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Henry Ross Perot

Henry Ross Perot

Businessman and activist, Henry Ross Perot (born 1930) founded the successful data processing company, Electronic Data Systems (EDS). He entered politics in 1992 as the Independent Party candidate for U.S. president.

Ross Perot was born in Texarkana, Texas, on June 27, 1930. His father was a cotton broker and horse dealer. The young Perot was much impressed by his father's negotiating skills and by his mother's discipline and religious principles. Perot grew up in Texarkana and spent one year at the local junior college. He then attended the U.S. Naval Academy, graduating in 1953, the president of his class. After graduation, he spent four years at sea.

At the Naval Academy Perot had received a basic education in engineering. He had no special training in electronics or computing. However, his personal qualities impressed an IBM representative who visited him on the aircraft carrier to which Perot was assigned. When Perot left the Navy, he was hired by IBM to sell computers in Dallas. He was most successful. At the same time Perot became convinced that a business could make money by leasing unused computer time to clients who needed it. IBM wasn't interested in the concept, so in 1962 Perot started his own business, Electronic Data Systems. His first client, Collins Radio in Iowa, flew tapes and personnel to Dallas to have programs run on a computer at an insurance company there.

In the years that followed, EDS expanded. Operating under contract, EDS personnel ran entire data processing departments for insurance companies, banks, and state and national governments. In the mid 1960s the U.S. Congress passed national health insurance programs for the poor and elderly. These programs, Medicaid and Medicare, were administered by individual states. EDS expanded its programs for processing medical insurance claims from private companies to state offices. This business accounted for about a quarter of EDS income by 1968 and proved highly profitable. At the end of the 1960s EDS went public. Perot sold a small fraction of his shares in the business for $5 million.

In the following decades Perot became known for his international and philanthropic concerns. During the Vietnam War, reportedly in response to a request from government officials, he tried to improve the treatment of American prisoners of war in North Vietnam. In December of 1969 Perot attempted to send two planeloads of food, gifts, and medical supplies to the prisoners. The Vietnamese refused to accept delivery of the goods, but the publicity surrounding the episode may have led to improved conditions in the prison camps. In 1973, after the return of the prisoners, Perot financed a weekend party for those who had been held at the Son Tay camp, as well as for a team of Green Berets who had tried unsuccessfully to rescue them in late 1970. Perot also sought out veterans for staff positions at EDS. The firm set strict standards of dress and conduct for its employees. It also required trainees to sign a contract stating that if they left the company to work for a competitor within three years of their hiring, they would reimburse EDS $12, 000 for their training.

In the early 1970s EDS attempted to improve data processing on Wall Street by purchasing a subsidiary of a stock brokerage firm. Unfortunately, the firm was in serious financial difficulties. Perot himself invested some $97 million in this firm and in another brokerage firm, before deciding to dissolve both businesses in 1974. He lost some $60 million in the process.

In the late 1970s EDS expanded to international operations. Its first overseas contract was with a Saudi Arabian university. Then, in 1976, the firm was hired to manage data processing for the social security system of the Shah of Iran. Two years later Iranian officials concluded that EDS had been paying too much money to its Iranian advisers. Iran stopped payment on its contract, and EDS notified the government that it was suspending operations. Two leading EDS officers were arrested and imprisoned. Perot set out to win their release, even paying a quiet visit to Iran himself. An EDS rescue team was formed and trained, but did not penetrate the prison where the men were held. Reportedly at the urging of an Iranian employee of EDS, an Iranian mob broke into the prison and released all the prisoners. The EDS officials escaped and, with the rescue team, fled the country on foot. Perot encouraged the British journalist and novelist Ken Follett to write a sympathetic account of the episode.

As EDS grew, it was ever on the lookout for new markets. At the same time auto manufacturer General Motors sought to diversify its holdings. Investment bankers at the Wall Street firm of Salomon Brothers suggested EDS as one of several possible acquisitions. Roger Smith, the chairman of GM, greatly admired entrepreneurs like Perot and hoped that EDS might be able to unify data processing in his company's diverse operations. Smith did not consult his own data processing staff about the proposed merger. He also apparently was unconcerned by EDS's lack of experience in the use of computers in design and manufacturing.

