Chapter 9

By Frank Tursi, Susan E. White and Steve McQuilkin
JOURNAL REPORTERS
© Winston-Salem Journal

The disease had won. By 1969, it had confined the once active Bowman Gray Jr. to a wheelchair. Even a simple task such as answering the telephone had become a physical ordeal. Keeping regular office hours had become impossible. Gray spent much of his time at his house at Brookberry Farm working puzzles. The winters chased him to Florida, where the warmth seemed to ease the pain of a body that had been slowly wasting away.

Bowman Gray Jr.'s funeral was on April 12, 1969, and he was buried in Salem Cemetery. (Journal File Photo)

Bowman Gray had come a long way -- from the streets of Boston where he hawked cigarettes for R.J. Reynolds Tobacco Co. in the 1930s to the chairman's office of the company his father had once run.

He had built an empire that dominated the tobacco industry and, as a response to the growing health threat, had begun to diversify into foods and other businesses.

The deal for Sea-Land Services Inc. in early 1969 would turn a home-grown tobacco company into a conglomerate.

Gray knew, though, that the journey was nearing its end. He may have been ready, but he sensed that the company wasn't. Executives he had hoped would take his place had died unexpectedly. Another resigned in frustration after being isolated by jealous rivals. Gray saw no one among his cadre of vice presidents who could step up and adequately guide the company through the turbulent times he knew lay ahead.

The R.J. Reynolds Tobacco Co. was once the largest cigarette company in the United States with a powerhouse of best-selling brands: Winston, Salem and Camel. But times changed, and as the case against smoking became more pronounced in the 1960s, RJR failed to adapt to the marketplace. Its rivals would eventually rush past it, and RJR's efforts to catch up would have a profound impact on the company and the cigarette industry.

So he scribbled. As best he could with hands that didn't always do what he willed, Gray filled three yellow legal pads with his thoughts about RJR's future. Company lore had it that old R.J. himself, while dying of cancer in 1918, told worried executives that all they had to do to maintain the company's success was to follow ''the book'' he had written.

Gray intended to leave an addendum, and he instructed his sons to give the legal pads to his likely successor, his cousin Alex Galloway.

Whether he had gotten it all down by that April night in 1969 as his wife Elizabeth helped him into bed is unknown. They had been married for 33 years. Good years, mostly. These last few, however, had not been easy for Elizabeth as she watched her husband slip away.

She smiled as she leaned over and kissed him good night.

''Thanks for everything, Lib,'' he said.

Bowman Gray Jr. died peacefully in his sleep a few hours later.

''I think he knew it was his time,'' his son Lyons said.

Gray was buried the next day, April 12, on a bluff in Salem Cemetery, surrounded by lush green springtime grass and gleaming gravestones that had been polished for Easter a week earlier. Through the budding trees, mourners could see the towering twin smokestacks that marked the seat of the empire. Its future, many who knew Gray now say, was buried with him.

They insist that, had Gray lived, the company would not have stumbled, would not have lost its way and may have even slowly weaned itself from tobacco and all its future problems. Gray, his most ardent admirers maintain, would have transformed RJR into a drug company or a foods company or something other than a cigarette company.

This is tricky territory, trying to determine what a man might have done had he lived. Gray was, after all, 62 when he died and wouldn't have been chairman much longer. Whether, in his few years remaining at the helm, he would have acted any differently than those who ruled after him or been less bound to the past makes for interesting speculation. Probably nothing more.

There is, however, this JFK mystique that now enshrouds Bowman Gray. Looking back from darker days to a glorious time when anything seemed possible, the legend's creators have burdened Gray's memory with all their hopes. Just as Kennedy was going to end the war in Vietnam before being struck by an assassin's bullet, Gray was going to lead RJR out of the morass to even greater glory.

''Had he been in excellent health, things would have been much, much more different,'' said Murray Senkus, a scientist who worked at RJR for more than 30 years and accompanied Gray to meetings with other industry scientists.

