Executive Times

Volume 5, Issue 10

October, 2003


ă 2003 Hopkins and Company, LLC

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Those of us who live in that part of the Northern Hemisphere where we note the change in seasons have experienced in recent weeks all the signs of a coming chill. Through experience, we’ve come to anticipate what’s next, and have begun to plan ahead. The most skilled executives work hard to anticipate a variety of possible outcomes, and are prepared to manage well for the most likely future scenarios. Often, to become aware of what’s unexpected, an executive will rely on those whose outlook or experience differs radically from that of the executive. Given such broad acceptance of the need to anticipate multiple and diverse scenarios, why is it that so many executives seem clueless or surprised when their actions generate unanticipated consequences? Each issue of Executive Times tries to help executives prepare for an uncertain future through encouraging reflection on what other executives have faced. As you read this month’s selected stories, think about how prepared you are to anticipate the alternate future scenarios you are most likely to face. Who has helped you pay attention to the areas where you’re least likely to anticipate what’s next? Are you at all aware of the many areas in which you’re likely to be blind or deaf to possible scenarios? How can you go about seeing a little more clearly, or hearing a little bit better?


Fifteen new books are rated in this issue, beginning on page 5, including our first five-star rating this year, for Bill George’s Authentic Leadership, which we recommend that you read right away. There are also two four-star ratings, one for James Citrin’s The 5 Patterns of Extraordinary Careers, and for a new novel by Larry Watson, Orchard. You can also visit our 2003 bookshelf at http://www.hopkinsandcompany.com/bookshelf.html and see the rating table explained as well as explore links to all 2003 book reviews. We felt empathy for Marie Arana when we read in The Washington Post (9/7/03) (http://www.washingtonpost.com/wp-dyn/articles/A28383-2003Sep4.html) that, “No fewer than 150,000 new books will claim a publication date of 2003. Only five years ago, the average annual output was closer to 50,000. It's enough to make a book review editor weep. The task of culling the books and selecting those we think merit interest is the hardest thing we do: For every book we review, 99 others will have passed through our hands.” Here at Executive Times, for the 15 books we review each month, 12,485 have been overlooked.

Greener Grasso
There’s an undertone of glee coming through the hundreds of stories written in recent weeks about the compensation and governance fiasco at the New York Stock Exchange.  The regulator whose own house is in disarray produces a perverse delight among those who feel that regulations can be heavy-handed or impractical to implement. Wharton professor Michael Useem reminded all executives and boards that there are lessons from this case to apply in the form of better governance. Useem began with this perspective in a Wall Street Journal article (9/23/03) (http://online.wsj.com/article/0,,SB106426706470302600,00.html), “Richard Grasso's forced resignation as chief executive officer of the New York Stock Exchange stemmed from governance failure as much as executive blunder. True, Mr. Grasso did not anticipate the howls of protest that would greet his $188 million pay package. But neither did the NYSE directors who approved it.” The SEC has started an investigation to assess the NYSE board’s due diligence over Grasso’s pay. The contract with Grasso (read for yourself at http://online.wsj.com/documents/wsj_grasso_091103.pdf) seemed clear enough, so the directors must have known what they were doing, and must have concluded they were paying him what they thought he was worth. They failed to anticipate the backlash once the terms were disclosed. Somewhere along the line they may have forgotten that the NYSE is a not-for profit self-regulatory institution. Now, the NYSE board quickly selected former Citigroup chairman John S. Reed to provide interim leadership. Did the board anticipate how many changes maverick Reed will make? Did Reed choose to take the job because his Citi rival Sandy Weill was refused a seat on the NYSE board? Reed’s first symbolic act: accepting $1 in pay for his service through year-end. Over a few years, Reed’s pay and Grasso’s averages out just about right.

How can you anticipate a potential negative reaction to aspects of your current situation? Have you considered policies, practices, or initiatives from multiple points of view? Have you utilized someone who would play a devil’s advocate role as a test for responses to your possible actions? What are the barriers to your ability to anticipate alternative future scenarios? Can an outsider help you see yourself and your organization more clearly?


While some executives can fail to anticipate alternate future scenarios, others anticipate, but fail to act quickly and decisively. The current poster child company for putting off action is Eastman Kodak Company. On September 25, CEO Daniel A. Carp announced (http://www.kodak.com/US/en/corp/pressReleases/pr20030925-01.shtml) that the company has made a significant strategic decision to stop investing in its traditional consumer film business. And of all things to get into, the company has decided to jump into the competitive consumer ink jet printer market, and they’ll jump in fast, by Kodak time: a few years. To fund the initiative, the company cut its dividend, at a time when other companies are increasing dividends. The announcement led the stock price to hit an eighteen year low. "Today, we are experiencing a structural shift in our traditional film and paper business in developed markets," Carp said. "To address this shift, we've begun a transformation that is pragmatic and bold. We are determined to win in these new digital markets, and we are creating a Kodak that is geared for success." Kodak has a goal of becoming a $20 billion company by 2010, up from $12.8 billion last year. Will investors be better off through this new growth strategy? Is growth always the best strategy? Would investors have been better served had the company decided to milk its cash-generating film business and get out of everything else? Stay tuned.


