The French were taking over his plants, Chile was still hanging over his head, ther was this problem with competition from two Alaskan companies, the senator from Indiana wanted more jobs back home, and a bill in the House could open up the U.S. market controlled by AT&T
Back in the mid-1950s, Rand Araskog was just a junior officer in the Pentagon. Now he was flying back to Washington as the chairman and chief executive of International Telephone and Telegraph Corp. At the firm's L St. office, staffers had spent two weeks worrying about the boss coming to town.
Araskog's schedule went through six revisions. Can we nail down that appointment at the State Department? What about lunch? Could Sen. Dan Quayle do it? No, that appointment was pencilled in for mid-afternoon. How about Sen. Henry Jackson? Fine. But Rep. Tim Wirth was speaking at a National Press Club luncheon. Shouldn't Araskog be there instead? No, Wirth will understand if Araskog sees him later. Lunch with Jackson can't be moved.
"I worry and worry about these visits," said Ray O'Brien, who has worked for ITT in Washington for 16 years. "But they always seem to work out. Maybe I tend to worry a little too much," said O'Brien, pointing to the ulcer pills on his desk.
These days corporate chief executive officers like Araskog are coming to Washington with increasing--and often startling--frequency. Sixty-five percent of the CEOs of Fortune 200 companies came to Washington at least every two weeks, according to a 1980 survey. This was in sharp contrast to 1971 when only 15 percent of the nation's business leaders said they came here even once a month.
Araskog is a prime example of this trend. "With this administration and with ITT's current circumstances," he said, "we're much more interested in Washington."
Sen. Henry Jackson (D-
Wash.) excused himself from the corner table in the Senate Dining Room to take a brief phone call. Within seconds, the senator's lunch guest, Rand Araskog, was plotting strategy with Mike Hunter, a lobbyist in ITT's Washington office.
"Rand, you may want to mention something to Jackson about the French situation given his interest in foreign affairs," said Hunter, a former Senate aide who has been with ITT for three years.
Araskog, 50, a shy and self-effacing man who took the helm at ITT in 1979, nodded. The French situation, one of the reasons Araskog was in Washington this last Thursday in June, was a squabble with the Socialist Mitterrand government over compensation for the nationalization of ITT's four telecommunications facilities in France.
As he waited for Jackson, Araskog looked around at the roomful of senators preening before lunchtime guests and said softly, but with an edge in his voice, "I wish these people who are giving away money--like that $50 million for Lebanon they voted this morning--had to earn it." ITT made $677 million last year. Araskog himself earns $1,150,000 per year plus a $173,000 housing allowance.
The chairman of ITT, whose Rayonier forest products division is a large employer in Jackson's home state, was all smiles when the senator returned to the table. "Hey, Scoop," Araskog said with studied nonchalance, "I might mention one other thing. We've been over at the State Department this morning. . . ."
What followed was a terse, but telling, illustration of the way the game is played when the chief executive officer of a $23-billion conglomerate, which ranks 14 on the Fortune 500 list, lobbies in Washington.
Araskog began with a seemingly offhand 30-second summary of "the French situation." Jackson wondered aloud whether the Hickenlooper amendment might apply (it didn't) and reminisced a bit about Sen. Bourke Hickenlooper (R-Iowa), who died in 1971. The next move was Araskog's: "What would help even more would be a reaction here on the Hill." Jackson gave a three-sentence speech about the importance of "abiding by the rules" in world trade. Then the subject was dropped.
It was that low-key. No campaign contributions or quid pro quos. But now ITT believed, as negotiations with France neared a climax, that they could count on the help of the senior senator from Washington state.
Once corporate titans
like Araskog worried
about blast furnaces and
inventories and left
Washington to the politicians. But that was before the growth of government, before the time when a paragragh in a tax bill or an environmental regulation could spell the difference between red and black ink in the annual report.
