By Zachary A. Goldfarb
Washington Post Staff Writer
Monday, May 12, 2008
For more than 20 years, ManTech International experienced steady growth satisfying the government's seemingly insatiable appetite for technology and services to support intelligence collection and national security.
Then the Cold War ended, and funding for such programs was cut. In the mid-1990s, George J. Pedersen, a co-founder and the chief executive of the Fairfax government contractor, looked to the private sector for growth, selling software to banks and other commercial customers.
"What we came to realize is we know a good bit about the defense business," Pedersen said. "We came to realize we don't know anything about the commercial business."
ManTech got out of the commercial business and returned its focus to national security. Soon after, the Sept. 11, 2001, attacks reshaped the local economy with a burst of demand for services in which ManTech specializes.
Many chief executives fail to keep their jobs when things go sour. But Pedersen is unusual among top executives at Washington's largest public companies, having served for 40 years, guiding his company through many ups and downs.
Typically, chief executives in the region have served for five to 10 years. Only a handful have lasted more than a decade, including at General Dynamics (Nicholas D. Chabraja, 11 years, and he's set to leave in June 2009), Capital One (Richard D. Fairbank, 14) and The Washington Post Co. (Donald E. Graham, 17). The dean of the leadership corps is J.W. Marriott Jr., who has worked at the Bethesda hotel chain bearing his family name since the 1950s and has been chief executive since 1972.
Pedersen, Marriott and other long-serving top executives are no strangers to the business cycle's fluctuations. They have seen the Washington area evolve from a government town to a bustling economy not only of contractors but also of technology, finance and hospitality firms.
And now they face another period of tumult. The housing and credit crunch, having already punctured the real estate bubble, has spiraled into a general economic downturn that could threaten other sectors. An administration change looms in Washington, sending unclear signals about the future for government contracting.
Many executives remain optimistic. Marriott sees some hope in the government's response to the downturn, compared with the savings-and-loan crisis and other downturns. "What is good about what's going on is you're getting a very strong reaction from the Fed and the federal government," he said.
Pedersen is bullish on the prospects for government contracting, regardless of who becomes president.
"What will change is how that money is spent. And in theory, they're going to withdraw troops from Iraq. . . . Some of the hardware and the ammunition and things of that type will go away," Pedersen said. "The intellectual type of research and technology that most of the companies in Washington are engaged in -- the mission-critical stuff of developing IT systems and collection systems -- is not going to go away. In fact, it's going to increase."
Whatever challenges lie ahead in the business cycle, Pedersen and other longtime executives dismiss the idea of retirement, saying they are doing exactly what they want with their lives. When asked about the possibility of stopping work, Pedersen said simply: " No comprende."
Marriott is like-minded.
"I think it's a big mistake to retire and sit on a porch. Everybody that seems to do that doesn't seem to last very long," he said.
Every chief executive has moments of crisis. For Pedersen, the worst came in February 2005. Two ManTech employees, supporting U.S. forces in Afghanistan, were traveling on a commercial plane when it crashed into a mountain, killing everyone aboard.
In an interview, Pedersen struggled with the memory. For a moment, he didn't say anything. He thrust his fist into the air, then apologized for the delay. He stepped away to clean his eyes and sat back down. "In all these years, we had people all over the world, but I never lost anybody," Pedersen said. "I still can't handle that."
But for the most part, he has a matter-of-fact attitude about the decisions he has made over the years. For instance, Pedersen -- born into a Staten Island fishing family -- said he learned on the job the art of buying new companies to expand ManTech's business. "I never wanted to go public," he said.
That changed in 2001, when ManTech's financial advisers pointed out that the company could continue to aggressively expand only if it could offer stock to buy companies. So Pedersen brought ManTech public the next year, and it has gobbled up nine companies since, spending $600 million.
Marriott's perspective on the local economy comes not only from the bottom line of his company but also from watching demand for his hotels grow with the District and its suburbs.
When he opened a hotel in Arlington in 1957, he recalled, "Nobody wanted to stay with us because we weren't in downtown Washington." Few companies had their headquarters in Northern Virginia. But now there are hundreds of companies, and as many hotels along the Beltway, fueled by the growth of the Dulles corridor, Interstate 270 in Maryland and other hotbeds of activity.
Some long-term Washington businessmen have built their companies into major public enterprises yet maintain a low profile. And that's not always by intention. Since Malon Wilkus founded his buyout company American Capital in Bethesda in 1986, it has grown into an enterprise valued at $6.5 billion with a place in the Standard & Poor's 500-stock index. But he doesn't have anything like the name recognition of David Rubenstein, one of the three founders of the private-equity giant Carlyle Group, which was started in the District around the same time.
"People are not familiar with us because we are not doing the billion-dollar-plus buyouts that they are doing," Wilkus said. "I think that's a bit of a shame. I really do think we're worth a lot of attention . . . because the average American can't invest in Carlyle, but the average American can invest in us."
Wilkus's work now is a far cry from his beginnings, on a commune in Missouri where he made hammocks by hand. (He estimates that he made about 700.)
"The reason I left the community is that I came to view capitalism as the better way to operate a business, and I'd say that American Capital is embracing that to a greater degree than, I'd say, the typical company," he said. "We pay out all our income in terms of cash dividends and return them to our shareholders every year."
Wilkus called the ongoing economic downturn "the worst financial recession the country's been in since the early '80s." But he said the Federal Reserve had finally taken the steps it needed to try to avert a crisis -- and he's confident that he has reduced leverage enough to enable American Capital to continue to run smoothly.
K. Paul Singh, chief executive of McLean's Primus Telecommunications Group, has seen some of the best -- and worst -- the Washington economy has to offer. He came to the United States from India in 1971 as a 20-year-old "with $50 in the pocket and a lot of dreams of succeeding in America," he said.
He built three companies, launching Primus in 1994. Over the years, it grew steadily, offering telecom services mainly overseas in developing countries, and its profile grew with the local telecom boom in the late 1990s.
Since the telecom bust, however, Primus's stock has lost much of its value, while the company has maintained about $1 billion in annual revenue. Singh noted that of the second-tier telecom companies -- after the giants like AT&T and Verizon -- "we may be the only one in this area to survive." He credits that survival in part to his experience; in 1987, he brought a prior company public just as the stock market was about to crash.
"I have seen capital markets go up and down. You have the sixth sense of being prepared," he said.
One longtime chief executive, Ivan Sabel of Hanger Orthopedic Group, who was the top man for the firm since 1995, decided to step down earlier this year. Even though he loved his job, he said, there were challenges.
"Being the CEO of a public company in the post-Sarbanes-Oxley era became very challenging," he said. "I didn't enjoy going through [the accounting standards] even if it was really the right thing."
Sabel decided to retire as chief executive -- he's retaining the title of chairman -- in part because he wants to spend more time with his four young grandchildren, he said. But he also wanted to give his president and chief operating officer, Tom Kirk, a chance to shine.
"Tom and I are relatively close in age," said Sabel, 63. "If I would have waited to a normal retirement age of 65, that would have basically cheated him out of two years of having an impact as a CEO."