Magazine

Joseph Neubauer, Aramark


There are moments of truth in everyone's life. For Joseph Neubauer, such a moment occurred in 1984 when two corporate raiders backed by Drexel Burnham Lambert Inc. took a run at his company. Trying to coax CEO Neubauer aboard the hostile takeover, one raider offered him 10% of Aramark (RMK), half for himself and half for his friends.

Neubauer turned him down flat. Instead, he mortgaged his house, took out a personal loan, and helped lead a management buyout with 70 other execs to fend off the raiders. "I felt an obligation to the people who worked with me," he says. "We wanted to control our destiny. "

It was a winning bet. Last year, he took a larger, more successful Aramark public again to finance overseas growth. "We made 250 people millionaires from hot dogs and dirty laundry. Only in America," he quips. Neubauer, who took on the biggest risk back in 1984, made out pretty well, too: His 17.6% stake is now worth $620 million.

It would be hard to find a more grateful beneficiary of America's free-enterprise system. Neubauer, 60, emigrated from Israel at age 14. He barely spoke English, but over the years he found mentors: a high-school teacher who worked with him after class, a Tufts University economics professor who helped him win a scholarship to the University of Chicago, and mentors in David Rockefeller at Chase Manhattan Bank and Don Kendall at PepsiCo Inc.

He joined Philadelphia-based ARA Services in 1979 as chief financial officer and rose to CEO in 1983. Neubauer has built Aramark into a $7.8 billion leader in managed services, averaging a 30% annual total shareholder return over the past 15 years. The stock has fallen 7%, to $21.50, since December's initial public offering, but that's less than the S&P 500 index, and third-quarter sales were up 13% and net income 51%. With over two million clients in 17 nations and 200,000 employees, the firm serves filet mignon to Goldman, Sachs & Co. execs, hot dogs to the baseball fans at Camden Yards, and lattes to New York University students. The company also runs the child care center at the Pentagon and cleans the uniforms of American Airlines mechanics. It consistently posts higher profit margins than rivals Compass Group and Sodexho Alliance.

Neubauer's management precepts are simple: The right investment in the right people flows to the bottom line; remember where you came from and help those following. Some 8,000 employees have a stake in the company. Each year, Neubauer visits hundreds of clients, many of whom have worked with the company for decades and do business with little more than a handshake. Typical is Baylor University, a 43-year customer that does $27 million in annual business with Aramark. "We have a contract that can be cancelled in 90 days," says Neubauer. "But that is the greatness of this company. That is the heart and soul of it, and that's what I was protecting back in 1984."

Perhaps Neubauer and the rest of our group will become examples for the next generation of chief executives: leaders who throw themselves into building a company that authors such as Jim Collins will one day call great. If so, they'll probably be the last to notice. They'll be too busy running their businesses. By Nanette Byrnes, with John A. Byrne in NewYork, Cliff Edwards and Louise Lee in San Mateo, Calif., Stanley Holmes in Seattle, and Joann Muller in Milwaukee


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