Are you clear on what not to do? If you were starting your organization from scratch, what would you want to do, and how would you do it? What changes have you been postponing? Why have you put off these changes? Would a strategy to shrink your organization ever be considered by you and other executives? In selecting where you want to compete for growth opporunities, how realistically do you assess your relative strengths and weaknesses?

Out of Spin Control
There’s a brief time period in a crisis when an executive has the chance to get out ahead of a controversy. The best executives receive good advice from communication experts and spin doctors about how to make this work. Others receive prudent legal advice to be careful of admitting to something that they may come to regret. When New York Attorney General Eliot Spitzer turned his attention to the mutual fund industry and certain practices that benefited selected clients and harmed many consumers, Janus Capital Group was one of the funds named. In response, CEO Mark Whiston sent a letter (http://ir.janus.com/news/JANUS0904.pdf) that reinforced its key message: “I want to assure you that we’re committed to the highest ethical standards and to acting in the best interests of you – our clients and fund shareholders.” Others would have advised Janus to respond more completely. Here’s what Slate columnist Daniel Gross had to say on 9/5 (http://slate.msn.com/id/2087995/):
But rather than confront the allegations head on, Janus has responded with a mixture of evasion, dissembling, and reality denial that would do Ari Fleischer proud. ‘At the outset, it's important to note that Janus was not mentioned in connection with the after-market trading allegations—and that we were not named as a defendant in any legal proceeding,’ Whiston notes. That's a little like getting rounded up with a bunch of accused thieves and stipulating that it's important to note you haven't yet been charged with armed robbery. What's more, if you listened to Spitzer's press appearances, it's clear that Janus and others are highly likely to be a target of legal proceedings. Whiston concedes that Spitzer has alleged that ‘we—and at least three other fund firms—allowed Canary to market time,’ and he points out that Spitzer said it was ‘a near certainty’ that other mutual fund companies could be named. The implication: Since others were doing it, and since others as yet unnamed may have also done it, the conduct alleged isn't so bad or reprehensible. That's hardly a comforting message. Asset managers like Janus are supposed to beat the market and established benchmarks, not simply run alongside the crowd. They're supposed to follow best practices, not just-as-bad practices. Because the investigation is in its early stages, Whiston continues, ‘there's very little we can say about the allegations except that we're reviewing the complaint closely and intend to continue cooperating with Attorney General Spitzer and his staff.’ Legally, this may make sense. But from a business perspective, it beggars belief. Janus stands accused of violating its most basic commitment to customers. It's long past the time for Janus to be ‘reviewing’ allegations. Spitzer appended to the complaint several remarkably damning e-mails that show Janus executives grappling with the problematic issue—and coming down on the side of greater profits over investor protection.”
Gross called the Janus response “the worst act of corporate spin this year.”

How prepared are you to anticipate the reaction of various stakeholders to a crisis relating to your organization? Will your message be too much like Whiston’s to be helpful?


“May Cause Financial Loss”
What responsibility does your organization have for the way your customers use your products and services? Based on Merrill Lynch’s settlement with federal prosecutors, it could be plenty. According to Kurt Eichenwald inThe New York Times (9/18/03) (http://www.nytimes.com/2003/09/18/business/18ENRO.html?hp), Merrill “promised today not to engage in business deals — even ones that appear legal — that it believes might be used to mislead investors about a company's financial condition.” A new level of lender liability may have begun.

How can you anticipate how your customers will use your products and services? What will you need to know about your customers to anticipate whether you may be liable for their misuse of your products and services?


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


Ř      We wondered on page one of the August 2002 issue of Executive Times if visible arrests of executives accused of malfeasance would begin the restoration of trust. Thanks to Daniel Gross, (Slate, 9/23/03) (http://slate.msn.com/id/2088790/) we read an Ivy League study (http://papers.ssrn.com/sol3/delivery.cfm/SSRN_ID425880_code030804420.pdf?abstractid=425880) that shows markets do better when civil, not criminal law is stronger. Read the study and you might conclude that class action shareholder lawsuits might actually be good for the market. For better or for worse, the first Enron executive went to jail recently, former treasurer, Ben F. Glisan Jr., pleaded guilty on September 10 to conspiring to commit fraud.

Ř      In the November 1999 issue of Executive Times we called the Dalai Lama’s book, Ethics for the New Millennium, one of the best books we read that year. (That was prior to our star rating system). We were intrigued to read (The Wall Street Journal, 9/19/03) (http://online.wsj.com/article/0,,SB106391803518680800,00.html) that during the Dalai Lama’s recent visit to the United States, he co-sponsored a conference with scientists at MIT called “Investigating the Mind.” According to the Journal, “Through their alliance with neuroscience, Buddhist scholars hope to gain insight into ways to improve contemplative techniques and training. But they also hope to show that meditators' claims -- that the practice cultivates compassion, allows them to control their attention for long periods, and enables them to call up mental images with the clarity and detail of a zillion-pixel photo -- have a measurable basis in brain activity. … If science undermines the claims, the Buddhists are ready. ‘If science proves facts that are different from Buddhist understandings,’ the Dalai Lama has vowed, ‘Buddhism must change.’”



