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newsletter F a l l 2 0 01 Fidelity’s Pozen Examines Tony Blair Briefs Conference Board Threats to Economic Growth Members in London

British Prime Minister Tony Blair briefed Conference Board Trustees, and chairmen and chief executives of FT 500 companies, at a special Conference Board meeting in obert Pozen is Vice Chairman of Fidelity London. The Prime Minister was welcomed Investments. Formerly president of by Lord Marshall of Knightsbridge, Chair- Fidelity Management & Research Com- man of British Airways Plc and Chairman of pany—Fidelity’s investment advisor for its The Conference Board’s Board of Trustees. nearly $1 trillion in mutual funds—Mr. Lord Marshall organized a series of events Pozen is a member of the President’s for the gathering, which included Conference RCommission to Strengthen Social Secu- Board Trustees and CEOs of U.K. member rity and a Trustee of The Conference companies. The program featured a boat jour- Board. His book, The Mutual Fund Busi- ney up the Thames, culminating at the Tower ness, is widely used in business schools. of London with the “Ceremony of the Keys” and a private viewing of the Crown Jewels. In this interview (conducted prior to the Robert Pozen events of September 11, 2001), Pozen con- siders current threats—and positive impulses—to business growth. In this envi- ronment, says Pozen—who also offers a look Growing Clout for ahead for mutual funds—The Conference Board is a vital resource for business lead- Global Investors ers around the globe. As corporations around the world become What are the major threats to U.S. business increasingly dependent on equity fueled by growth over the next few years? The U.S. open markets, economic clout is shifting toward economy is going through a reduction in investors who have equity stakes—especially the growth of corporate earnings, espe- those willing to become activists. cially in the telecom and technology sec- A new Conference Board study finds that tors. These sectors experienced a large transnational institutional investors are begin- increase in capital expenditures over the ning to evaluate corporate performance by an last few years, so it may take a while to evolving set of global work off this capacity build-up. The other standards. This development is changing how major threat to the U.S. economy comes companies and investors do business with each from U.S. consumers. So far they have other. Moreover, the towering share of U.S. held up pretty well, as reflected in solid corporate investments worldwide raises the housing and auto sales. But consumer expectation that U.S investors will not only attitudes could change if the unemploy- have an important say in the standards them- British Prime MinisterTony Blair with Lord Marshall, ment rate rises sharply. selves, but could also make U.S.-style activism Chairman of British Airways Plc and Chairman of the norm among global investors. The Conference Board’s Board of Trustees. What do you see as positive forces that may Source: The Global Investor and Corporate Governance: What counter those threats? The Federal Reserve Do Institutional Investors Want? Report 1297-01-RR, 2001. L CONTINUED PAGE 2 THE CONFERENCE BOARD The Business Knowledge Network

