Executive Times

Volume 6, Issue 7

July, 2004


ã 2004 Hopkins and Company, LLC

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Risky and Responsible Business

One pleasure of summer, Shakespeare in the Park, reminded us that exposure to the arts reinforces experience: appearance and reality are often reversed. In many of Shakespeare’s plays, people and things are not as they appear to be. The same is true among executives. One key requirement for executive success involves taking risks. In the current climate of “one strike and you’re out,” it may seem that executives are being encouraged to take less risk. Read on to see why that may not be the case. All executives want to, and believe they do, act responsibly, and most will say their actions are always ethical. Why, then, are reputations damaged by unethical practices and why do executives find themselves misled by trusted employees? We’ll try to offer a dose of reality about executive risk and responsibility practices in this issue. As you read, think about your personal practices and the degree to which you are anchored in reality, and what appearances can distract you.


Fifteen new books are rated in this issue, beginning on page 5. We’ve awarded our top rating, five stars and “read at once,” to James Surowiecki’s The Wisdom of Crowds. In this era of reliance on smart experts, this book offers a different perspective about where and how to get the best answers to questions in many areas of work and life. Eleven books are recommended with three stars, two with two stars, and one with one star. You can also visit our complete 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. You can also check this same bookshelf to see what other books we’re reading or considering. Twenty six additional books were added to the “shelf of possibility” during June. If there’s something missing from the bookshelf that you think we should be considering, let us know at books@hopkinsandcompany.com.

Embrace Me
There seems to be an emerging danger that with Sarbanes-Oxley compliance concerns, increased litigation against companies, and Boards firing CEOs for one misstep, risk taking will be avoided. While some executives may choose to become risk averse, others will find ample opportunities to act. Here’s what we read in The Manager’s Journal column of The Wall Street Journal (6/22) (http://online.wsj.com/article/0,,SB108785660103143430,00.html): “Traditional risk management seeks to contain losses. But that's just one-half of the growth equation. By embracing strategic risk,   risk-savvy companies have raised their growth potential in addition to reducing their economic volatility. That's important at a time when aggregate market growth is sluggish. The biggest risk of all is not to take the right growth risks for the business.” The rest of the article describes how some companies are placing and hedging strategic bets. Right after setting down that article, we read in the July 5 issue of Forbes (http://www.forbes.com/business/forbes/2004/0705/048.html) that Monsanto has decided not to market bioengineered wheat because of pressure from global activists invoking what author Cass Sunstein calls “The Precautionary Principle.” “The Precautionary Principle demands that all steps must be taken to avoid risks of harm if cause-and-effect relationships are not established scientifically.” While we’re not keen on bioengineered food, we’re also not keen on avoiding all risk. As Sunstein says, “The Precautionary Principle has a lot of intuitive appeal. Sensible regulators should not require unambiguous proof of harm. Inconclusive evidence can be enough. But the problem is that while promising safety, it can be both dangerous and incoherent. Risks are on all sides of social situations, and regulation itself creates risks. Because risks are everywhere, the Precautionary Principle forbids action, inaction, and everything in between. It is therefore paralyzing; it bans the very steps that it mandates.” Sunstein makes the point that in the attempt to achieve a state of “better safe than sorry,” we can become both safe and sorry, a lousy misbalancing of risks and rewards. Executives need to think through the risks to avoid and the risks to embrace, then take, rather than avoid, action.

How effective is your method for balancing risks and rewards? Has your focus on containing losses distracted you from placing strategic growth bets? Have you adopted something like the Precautionary Principle as an operating practice? What effect has that had on your organization, and on your strategic positioning? Has your avoidance of risk led you toward taking the biggest risk of all? Have you embraced risk today?

Everyday Low Equality
You couldn’t miss the media coverage of the largest sex discrimination class-action case ever, against Wal-Mart, claiming a consistent pattern across the country of unequal pay between men and women in the same jobs. We’ll let that play out for a while before drawing any conclusions. In the meantime, you may have missed the lessons from some of the changes in practices Wal-Mart implemented over the past year, according to the company’s press release (6/4) following its annual meeting (http://www.walmartstores.com/wmstore/wmstores/Mainnews.jsp?). CEO Lee Scott announced diversity goals, and “If we do not meet our individual diversity goals for the year, our incentive compensation will be reduced as much as 7.5 percent. Beginning next fiscal year, that penalty will increase to 15 percent.” A new corporate compliance team “will oversee Wal-Mart's compliance in a number of areas, including the company's obligations to associates in terms of pay, working hours and time for breaks.” Also, a new pay structure and scale for hourly workers will standardize practices, requiring consistent annual pay revisions at a set number of cents per hour, for standard performers, and a slightly higher number of cents per hour for a small percentage of above standard performers. Wal-Mart wants to be perceived as a leader in employment practices, and is digging out of a hole in how their past practices have been perceived. Wise executives will want to pay close attention to these changes in everyday practices and how they compare with those of your organization. For another look at why the gap between pay for men and woman remains long after organizations have made commitments for equality, read Aaron Bernstein’s commentary in the 6/14 issue of Business Week (http://www.businessweek.com/magazine/content/04_24/b3887065.htm).

