Fall/Winter : Past Issues

Insights from the Top
Fortune 500 CEOs Share Words of Wisdom from the Corner Office
by Jerry Mahoney

The University of Texas at Austin and the McCombs School have strong traditions of educating future corporate leaders. In a recent Bloomberg News survey (June 30, 2004) of where CEOs of Standard & Poor's 500 firms attended college, UT Austin ranked fifth among all undergraduate institutions. In Bloomberg's survey of MBA programs, McCombs fared equally well, ranking fifth among all graduate business schools and first among public business schools as a source of S&P CEO talent. What’s more, the school’s online alumni database (which is not complete) lists nearly 500 alumni who hold the position of CEO at firms of various sizes.

Planning for this article began last January, well before the Bloomberg survey, as an effort to profile McCombs alumni who run firms on another distinguished list of companies, the Fortune 500. We wanted to get their take on what it’s like at the top and what it takes to succeed.

We started with the four CEOs profiled below, all members of the McCombs Advisory Council. In the interim, two more alumni assumed the top spot at Fortune 500 firms (John Wilder at TXU Corp. and Gary Kelly at Southwest Airlines). We look forward to writing about their accomplishments, alongside those of other leading McCombs graduates, in the future.

• Kenneth M. Jastrow
• William R. Johnson
• Gerard J. Arpey
• James M. Mulva

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Kenneth M. Jastrow II
(BBA ’69, MBA ’71)
Chairman and CEO, Temple-Inland Inc.

Except for the seven years that he spent running a mortgage company and its affiliates, Kenny Jastrow has been with Temple-Inland Inc. or one of its subsidiaries his entire career. As a senior executive for more than 25 years, he has been involved in numerous divestitures and acquisitions that have helped the company climb to No. 372 on the Fortune 500.

How He Got His Start

Jastrow fondly recalls working with Dr. Ernest Walker, who was chairman of the Finance Department at UT Austin from 1961 to1965. Lumbermen’s Investment Corp., the predecessor of Temple-Inland Mortgage Corp., had asked Walker for advice on a tax-related research project, and he recruited Jastrow to help. The project paid off, helping the company qualify for a tax deduction.

Walker insisted that Jastrow take $2,000 of the $2,500 fee for the work, which was completed in 1970. “At the time, that was more money than I’d ever seen, and that’s how I got with the company,” he says. Thus Professor Walker was the catalyst that set the young student on the course that led to his long career at Temple-Inland.

Leadership and Success

Strong performance requires dedicated employees executing a solid business plan. And to achieve such an employee base requires a corporate culture that attracts, trains, retains and promotes good people from top to bottom. It all starts and ends with the CEO, says Jastrow.

“There has to be a willingness to really devote time and effort to the job. Leadership should produce the ability to recruit top people, the ability to train them and get everybody on the same page—that is, a shared vision, mission, values and the drive for success.”

Dedication to performance includes not only learning from your mistakes, but also understanding that you will be measured according to specific expectations and that you will accept the consequences of your decisions and actions. “You have to be willing to seek out honest feedback and be self-critical,” Jastrow says. “People walk into my office all the time and say, ‘That’s a dumb idea.’ A chief executive absolutely must set a culture of honesty and integrity.”

A Day in the Life

There is no such thing as a typical day for Fortune 500 CEOs, who are required to juggle a wide range of responsibilities, stay abreast of changing markets, travel frequently and remain mindful of the needs, expectations and hopes of employees, customers, investors and Wall Street.

In addition to executing the long-term goals of the company, Jastrow says CEOs should be good day-to-day tacticians. “It’s important for me to be proactive, so our message gets communicated.

It’s not that others can’t be, and that others aren’t, but the message needs to be focused and consistent within the company and done in such a way that people share a common mission and values.”

Jastrow tries to carve out a portion of every day to review, consider, wonder and contemplate. “The greatest technology is your own brain, your own thought process,” he said. “I try to take time to think.”

Personal Time

“I might wake up in the middle of the night thinking about the company,” Jastrow says. “But I have a home life. I don’t think you have to marry your job. I’ve got a wonderful family.” Jastrow and his wife Susie met at UT Austin in 1965 and have been together ever since. They have three children and two granddaughters.

