Executive Times

Volume 6, Issue 1

January, 2004

 

ă 2004 Hopkins and Company, LLC

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Stand Up, Sit Down: Fight, Fight, Fight

The turn of the calendar page to a New Year can sometimes bring a certain cheerleader attitude: the expectation of improved performance and better times ahead. There are, of course, few cheerleaders for executives. When executives stand up during 2004, will we see images of hands raised prior to testimony in corporate malfeasance cases? Which executives will be asked to step (sit) down in coming months? What will the organizational battles be about this year? Who will fight them, and what approaches are likely to lead to success? One way or another, we’ll follow these themes and others on the pages of Executive Times during 2004. In this issue, consistent with our heading, we’ll reflect on some executives who took a stand; we’ll call attention to some who stepped down; and we’ll look at some of the current fights and what they may mean. As always, as you read these stories, think about how you might do things the same way or differently from those individuals mentioned here. Consider how well prepared you are to face your own challenges for 2004, and what you’ll do in coming weeks to be as prepared as possible for the likely scenarios you’ll be encountering at work.

 

Fifteen new books are rated in this issue, beginning on page 5, in what looks like a bell curve of ratings. Two books are rated with one star, five with two stars, five with three stars, two with four stars and one with five stars, The Innovator’s Solution by Clayton Christensen. We suggest you buy and read that book right away, since your competitors probably are. You can also visit our 2004 bookshelf at http://www.hopkinsandcompany.com/2004books.html and see the rating table explained as well as explore links to all 2004 book reviews. For the first time, you can also check this same bookshelf to see what other books we’re reading or considering. If there’s something missing from the bookshelf that you think we should be considering, let us know at books@hopkinsandcompany.com.

 

Standing Firm
We noted in one out of a score of end-of-year reflection articles two items that we wanted to be sure Executive Times readers noted. In Carol Hymowitz’s “In the Lead” column in the December 23 issue of The Wall Street Journal, (http://online.wsj.com/article/0,,SB107212950894181900,00.html) she began by calling attention to the performance of Health South’s Robert May during 2003. Rather than being intimidated by founder and CEO Robert Scrushy, who threatened to fire him, May stood up and influenced other company directors to cooperate with a Justice Department investigation and to demand that Scrushy step down as CEO. With Scrushy gone, the company’s problems saw the light of day, and everyone learned that financial malfeasance had gone on for years. A crisis management team, led by May, took over, and Health South is now back on track, thanks to one individual who took a stand. That same year-end article reminded us of a sidebar story relating to the United States Supreme Court’s 5-4 ruling in favor of allowing the University of Michigan’s law school to continue to use race as an admissions consideration. According to Hymowitz, “Numerous CEOs overcame their usual avoidance of controversial political issues by supporting the University of Michigan's defense of its affirmative-action programs before the Supreme Court. Business leaders from some 63 blue-chip companies -- including 3M, Coca-Cola, Procter & Gamble, Pfizer, Kraft, Intel, Eastman Kodak, Shell Oil and UAL Corp.'s United Airlines unit -- filed together a friend-of-the-court brief that asserted that a diverse work force is key to succeeding in a global economy.” When you know what you stand for, what principles are critical to you and to your organization, the stand you take on an issue becomes obvious.

What are the few core principles or values of your organization? How are they consistent with or difference from your personal values? Are you ready to take a stand during 2004? Do you know for sure what you are for or against? Would you have the courage to stand up to a long-time leader, like Scrushy if you thought he was wrong? Would your organization have stood up to support one side in a controversial court case? Are you prepared to make enemies if you take a position that others strongly oppose? Does it make a difference who those enemies are, or are your principles and values so solid that they will ensure any opposition? What do you stand for?