The evidence for such an assessment is tantalizing. Though he sincerely believed that science had yet to prove conclusively that smoking was harmful, Gray allowed his scientists to look for the proof, and he had enough stature to hold off those executives who wanted to stop research that could be harmful to the company.

Like RJR's founder, Gray was willing to take risks, as his enthusiastic support of Winston and Salem proved, and he wasn't shackled by the past. The company's future, he knew, depended on its ability to do something other than make cigarettes.

''(He) had smarts, vision and balls,'' said Bob Rechholtz, an advertising and marketing manager under Gray. ''He was willing to make changes, try new things and give professionals a chance to prove their worth.'' (Fisher footnote; Rechholtz quote.)

Mysterious Ailment

The doctors called it progressive spinal atrophy, a disease that was gradually shrinking the muscles in Bowman Gray's body. They didn't know its cause but speculated that it could have been the result of an old war injury. Gray, though, spent World War II in Norfolk, Va., as a naval intelligence officer. As far as anyone in the family knew, he was never in combat. ''The truth is it was never fully explained to the family's satisfaction,'' Lyons Gray said.

What had started as a twinge in a calf muscle on a tennis court in the early 1950s had Gray walking with a cane within a year. Within 10 years, he was in a wheelchair. The disease first struck the muscles in his legs and arms so that near the end, writing or answering a telephone was difficult.

Specialists in Boston and the famed Mayo Clinic in Rochester, Minn., tried various drugs and exercises, but nothing seemed to work. Swimming each morning and evening in the pool at Brookberry Farm brought some relief. So did the mild Florida winters. Gray bought a house in Hobe Sound, Fla., in 1956 to escape the cold damp of North Carolina.

He usually remained in Florida until late spring but insisted on coming home in March of 1969. Lyons Gray flew from Detroit, where he worked as a salesman for RJR, to accompany his father, strapped to a gurney, on the flight home. He now thinks that Bowman Gray, knowing his time had come, wanted to die in the familiar surroundings of his beloved Brookberry Farm.

Those last few weeks were spent at the manor house on the farm, where Gray enjoyed putting together wooden puzzles that he ordered through the mail. ''He liked to sit and work them and you could see that mind working,'' Lyons Gray said. ''He'd find a piece that fit and move it over there. Then, he'd light up a Winston and enjoy it. Then you'd see that mind working some more. Then, he decided that he wanted a Salem, and he'd alternate back and forth.''

Though he spent less and less time at the office during the final years, Gray called the Reynolds Building daily from speakerphones that he had installed at his homes. ''As long as he could get to a telephone, he kept a strong hand on the company,'' explained cousin James A. Gray. ''The nearest and dearest thing to his heart, next to his family, was that tobacco company.'' (Winston-Salem Journal footnote; Gray quote.)

Big Eyes, Small Stomach

Its future worried Gray. His company was awash in money that it had to do something with. In 1960, for instance, net sales were $749 million and earnings were a staggering $102 million. After dividends, cash flow was $66 million. The money could be used to enlarge the company, but that didn't make much sense in a mature industry like tobacco. The company could increase the dividends, but wealthy stock owners, such as Reynolds family members, who owned 7 percent to 8 percent of company stock, would be unhappy, given their 70 percent marginal tax rate.

The wild card in all this was the whole health-and-cigarettes question, which implied that tobacco had an uncertain, if not unhealthy, future. Buying companies that didn't have anything to do with cigarettes seemed like a prudent hedge to Gray. His fears for RJR's future had become more acute after the surgeon general's report in 1964.

Gray suspected that RJR's managers, though good tobacco people, didn't have the talent to run a large nonrelated business. He remained adamant, however. ''Well, we'd better prepare because we have to do it,'' he said. Despite his urgings, RJR could never pull off a significant buy. ''His eyes were bigger than his company's stomach,'' one former executive said.

The one big fish that got away was Warner-Lambert Pharmaceutical Co. Gray and the drug company executives were close to a deal, but it fell apart in 1958 over disagreements about who would run the merged companies.

