for both sides -- especially as we reached a resolution that was remarkably helpful to our company and its shareholders. Henry Kravis and I had lunch several weeks ago. It was altogether friendly and pleasant.

You have written about employee behavior. One of your manufacturing plants, in Tennessee, is the basis for a case study at Harvard Business School on how to nurture employees. What makes a good worker?

Many things make a good worker. Some are moved by an instinct for craftsmanship; some by a drive to support the family; and others because for them the workplace is the social center of their lives. Regardless of the individual worker's motivation, an environment that encourages his or her personal development and elicits a sense of emotional equity in the company is essential.

You had one chief executive who lasted less than six months on the job. What happened there, and talk about your new chief executive.

We determined relatively quickly that our previous CEO and the company were a poor fit. It would have been unwise for both parties to continue once that was recognized. In the six months that Dinesh Paliwal has been the CEO, it is clear that he is in every respect the right person for the job. He is superbly qualified and absolutely committed. He and I work together very well.

How long are you going to remain as chairman of Harman International?

I will remain chairman as long as I continue to make a substantial contribution and as long as the board thinks it's a good idea.

What company, other then Harman, do you most admire?