This summer in , a Changing Company special Conference Culture: The Irish Dilemma Board meeting on sustainability drew business leaders When the European Council on Human Resources met in Dublin in June, members examined new paths companies from throughout are taking to change their cultures. John Guinan, Director Asia/Pacific. of Human Resources for Retail Banking and Distribution Shown left to right at the Bank of Ireland (the meeting’s host), said that too are: Lily Yam, much time is devoted to writing the company’s values while Secretary for the the leaders fail to demonstrate those values. “Exceptional CONTINUED FROM PAGE 1 Environment and business performance,” he said, “will be achieved only has dropped interest rates several times this year and through exceptional leadership and people management.” Food, Government continues to let the money supply expand substantially. The keynote speaker, Paul Haran, Secretary General of These typically have been favorable factors for the U.S. of the Hong Kong the Irish Department of Enterprise, Trade, and Environ- economy. As interest rates drop, the has Special ment, described the transformation of the Irish economy experienced a wave of mortgage refinancings. These Administrative into today’s successful “Celtic Tiger.” But he warned that are like giving homeowners a monthly tax cut. Finally, Region; Eden Woon, complacency is the greatest danger to continued success. To there are the real cuts in tax rates, which over time Director of the avoid this, he predicted growing investment in education at should help stimulate economic growth. all levels, creating more intellectual capital for the future. Hong Kong General What is The Conference Board’s chief contribution to the Chamber of world business community? The Conference Board is a Commerce; and key source of research and statistics on the U.S. and Marjorie Yang, other world economies. For example, its survey on con- Chairman of the sumer confidence is watched carefully by business and Esquel Group of Nielsen is Board’s government leaders. The Board also provides an impor- Companies. tant forum for in-depth discussion of management New Nordic Director issues through its councils and conferences. These have the special benefit of participation from company man- Niels Erik Nielsen is The Conference Board’s new Direc- agers actively involved in the subject matter. tor of Associate Service for the Nordic Region (includ- ing Denmark, Finland, Iceland, Norway, and Sweden). How important is The Conference Board’s continuing He replaces Jani Törnqvist, who will continue his long effort to globalize its membership and research? Very association with The Conference Board Europe as a pro- important. It is easy to say that businesses should oper- ject director for a number of European Councils. ate globally, but difficult to do well. The Board can help Nielsen, a Dane, began his career with one of the executives learn how to manage better across continents. Board’s longest-standing members, A.P. Møller. He has In addition, the Board is in the process of expanding its also held management positions in Denmark, , economic indicators to include significant countries out- Taiwan, Ghana, the United Kingdom and the United States side of the United States. This expansion will create a for such major international companies as General valuable resource for global economic projections. Electric and Marsh & McLennan.

As the author of the definitive book on mutual funds, what’s ahead for the industry? During the late 1990s, U.S. investors became accustomed to annual returns above 20 percent. The fund industry has to help manage investor expectations to more realistic levels—for example, long- Michael Eskew, term equity returns in the United States are in the range who will become of 11 to 13 percent per year. At the same time, the fund the Chairman and industry has to deal with the aging of the baby boomers, CEO of UPS in who will start to reach 65 in 2011. Up to now, fund com- January 2002, plexes have concentrated on helping investors accumulate addressing The nest eggs for retirement; in the future, they will have to develop programs to help distribute retirement income to Conference Board’s Gail Fosler, Chief Economist of The Conference Board, addressing fund shareholders. Strategic Alliances the Board’s Paris business briefing. meeting.

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Top Board Economists New Conference Board Chair Meet Chinese Experts at University of Groningen

The Conference Board’s top economists and China’s eco- Professor Bart van Ark, Director of International Eco- nomic policymakers met in to discuss challenges nomic Research at The Conference Board and Professor and opportunities facing the United States and China. in the Economics of Productivity and Technology Policy This “Sino-U.S. Economic Forum” was initiated by the Bart van Ark, at the University of Groningen, keynoted a special meet- Chinese government and co-sponsored by China’s Director of ing this spring at the University of Groningen, The Nether- Academy of Macroeconomic Research, the State Devel- International lands. It marked the debut of The Conference Board Chair opment Planning Commission, and the Center for China Economic in the Economics of Productivity and Technology Policy. and Foreign Group Enterprise Development Studies. In his lecture, van Ark questioned whether Europe is fully Research at The Conference Board Chief Economist Gail Fosler and utilizing new advances in information and communication Director of Economic Research Robert McGuckin Conference Board technologies. He underscored the urgency of investment so explained the need for microdata and economic mea- and Professor in that the old economy can benefit from the new economy. sures to assess ongoing reforms in China. Chinese the Economics of economists provided updates on economic developments Productivity and in China and explored ways in which The Conference Technology Policy Board and China can cooperate in future activities. at the University of Knowledge Management a Groningen. Hot Issue in the U.K.