If they want to do business, CEOs stay in their corporate towers in New York, Pittsburgh or Houston. But if they want to make powerful friends, whose decisions can affect their business, they come to Washington.
Personal ties with an influential senator or administration official can help a corporation gets what it considers a fair hearing in Washington. Enough of these friendships can goad a recalcitrant Congress or stimulate a sluggish bureaucracy.
But many business leaders also come to Washington looking for something equally important, and far less tangible. They don't want their companies to be seen as X number of jobs, X number of plants and X billion dollars in sales. They want senators and cabinet members to get a warm glow when they hear the name XYZ Corporation. The goal of many skillful CEOs is to get the people who count in Washington to think of his company in personal--not abstract--terms: "XYZ? Why that's Bill Smith's outfit. Bill was in my office just last week. A hell of a nice guy."
As major corporations go, ITT needs friends in Washington more than most. ITT's neediness is the legacy of Harold Geneen, Rand Araskog's mentor and the man who ran ITT until 1977.
Geneen turned the corporation into America's largest conglomerate, with operations in 100 countries, deeply involved in telecommunications, insurance, forest products, defense contracting, the operation of Sheraton hotels and the manufacture of such familar products as Wonder Bread. As a result, few decisions are made in Washington that don't affect some division of ITT.
But under Geneen ITT also became the controversial symbol of unbridled corporate power. Remember Dita Beard, ITT's earthy and unorthodox lobbyist in Washington? She allegedly wrote the famous memo seeming to link an antitrust settlement favorable to ITT with the company's purported offer of $400,000 to help pay for the 1972 Republican Convention.
The scandal, which predated Watergate, was upstaged by charges that Geneen's company had intrigued against the Marxist government of Salvador Allende in Chile. ITT, which ran the Chilean phone company and feared punitive nationalization, steadfastly denied wrongdoing. ITT eventually said it spent $450,000 to block Allende's election in 1970.
Washington is a city with a long memory for scandal. Thanks to the current pro-business climate, when other CEOs come to town, they can build upon a foundation of good will. But Rand Araskog faces a special challenge when he comes to Washington: to make friends, in part, to offset ITT's troubled past.
But the rituals of making friends in Washington often can be tedious, especially for a CEO used to making rapid-fire decisions in New York.
The business reasons for Araskog's lunch with Jackson were often hard to remember as the the senator played expansive host in the Senate Dining Room. From the moment Jackson touted the hot cornbread and gave his speech on Senate bean soup, the conversation became as slow-moving and meandering as a muddy southern river.
Among the topics discussed by Jackson and the visiting CEO were: the budget, the economy, Felix Rohatyn, New Jersey, gambling in Atlantic City, the Mafia, the disappearance of Jimmy Hoffa and the 19th-century settlement patterns of Russian immigrants in the Pacific Northwest.
There was a brief interlude, however, when Araskog got to mention that his company was concerned that two Alaskan wood-pulp mills, direct competitors of ITT Rayonier, had asked for special exemptions from the Clean Water Act. As planned, Araskog began his soft-sell by showing Jackson an award that Rayonier had received for "solid waste disposal."
From there, it was just a short step for Araskog to mention that Rayonier had spent $100 million to comply with environmental regulations and now its competitors were trying to change the rules.
"Your point is a valid one," said Jackson, the ranking Democrat on the Senate energy committee, "because you have here an element of unfair competition."
A short speech from Araskog on the environment ("It's time that industry cleans up for themselves"), a few more words from Jackson, and that was it. Another apparent understanding had been reached between the senator and the CEO. The details would be worked out when the ITT staff talked with Jackson's staff.
As the lunch dragged on, Araskog grew fidgety and began to play absentmindedly with the silverware. Nothing was left on the ITT agenda.
Finally, after a lengthy discussion of the Hinckley verdict, Araskog said pointedly, "Scoop, it's 1:45. How are you fixed for time?"
"Fine, Rand, just fine. I'm free until 2."
Araskog is the grandson
of Swedish immigrants.