As a devotee of lifelong learning, Jastrow reads articles and books about business, people and examples of leadership. “I always find it interesting to understand how people do things and why they did it that way.”

Jastrow and his wife live on a ranch near Round Mountain in a house they built several years ago, using pine supplied by Temple-Inland. “A lot of things are over-rated in life,” Jastrow says, “but living on a ranch is not one
of them.”

Giving Back

“The University of Texas was a transforming experience. When I came to UT in 1965, the whole world opened up to me. I saw this vast world of learning and ideas—and I just said, ‘Wow!’ ”

The admiration is mutual. This year, Jastrow received the Distinguished Alumnus Award from the Texas Exes, and he was inducted into the McCombs School Hall of Fame. He is a former chairman of the McCombs School Advisory Council and UT’s Development Board. He is also chairman of UT Austin’s Commission of 125, a group of national leaders who convened to help President Larry Faulkner chart the University’s future course.

“You ask yourself what you can do to say thanks,” says Jastrow. “The answer is whatever you can.”

William R. Johnson
(MBA ’74)
Chairman, President and CEO,
H.J. Heinz Co.

Bill Johnson, 55, is only the fifth chairman and sixth CEO in the 135-year history of the H.J. Heinz Co. Like Jastrow, he learned the business on the inside, and rose through a succession of executive positions. Heinz is No. 213 on the Fortune 500.

Life at the Top

“It takes an enormous desire to succeed or an enormous phobia of failure to drive yourself as much as some CEOs drive themselves,” says Johnson.

Johnson believes CEOs must be able to communicate clearly and delegate. “You’ve got to be well-read and highly literate,” he says. “I’m not talking about business periodicals. I’m talking about topical periodicals that give you insight into trends and things that are happening. But I think the most important qualities are stamina, thick hide and perspective.”

Stamina helps an executive deal with the long hours and the “incredible levels of stress,” that are part of running a Fortune 500 company. “Perspective and a thick hide help you stay focused on what’s important and make difficult decisions, often in the face of conflicting advice,” Johnson says. “Your job is not to be popular. Your job is to create value for your constituencies.”

The Next Generation

All corporate executives are expected to groom not only their eventual successors, but to put in place effective management recruiting and training programs. Johnson’s answer to this call was to establish the CEO Academy, an innovative program to identify and challenge promising management and executive prospects.

Each year Johnson invites about ten “up-and-coming” managers to join him in candid discussions about business issues and challenges, and assessing the requirements needed to run a company like Heinz. “We talk about my vision and their hopes and desires. It is very rewarding for me,” Johnson says. “It’s an eye-opener in terms of the talent and capabilities in this company.”

Motivating People to Get the Job Done

“I can’t begin to tell you if I’ve had two or three weeks in a row that are alike,” says Johnson. In addition to his overseas meetings with employees, customers and suppliers in Heinz’s far-flung empire, Johnson typically spends one week each month visiting the company’s domestic sites. When he’s in his Pittsburgh office, much of his time goes toward ongoing executive-level responsibilities like reviewing strategies and budget, and talking to investors and analysts.

“I certainly deal with people issues every day,” he says. “Everything comes down to people and the ability to execute.”

To illustrate this point, Johnson points out that Heinz Tomato Ketchup has been around for 100 years, but in the past two years its sales have grown more than in the previous five. In a very mature market like that, solid execution accounts for the growth. “No MBA wants to learn about execution,” he says. “It’s not exciting. Strategy is exciting. Thinking about The Big Thing is exciting. But execution is far more important.”

Like Jastrow, Johnson values learning as a part of his job.
“I like meeting with our people and customers. The learning is so great, the reward is so palpable.”

Personal Time

Johnson typically works at least 60 hours a week. “My wife will tell you there is never a time when I’m not working,” he says. Because working that much year in and year out requires endurance, one of the few constants in Johnson’s week is a 90-minute cross-training regimen of running and lifting weights at 4:30 in the morning. “One thing I like about exercising early in the morning is it gives me time to think, and it’s the only thing I do that’s 100 percent for me. I guard it religiously.”

Johnson may be one of the few people outside of the literary world who has read Moby Dick several times. He jokes about the book’s lesson to avoid angry whales, but believes the classic has important lessons for CEOs: Don’t take events personally and don’t worry about things you can’t control. “It’s a worthless use of energy,” Johnson says.