How do you interpret the statistics you review about your workforce? Do you look for patterns of unintended discrimination? Are your employment practices effective and appropriate? Can they stand up to scrutiny? 

Master’s Voice
There are at least three generations of executives who have tried to become effective through listening to the advice of management guru Peter Drucker. Here’s a list from the 6/1 issue of The Wall Street Journal (http://online.wsj.com/article/0,,SB108605270355625419,00.html) of the eight practices and one rule that he recommends all executives follow:

Ø         Ask “What needs to be done?”

Ø         Ask “What is right for the enterprise?”

Ø         Develop action plans.

Ø         Take responsibility for decisions.

Ø         Take responsibility for communicating.

Ø         Focus on opportunities, not problems.

Ø         Make meetings productive.

Ø         Think and say “We.”

Ø         And one practice he elevates to a “rule:” Listen first, speak last.

If you’re looking for a roadmap toward executive success, these practices are a great beginning.

Are the questions you ask the most effective? Are your action plans producing desired outcomes? When your messages are misunderstood, what do you do? When issues arise, do you give direction before you’ve heard from others? How do others characterize your meetings? How real is the responsibility you take? How do you apportion time between solving problems and seeking opportunities? Does that balance of time lead to better outcomes?

No Good Deed Goes Unpunished
When we read Michael Lewis’ long article in the magazine section of the June 6 issue of The New York Times (http://www.nytimes.com/2004/06/06/magazine/06ETHICS.html) about corporate social responsibility, we thought of the quote attributed to Claire Booth Luce, “No good deed goes unpunished.” Think about this reflection from Lewis: “Business executives acting on behalf of shareholders are expected to behave in such a self-interested fashion that even their good works -- philanthropy, environmental sensitivity, greater-than-necessary concern for employees and so on -- must generate profits. That's what they teach in business schools, because that's the convention of the financial marketplace. Extreme self-interest is what most investors demand from their corporations. But if goodness for goodness' sake has no place in public corporations, is it any wonder that the people who work for them exhibit less-than-ideal ethical standards? For that matter, is it surprising, given their necessarily relentless selfishness, that they occasionally forget exactly for whom they are meant to act selfishly? The pressure applied to people who run public corporations almost requires them to forget how to be good” In the midst of this reality, executives from 400 global organizations met at the United Nations in late June to add a tenth principle to fight corruption to the nine existing principles of the Global Compact, a voluntary set of core values to support human rights, labor standards and the environment. (Visit http://www.unglobalcompact.org/Portal/Default.asp for more information.)  To whatever extent involvement in the Global Compact is unprofitable, and we believe Lewis and some business school professors, we can expect involvement to cease. Stay tuned.


What core values direct the activities of all employees of your organization? How does self-interest influence your good works? Do you agree that investors want extreme self interest practiced by the corporations in which they invest? To what degree do you and others in your organization participate in collaborative efforts like the Global Compact? Is your involvement profitable?


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

Ø      Several issues of Executive Times have referred to the problems of Enron, but we’ve neglected to focus much attention on Ken Lay, mostly because he’s been a bit reclusive. Readers who want an update about Kenny Boy should read the results of Kurt Eichenwald’s 6 hour interview with Lay in The New York Times (6/27) (http://www.nytimes.com/2004/06/27/business/27ENRO.final.html). Among the highlights for those of us who concluded that Lay dumped stock while telling others he was buying: “…a review of Mr. Lay's financial and trading data shows that the facts are much murkier than is generally believed, with the stock sales being forced by lenders as he took numerous actions that are consistent with someone trying to minimize his sales.” 

Ø      While following up on Enron, we remembered that we last mentioned Sherron Watkins, author of a pointed e-mail to Ken Lay, in the January 2003 issue of Executive Times. For more about her post-Enron life, read The New York Times magazine issue of 6/6 (http://www.nytimes.com/2004/06/06/magazine/06QUESTIONS.html).

Ø      In the April 2003 issue of Executive Times we told readers to rest easy because Sumner Redstone and Mel Karmazin agreed to continue their dysfunctional relationship at Viacom and were positively sappy in their comments about each other. All bad things must come to an end, though, and Viacom announced on 6/1 Karmazin’s resignation (http://www.viacom.com/press.tin?ixPressRelease=80354155). 