Like so many corporate leaders, he grew up in a small town in the Midwest, in his case Fergus Falls, Minn. But his natural habitat is now a modern 12th-floor office overlooking St. Bartholomew's Church on Park Avenue in Manhattan. The only personal touch is a small tree growing in the corner.
A West Point graduate, Araskog prides himself on a crisp, efficient, clean-desk management style. Meetings, which are designed to produce decisions, are primarily with subordinates, bankers and shareholders--people for whom ITT is all important. At lunch, Araskog and other ITT executives eat off blue-and- white dishes with the company logo in gold leaf. Every piece of silver flatware has ITT etched on the handle.
An ITT tradition is the monthly management meeting --alternating between New York and Brussels--that brings together in one room the viceroys of the corporation's worldwide empire. A glimpse of one of these sessions conveys the multinational sweep of ITT and the importance of Washington to the company.
On the dot of 10 a.m. on Tuesday morning, June 22, a buzzer sounded outside the doors of ITT's main conference room in New York, abruptly ending the small knots of conversation by the coffee urns. More than 80 senior executives settled into navy blue armchairs around a long oval conference table with a covering of lime-green felt. The whole scene resembled an outtake from a movie on corporate power: the hushed atmosphere, the muted lighting, the dark pinstripe suits, the smattering of foreign accents, the table microphones and the three movie screens.
Araskog, wearing a muted gray plaid suit and a Countess Mara tie, took the place of honor near the center of the oval. His manner was understated and virtually his first words were about Washington: "I think you're all aware from the newspapers that the United States is fighting with the budget process. . . . We're trying to make sure that nothing slips into that process that unfairly impacts on ITT."
Minutes later, James Lester, a senior executive vice president, reported on the progress of the Wirth bill in Congress: "It should pass readily in the House." The company hoped that the legislation, sponsored by Rep. Tim Wirth (D-Colo.) and bitterly opposed by AT&T, if passed, would open up the domestic telephone equipment market to ITT for the first time.
Telecommunications is the ITT division with the largest profits and the best return on investment. Small wonder that just two days later Araskog, accompanied by his wife Jessie, left his Park Avenue apartment at 7:30 a.m. to fly to Washington for a meeting with Wirth, the lunch with Jackson and a 15-hour day of courting the powerful.
Shortly after 9, the plush ITT jet, a turquoise-and-white 12-passenger Gulfstream III, touched down at National Airpord for specialt. Waiting for Araskog outside the Butler Aviation terminal was ITT's silver-gray 1979 Lincoln Town Car with 64-year-old Winston Jones behind the wheel. Jones has been driving for ITT in Washington for 14 years and takes the occasional visits by his CEO in stride: "He's a pretty nice guy. He greets you well." On this sunny morning, Araskog's greeting was a simple and direct, "Good morning, Winston."
A second ITT car was there to take Jessie Araskog to the Capital Children's Museum. Last fall ITT gave $250,000 to the museum for a communications exhibit and shortly thereafter Mrs. Araskog, the mother of three children, was named to the board. Such an honor is one of the compensations for being a CEO's wife. A drawback, as the poised and well- dressed Jessie Araskog acknowledged on the flight down, is that her husband is invariably in Europe on their anniversary (July 29).
As Jones guided the Lincoln across the 14th Street Bridge, Araskog balanced a battered black-leather Gucci attach,e case on his lap and made small talk. "A lot of jobs go wanting because people would rather collect that welfare check," he said at one point, reflecting his conservative political views on almost all matters not affecting ITT.
The CEO also took time to scan the two-page typed schedule (marked "Revision n 6") prepared by ITT's Washington office. The Wirth bill and ITT's problems in France (the reason for an 11 a.m. meeting at the State Department) dominated the agenda. However, there would also be time for a get-acquainted session with freshman Sen. Dan Quayle (R-Ind.). In the evening, the Araskogs would be the guests of honor at a buffet dinner at the Spring Valley home of Fred Dutton, lawyer, and a leading U.S. adviser to Saudi Arabia.