Johnson and his wife, Susie, have been married 31 years. They have two children, one of whom is currently a second-year MBA student at McCombs.

Finding Inspiration in Ketchup

Heinz helped turn the 100-year-old ketchup business on its head in 2002 with the introduction of the upside-down bottle. Stored on the wide-brimmed cap, the bottle solved the age-old problem of getting the sauce out. “It was an extraordinary success in helping drive market share,” Johnson says.

Johnson keeps a collection of 50 ketchup bottles in his office that remind visitors of the role that the ubiquitous condiment has played in Heinz’s history. The collection has a significantly deeper meaning to Johnson. “If you have a down moment or you are trying to figure something out, you look at it to get a sense of value,” he says. “You look at it and remind yourself of what you’re trying to accomplish.”

Gerard J. Arpey
(BBA ’80, MBA ’82)
Chairman, President and CEO, AMR Corporation

Gerard Arpey has a deep and broad perspective on the airline industry. He worked as a ticket agent and baggage handler for Delta when he was an undergraduate and joined AMR Corp.—No. 110 on the Fortune 500 and the
parent company of American Airlines—right after receiving his MBA from The University of Texas at Austin. He has spent his entire career with the airline.

A Challenging Environment

“9/11 had a devastating impact on our industry and certainly on American Airlines,” says Arpey. “The industry is slowly coming back as business travel gradually returns, but whether we’ll ever return to the robust days of the past is still in question.” Added to the challenges posed by the aftermath of the terrorist attacks, Arpey says the growth of low-cost, low-fare carriers and the ability to compare fares and buy tickets on the Internet have transformed the airline industry.

“The real challenge for management—and for all our employees, really—comes in finding ways to produce our product at lower costs, without diminishing the very things that have built our reputation over many years and given us lots of loyal customers. How do we maintain our level of quality and service and positively differentiate our product when faced with the need to constantly cut costs?”

American’s response to these multiple challenges has been the Turnaround Plan, which Arpey described as a broad-based strategic blueprint of four parts: lower costs to compete; give customers what they value; “pull together, win together”; and build a financial foundation for the future. “Everything we do is based on one or more of these four basic tenets,” Arpey says. “The Turnaround Plan has been in effect for about a year now. We’ve been very encouraged by the results so far, although we still have a long way to go.”

Involving Employees

Arpey says the events of 9/11 dramatically changed expectations and challenged all employees to aggressively rethink the very nature of their product. “One way we’re doing that is by actively engaging employees in our company’s efforts,” Arpey says, “It’s vitally important that every employee knows and understands where the company is headed and that all our managers make every effort to listen to our employees, because the people who actually do the work have the best ideas for doing it more effectively and efficiently.”

Actions Define Culture

The job description of a CEO also includes visionary and chief spokesman to the public and to Wall Street. Arpey uses his regular column in American Way, the airline’s in-flight magazine, for such topics as airline safety, the skill and professionalism of American’s employees and issues affecting the entire industry. Arpey says a CEO should be a highly visible pitchman for his company’s products or service and the leader of the corporate culture. “Culture is not something we spend a lot of time talking about,” Arpey says. “Instead, we prefer to set the tone with our actions. Culture is a by-product of what we do, not what we say.”

Arpey meets weekly with American’s Executive Committee, which includes senior managers of the finance, marketing operations, customer services, human resources, legal and government-affairs committees.

“We discuss and debate any number of issues that affect American, ranging from our long-term strategic direction to short-term, specific activities and everything in between,” he says. “It’s a very participatory approach to managing and operating the company, and it works well for us.”

“It bears pointing out that in each area a CEO of a large company has an enormous amount of help in fulfilling those tasks—certainly I do at American,” Arpey says.

Staying Connected

Arpey is a member of the McCombs School of Business Advisory Council. His civic activities include membership on the Dallas Museum of Art’s board of directors. Arpey and his wife, Lisa, have been married 13 years and have three children.

Arpey’s loyalty to UT includes an avid interest in Longhorn football, and he attends as many games as he can squeeze into his schedule. He notes that University of Oklahoma President David Boren is on AMR’s board. “He’s one of the finest men I know, but it’s been tough sitting next to him at the Texas-O.U. game the past few years,” he jokes.