Community Activist
One executive who changed the perspective of a huge company about community involvement and corporate social responsibility was James Roche, who headed General Motors as Chairman and CEO in the late 1960s and early 1970s. Roche nominated Rev. Leon Sullivan to the GM board, one of the first African Americans to serve on the board of a major American corporation. Roche formed a public policy committee that required the company to look at its engagement with the community outside its facilities. Sullivan pressed GM to leave South Africa as a protest against apartheid. It was Roche who publicly apologized to Ralph Nader on discovering the company’s efforts to discredit Nader’s accusations about the Corvair. After he reached GM’s mandatory retirement age, he went on to work on community development projects, especially in the Detroit area. We read a quote from Roche in the Detroit Free Press (6/7) (http://www.freep.com/news/statewire/sw99076_20040607.htm), “‘Anybody who achieves a top position in an organization owes a debt of some kind,’ he told the St. Petersburg Times in 1987. ‘If you have a talent and you have your health, you should help others.’” Roche spent his work life and his retirement helping others. We guess that if he reflected on Michael Lewis’ article referenced on page 3, he might have said, “Hogwash.” At the least, his leadership concluded it was in the best interests of GM to be a good corporate citizen. He died in Florida in early June at age 97.

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)



Review Summary


The Fall of the Berlin Wall

Buckley, Jr., William F.

Yield. Readable story of how the Wall came and went. Part of the Turning Points series. Energetic writing style, cogent observations, and thoughtful insights.

So Many Enemies, So Little Time: An American Woman in All the Wrong Places

Burkett, Elinor

Polo. A modern Marco Polo describes experience teaching journalism in Kyrgyzstan, and visiting surrounding countries. Colorful story telling and descriptive language help readers better understand that part of the world.

The Rule of Four

Caldwell, Ian and Dustin Thomason

Riddles. Readers looking for more ancient code books, a la The Da Vinci Code, will find many memorable moments in this debut novel by lifelong friends.

The Enemy

Child, Lee

Bad Apples. Jack Reacher’s Army days are reprised in this novel, set after the fall of the Berlin Wall. A few Army bad apples do serious damage, and Reacher struggles to solve murder cases.

Warren G. Harding

Dean, John W.

Gamaliel. Nixon White House counsel writes volume in American Presidents’ series on the man often rated as the worst. Dean describes someone who worked himself to death, and who was deceived by appointees.

A Message from Garcia: Yes, You Can Succeed

Garcia, Charles Patrick

Initiative. Readers who want to be told how to succeed by self-confident author will find the answers here. Typical nostrums from motivational genre.

The Crisis of Islam: Holy War and Unholy Terror

Lewis, Bernard

Primer. Scholar distills lifetime of observation and study into a primer that answers novices’ questions about Islam and provides an historical context for today’s events and activities.

Shackleton’s Way: Leadership Lessons From the Great Antartic Explorer

Morrell, Margot and Stephanie Capparell

Engaged. Stories from the life of Sir Ernest Shackleton, synthesis of lessons learned, and modern examples of executives who have followed his example of involved and engaged leadership.

Truth and Beauty: A Friendship

Patchett, Ann

Intertwined. Poignant and sad memoir of the friendship, love and devotion between two women leading intertwined lives from college to one’s death.

Dark Tide: The Great Boston Molasses Flood of 1919

Puleo, Stephen

Corners Cut. Captivating tale of ruptured tank of molasses that caused death and mayhem in a Boston neighborhood. Lessons for today’s managers throughout, especially from transcripts of court testimony by company officials.

Dress Your Family in Corduroy and Denim

Sedaris, David

To Wit. 22 well-written, usually hilarious essays of family life, coming of age, relationships, and life’s many ups and downs.

The Wisdom of Crowds

Surowiecki, James

Collective. Groups are smarter than the smartest person in them, and wise groups are made by fostering diversity of opinion, independence, decentralization and aggregation. Top rating for good writing, facts and examples, thoughtfulness, and broad opportunity for implementing ideas.

Venus As a Boy

Sutherland, Luke

Cupid. Popular U.K. writer published for first time in U.S. Strange tale of Orkney youth full of sex, drugs and alienation, bringing love to others. Some fine writing, mostly quirky.

Eats, Shoots & Leaves: The Zero Tolerance Approach to Punctuation

Truss, Lynne

Punchy. Punctuation sticklers unite! Read, but stop telling us about our own errors. Funny and practical. Read and give to someone who needs help.

Reckless Abandon

Woods, Stuart

Serial. Author brings together characters from Stone Barrington and Holly Barker series to solve serial murders. Not his best work, but entertaining light reading, like a summer rerun.


ã 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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About Hopkins & Company

In addition to publishing Executive Times, Hopkins & Company engages in a variety of other activities focused on helping executives succeed, including:

Ø      Coaching: helping individuals or teams find ways to do more of what works for them, and ways to avoid what's ineffective

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