The first event was a briefing at ITT's office on L Street to discuss the schedule. At 10:45, Araskog was in the Lincoln again, this time headed for the State Department.
In mid-May ITT issued a long-delayed final report on its questionable overseas payments that were largely designed to help get business abroad. The report, which was part of a voluntary agreement with the Securities and Exchange Commission, acknowledged $5.7 million in such payments since 1975. Nonetheless, its release marked the end of an era that began with the 1973 Senate investigation into ITT's intrigues in Chile.
Araskog spent four years at the Pentagon and the National Security Agency in the mid-1950s as an intelligence briefing officer and also worked on the early space program. Until the SEC report was released, Araskog, despite his many friends at the Pentagon, felt slightly uncomfortable coming back to Washington as ITT's boss.
"Frankly, having that SEC business out of the way makes it easier to deal," Araskog said. "It was sort of a cloud that perhaps I was more sensitive about than I should have been, but we really wanted that behind us."
This was Araskog's first major trip to Washington since ITT had met all the requirements of the settlement with the SEC. But at the State Department, Araskog discovered that even now he could not escape the shadow cast by Allende's Chile.
It is rare when a CEO himself comes to the State Department just to brief mid-level officials. But the problems facing ITT in France were unusual. Honeywell, the only other American company whose French operations were nationalized, had quickly agreed to what was considered a generous settlement. ITT, which sells equipment to the government-owned French telephone company, was in a much weaker bargaining position. The Mitterrand government was offering little more than one-tenth of what ITT thought its facilities in France were worth.
Even for a company of ITT's size, the money involved was significant. Merrill, Lynch had valued ITT's four French subsidiaries at $360 million. The Socialist government's offer was $37.7 million. Araskog had been in regular contact with the U.S. Embassy in Paris and would be taking the company's Gulfstream III there o specialn Sunday, June 27, to take charge of the negotiations himself. He wanted to underline to State Department officials in Washington how seriously ITT regarded the dispute.
But what is crucial to a company like ITT is often of routine interest to the career diplomats in Foggy Bottom. ITT's Washington office had hoped for an audience with at least an assistant secretary of state. They got Elinor Constable, the deputy assistant secretary for international finance.
Araskog, flanked by two aides, took a seat in Constable's government-drab office on the seventh floor at State. His approach was discursive, but businesslike. He began methodically ticking off his points on his fingers. Periodically, Constable would interject something noncommittal: "We've made clear to the French government that valuation has to be done on a case-by-case basis."
It was Araskog himself, perhaps as a preemptive strike, who first raised the sensitive topic of Chile: "I reported to our board in April that ITT activities dating back to Chile were being heavily played in France. That period's all gone now, but they can try to use it." He gave Constable a cold stare as he said,"I have a feeling they're counting on an anti-ITT attitude in France, and they're hoping that you won't do much."
The career official ignored the provocation, and Araskog added quickly, "I'm not trying to put you on the spot. We're not talking about nationalization. The French people voted for that, and it's their right."
"I'm glad you said that," replied Constable. "That's something we can't do anything about."
An uncharacteristic passion crept into Araskog's voice: "My position is clear. I'm not going to accept $50 or $75 million. If they're going to expropriate us, let them expropriate us and then try to explain it to the world. We'll then go into French courts to try to protect our shareholders."
(Araskog, it turned out, settled for less. On July 7, ITT announced that the firm had reached an agreement with the French government--$50 million. Araskog in a written statement called the settlement "acceptable" and said that ITT had "no practical alternative but to sell.")
Back in Constable's office, E. J. Beigel, a foreign service expert on France, who was sitting in as a "friendly observer," mentioned that the film "Missing," loosely based on Allende's Chile, was "making a big splash in France right now."
