Barbarians at the Gate: The Fall of RJR Nabisco

Corporate Excess and Wall Street Greed in 1980s America is a key theme in Barbarians at the Gate. Even in 1989, there was nothing particularly original about pointing out the relationships between economic and cultural power in New York City. In the world of fiction, Tom Wolfe had written perhaps the definitive treatment of this theme two years earlier, with Bonfire of the Vanities. Burrough and Helyar set their book apart by carefully and systematically analyzing the mechanics of high finance at a moment of profound transformation, using the RJR Nabisco bidding war as a case study indicative of the greed and excess that came to define Wall Street in this era. They do not engage in explicit moralizing but rather provide colorful examples for the readers to draw their own conclusions about the behaviors described. Nor do the authors engage in ideological analysis about the nature of capitalism, sticking instead to the journalistic ethic of presenting the facts and leaving judgment up to the reader. Here, too, their examples of RJR Nabisco’s CEO Ross Johnson toying with thousands of employees of his company allows the reader to consider the effect of such corporate mismanagement on the ordinary people whose jobs are impacted by such overarching decisions.

Burrough and Helyar examine the theme of greed and excess in several ways. First, they simply describe the lifestyles of wealthy corporate leaders and Wall Street bankers and attorneys. For instance, John Gutfreund, the CEO of Salomon Brothers, and his wife, Susan, were “fixtures in the social pages of W and Women’s Wear Daily,” photographed while throwing a birthday party for American statesman Henry Kissinger (214). Henry Kravis and his second wife, fashion designer Carolyne Roehm, led a similarly glamorous lifestyle, mingling with celebrities and purchasing multi-million-dollar properties. Ross Johnson is perhaps the most pronounced example of corporate waste. The authors describe an incident in which he used the RJR Nabisco jet to transport his beloved German shepherd to avoid it being taken by animal control after the dog bit a person. He also paid hundreds of thousands of dollars to sports celebrities like OJ Simpson, who did not bother showing up to company events. Johnson also displayed little concern for the fate of his employees. When Time asked him about job losses, Johnson told them that their jobs are portable, and they can easily be rehired elsewhere.

The management agreement Johnson hammered out in the context of the RJR Nabisco bid—described by the authors as “history’s richest” (179)—deserves special attention. This agreement was a point of contention even for those who backed him. RJR Nabisco’s board, too, grew to despise Johnson, in part due to the publicity around the management agreement. When Johnson’s management group lost the bid to Henry Kravis, the first words out of his mouth were, “We’ve heard they’re going to cancel the golden parachutes” (464). His colleagues were shocked that his first concern was for his own severance package rather than “the fate of his company” (464).

Next, Burrough and Helyar let the 1988 media coverage of the RJR Nabisco story speak for itself. Its pinnacle was a December cover story in Time. The issue was called “Game of Greed: This man could pocket $100 million from the largest corporate takeover in history. Has the buyout craze gone too far?” It was this publication that both shaped public opinion and definitively turned the RJR Nabisco board against Johnson, so much so that they were pleased with Henry Kravis’s hostile takeover.

Finally, the authors focus on the overall Wall Street transformation. By the 1980s, its firms routinely funded their corporate takeovers through debt and used high-risk junk bonds. This risky behavior had many critics. Ted Forstmann was on a one-man crusade against junk bonds, which he did not consider “real” money (234). The Federal Reserve, too, questioned the survival of LBO loans should a recession occur. Also, the government started punishing obvious cases of illegal insider trading such as that of Ivan Boesky. However, rather than becoming more reasonable, Wall Street bankers grew more aggressive after the 1987 stock crash in search of new opportunities. Overall, the authors show that the behavior of individual corporate CEOs and Wall Street professionals were merely part of the system, and the system did not change.