 

Grounded
Over the course of what seemed like a few days, events at Boeing led to CEO Phil Condit being forced to step down, and the company has multiple wounds to heal. The best story we read about what happened came from Stanley Holmes in the December 15 cover story of Business Week (http://www.businessweek.com/magazine/content/03_50/b3862001_mz001.htm), titled, “Boeing: What Really Happened: Flawed strategy. Lax controls. A weak board. Personal shortcomings. CEO Phil Condit lasted longer than he should have.” While the firing of the CFO and a VP for unethical acts in doing a Pentagon deal happened shortly before the CEO’s departure, Business Week set the Pentagon scandal in context as only the latest in a seven-year reign of “ethical lapses and managerial blunders.”  The article goes on to say, “The story of Philip Murray Condit, 62, is the tale of a manager promoted beyond his competence and blind to his own shortcomings. The skills that made him a brilliant engineer -- obsessive problem solving and an ability to envision elegant design solutions -- were of less use in an executive position.” This is a must-read article about an executive career full of success, to a point.

 

Are the skills that have made you successful so far, the ones that will make you successful in 2004 and beyond? What skill improvements will you be working on? Do those who surround you have skills that complement your own? Do you communicate regularly about what behavior is in and out of bounds for your organization? Are you confident that those who report to you will more likely than not act in ways that are consistent will the values you’ve articulated? How sure are you that your values are understood and are shared?

What Was He Thinking?
Some stories about executives present an unspeakable sadness over events and an amazing wonder about why things happened the way they did. When we read this quote in a press release (http://a584.g.akamai.net/7/584/1326/000/www.estrong.com/strong/pdf_forms/20031202_pr.pdf) from Richard S. Strong, founder of Strong Financial Corporation, we felt that sadness: “’For the past twenty nine years, this firm and what it represents have meant everything to me and I have always tried to act in the best interests of investors, said Richard Strong. ‘After weeks of intense reflection, I have come to realize that the best way for Strong Financial to pursue its promising future is for me to step down.’” As one example in the growing mutual funds trading scandal, Richard Strong is under investigation for short trading in the funds for his own account, reaping about $600,000 in improper gains. In an earlier statement, Richard Strong stated that his trades were not disruptive to the funds and he would reimburse clients for any financial losses investors had because of his trades. As a self-made centi-millionaire, it appears that Richard Strong wasn’t pressed for cash. Could it be that he saw nothing wrong with his trades? Could it be that the opportunity to trade when others couldn’t was perceived as an appropriate executive perk? Whatever he was thinking then, Richard Strong has realized now that the firm that meant everything to him can’t be his anymore. He’ll be divesting his interest, which probably means the name on the company’s door will be changing as well.

How alert are you to the impact of corporate perquisites on others? What boundaries do you set on what’s appropriate, and what can’t be done because it would be unfair to other stakeholders? In Strong’s situation, it appears that he may have breached his fiduciary responsibility. What positive actions do you take to ensure that you don’t breach your own responsibilities, even when you believe what you’re doing may be legal? Do you ask someone to review your planned actions to take an outsider’s look to ensure that you will not be perceived as taking inappropriate action?

 

Home on the Rage
What a surprise for those executives who find interested stakeholders bringing corporate fights to the homes of business leaders. Executives’ castle walls have been breached by animated protestors for years, since Michael Moore first harassed former General Motors CEO Roger Moore for the movie, “Roger and Me.” One creative surprise we read about in The New York Times (12/7/03) (http://www.nytimes.com/2003/12/07/business/yourmoney/07enviro.html) involved a woman executive at a company who answered her doorbell at home to find an undertaker who arrived with a coffin to pick up a dead person, her. An animal rights group that wanted to send a message to this executive of an American company not to hire U.K. based Huntingdon Life Sciences, a lab that uses animals for testing, duped the undertaker into sending the hearse to the executive’s home. According to the Times, “If the goal was to scare her out of her wits, the tactic succeeded. Her voice cracked with fear as she insisted to a reporter that she not be identified, lest she and her family be singled out again. … A group called Stop Huntingdon Animal Cruelty had sent the hearse, and it had also posted the woman's name, home address and phone number on its Internet site, along with those of three other company executives. The group's Web posting warned: ‘We will continue to target you until your company ceases from doing any business with Huntingdon. We will not let you sleep.’” If activists haven’t targeted your organization or its executives yet, consider yourself lucky. If you’re been a target, you know that the fight is relentless.