Araskog chimed in with a story about how he had been greeted in Brussels recently by a demonstration attacking ITT for its role in Chile. "I was selling navigation equipment in Europe back in those days, anyway," he said, referring to the Allende era.
"The French socialists were very close to Allende," Beigel said in a knowing tone.
That remark triggered something in Araskog. "We had nothing to do with Allende," he said angrily.
"It's what the French think that happened. It's perceptions," said Beigel.
In an apparent effort to salvage the situation, Araskog tried a joke. "Well, we're certainly not going to try to do anything to Mitterrand."
The remark hung over the room for a few awkward seconds.
The meeting ended five minutes later. "You'll keep us informed on your results?" Constable said.
The meeting with Dan
Quayle had been ITT lobbyist Ray O'Brien's idea. "Quayle has been known to ITT, but not to Araskog," said O'Brien. ITT has 3,800 employes in the senator's home state of Indiana.
Now it was 2:15 and Araskog was standing in the doorway of Quayle's office in the Russell Building, shifting his weight from one foot to the other. The chairs in the small reception area were occupied by two generals, with five stars between them, who had come to pay homage to Quayle's seat on the Armed Services Committee. O'Brien gestured toward the brass and whispered, "Our appointment may be shorter than we thought."
Quayle's receptionist came forward and said to Araskog with the self-importance that is endemic on Capitol Hill: "The senator is with a staffer right now. He'll be with you as soon as he's through."
There was no indirection, idle chatter or feigned intimacy when Araskog was finally installed in the senator's office. Just a bit of I'll scratch your back if you'll scratch mine. Quayle's opening was blunt: "I'm looking for the good news that ITT will be opening a new plant in Indiana. Our unemployment rate is 13 percent."
Araskog responded in kind: "If we get the SINCGARS contract, it'll mean 700 jobs." SINCGARS stands for Single Channel Ground and Airborne Radio System and will be the Army's principal ground-to-air communications system. ITT is competing with the American subsidiary of an English-owned firm for the $500-million contract, which won't be awarded until early 1983.
Quayle tried to sidestep and talk about the economy, but Araskog kept bringing up SINCGARS: "It's probably a few months off, senator, but if the other guys are getting help, we may need some too."
The 15 minutes were up and the generals were waiting. "I'll have Ray O'Brien keep me posted," said Quayle. Araskog got the hint. "It could be a very close thing on SINCGARS," he said on the way out.
ITT lobbyist Mike Hunter's job has been easier since Rand Araskog and Tim Wirth discovered that they genuinely liked each other. "We know that if Tim has a problem, he'll pick up a phone to call Rand," Hunter said.
Wirth, who chairs the House telecommunications subcommittee, is a so-called "Atari Democrat" who believes that high technology is the answer to America's economic woes. Araskog's background is military technology; he joined ITT in 1966 as director of marketing for its U.S. Defense-Space Group.
The two technocrats met last December when Araskog came to town as part of a delegation of CEOs to discuss telecommunications legislation. But things blossomed in February when the Araskogs were seated next to Wirth at a dinner at the Capital Children's Museum. In mid-May, Araskog made a quick trip to Washington, in part to plot strategy with the author of the Wirth bill.
ITT has been virtually shut out of the domestic telephone business. ITT officials hoped this would change with the passage of the Wirth bill (H.R. 5158) designed to modify the government's recent antitrust settlement with AT&T. ITT believed that passage of H.R. 5158 would finally give them a chance to compete with Western Electric, AT&T's manufacturing arm.
"Hello, sir," said Wirth as he ushered Araskog into his office. "I just got back from my luncheon speech at the National Press Club."
"We wanted to go but I had another engagement," the CEO said. It was true. ITT's Washington office had tried unsuccessfully to move the appointment with Jackson to midafternoon.
There was a reason for Araskog's flattering interest in Wirth's oratory. After the May meeting, the CEO became worried that his new friend was losing enthusiasm for the struggle. So Araskog had returned to Washington to buck up Wirth's spirits and underline ITT's unflinching support for H.R. 5158.