Consignia, formerly the United Kingdom’s Post Office, hosted the second meeting of The Conference Board’s European Council on Knowledge Management, in Rugby, England. A highlight of the meeting was a tour of Consignia’s Innova- tion Laboratory and an introduction to technologies for the Gail Fosler, Senior future. The meeting focused on strategies for winning com- Vice President and mitment of the CEO and top management to knowledge Chief Economist of management strategies, and for measuring and demonstrating The Conference the value of knowledge management projects. Board, addressing the Sino-U.S. Economic Forum in Americans Face Lowest Beijing. Earnings Gains in a Decade

Beefing Up Communications: With inflation rising and salary increases holding at 4 percent both this year and in 2002, Americans’ real earn- The View From Sweden ings gains over the next two years will be the smallest in a decade. A Conference Board report finds that inflation TietorEnator Corporation, a leading supplier of IT services will wipe out most wage increases. in Europe, hosted The Conference Board’s European Coun- U.S. Commerce In 2001—for the eighth year in a row—salary increases cil on Communications for its meeting in Stockholm. The in the United States will average 4 percent and will remain Secretary Donald company’s Deputy CEO, Ake Plyhm, examined the busi- at this level through 2002. ness case for strong employee communications. L. Evans (left) with Eric Osterberg, TietorEnator’s Senior Vice President Conference Board of Corporate Communications, put on one of his former President and CEO hats as a business journalist to share insights on the theme Richard E. of effective communication in Sweden. He revealed a Cavanagh at the menu of dos and don’ts when dealing with the Swedish Washington media. “Build long-term relationships; keep regular per- sonal contacts; educate yourself and position yourself as ceremony for the an authority; keep away from high-tech lingo in press Awards releases; and don’t offer extras, trips, and expensive gifts for Corporate to media partners,” he said. Leadership.

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Corporate Headquarters Facing Problems Spurring Troops Into Action

Corporate headquarters, the “leadership engines” of busi- ness, are encountering serious challenges in motivating their business units to carry out new headquarters-led initiatives. A Conference Board study of leading firms in the United States and Europe finds that two factors—corporate cul- ture and reluctance to change—are stifling efforts to imple- ment these initiatives. Widespread decentralization, which has pushed down decision making in many organizations, is also a major barrier. Headquarters-led initiatives are triggering an unusu- ally high level of frustration and disappointment, often producing only partial success or ending in outright fail- ure. Only 56 percent of the executives surveyed say they The Conference have a clear understanding of the role and authority of Board’s Global Zarnowitz Wins Major their company’s headquarters. Advisory Council, Says Dr. Robert J. Kramer, an expert in corporate orga- which advises the Economic Award nization at The Conference Board, “It is no surprise that Board on economic business-unit managers resist when headquarters asks or Dr. Victor Zarnowitz, a Conference Board economist, pressures them to cooperate with headquarters-led syn- issues, meets in has been named a winner of the Butler Award, one of ergy projects. The stage is set for hard bargaining, and London. The Council the most prestigious awards conferred to an economist. even conflict, between the parties.” is chaired by W. The award was presented to Dr. Zarnowitz by the New Source: Organizing for Global Competitiveness: The Role of Corporate Craig McClelland, York Association for Business Economics. As the fifth Conference Board economist to receive this Headquarters and Its Leadership in Organizational Integration, Report Chairman and CEO 1291-01-RR, 2001. award, Zarnowitz joins previous Board winners Alan (retired) of Union Greenspan, William B. Franklin, Al Sommers, and Ed Fiedler. Camp Corporation, Dr. Zarnowitz is an advisor to the Board’s economic Why Mergers Don’t Always and Paul A. Volcker, research program and its analysis of business cycles and former Chairman of their indicators. He is also one of six economists who com- Deliver Growth and Revenue the Federal Reserve. prise the Dating Committee of the National Bureau of Economic Research, which certifies whether and While many mergers don’t generate growth, a new Con- when the United States has entered an economic recession. ference Board study finds that some companies are prof- iting from both mergers and acquisitions. The study, which provides tips garnered from compa- nies that have strong merger track records, says that top- line growth is the key driver in most mergers. The study describes how companies plan and plot mergers, showcasing strategies from four major compa- nies—Arrow Electronics, Medtronic, Tyco International, Dr. VictorZarnowitz, and The Williams Companies. It underscores the urgency Senior Fellow of keeping top talent aboard as mergers take shape. As and Economic one merger-savvy expert warns: “Competitors will try to Counsellor at The cherrypick the best employees in the target company. Conference Board. During the due diligence period, the acquiring company should make retention offers to key employees, especially the star salespeople, who could be lured away by the competition.” Federal Reserve Chairman examines economic Source: Executive Insights: Merging and Acquiring for Growth, trendlines forThe Conference Board’s Council of Financial Report 1298-01-RR, 2001. Executives in Washington.

