Ashes to Ashes (105 page)

The Japanese market, too, opened a crack for PMI with the purchase of Liggett’s foreign business, prominently including the charcoal-filter Lark, the most popular import there. In vain Campbell pressed Japanese officials to lighten punitive cigarette tariffs and excise taxes on imported brands and to allow U.S. makes to be distributed through the hundreds of thousands of vending machines available to Japan Tobacco, the national monopoly. A little progress was even made in China, where the demand for cigarettes vastly outstripped the supply. Campbell was enlisted for technological advice to the native plant managers and got taken on tours of the provinces, where he ate a lot of 4 a.m. breakfasts on very chilly mornings, heard a lot of patriotic music, and inspected much grit-encrusted machinery left over from pre-World War II days. Eventually he was rewarded with a grant to sell imported Marlboros and a small joint venture with the government to produce several Liggett brands, all for distribution through a handful of “friendship” stores around the country. The opportunity to export PM brands made from a Chinese plant to Asian markets was also offered, but since it would have undercut the company’s own efforts to cultivate those areas for much better profit margins, the offer was politely rejected. “We didn’t want to burn any bridges there,” Campbell recounted, “or build any too fast.”

Maxwell’s feat in running PMI was to take a collection of complex and loosely confederated businesses, each essentially separate, and a bunch of
swashbuckling young executives and turn them into a coherent and more readily manageable business without killing the incentive of people used to a minimum of oversight. “The trick,” as Maxwell himself later put it, “was to sustain the vitality of the operations while running under a more clearly defined set of responsibilities.” That meant more financial data flowing to PMI headquarters in New York, long-term sales and profit projections, brand introductions and line extensions more carefully justified, and an end to managers’ high-living. Far more so than at PM-USA, you had to perform in the overseas territories or you were cut loose.

Maxwell pulled the strings through a team of devoted technicians, including R. William Murray and Geoffrey C. Bible, a pair of remarkably diligent numbers crunchers from Australia; Ehud Houminer, a brainy Israeli planner; and the German-born Hans Storr, who established wide contacts throughout the banking and financial communities and became a deft manipulator of international currencies. All would soon play central roles in running the parent company. To William Campbell, Maxwell’s primary gift as a motivator was “to demand excellence of you in a way you found tolerable—he didn’t offend or destroy you—he challenged you to do the job better. And he gave incredibly good directions, however sparing.” PMI profits forged ahead, more than doubling during Maxwell’s five years at the helm.

While speculation rose throughout 1983 about who would succeed George Weissman as chief executive, the year seemed to have a celebratory quality. As befit the new industry leader, the company moved its headquarters one block north to the newly completed Philip Morris Building, a twenty-six-story slab of gray granite and glass and no great distinction except for its location—on Forty-second Street, directly across from Grand Central Terminal—and an enclosed block-long, four-floor-high pedestrian mall containing greenery, retail shops, and modern sculpture. The Whitney Museum was persuaded to designate the atrium area and a small adjacent gallery as its downtown branch and fill it with sculpture. Company publicity called inclusion of the “museum” within Philip Morris’s domain an example of “how private enterprise can address the public interest to the betterment of society.” It was the classic Weissman touch, manifest a few months later in a world-class public-relations coup: exclusive sponsorship of a five-month tour of the Vatican’s art treasures to raise money for their restoration. The cost of the show to Philip Morris was $7 million, but its rewards, including good will among the faithful and a papal blessing that tactfully omitted any suggestion of corporate mortal sins, were priceless.

In bowing out, Weissman received many testimonials from the tobacco industry as a “class guy” after having posted annual average per-share earnings gains of 18 percent without ever even hinting at any doubt or remorse about the nature of his company’s prime product. His cultural patronage was rewarded
by a post-tobacco career as chairman of the board of the nation’s leading showcase for the performing arts—Lincoln Center. Even so, he could not dictate to the Philip Morris board of directors who his successor as CEO should be, as Joe Cullman had.

Weissman, it had been no secret, favored his fellow self-made native New Yorker, John Murphy, who had done so well helping put PMI together and then turning Miller Brewing into a winner before hitting the stone wall Anheuser-Busch had belatedly erected in his path. Few in the company doubted that Murphy was smart, excellent with figures, and an effective and at times even inspirational manager. But as a big man with a correspondingly outsized personality, he had displayed a flamboyance that edged over into arrogance at times, the kind of swagger that did not win him points with the more sedate denizens at corporate headquarters. While the relatively low profit margins at Miller and the failure to make a go of Seven-Up had mellowed Murphy somewhat, the tobacco people in New York feared that his advancement to the chairmanship would signal that the role of cigarettes was to be markedly diminished in the company’s future.

As word of opposition to Weissman’s choice circulated, the board meeting to elect his successor was twice postponed, and reports spread that the retiring chairman’s second choice was an outsider, John Reed, executive vice president of Citibank and a Philip Morris director. But the prospect of his election was no more pleasing to the tobacco people, who as the heart of the enterprise thought they had first claim to the throne. Their spokesman, Clifford Goldsmith, too old at sixty-four to be a candidate himself, proved to have almost equal standing with Weissman in the eyes of the board, and his choice for chairman was a man almost the polar opposite of Murphy. After a long meeting, fittingly held in Lausanne, and a reportedly close vote, the board chose fifty-eight-year-old Hamish Maxwell to run Philip Morris. He would shortly perform spectacular corporate feats of the sort that might have been expected of his vanquished rival for the chairman’s job.

Of Dragonslayers and Pond Scum

NOT
since before the Depression had the gospel of laissez-faire been so enshrined as the state creed as it was when the Reaganites took command of and promptly throttled the machinery of government. A true free-enterprise system, inviting the open play of marketplace forces without dour bureaucrats fretting over deceitful business practices or rampant economic concentration, would surely generate the greatest good for the greatest number, the new administration was certain. This fundamental faith nourished corporate America’s undeclared conviction, as exemplified by the conduct of the tobacco industry, that its own financial well-being was more important than anything on earth, not excluding the health of its customers.

