Understated, Underrated, and One Hell of a CEO
By Andy Serwer

(FORTUNE Magazine) – It's likely that sometime in the near future, a rare and--most would say--wonderful thing will happen over at the Washington Post Co. The company's stock price will hit $1,000 a share. Yup, the Post has never split its stock, and one share of WPO now fetches $924. But when the stock does break $1,000, don't expect to hear any champagne corks popping or to see any congratulatory e-mails coming from the CEO, who as you probably know is Don Graham. "It would be a nonevent," Graham said to me recently. "It's not our job to follow or influence the short-term movement of our stock. Over the long term we hope to bring out its intrinsic value."

If that sounds rather Buffett-esque, well, it's no coincidence. Graham cites Warren Buffett--the Post's lead outside director--along with his mother, the late and legendary Kay Graham, as his two business mentors. With that pair looking over his shoulder, the expectations and the pressure on Don Graham, 59, couldn't have been any higher. And yet since he became the Post's chief executive in May 1991, it's safe to say that Graham hasn't let anybody down. Actually that's selling him short, because I think Graham just might be the nation's most underrated CEO. Though Graham can be guarded and measured to a fault (and is no threat to Vijay Singh on the golf course), in this age of the Celebrity CEO, the Cabinet Secretary CEO, and the Indicted CEO, Don Graham stands out as a model of integrity, modesty, and professionalism. "As high-grade a person as you can imagine," says Buffett of his protege. "If I had his intelligence, I'd show off. No media company has deployed its capital better than the Washington Post."

The Washington Post is one of those funny companies that everybody knows, but in many ways it is a kind of afterthought in corporate America. Yes, it has the flagship paper and Newsweek and a parcel of TV stations and cable networks (last year it was strong-armed into selling its half stake in the International Herald Tribune to the New York Times Co. for $65 million). But with some $2.8 billion in revenues last year ($241 million in profits), it's not quite big enough to land on the FORTUNE 500 (this year it ranked No. 544). The company has a market capitalization of $8.8 billion. Compare that with, say, hot videogame-maker Electronic Arts, which has revenues of nearly $3 billion, profits of $577 million, and a market cap of $15 billion.

Of course, Electronic Arts is more profitable. But another reason the market values the Post less than a company like EA is that many of the Post's businesses are considered slow-growth propositions. As Buffett himself pointed out recently, newspapers will gradually see their competitive positions erode. So how then can the Washington Post Co. grow? It comes back to Buffett's point about deploying capital. Graham and his people are constantly reviewing possible media acquisitions--don't be surprised if they end up owning Dow Jones down the road. Right now the Washington Post's fastest-growing business--and a big reason WPO stock is up some 50% over the past two years--is Kaplan Inc. Yes, that Kaplan, the education company, which has businesses in test prep as well as in higher education, and also in supplementary education for elementary school kids. (A recent smudge on Graham's record was his giving Kaplan executives an overly generous stock-option package in 1997, which the Post partly bought out for $138 million last year.)

What makes Kaplan tick? "Jonathan Grayer has done an exceptional job of running that company," Graham says simply. He goes on to name executive after executive when speaking of the Post's various businesses. "It's not me giving them credit," he insists. "It's how we run the company. We are decentralized. Our education business has done very well, and I had nothing to do with it." As for succeeding a legend who just happens to be your mother and stepping in to run one of the most high-profile media businesses in the world, he merely says, "By the 1990s we had a pretty well-established pattern for how to run this place." Hmm. This time I think it's Graham who's selling himself short.