The Race To The Top

Sun-splashed and blanketed with golf courses, Boca Grande, Fla., is a natural habitat for that most elite breed of American capitalism: members of the old boys' network. On a single day last spring, you could spot an intimate gathering of these Masters of the Universe flown down from the north: honchos from American Express and AOL Time Warner and Merrill Lynch. The scene was as you'd expect: lots of backslapping, nostalgic talk about Harvard M.B.A. days and the requisite ribbing about the precision (or lack thereof) of their golf games.

There was also something about this elite gathering that may warrant a footnote in the nation's history of racial progress. Everyone in the group was African-American. In fact, the pairings in this particular golf match included a Who's Who of Black America: Kenneth I. Chenault, elevated to chief executive of American Express in January 2001; E. Stanley O'Neal, poised to occupy the corner office at Merrill Lynch after a bitter succession battle, and Richard D. Parsons, taking the reins at AOL Time Warner come May. At each company--all of which are multibillion-dollar behemoths with brands recognizable worldwide--these men were handpicked by the CEOs they are succeeding, all of them white: AOL Time Warner's Gerald Levin, American Express's Harvey Golub and Merrill Lynch's David Komansky. And to a man, all three departing executives are unanimous about one point: race wasn't a factor. "Having been the person who made the recommendation to the board, I can tell you race didn't enter my mind once during the whole process," says Komansky. But if the rise of these three executives owes nothing to their skin color, each has succeeded in part thanks to skills--conciliation, bluntness and boldness--that owe something to their unique personal perspectives. And it clearly says something about a new level of opportunity that is now open to talented and dedicated people of color. As Vernon Jordan, the famed Washington insider and professional board member, puts it, it shows that "hard work, sacrifice and working within the system has its benefits."

Neither Parsons nor Chenault nor O'Neal is comfortable with having his enormous professional accomplishments viewed through the prism of race. "I think that's a narrow definition of a person because it's only one element of who they are," says O'Neal. So how should we view these men--as black CEOs, or CEOs who happen to be black? All three realize that their appointments come with heightened expectations, especially from other African-Americans who see in them the opportunity for social progress. But they are understandably ambivalent about what their proper roles should be when it comes to questions of race, and they calibrate their answers carefully. Take the issue of workplace diversity. Parsons says "all CEOs have the duty" to foster diversity. "The difference is, we might bring a different sensibility and personal commitment to bear.'' Chenault notes that a CEO's primary obligation is to enrich shareholders--but that looking for the best talent from the widest possible pool is one sure route to that end.

Throughout their careers, all three men have shown a capacity for answering such Solomonic questions. What has changed--because of their rise to the highest reaches of corporate America--is the number of people who are listening carefully to them. So what significance do they see in their triumphs? Are they a noteworthy shift or a fleeting aberration? The answer from all three is characteristically measured and philosophical. "It is a good trend, but an early one," says Chenault. "When there is an open playing field, people from different groups can succeed."

How did these exceptional men get their start? For AOL Time Warner's Dick Parsons, it was working for the storied Rockefeller family. After serving eight years as a trusted aide and lawyer to former vice president and New York governor Nelson Rockefeller, Parsons was called on in 1977 to help settle a family feud over leadership, finances and ideology. At first, many in the family suspiciously viewed Parsons as Nelson's flunky. But Parsons plunged into this cauldron of rich egos. Through quiet, persistent coaxing, he finally prevailed, pressing the family to form a corporation to handle their affairs and put an end to the intergenerational tensions, says a Rockefeller associate.

Call him the Great Mediator. Parsons ascended to the helm of America's biggest media company--a cable giant, owner of Warner Bros. studio and the AOL Internet empire--precisely because he understands the critical role of the go-between. "Richard Parsons is a player in this country," says Gerald Levin, who with unanimous board approval picked Parsons last month to succeed him as AOL Time War-ner's CEO. "People in the organization like him even when he's dealing with some harsh realities," says Fay Vincent, an AOL Time Warner director. Ever self-effacing, Parsons offers this success formula: "Ten percent who you know, 10 percent what you know, and 80 percent luck."