The Reagan administration wasted little time in removing heads at the FTC, the putative protector of the consumer, where staff was reduced by one-third within a few years. At the Justice Department, not only was the antitrust division reined in but mergers, said to stimulate more efficient and profitable operations, were encouraged. One of the few liberal voices occasionally heard amid “the sour hum of reaction,” as he put it, belonged to Michael Pertschuk, now a holdover FTC commissioner almost entirely shorn of power, who decried the reigning Republicans’ “innate awe of the wonders of unfettered capitalist behavior” and their faith that business would police its own excesses, even if history offered scant evidence of any such impulse. The cigarette manufacturers’ interests were now roundly championed by such high-riding conservative commentators as William Buckley, James Kilpatrick, Patrick
Buchanan, and William Safire, who argued that the health risks of smoking were a matter for each citizen to resolve without government interference.

Prominent among Ronald Reagan’s virtues was that, once in office, he did what he had said he would do, such as keeping his promise to tobacco interests that “my own Cabinet officers will be far too busy with substantive matters to waste their time proselytizing against the dangers of cigarette smoking.” His regulators took the cue. New FTC Chairman James C. Miller III told the press he had had no time to read the report of his staffs five-year investigation into cigarette advertising abuses, calling for toughened, more explicit, rotating health warnings on cigarette packs and in advertisements—and the full commission dawdled for nearly two years before responding to a request from Congress for its opinion of the proposal. “If people want to smoke,” Miller remarked, “that’s their business.”

It was thus something of a surprise when, in March of 1982, Assistant Secretary of the Department of Health and Human Services Dr. Edward Brandt appeared before a House subcommittee considering a bill embracing the FTC staff proposal for expanded cigarette warnings and testified that the measure had “high priority” within the Reagan administration. Overnight the tobacco lobby besieged the White House, reminding its occupants of the President’s promise to lay off their business, and when Brandt came before a Senate committee six days later to discuss the same antismoking bill, he backed off his earlier unequivocal endorsement. The White House would take no official stand on the new labeling bill, which languished for the next several years.

The bleak prospects for executive-branch backing of antismoking legislation were all the more poignant in view of remarks delivered by the nation’s lately installed No. 1 health officer, Dr. Everett Koop, on the release of the 1982 Surgeon General’s report to Congress. The consequences of smoking, he said, were “the most important public health issue of our time,” and cigarettes were “the chief, single, avoidable cause of death in our society.” Even so, Koop was not about to defy the White House and learned early on the vast gap between the license to wax rhetorical and the application of real political power. Over the ensuing seven years, Koop’s would be the sole voice within the administration to speak out forcefully on the smoking peril. While he wielded no power himself and had only a tiny staff and budget—indeed no job, really, beyond serving as titular head of the Public Health Service’s commissioned officers’ corps and advisor to the HHS Department—he had a pulpit and brought to it a moral gravity as nobody in that post had before him. There was a self-dramatizing theatricality about Koop that captured the nation’s attention. For one thing, he was a Surgeon General who really had been a surgeon, an autocrat of his own operating room, with the omniscience and self-certitude customary in one used to being entrusted with his patients’ lives.
Like most surgeons who cannot taper off without risk of losing their skills, Koop channeled his professional drive into a public-health crusade rendered in the direct, unwavering tones of the missionary, but one who, his palpable vanity notwithstanding, never confused himself with God.

While a moral exemplar, Koop was a walking contradiction to the tenets of ideal health. He ate too much red meat and drank too many martinis and had become overweight and overstressed, the latter condition manifested by ulcers and frequent migraines. Yet at sixty-four, he was ready for the final challenge of his career. During the nine-month confirmation period when Koop was nastily pilloried, the Reaganites had applied their scalpels to the PHS’s uniformed commissioned officers’ corps, letting go 1,600 physicians and public-health workers, more than a quarter of the total, and ordering nearly all the PHS hospitals closed. Finding morale understandably low in the corps as he took office, Koop decided that it was fitting for the Surgeon General to don a uniform and so routinely appeared in public in navy blues or dress whites with a splash of gold braid. “I was fighting for recognition of a service that the Administration was trying to destroy,” he recounted. “You can rally people around a uniform.”

To the surprise of those at both ends of the political spectrum, the Surgeon General rapidly turned into an outspoken champion of issues neglected by most others in the federal government: the need to eat sensibly; the rights of the elderly; curbs on child abuse, domestic violence, and pornography; and the urgency of combating the new scourge of AIDS in an age when many on the political and religious right were inclined to believe that those so afflicted deserved their fate.

On no issue would Koop prove to be fiercer and more relentless in his opposition than smoking. He had smoked cigars for ten years—but never cigarettes—and had not planned to crusade against tobacco use until coming to government and discovering what he would later call in his memoirs “the incontrovertible truths about the health hazards of smoking.” He was first dumbfounded by and shortly thereafter furious with the behavior of the tobacco industry for taking the “ridiculous position” that nothing had been proven about the health hazards of smoking, a stance he mocked in his many public appearances by saying he knew full well that each time he turned on a light switch, he set a lot of electrons moving along a wire—“but I can’t prove it.” He characterized the cigarette purveyors collectively as “a sleazy outfit” that deserved scorn “for attempting to obfuscate and trivialize this extraordinarily important public health information” and for instead flaunting “its ability to buy its way into the marketplace of ideas and pollute it with its false and deadly information.” Never would he appear knowingly on the same platform with the industry’s representatives to debate what they tried to fob off as “the smoking controversy.”