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newsletter spring 2002 A.P. Moller/Maersk: The Drive to Make Dealing with a Sluggish Boards More Effective The collapse of Enron is spurring many com- World Economy panies to re-examine their board management systems. A new Conference Board report, available online, provides a valuable check- list of do’s and don’ts in making board A.P. Moller/Maersk,headquartered in Copenhagen, is a leading global shipping firm. The company is processes more effective. also engaged in a multitude of other businesses, The report urges corporate directors, who including the exploration and production of oil and no longer enjoy broad legal protection, to ques- gas, shipbuilding, aviation, supermarkets, and infor- tion management when “red flags” appear and mation technology services. The company has more than 60,000 employees in some 100 coun- even when they sense that serious problems tries operating a fleet of about 250 vessels. are developing. “The first response is to blame Most well-known is A.P. Moller’s shipping arm, the accountants. But the accountants don’t AMaersk Sealand, the world’s leading containerline act in isolation. It takes a board, management, with a network of services connecting all six con- legal counsel and a host of others to create tinents and more than 20,000 port calls per year. The following is a conversation with leaders of some of these spectacular failures of corpo- this remarkable firm. Mærsk Mc-Kinney Møller is rate governance.” Chairman of the Board of the firms comprising The Conference Board report presents a Mærsk Mc-Kinney Møller the nucleus of the A.P. Moller/Maersk Group. series of short- and long-term questions Jess Søderberg is Chief Executive, and Ib Kruse is a partner of the firm. board members need to ask. Carolyn Brancato, the Board’s corporate Q. Maersk has been a member of The governance expert, notes that “while it’s dif- Conference Board for nearly four decades. ficult to uncover outright management fraud, How are Maersk executives benefiting boards should be more proactive in demand- from the Board’s growing business ing accountability.” network today? Source: In the Wake of Enron: Does Your Board Mr. Møller: Our affiliation with The Con- Have an Effective Management System of Its Own? Executive Action #14, The Conference Board. ference Board goes way back to 1964. I accepted your invitation with enthusiasm because it offered an opportunity to discuss U.S. Economy and exchange ideas with top U.S. business- men. It should be understood that at that Jess Søderberg Gaining Ground time U.S. business was not nearly as global as today. Mr. Kruse, my colleague and suc- cessor as Global Counsellor to The Confer- The bellwether American economy is mov- ence Board, says he has had the same ing into recovery, which should be good news positive experience. A number of our exec- for many global economies. While growth will utives have, and are benefiting from the net- be slow, a major turnaround in corporate prof- working and the timely research The its is ahead, The Conference Board reports. Conference Board provides. Rising productivity, a major driver of Q. What are the major challenges facing economic growth, will push profits. Declin- your business in 2002? ing financing requirements and the Mr. Søderberg: To cope with the economic rising availability of credit all point to bet- global downturn, which started toward the end ter times ahead. of 2000. During 2001, we have also seen Ib Kruse “But businesses will once again have to a significant reduction in trade volume, become their own bankers,” says Conference L CONTINUED PAGE 2 Board Chief Economist Gail Fosler, “financ- ing their productivity and competitive improve- ments from cash flow.” THE CONFERENCE BOARD The Business Knowledge Network