Many point to Parsons's ties to the old-moneyed Rockefellers as a big reason for his steady rise. Even Parsons says that "falling under the protective aegis of Nelson Rockefeller was a major steppingstone in my life.'' Yet this powerful connection--a rare one for an African-American when it was forged in the early 1970s--is widely misperceived as a one-way street. "It's his personal capacities rather than his personal associations which have contributed to his success,'' says patriarch David Rockefeller, now 86, who over the years has tapped Parsons to serve on numerous boards and family enterprises.

As a Rockefeller emissary, Parsons only rarely encountered issues involving his race. On one occasion in the late 1970s, Nelson Rockefeller dispatched Parsons to the Metropolitan Museum in Manhattan to negotiate a dispute. The loyal deputy arrived and presented himself to the museum's lawyers. The group ignored him, and for several minutes they kept looking at the door, apparently expecting a team of Rockefeller attorneys. "Finally, I said, 'What are we waiting for, guys?' " Parsons recalls. They quickly looked for a way out of the awkward moment. "Someone looked at me and said, 'Oh, but you are so young.' It was such a hoot." He adds: "Frequently, people who haven't met me are surprised to discover I'm black."

It's hard to miss Dick Parsons. Bearded and the size of a lumberjack, the 53-year-old says he's getting even bigger these days, thanks to the tins of cookies still arriving from well-wishers, now several weeks after the news of his appointment as CEO. A Brooklyn native, Parsons grew up with his parents and four sisters in a solidly middle-class household. After high school he ventured off to college in Hawaii, where he relished the climate more than the classes. It wasn't until he returned to New York and Albany Law School that his talents blossomed. He snared an internship at the state legislature and caught the attention of aides to Governor Rockefeller, who went on to hire him after Parsons garnered the top score in the state bar exam in 1971.

When Rockefeller became Gerald Ford's vice president, Parsons went with him to Washington, ultimately helping run the domestic-policy council. Rockefeller had big plans for his protege: a long political career, maybe even a seat some day on the Supreme Court. But Ford lost the White House, and Rockefeller and Parsons returned to New York in 1977--just in time for the family blowup, which was precipitated in part by Nelson's return. Parsons's deft handling of Rockefeller family business led to a job as managing partner of Patterson, Belnap, a Rockefeller-connected law firm. After several years, he abruptly changed course, accepting the CEO post at troubled Dime Savings Bank in New York in 1988, even though he had no banking experience. Parsons managed to stave off regulators, raising $300 million in new capital and ultimately merging Dime with another thrift in 1994. The following year, Levin tapped him as president of Time Warner.

That move stunned Wall Street--and everybody else. Although he was an influential member of Time Warner's board, Parsons had no experience to speak of in media and entertainment. "Nobody could figure it out because half the people thought the board had imposed this on Jerry," says Parsons. Yet almost everything at that time on Gerald Levin's corporate agenda--from acquisitions, to unburdening the balance sheet, to pressing regulatory issues--was a project that could benefit from Parsons's skills. Parsons also kept squabbling executives from each other's throats, helped negotiate the purchase of Ted Turner's company and settled nasty disputes between Levin and other moguls. Ultimately, it was Parsons who spearheaded the company's yearlong regulatory battle to win approval of AOL's purchase of Time Warner. When the deal closed, he became a co-chief operating officer, landing responsibility for the company's movie and music operations. Before long, the slumping music company started showing signs of life, and the studio caught fire with a string of hits including "Harry Potter," "Lord of the Rings" and "Ocean's Eleven."

Parsons still faces plenty of challenges. In his first address to Wall Street since the news of his promotion, Parsons had to explain the details of a $60 billion write-down of the company's value. The bumpy economy continues to rattle the media, publishing and Internet giant, and now that the honeymoon has passed, AOL and Time Warner have to deal with the pesky little details of wedding the two vast--and vastly different--companies. One of "the biggest challenges I have is making the pieces work together, so we can shape our own destiny," Parsons says.

For American Express's Kenneth Chenault, the early challenges were far more concrete--and far more wrenching. Millions of TV viewers got their first glimpse of him on Oct. 3, though most people didn't realize that it was the new AmEx CEO sitting next to President George W. Bush, who was in Manhattan to reassure some of America's corporate chieftains in the wake of the terrorist attacks. "I think the reason I was sitting next to him was that he had asked me to summarize the meeting'' for the press following the gathering, Chenault recalled last week.