4 THE CONFERENCE BOARD AGENDA 2001 THE CONFERENCE BOARD

U.S. Calendar European Calendar The 2001 Marketing Conference The 2001 Corporate Image Conference Marketing Metrics and Execution Living the Brand Promise with your Stakeholders November 1-2, 2001 November 7-8, 2001 The Waldorf=Astoria, New York, NY Royal Garden Hotel, London, UK

The 2001 Purchasing Conference 2001 European Performance Measurement Forum Internetworking for E-Sourcing Excellence The Link Between Performance and Pay November 8-9, 2001 November 28, 2001 Minoru Makihara, The Waldorf=Astoria, New York, NY ABN-AMRO Holding N.V., Amsterdam, The Netherlands Chairman, , Mitsubishi, Issues-Oriented Workshop 2002 European Environment Forum at a special meeting The Power and Promise of Corporate Philanthropy Assessing Science’s Role in Environmental Policy Making of The Conference November 14-15, 2001 January 16-17, 2002 Board and the Japan Roosevelt Hotel, New York, NY ATOFINA, , Belgium External Trade People Solutions 2001 Organization. Optimizing Employee, Customer, and Business Performance Asia-Pacific Calendar November 28-29, 2001 Leadership 2010: The Future of Women in Business Hotel Inter-Continental, New York, NY February 19-20, 2002 Sydney, Australia The 2002 Corporate Image Conference February 21-22, 2002 Building and Sustaining Your Image, Brands, and Reputation Melbourne, Australia January 15-16, 2002 Grand Hyatt, New York, NY Knowledge Management Conference April 11-12, 2002 The 2002 Strategic Management Conference Shangri-La Hotel, Singapore Gayle Wiley, Ways to Improve Profits, Growth, and Innovation in This Changing and Connected Economy 2002 Shared Services Conference Human Resources January 16-17, 2002 April 16-18, 2002 Executive, Diversity, The Waldorf=Astoria, New York, NY Shangri-La Hotel, Singapore EMEA, IBM Euro- coordination, The 2002 Employer Healthcare Conference France, at the Healing What Ails Your Employee Board’s European February 7-8, 2002 Marriott Marquis, New York, NY Work-Life Conference in The 2002 Leadership Conference on Brussels. Global Corporate Citizenship February 11-12, 2002 The Waldorf=Astoria, New York, NY

The 2002 Global Human Resources Conference Strategies to Identify, Attract, Develop, and Retain Future Leadership Resources February 13-14, 2002 At The Conference Board’s sustainability meeting in Hong Kong The Waldorf=Astoria, New York, NY (left to right): Alois Flatz, Head of Research at SAM Sustainable Steven Miller, Asset Management; Euan Marshall, Business Development The 2002 Organization of the Future Conference President, Director at ASrIA; Chandran Nair, CEO of ERM Asia Pacific; and From Ownership to Strategic Purpose Chairman, and CEO February 28-March 1, 2002 Margaret Chin-Wolf, Principal and Senior Portfolio Manager at of Shell Oil, The Waldorf=Astoria, New York, NY Nexus Asia Investment Management Pte Ltd. addressing a Conference Board meeting on how companies are For more information about any of these events, please contact customer service at 212 339 0345, facing tough issues or visit our Web site at www.conference-board.org. in the workplace. The Conference Board welcomes the following new members:

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Accenture Company Limited Hunter 2000 S.L. (Europe) Reputation Technologies, Inc. Agfa-Gevaert N.V. (Europe) IDEC Pharmaceuticals Rockefeller & Company, Inc. Anne Arundel Community College Incentive Systems Royal Melbourne Institute of Technology Ault, Inc. Insead – Asia Campus Saint Joseph’s University B2eMarkets Integra Consulting Team San Jacinto College South Banco Popular de Puerto Rico InterDigital Communications Corp. Sapient Bass Hotels & Resorts Interra Software India Pvt. Ltd. SembCorp Industries Blattner Brunner Invensys plc (Europe) Shenandoah University Bon Appetit Group (Europe) Irving Oil Corporation SICS (Europe) Caltex Services Pte. Ltd. Itochu International Inc. Smiths Group Plc (Europe) Campbell Soup Company (Europe) Janus Somerville and Associates, LLC Carilion Foundation J-Phone Communications Co., Ltd. Sony Entertainment Television India Ltd. Carlow College KBC Bank & Insurance (Europe) South African Tourism CarnaudMetalbox S.A. (Europe) L & T International Corp South Texas Community College Carter Holt Harvey Ltd. L&T Information Technology (Europe) Spherion Corporation Center for Creative Leadership Liberty Shoes Ltd. Sponsor Management Consulting (Europe) CheckFree Corporation Lock Haven University Standard Chartered Bank Malaysia Chubb Insurance Company Loomis Fargo Co. Standard Commercial Tobacco (Europe) CITIC Pacific Ltd. Louisiana Lottery Corporation Standard Register Citizens Bank Lynn University Susan G. Komen Breast Cancer Foundation, The Coca-Cola China Ltd. Marquard & Bahls AG (Europe) Swiss Re (Europe) Confederation of Danish Industries (Europe) Midwest Generation EME LLC Swiss Re Life & Health (Europe) Corning Cable Systems Montefiore Hospital and Medical Center Symantec Corporation D’Arcy (Europe) Monterey Institute of International Studies Syngenta (Europe) Debevoise & Plimpton Mycom Berhad Temasek Holdings Deborah Hopen Associates, Inc. National Institute of Standards & Texas Health Resources Defense Acquisition University Technology/Manufacturing The Greenery International B.V. (Europe) Deloitte Touche Tohmatsu Nebraska Department of Economic The Morgan Crucible Company (Europe) Descartes Systems Group (Europe) Development Top Human Technology Deutsche Lufthansa (Europe) New Scale, Inc. Turkish Industrialists and Business (Europe) Dixons Group (Europe) Novo A/S (Europe) Uniq plc (Europe) Drake University Novozymes (Europe) United Distillers De Mexico, S.A. de C.V. E.ON AG (Europe) Nurseryworks Ltd. (Europe) Universidad Carlos III (Europe) EBS Dealing Resources, Inc. Pacific Investment Management University of Saint Thomas Edwards Lifesciences Company (PIMCO) University of Tampa El Paso Electric Pameco Corporation Vasu Tech Limited EnBW Transportnetze AG (Europe) Peppers and Rogers Group Vertex Pharmaceuticals Incorporated Essent N.V. (Europe) Perfect Commerce, Inc. Vytra Health Plans Experian Petronas Penapisan (Melaka) Sdn Bhd Watson Wyatt Hong Kong Limited FreeMarkets, Inc. Pfleiderer (Europe) WellMed, Inc. Gate Gourmet Holding (Europe) Piderit & Partners Widgetwonder Gentiva Health Services Polskie Koleje Panstwowe SA (Europe) Xoma Guinness Ireland Group Ltd. (Europe) Premier Oil Plc (Europe) Yellow Pages Publishers Association HFC Bank plc (Europe) Queensborough Community College High Industries Inc. Redcats (Europe)

Ron Berenbeim, The Conference Board’s expert on business ethics (center), addressed a special briefing in the Philippines on resisting corrupt practices. With him are Felipe Alfonso, President of Business leaders tour Normandy, France, during a special Conference Board briefing with military the Asian Institute of Management (left), and Sandy officers and political experts. The combination of tours and meetings focused on leadership and Prieto-Romualdez, President and CEO of the strategic issues that have implications for business executives. Philippine Daily Inquirer (right).