How deep is the moat in your gated community? Are activists on your doorstep protesting one thing or another about your decisions and those of your organization? Have your neighbors tired of the traffic jams and parking problems in your subdivisions when the protestors and placards arrive? Will you succumb to the protests, or will you stand and fight?
 


Follow-up

Here are selected updates on stories covered in prior issues of Executive Times:

 

Ř      The last time we mentioned Priceline in Executive Times was in the November 2000 issue when we noted that the value of founder Jay Walker’s holdings in the company went from $8 billion to $220 million after the bubble burst. Prior to that, we noted their IPO success in the May 1999 issue along with William Shatner’s successful ads. In a return to the future, we read of the company’s new pitchman on the pages of The New York Times on 12/7/03 (http://www.nytimes.com/2003/12/22/business/media/22spock.html). Leonard Nimoy, Mr. Spock himself, has become a new face for the company’s ads. How predictable was that?

Ř      We last noted former Conseco CEO Stephen Hilbert in the June 2000 issue of Executive Times when we mentioned that despite his $70 million severance payment, he still owed Conseco $160 million for loans he used to buy company stock, the value of which declined precipitously. A page one story in The Wall Street Journal (12/5/03) (http://online.wsj.com/article/0,,SB107058914336380400,00.html) brings us all up-to-date on what’s happened in the past few years. The $160 million debt turned into $225 million when interest was added. “According to Conseco, Mr. Hilbert made a payment of $1 million in April of 2001 and another of $6 million in April of 2002, reducing his total debt to $218 million. After that, says Conseco, Mr. Hilbert simply stopped paying.” Hilbert claims he owes nothing. Stay tuned as a bitter litigation fight escalates.

 

Legacy

“I Am Responsible”
Among a handful of talented technology executives in the era before the bubble, John Sidgmore was a serial entrepreneur who produced outstanding awards for shareholders, and who helped incubate the technology dreams of others. At the height of his career, he provided the backbone of the Internet as he was the adult in charge at the number one Internet Service Provider, UUNet bringing their revenues from $6 million in 1995 to more than $4 billion in 1999. The acquisition of UUNet by WorldCom brought profound changes, and Sidgmore, whose style contrasted with Bernie Ebbers, remained on board to help the merged entity succeed. After Ebbers was fired, the Board asked Sidgmore to step into the CEO job, which he held for nine months. Here’s part of what he said in testimony before the Committee on Financial Services of the U.S. House of Representatives in July, 2002:

“About two months ago, when I agreed to take over as CEO, it was clear that the company faced significant challenges. But I never imagined what was in store for us. Since WorldCom's public announcement on June 25, 2002 that the company misstated its earnings for 2001 and the first quarter of 2002, there’s been an understandable outpouring of anger from every quarter of American society. While the misdeeds we uncovered occurred before I became CEO, I want to apologize on behalf of everyone at WorldCom. And I want to underscore that WorldCom's new management team — and our more than 60,000 employees — share the public’s outrage over these events. I cannot change the past. But I am responsible for what we do now and in the future.”

John Sidgmore died in mid-December at age 52.

 


Latest Books Read and Reviewed:

 (Note: readers of the web version of Executive Times can click on the book covers to order copies directly from amazon.com.  When you order through these links, Hopkins & Company receives a small payment from amazon.com.  Click on the title to read the review or visit our 2004 bookshelf at http://www.hopkinsandcompany.com/2004books.html).

 

Title (Link to Review)

Author

Rating

Review Summary

Purchase

Split Second

Baldacci, David

Slow Motion. Another attempt at a suspense novel becomes entangled in poor writing and fading reader interest over more than 400 pages of occasional fast-paced action.

The Big Bing

Bing, Stanley (Gil Schwartz)

Too Big. Collection of years of Fortune and Esquire columns by CBS executive. Delivers laughs and underlying truths about executive life. Savor one at a time with single malt and Cuban cigar.