If not many Americans knew who Ken Chenault was last year, they certainly do now. Few companies suffered as much collateral devastation from the September 11 attacks as AmEx did. It has been Chenault's unenviable task to put the best face on what has clearly been an awful year for his company. "The role of a leader is to define reality and give hope," says Chenault, 50. "And this certainly was the year where it was important to constantly do both." The company's battered world headquarters, directly across the street from the World Trade Center, is still uninhabitable for Chenault and the 3,200 employees who worked there.

Even before September's tragedy, the view from Chenault's office on the Hudson River was gloomy. A big move by American Express into junk-bond investments years earlier was turning into a $1 billion blunder. The choppy stock market had cut into its money-management business. After the terrorist attacks, the company's core travel services and charge-card businesses were sputtering from the weakening economy. Last month Chenault had to lay off 6,500 employees, on top of 7,700 let go earlier in the year.

To say that Chenault's job is more than he bargained for is putting it mildly. Yet most observers believe he is up to the challenge. As a 20-year veteran of American Express, Chenault is the consummate insider. And yet he has an uncanny ability to take an outsider's view of his company that will prove crucial in rebuilding American Express. Time and again, Chenault has stuck by his guns, even when his suggestions were opposed by the AmEx old guard. "He was the only senior executive who had the courage to express issues we faced in the card business, and had ideas to help solve some," says Harvey Golub, who picked Chenault as heir.

Born into a middle-class family in Hempstead, on New York's Long Island, he attended private schools. As a youngster, he was a mediocre student--his early report cards were loaded with C's and his parents, both of whom graduated at the top of their dentistry classes at Howard University, were hardly impressed. But by high school Ken had turned things around, and he graduated with honors as class president. He attended the tiny but prestigious Bowdoin College in Maine. It was there he first joined in heated debates within the small klatch of African-American students about whether blacks should work within the system. Though classmates recall Chenault encouraged discussion of both sides, to him the answer was clear: yes, they should. Chenault's next stop was Harvard, where he collected a law degree and an M.B.A., then it was on to jobs in law and consulting.

American Express came calling in 1981, while Chenault was working at Bain, a top consulting firm in Boston. Chenault was among a small group of special recruits considered "high-potential candidates," recalls Lou Gerstner, the IBM chief who was then a top American Express executive. Hired to plan strategy, Chenault did well toeing the company line, and was attracting attention. At the time, recalls Amy Digeso, a former AmEx personnel executive, there was a lot of buzz around the company about the exceptional young newcomer. A straggler who'd heard about Chenault but had yet to meet him entered a room one day and was introduced. " 'My God, you're black'," Digeso recalls the man saying. "Ken said, 'Yes, I know'." She adds: "That could have been very tense. Because Ken is so elegant and warm, it ended up being a light moment."

The outsider's perspective helped Chenault take chances that other fast-trackers might have avoided. He eventually sought a position--against the wishes of his superiors--in the AmEx division that peddles merchandise to cardholders. That wasn't a route to the top, they told him. But Chenault believed he could retool the business through aggressive marketing and upgrading of its products. The upshot: sales jumped from $100 million to $600 million in about two years. Chenault also bucked tradition when in the 1990s he moved over to the troubled American Express card business. Among other things, AmEx was facing heavy assaults from rivals Visa and MasterCard. Chenault found himself arguing against old-line managers who didn't want to introduce credit cards aimed at the mass market, fearing that such a move would dim the company's upscale luster. But Chenault prevailed, successfully launching cobranded credit cards with the likes of Delta and Costco, as well as signing up mass retailers like Kmart, which AmEx had previously snubbed, to accept The Card.

Chenault's strong convictions not only won him admiration at American Express. They also resulted in big gains for the company in terms of customer loyalty and, of course, the bottom line. "By the time I made the decision on succession, it was clear Ken had the full capacity to become CEO," says Golub. Adds Chenault's old boss Gerstner: "I'm really proud of what he's done."

If there's one shot that's gotten Stanley O'Neal to the top of his game, it's the swift, decisive stroke. Named president and chief operating officer of Merrill Lynch in July, O'Neal had emerged victoriously from a tumultuous two-way battle to succeed David Komansky when he retires in 2004. O'Neal wasted little time demoting his rivals, prompting two of them to resign.