CONTINUED FROM PAGE 1 a situation that was further aggravated by the tragic Online Meetings Draw September 11th events. Q. Security issues have become dominant concerns at Raves in China, India, many of our member firms. Is that true at your company? Mr. Søderberg: Yes. Because our vessels are engaged in Australia, U.S. worldwide trade, we have always paid close attention to the security of our personnel and our vessels. But now The Conference Board’s use of latest online technology the issue has moved to the very forefront of our think- to bring busy executives together is winning ing and planning. A.P. Moller/Maersk is also working with CNBC anchor Ron executive fans. a number of government agencies, particularly in the Insana discusses These meetings, presented via the Internet, cover a U.S., on how to make ports, vessels and the whole trans- what’s hot in TV wide range of timely issues. The Board’s Ann Barrett pre- portation chain more secure. However, we must avoid sented findings from her upcoming study on leadership impractical and cost prohibitive security measures that business news at development to a Human Resources Council meeting hamper trade and can have a negative impact on world the Board’s Wireless held in Goa, India. The event was extremely well received. economies. Conference in The first of these online meetings linked the Board’s Q. What’s ahead for the container shipping industry? New York. Council of Chief Audit Executives to examine continu- Mr. Kruse: We expect the container trade growth rate ity planning. The Human Resources Council in China to return to its previous growth rate of 7-8% a year. was briefed on findings from the Board’s new study on But the industry today is very fragmented. The largest the fast-growing Chinese economy. carrier owns less than 15% of total capacity. Mergers The new technology was also used to launch the Asia and acquisitions and operational alliances will con- Pacific Learning and Knowledge Management Council. tinue in order to enhance efficiency, cut costs, and meet This online event linked executives from Brisbane, Mel- shippers’ global demands. bourne, , Manila and . And it was effectively used in an economic briefing for members of the Council of CFOs, Council of Corporate Treasurers, the Council of Financial Executives, and the Executive Council. In this broadcast, Gail Fosler, the Board’s Chief Economist, said the economy was rapidly entering a recov- Why the World is ery that would lift profits and that technology would Daniel A. Meiland, strengthen the nation’s productivity boom. Watching China Chairman and CEO, Egon Zehnder While China’s booming economy could slow slightly from International, at its red-hot pace, its ongoing economic and political reforms are turning the nation into a formidable world the Board’s recent Flash Points for Management competitor. Trustees meeting. A comprehensive Conference Board study covering Only one-third of the major companies say their lead- more than 23,000 firms in China shows that privatiza- ers’ capacity to meet business challenges is excellent or tion and federalism are unleashing competitive and entre- good. Five years ago, about half the firms surveyed rated preneurial forces throughout the nation. More than 500 their leadership strength as excellent or good. large and medium-sized Chinese firms are now fully But less than half the surveyed companies say that owned by foreign interests, up from only 100 just seven developing future leaders is a major priority of their com- years ago. Some 300 Chinese firms are totally private panies’ top management. entities, compared with just 3 in 1995. Source: Developing Business Leaders for 2010, Report 1315-02-RR, Reforms will intensify when China becomes a full- The Conference Board. fledged member of the World Trade Organization. Joint- venture firms are proliferating and will continue to put competitive pressure on companies of all sizes through- out the world. Former U.S. labor “Foreign-owned businesses will discover that they can Closer Dutch Ties no longer take China lightly,” says Dr. Robert McGuckin, secretary Robert co-author of the new study. Reich gives execu- The Conference Board and the Nederlandse Vereniging Source: Restructuring Chinese Enterprises: The Effects of Federalism and tives some pointed voor Management (NIVE) have agreed to collaborate Privatization Initiatives on Business Performance, Report 1311-02-RR, tips on motivating more closely on event organization and research, accord- The Conference Board. ing to the terms of a Memorandum of Understanding people at The signed in Voorburg, The Netherlands. Conference Board’s Human Resources Conference. THE CONFERENCE BOARD The Business Knowledge Network

Remaking New York: King Dollar Causing A Work in Slow Motion World Market Jitters

Ground Zero in is slowly staging a come- Like a weight lifter on steroids, the American dollar will back. But a return to anything approaching normalcy will grow even stronger and more powerful this year. After be painfully slow. A Conference Board analysis shows posting a nonstop advance over the last six years, it is that the key public priority is restoring transportation Carlos Represas now reaching toward its 1985 peak. links, critical in rebuilding the demolished private sec- of Nestlé, a Global Both the euro and yen appear to be heading for new tor in that area. Counsellor of The lows. Neither currency has the power to dislodge the dol- Since most of the emergency relief to businesses is in Conference Board, lar from its preeminent position. The upward thrust of the form of loans, not grants, many downtown firms aren’t the dollar is not only reducing the ability of countries to rapidly accepting these offers. Many are leery of taking at the Board’s purchase goods on the world market, but is raising local on more debt. But redevelopment is firmly underway and New York dinner. interest rates, slashing local demand, and increasing incen- is likely to result in a more lively, 24-hour environment tive to add capacity to spur exports. downtown when all work is done. Rebuilding efforts pose Warns Conference Board Chief Economist Gail Fos- an unprecedented challenge to private, government and ler: “The global economic system needs a tough look and nonprofit organizations. But skeptics aside, the area sur- even tougher leadership. The continued rise of the dol- rounding the former World Trade towers is on the way lar is a very loud signal that the global market system to recovery. Says the Conference Board analysis: “Lower needs work.” Manhattan can and will recover, but the heavy lifting has only just begun.” Source: Rebuilding Lower Manhattan: The Need for Cross-Sector Collaboration, Executive Action #11, The Conference Board.

Jack Rosenthal, President of The New York Times,at a Conference Board leaders dinner in New York.

At The Conference Board/McKinsey & Company’s CEO seminar in New York: Stephen P. Kaufman, Chairman of the Board of Arrow Electronics; L. Dennis Kozlowski, Chairman, President and Chief Executive Officer of Tyco International; and David Fubini, Director and Global Practice leader at McKinsey & Company.

Bill Driscoll, Vice President of Environment, Health and Safety at TXU Industries, chats with his office at a special Conference Board Lower Manhattan, January 2002 meeting in Palm 3M’s Sarah Ethier and AT&T’s Clair Krisov at the Board’s Springs. environmental meeting. THE CONFERENCE BOARD The Business Knowledge Network

Wooing Customers Now Top Corporate Priority

Attracting and holding customers tops all other man- agement priorities, a new Conference Board survey shows. Top executives from 54 companies say that romancing customers has become the primary issue in companies in virtually all industries. The top four concerns: generating customer loyalty by improving customer care strategies, transforming cus- tomer data into knowledge that can be profitably used, spurring innovation in products and services, and iden- tifying and servicing key customers.