James J. Mulva
(BBA ’68, MBA ’69)
President and CEO, ConocoPhillips

With the merger of Conoco Inc. and Phillips Petroleum Co. two years ago, ConocoPhillips became the third-largest integrated U.S. energy company, the sixth-largest publicly held energy company based on reserves and production and the fifth-largest global refiner. Jim Mulva, 58, has guided the company’s recent growth and movement to No. 7 on the Fortune 500.

Satisfying a Demanding Constituency

Consumers, regulators and investors expect oil and gas to be readily available, delivered in a reliable, environmentally friendly way and at an affordable cost. “Shareholders and the financial community are more aggressive than ever with respect to accountability,” Mulva says.

“The marketplace expects good financial returns, today, every day, every year. The bar has been raised in every constituency. And we have to do that in a way that returns value to shareholders,” Mulva says. “It requires flexibility and balance.”

It’s all about Long-term Relationships

Big oil and gas companies must follow the recoverable reserves, which are often found in countries whose cultures and government systems are far different from America’s. In some areas, such as the Middle East and Russia, the reserves are proven, but the challenges are great.

“You’re trading exploration risks for political and commercial risks. I spend a lot of time working on relationships,” says Mulva, who met with Russian President Vladimir Putin twice this year to discuss ConocoPhillips’ proposal to buy a $7.6 million stake in the giant Russian oil company Lukoil. “One of the things that is very important is the development of long-term relationships in those countries,” Mulva says. “You can’t show up in Moscow or Beijing once a year and have people think you are committed.”

Even in Western-style democracies, major projects require patience and persistence to build relationships and assemble partnerships. ConocoPhillips’ project to begin delivering liquefied natural gas to Japan next year from reserves in Australia’s Bayu-Undan field has been six years in the making. Mulva, who travels about 175 days a year, flies to Australia every six weeks or so. “You chase things for years,” he said. “They don’t come to you.”

Life at the Top

“Six years ago, our board challenged us. They said it’s important to outline what it is that you want to become in five to 10 years, what you want to look like and what investment you need to make that happen. We felt we had to have scope and size to compete, and it would require an investment of multiple billions of dollars.”

That board meeting, held when Mulva was president and CEO of Phillips Petroleum, started the company on a course that led to the merger with Conoco. And that challenge from the board is one of the aspects of his job that Mulva enjoys most. “I like the strategy formulation, figuring out what we’re going to do. It’s the thrill of implementing the strategy to see the company grow and develop.”

Like other CEOs, Mulva spends a large chunk of his time on operations, planning and setting budgets. “You’ve got to have a system in place to make sure the company is operating well,” he says. At ConocoPhillips, that meant eliminating the chief operating officer’s position, and having heads of divisions such as exploration and marketing report directly to Mulva. “It’s more efficient, but it’s also puts more demands on the CEO,” he says.

Nurturing the Next Generation

“The number of students who come out of school interested in this discipline is not what it was historically,” Mulva says, acknowledging that an older industry like the energy business has difficulty appealing to younger workers interested in new technology ventures. As a result, the industry’s work force is older than in other industries.

Mulva notes that the other side of the coin is stability. ConocoPhillips’ employees don’t spend much time wondering if the company is going to survive. “There is no question about us being a long-term player in this business.”

ConocoPhillips has formal and informal mentoring systems to nurture and develop the next generation of managers. Mulva’s commitment to mentoring stems from his relationship with his first boss in 1973. Gene Bonnell, then assistant treasurer and chief financial officer, was the toughest boss Mulva ever had. “He was very demanding in terms of his expectations,” Mulva recalled. “He is probably the most important person I ever worked for in my life.” The two men have been close friends for years.

Dedication to Work and Family

“The values by which you run your personal life shouldn’t be different from those in your professional life,” Mulva believes. While he has worked long hours for most of his career, Mulva always tried to carve out time for his family. He and his wife, Miriam, have been married for 31 years and have two sons.

Mulva says he hopes to keep this job until he is 65. “I love it and I will be able to tell you when it’s time to stop,” he said. “I hope I can look back when I’m in my 80s, and say, ‘You know what? I was part of the team that was involved in that growth.’ ”

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