It would be five years before Gray pulled off a significant purchase. He bought Pacific-Hawaiian Products, the maker of Hawaiian Punch, in February 1963. He followed that up with other foods companies: Penick & Ford, maker of My-T-Fine pudding and Vermont Maid maple syrup, in 1965; Chun King Corp., maker of egg rolls and other Oriental foods, in November 1966; and Patio Foods, maker of Mexican specialty foods, in July 1967.

Reynolds overpaid for most of these companies -- $63 million for Chun King, for instance -- but executives hoped they could use their marketing expertise to turn these companies' small regional brands into national products. Marketing egg rolls and pudding would be easy compared to cigarettes, which carried government-mandated labels that warned of death and disease. The company's ad people quickly learned that selling cigarettes wasn't the same as selling food.

Finding a Successor

Finding someone to lead the company after his death became the other main task during Gray's final years, explained Frank Christian Gray, another son. ''He absolutely believed in what he did,'' Chris Gray said. ''He absolutely loved the tobacco industry, loved working in it. He was dismayed by it from time to time; frustrated in some way he hadn't built a stronger management-succession plan. I'm not here to criticize people, but it was something he worked on and worried about.''

Gray thought he had a worthy successor in Francis G. ''Bill'' Carter, who became RJR's president in 1959 when Gray was elevated to chairman. Like Gray, Carter started as an RJR salesman, peddling cigarettes first in Winston-Salem, then in various towns in western Virginia. Also like his boss, Carter had been sales manager. A tall, stout man, Carter was considered approachable, quiet, even-tempered. All Gray traits. But unlike Gray, Carter came from humble circumstances. He grew up in farm country outside Danville, Va., and never went to college because he didn't have the money. RJR liked to portray him as its Horatio Alger, a man who made his way to the top through hard work and energy.

His unexpected death in June 1960 came as a shock. He had gone fishing in Williamsport, Pa., with some distributors and had a heart attack. Bowman Gray wept when he heard the news.

Spencer B. Hanes Jr., the executive vice president in charge of buying tobacco, was well-liked by Gray and, after Carter's death, was considered to be the top candidate for the chairman's job. He died, though, in 1966, apparently of a brain tumor.

Gordon Gray, who had almost 20 years in Washington working for two presidents, suggested to his brother, Bowman, that he hire Chuck Ellington, who had been an assistant secretary of defense and assistant dean of the Harvard Business School. Gray, who by then was in a wheelchair, consulted Rodney Austin, his personnel manager. His mobility restricted, Gray told Austin that he needed eyes and ears in the company.

''Mr. Gray, I fully understand that, but we have kingdoms here, and they're inside directors,'' Austin replied. ''If he goes out in the king's name, they'll kill him. They'll never let it work. And if he is able to get the kind of information that you need, they'll gang up on him for being a fink. It's a situation that can't work.''

Knowing the fears of his managers, Gray tried to hide his intentions by giving Ellington the title of assistant to the chairman. No one was fooled and all suspected that Ellington was at least a potential successor to Gray. So they ignored him. Managers held meetings without informing Ellington, effectively cutting him out of the loop. He eventually resigned in disgust.

All Gray was left with were his three legal pads.

As instructed, his sons retrieved the pads from his office desk after Gray died and took them back to Brookberry Farm. Seated in Gray's study, they read his vision for RJR's future. Gray reminded his successors to remember that taste, flavor and image were the most important factors in a cigarette and urged them to keep abreast of changing consumer demands. Above all, Gray warned from the grave, the company shouldn't be diverted from becoming a consumer-products company.

''I am sorry that, as far as I'm aware, we never made copies of those pages,'' Chris Gray said. ''Our instructions were to give them to Mr. (Alex) Galloway and that's what we did.''

No current RJR official knew about the legal pads and couldn't find them in the company's archives. Galloway's son, Alex, said he had never seen or heard of the pads either.

Soon after Bowman Gray's death, a Philip Morris executive approached Chris Gray, an RJR salesman at the time, at a business meeting. He expressed his condolences and noted that Bowman Gray was the smartest man in the tobacco industry. ''We learned a lot from him,'' said the executive, whose company was in fourth place, still far behind RJR. ''But we're just going to execute it better than you guys.''