Gentleman Revolutionary: Gouverneur Morris, the Rake Who Wrote the Constitution

Brookhiser, Richard

Cheerful. Short biography of a Founding Father few learn about in school, but one who made a huge contribution to the creation of the United States.

The Hornet’s Nest

Carter, Jimmy

Stung by Curiosity. A novel set during American Revolutionary War with wooden characters, slow moving plot and weak dialogue, but written by ex-President. 150 or more pages could have been edited out.

The Innovator’s Solution: Creating and Sustaining Successful Growth

Christensen, Clayton M. and Michael E. Raynor

Using Theory. Dozens of tough questions about innovation explored, theory explained, success and failure illustrated, conclusions drawn, and sources documented in footnotes galore. Advice to think about and use in growing your organization.

Living a Year of Kaddish

Goldman, Ari L.

Grief. Anyone experiencing the loss of a loved one will find some empathy and consolation on the pages of this book. An added bonus is insight into modern American Orthodox Judaism.

Pompeii

Harris, Robert

Salve Lucrum. Hail Profit may have been the motto of Pompeii in 79, but readers know what happened next. Harris’ fine research and writing brings the era alive through characters and memorable, exciting plot momentum.

Franklin Delano Roosevelt

Jenkins, Roy

Eloquent. Another well written volume in the American Presidents series. Jenkins died before finishing the last few pages, and this final work from a great historian and politician leaves an eloquent legacy.

Mountains Beyond Mountains

Kidder, Tracy

Over the Top. Fine writing by talented writer about the amazing life and work of Paul Farmer, a medical doctor and anthropologist working in Haiti for the past two decades, and how his methods for community based treatment of communicable disease have changed international medicine.

The Namesake

Lahiri, Jhumpa

Alienation. Novel of identity explores the first and second generations of a family from India and their ties to their old and new lives. Finely written debut novel from author who won Pulitzer for 1999 collection of stories.

So Many Books, So Little Time: A Year of Passionate Reading

Nelson, Sara

Hyperlinking. Busy New Yorker chronicles her year and the many directions her reading led her toward or away from what she planned.

Shameless Exploitation in Pursuit of the Common Good

Newman, Paul and A. E. Hotchner

Worth the Hustle. Entertaining and informative story of how a business was formed, grew and thrives, despite following paths not recommended by the experts consulted. Includes moving stories of helping children in need with the profits from the business.

Blacklist

Paretsky, Sara

Loyalty. Detective V.I. Warshawski returns in deftly written, often strident, novel about the loss of rights after 9/11, the parallels to the McCarthy era, and how personal loyalty and closely held secrets can lead to conflicts with the law.

Blood Canticle

Rice, Ann

Love. Rice claims this is her last Vampire Chronicles novel. Considering how Lestat is presented as a kind and generous lover, she may be right. Imaginative, as always, and not very well written.

There Must be a Pony in Here Somewhere: The AOL Time Warner Debacle and the Quest for a Digital Future

Swisher, Kara

Culture Clash. Neither AOL nor Time Warner felt they could learn from each other. Reading their foibles is the print equivalent of reality TV shows, and the episodes Swisher describes are often enjoyable, if you like watching the misfortune of others.

 

ă 2004 Hopkins and Company, LLC.  Executive Times is published monthly by Hopkins and Company, LLC at the company’s office at 723 North Kenilworth Avenue, Oak Park, Illinois 60302. Subscription rate for first class mail delivery of the print version is $60.00 per year (12 issues). Web version subscriptions are $30.00 per year. Single issues: $10.00 print; $5.00 web. To subscribe, sign up at www.hopkinsandcompany.com/subscribe.html, send an e-mail to executivetimes@hopkinsandcompany.com, call (708) 466-4650, or fax to (708) 386-8687. For permission to photocopy or e-mail Executive Times, call (708) 466-4650 or e-mail to reprints@hopkinsandcompany.com. We will send sample copies if requested. The company’s website at http://www.hopkinsandcompany.com/archives.html contains the archives of back issues beginning in the month after the issue date. 

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