As president of the brokerage division before his promotion to No. 2, O'Neal rapidly and radically revamped the business. Profits jumped, apparently providing the final boost he needed to become the board of directors' top choice as the next CEO. Even as a youngster, O'Neal realized he'd likely get somewhere faster in life if he throttled his ambition to be a writer, an option he nixed at his father's urging. "His thought was that it's sort of an interesting ambition," recalls O'Neal. "But he had trouble thinking of people he knew who actually made a living from it. I had to admit he had a point."

Instead, O'Neal focused on ways to write his ticket to the top. Among the keys, he discovered, were speed, boldness and focus. Those qualities have become even more the essence of Stanley O'Neal in the months since he reached the step below the summit. On Wall Street, dawdling never paid. And now that the charging bull market has run out of steam, slowness in reacting could mean going bust or winding up on the auction block. Predictably, O'Neal has moved with alacrity. Under his direction, the nation's largest brokerage is revamping at warp speed, pulling in its horns from Canada to South Africa to Japan. Since October, the company has cut its work force by 9,000, for a 2001 total of 15,000 layoffs--fully one out of every five employees--a move that could result in extra profits of $700 million. When the market rebounds, Merrill expects to deliver turbocharged profits. "We have, I think, achieved a lot; I think there's a lot more to be done," says O'Neal as he gazes out his office window at a panoramic view of New York Harbor and the Statue of Liberty.

It's a view his grandfather, a former slave, could never have imagined. Born in tiny Wedowee, Ala., O'Neal used to pick cotton as a child, and walked about a mile from his family's small farm to a one-room schoolhouse heated with a wood-burning stove. During his early teens, the family relocated to Atlanta in search of a better life, but ended up living in public housing for a while. O'Neal's father eventually landed a job at a nearby General Motors plant. "We never went hungry and somehow miraculously managed to be fully clothed and pretty happy," O'Neal says. GM proved a springboard for O'Neal, and he wound up attending the General Motors Institute, a cooperative college now renamed Kettering University. In 1978, he earned an M.B.A. from Harvard, then returned to GM in New York to work in the treasurer's office.

Eight years later Merrill came knocking. And what O'Neal saw and heard, he liked. "There was an openness to talent from many different backgrounds," O'Neal says. "That's a wonderful aspect of the culture." From the start, it was clear to O'Neal that he could have a bright future at Merrill. And, as he had guessed, it rapidly began unfolding for him. "He really excelled at all of the assignments," Komansky says. In 1991, O'Neal began running the junk-bond group, leading Merrill to dominance. Merrill's ranking sank after he was pulled away in 1996 to run other divisions. Komansky then made him chief financial officer in 1998. "One element of that assignment was to get him a broad view of the overall organizations," Komansky says. "Once again he did a terrific job."

Komansky then ended up throwing O'Neal in what initially must have seemed a lion's den, dispatching him to the Princeton, N.J.-based brokerage division. O'Neal had never been a broker, and Merrill's 15,000-strong army wasn't exactly waiting with open arms to greet him. In fact, the brokers grew downright anxious when O'Neal announced he was implementing a dramatic new strategy to refocus the brokerage on luring only customers with at least $1 million in assets. "It was obvious to Stan and I that the business needed a lot of reconstruction," Komansky says. "When Stan set about doing that, it wasn't a popular task. What happened is he earned their respect."

And the respect of Merrill's directors. Now that O'Neal has taken charge with a vengeance, many on Wall Street are speculating that Komansky will step down well ahead of his scheduled exit in 2004. Does O'Neal believe his timetable, like much of everything else that has happened for him, will also be accelerated? "I spend almost no time thinking about that," he says.

Given their ages, Parsons, Chenault and O'Neal could have 15 years or more to make their mark on their companies. Or, thanks to the vagaries of corporate life, any one of them could get sacked tomorrow. What will remain, in either case, is the indelible mark they've made in the history books on racial progress.

"This is a powerful affirmation to young people that anything is possible," says Hugh Price, president of the National Urban League. Or, as O'Neal puts it, "It gives people a chance to see someone who looks like themselves... and maybe creates some thoughts of success in a way that's different." To a generation of young black Americans who've been led to believe they have a better chance of landing in prison than in the executive suite, the rise of Parsons, Chenault and O'Neal is redefining what black power can--and should--ultimately be about.