As Wirth gave a capsule summary of the latest fights in subcommittee, Araskog kept chiming in with lines like: "That's the way to operate," and, "I'm awfully glad you're pressing on."
When not talking about the bill, the two men discussed their children and computers. "Kathy's at Spence and they have a computer at the school," said Araskog, referring to his 12-year-old daughter who attends a private school.
The conversation was winding down when three bells sounded, the signal for a floor vote. "Let me give you a copy of my speech to the National Press Club," Wirth said.
Araskog, with one last obsequious gesture, asked, "Do you have a recording of the questions and answers from the session, too?"
(On July 20, Wirth would withdraw his bill blaming an AT&T campaign of "fear and distortion." But Araskog's courtship of Wirth would almost certainly pay future dividends for ITT. After all, Wirth is still chairman of the House telecommunications subcommittee.)
Araskog had no illusions that the informal buffet dinner at the home of Fred Dutton was purely social: "It's fair to say that most people who will be there are friends of Fred's who he wants me to meet."
Dutton, who has been a consultant to ITT for a decade, was equally frank: "When I heard that Araskog was coming down from New York, I said that I'd love to have him to the house. Let me get a cross-section of people together for him to meet." Dutton provided ITT with a memo giving brief biographical sketches of his two dozen guests.
They included: Supreme Court Justice Byron White; Sander Vanocur (ABC News); Paul Duke ("Washington Week in Review"); Marvin Stone (U.S. News); Barbara Gamarekian (The New York Times); and Walter Pincus (The Washington Post). The heavy emphasis on the press and TV news, Dutton said, was "mostly because they're my friends."
A trio of Senate heavyweights had also been invited, but the Duttons were competing with the opening of the Democrat's midterm convention in Philadelphia. Ted Kennedy sent his regrets and Fritz Hollings (D-S.C.) didn't show. Republican Mark Hatfield was in Oregon campaigning for reelection.
There was nothing overt about the evening--just influential people meeting the Araskogs in a relaxed social setting. Before dinner, the CEO sipped scotch and chatted about the Russian natural gas pipeline with Paul Duke, West German TV correspondent Lothar Loewe and Paul Petrus, the head of Mobil's Washington office.
It was a warm clear evening and three tables had been set up outside--two on the patio and a third on the porch. Protocol, enforced by placecards, had Araskog on the patio seated between Antoinette Hatfield, the senator's wife, and Marion White, the justice's wife. Jessie Araskog, wearing a white blazer and expensive jewelry, was on the porch flanked by Dutton and White.
A cold lamb salad was followed by a dessert built around strawberries and whipped cream. A waiter refilled the champagne glasses and offered cigars to the gentlemen. Araskog chatted with Toni Hatfield about her real estate business and Sander Vanocur, who was on her right, about his experiences in Argentina during the war in the Falklands. Jessie Araskog's table tried to predict the 1984 presidential candidates.
The evening ended around midnight with warm handshakes on the front lawn. Asked how it differed from a New York dinner party, Araskog said, "It's about the same. Except much more politics."
The Lincoln, with Winston Jones still at the wheel, moves slowly down Reservoir Road heading for the ITT-owned Sheraton-Carlton Hotel where the Araskogs would spend the night in the one-bedroom ITT suite before returning to New York in the morning.
There isn't much conversation. Araskog mentions something about the Washington Redskins: "Do you think they'll be a contender this year, Winston?" "No, sir," says the chauffeur.
A moment later, Araskog is remembering the heat of June in Washington, more than 20 years ago, when he worked at the Pentagon and Jessie taught elementary school. He pictured himself back on Columbia Pike waiting for the bus: "Even at 8 o'clock in the morning, my shirt was damp with sweat."
His wife smiled and the two of them lapsed into silence, perhaps musing on how far they had come since that long-ago June on Columbia Pike.