Not Gone, Not Forgotten
On October 1, 2003, Sanford I. Weill steps down as chief executive of Citigroup, three months ahead of schedule. Weill is scheduled to remain as non-executive chairman until 2006, and he made it clear that he will remain active in the company’s affairs. Investors who have stuck with Sandy over the decades have been rewarded handsomely, and he remains aligned with their interests. He’s agreed to retain 75% of the 22.3 million Citigroup shares he currently owns. After many years of being prodded and pushed around succession planning, it appears that a successful transition is underway.


While continuing to keep his eye on Citigroup, another Weill legacy is prospering. Weill’s daughter, Jessica M. Bibliowicz launched an IPO of National Financial Partners, the firm she’s been running since 1999, when she left a predecessor of Citigroup. Sandy noted that National Financial’s first day rise of $3.00 beat the 12 cents a share he saw when Commercial Credit went public in 1986. The proud father suggests we invest in the next generation. What better legacy than that?

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 2003 bookshelf at http://www.hopkinsandcompany.com/bookshelf.html).


Title (Link to Review)



Review Summary


Woodrow Wilson

Brands, H.W.

Eloquence. Skilled historian presents brief bio of former President, whom we now call Tommy. Tightly packed with personal formation, academic success, wartime leadership, and postwar missteps in peacemaking.

Secret Father

Carroll, James

Legacy. Recollections by father and son narrators of what happened to trio of teens in Germany in the weeks before the wall was erected. Secrets that were kept are revealed. A legacy is passed along from one generation to another. Understanding develops over time, and with perspective.

The 5 Patterns of Extraordinary Careers: The Guide for Achieving Success and Satisfaction

Citrin, James M.

Provocative. No matter what degree of success or satisfaction you’ve achieved in your career, you’ll find something to think about when you read this insightful book based on analysis of successful executives.

Love in Idleness

Craig, Amanda

Dreamy. Reprise of Shakespeare’s A Midsummer Night’s Dream using the form of an English extended family and friends on vacation in Tuscany, where all the magic happens. Clever and deft writing provides an amusing diversion.

Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value

George, Bill

Journey. Outstanding book by former Medtronic CEO, who “gets it.” There are five dimensions to being an authentic leader: understanding why you want to lead, practicing solid values, leading with a heart, establishing connected relationships, and showing self-discipline. Read this book now.

The Importance of Being Lazy: In Praise of Play, Leisure, and Vacations

Gini, Al

Time Out. Philosophy professor provides well-developed rationale for taking breaks in various forms, including an extended vacation. Read while working, not while relaxing.

Triumph and Tragedy in Mudville: A Lifelong Passion for Baseball

Gould, Stephen Jay

Champion. Gould loved baseball almost as much as paleontology, and his writing on the sport soars. Posthumous collection of essays appeals both to fans of baseball and fans of fine writing.

Creating True Peace: Ending Violence in Yourself, Your Family, Your Community, and the World

Hanh, Thich Nhat

Teacher. The practice of peace always begins right here, right now. Busy executives may enjoy the excerpt about taking time to live, and using a tea meditation to nourish mutual understanding and happiness.

Love Me

Keillor, Garrison

Ups and Downs. Spotty novel of Minnesota writer who produces a hit, moves to New York, and discovers failure. Touching at times, hilarious now and again, tedious after a while.

Office of Innocence

Keneally, Thomas

Thoughtful. Keneally reveals the flaws of human nature in multiple characters of this well-written novel, calling our attention to who is innocent and who is not.

The Maverick and His Machine: Thomas Watson, Sr. and the Making of IBM

Maney, Kevin

Character. Maney presents Watson in many dimensions: self-absorption, ambition, effective leadership, motivation, shady practices, insecurity, over-confidence and pride. Like today’s CEOs.

Better Together: Restoring the American Community

Putnam, Robert D.

Capital. Something to think about and learn from the twelve case studies of how different people are trying to build social capital from branch libraries to schoolchildren leading community change. Read excerpt about how UPS builds social capital.


Scott, Anne

Imagery. Debut novel of estate agent trying to sell the belongings and creations of an artist, the late owner of Villa Calpurnia, a Main Line Philadelphia 19th century stone home. From many perspectives, we get to learn about the late artist and her art.

The Wal-Mart Decade: How a Generation of Leaders Turned Sam Walton's Legacy Into the World's # 1 Company

Slater, Robert

Rollback. Pleasant story about unassuming and talented executives who built a gigantic and successful business. Some repetition and a few dozen really boring pages.


Watson, Larry

Artistic Vision. Must one understand an enigma in order to portray it to others? Well-crafted novel presents complicated relationship between artist and model, and their respective spouses. Intimacy and alienation co-exist.


ă 2003 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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