After lengthy negotiations, GM purchased EDS in June 1984. Owners of EDS stock had a choice of receiving payment entirely in cash or partly in cash and partly in a new issue of GM stock, designated GME. Dividends from this stock were tied directly to the performance of EDS. EDS executives expected to receive bonuses in shares of stock when their performance merited it. For the 45 percent of EDS stock that Perot owned, he received nearly $1 billion in cash and 5.5 million shares of the new stock. He also remained head of EDS and was elected to the board of directors of GM.

EDS set out to take over all data processing operations at GM. It encountered resistance from both executives and those at other levels and did not feel it received sufficient backing from Roger Smith. Perot also discovered that he did not, in fact, control the award of bonuses to EDS personnel. Moreover, GM auditors expected to review the books at EDS, just as they did at other parts of GM. Perot first broke openly with Smith in the fall of 1985 over the question of whether GM should purchase Hughes Aircraft. Perot objected and was ignored. Tensions between EDS and GM were exacerbated by the poor performance of GM vehicles in the marketplace and by Perot's criticisms of GM's way of doing business. In the fall of 1986 GM voted to buy out Perot's GME shares, ending his connection with EDS. Perot agreed and promised not to open a new profit-making data processing business for three years. By 1989 GM and Perot were in court over the question of whether Perot had held to this agreement in forming a new company, Perot Systems.

Perot was noted for his campaign to improve the school systems of the state of Texas and his contributions to various schools and educational institutions. He married Margot Birmingham in 1956. They had four children.

Perot's career took a definitive turn in 1992 when he spearheaded a campaign to have himself elected president of the U.S. under the Independent Party. Critics were amazed that this virtual, political unknown commanded 18 percent of the popular vote. Perot ran again in 1996, receiving a less impressive 8 percent of the vote. However, his presence is still felt in the realm of politics. Perot remains both a politician and a businessman. It is estimated that his net worth is over $3 billion.

Further Reading

For more information on two of H. Ross Perot's greatest adventures/misadventures see Ken Follett, On Wings of Eagles (1983) and Doron P. Levin, Irreconcilable Differences: Ross Perot versus General Motors (1989). A look at the man himself, especially his relationship with General Motors' Roger Smith, is Todd Mason, Perot: An Unauthorized Biography (1990). Perot is also listed in Forbes "400 Richest People in America 1997" (July 1997). □

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Perot, H. Ross

H. Ross Perot (Henry Ross Perot), 1930–, American business executive and political leader, b. Texarkana, Tex., grad. Annapolis, 1953. In 1957 he resigned his commission and became a salesman for IBM. In 1962 he founded Electronic Data Systems (EDS), one of the first computer data service companies. In 1984, he sold EDS to General Motors, but retained an interest in the company. Bitterly critical of General Motors management, he sold his remaining interests in EDS to GM for $700 million (1986). He diversified into real estate, gas, and oil and in 1988 started a new computer service company, Perot Systems.

Perot came to national attention during the Iran hostage crisis (1979), when he funded an operation that rescued two of his employees from an Iranian prison. In 1992, he emerged as an independent candidate for president, expressing serious concern over the national debt. After a departure from the race in July, which alienated much of his support, he returned in October and finished third in the general election with nearly one fifth of the popular vote. He subsequently opposed the ratification of the North American Free Trade Agreement.

In 1995 Perot founded a new national political party, the Reform party, as an alternative to the Democratic and Republican parties. As the party's 1996 presidential candidate, he again finished third in the presidential race, but with a much reduced popular vote. While Perot remained a significant force in the party, during the late 1990s his role was gradually eclipsed by the Reform governor of Minnesota, Jesse Ventura.

See K. Follett, On Wings of Eagles (1983); D. Levin, Irreconcilable Differences: Ross Perot versus General Motors (1989).

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