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ã 2003 Hopkins and Company, LLC
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Anticipation
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?
Flash!
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?
Follow-up
Here are selected updates
on stories covered in prior issues of Executive Times:
Ø 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.
Ø 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.’”
Legacy
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).
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Title
(Link to Review)
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Author
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Rating
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Review
Summary
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Purchase
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Woodrow
Wilson
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Brands, H.W.
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•••
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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.
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Secret
Father
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Carroll, James
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•••
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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.
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The
5 Patterns of Extraordinary Careers: The Guide for Achieving Success and
Satisfaction
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Citrin, James M.
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••••
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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.
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Love
in Idleness
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Craig, Amanda
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•••
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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.
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Authentic
Leadership: Rediscovering the Secrets to Creating Lasting Value
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George, Bill
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•••••
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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.
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The
Importance of Being Lazy: In Praise of Play, Leisure, and Vacations
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Gini, Al
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•••
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Time Out. Philosophy professor provides well-developed rationale for
taking breaks in various forms, including an extended vacation. Read while
working, not while relaxing.
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Triumph
and Tragedy in Mudville: A Lifelong Passion for Baseball
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Gould, Stephen Jay
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•••
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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.
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Creating
True Peace: Ending Violence in Yourself, Your Family, Your Community, and
the World
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Hanh, Thich Nhat
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•••
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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.
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Love
Me
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Keillor, Garrison
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••
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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.
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Office
of Innocence
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Keneally, Thomas
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•••
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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.
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The
Maverick and His Machine: Thomas Watson, Sr. and the Making of IBM
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Maney, Kevin
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•••
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Character. Maney presents Watson in many dimensions:
self-absorption, ambition, effective leadership, motivation, shady
practices, insecurity, over-confidence and pride. Like today’s CEOs.
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Better Together:
Restoring the American Community
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Putnam, Robert D.
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•••
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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.
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Calpurnia
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Scott, Anne
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••
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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.
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The
Wal-Mart Decade: How a Generation of Leaders Turned Sam Walton's Legacy
Into the World's # 1 Company
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Slater, Robert
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••
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Rollback. Pleasant story about unassuming and talented executives
who built a gigantic and successful business. Some repetition and a few
dozen really boring pages.
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Orchard
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Watson, Larry
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••••
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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.
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