The Conference Board C.R. Shoemate, in Spain: Adding Value retired Chairman The Power of Branding of Bestfoods, with Examined at U.K. Meeting A joint agreement between The Conference Board Sir Martin Sorrell, Europe and the Spanish Confederation of Directors and CEO of WPP Group Executives (CEDE) provides for information exchange, Companies boasting strong brands enjoyed sharply higher at New York CEO collaboration on research, and other shared activities. appreciation of their stock prices than companies with More than 34,000 executives are members of CEDE. meeting. moderately strong or weak brands. With support from The Conference Board, CEDE Larry McNaughton, who heads Corporate Branding, recently held its first International Directors’ Congress told The Conference Board’s Corporate Image Confer- in Madrid. More than a thousand delegates attended, ence in London that there is powerful equity in strong including the chief executives of some of Spain’s largest branding. His firm’s study of nearly 1,000 major com- companies. panies covering 1996 to 2000, found that firms with the The theme of the Congress: “Entrepreneurs with Val- most powerful brands recorded a 138 percent stock ues: Directors and the New Europe-America Partner- price increase. Stock prices of firms with weak brands ship.” Isidro Fainé, Global Counsellor of The Conference saw their stock prices rise 56 percent. Board, Chairman of CEDE, and President and CEO of Said McNaughton: “Leaders often ask, ‘Which comes La Caixa, Spain’s third largest banking group, said that first, financial performance or brand image?’ My answer organizational culture must be based on trust. Company is a question: Which one can you influence, the world initiatives must be open and backed by solid ethical economy or your brand?” principles. Rodrigo Rato, Spain’s Minister of the Economy, called for wage moderation to reduce firms’ costs and enable them to increase their investments. Despite the current slowdown in the global economy, Rato said the Spanish economy was gearing up for further gains. Top Companies join TCB’s Hayes Anderson, New E-Learning Group Vice President, Human Resources, Dow Chemical, Allstate, Sony and other pace-setting com- Arch Chemicals, panies are among those participating in The Conference Inc., shares his Board’s Virtual E-Learning Working Group. company’s latest The group examines latest developments in e-learn- HR strategies at ing, bringing together world-class experts in this field. It is becoming a major resource center for bench- The Conference The Conference Board newsletter is written and edited by Randall Poe, Carol marking, examining best practices and sharing strate- Courter, and Sandra Lester. Based on an original design by Scott Adams. Board’s Human gic information. © 2002 by The Conference Board, Inc. All rights reserved. Printed in the U.S.A. Resources The Conference Board and the torch logo are registered trademarks of To learn more, contact David Dell at 212 339 0407. The Conference Board, Inc. Conference. AGENDA 2002 THE CONFERENCE BOARD

U.S. Calendar The 2002 Compensation Conference The 2002 Employee Benefits Conference A Time for Re–evaluating Compensation Benefits in Balance: Navigating in Volatile Times April 24-25, 2002 March 20-21, 2002 Waldorf=Astoria, New York, NY Marriott Marquis, New York, NY April 4-5, 2002 Loews Coronado Bay, CA Managing Change and Seizing Opportunity in a Rapidly Evolving Sales Environment The 2002 Talent Management Strategies Conference May 2, 2002 Paul Pocialik, Chief Creating the Talent-Advantage Enterprise Inter-Continental The Barclay, New York, NY Technology Officer March 20-21, 2002 at Nobelstar, tells Waldorf=Astoria, New York, NY The 2002 Knowledge Management/Organizational executives at a Learning Conference The 2002 Strategic Alliances Conference Enabling Success in Troubled Times Conference Board Formulating and Executing Successful May 7-8, 2002 meeting how his Alliances Strategy Waldorf=Astoria, New York, NY firm is making new April 9-10, 2002 wirelesss marketing Waldorf=Astoria, New York, NY The 2002 Customer Loyalty Conference strategies pay off. Loyalty-Based Leadership, Strategies, and Tools The 2002 E-Procurement Conference May 9-10, 2002 Strategic E-Sourcing, Collaboration, and Marriott Marquis, New York, NY Supplier Relationship Management April 9-10, 2002 The 2002 Corporate Communication Conference Palmer House Hilton, Chicago, IL New Strategies for Uncertainty and Risk May 9-10, 2002 The 2002 Performance Measurement Conference Waldorf=Astoria, New York, NY Beyond Measurement to Management April 17-18, 2002 The 2002 Leadership Development Conference The Plaza Hotel, New York, NY Making Leadership Development Systemic May 16-17, 2002 The 2002 Advertising and Brand Impact Conference Grand Hyatt, New York, NY David Bell, Creating Financial Value Through Advertising April 18-19, 2002 Chairman, Inter-Continental The Barclay, New York, NY ,at The Conference Board’s Leadership Conference on Global Corporate Citizenship.

Duke Power’s Environmental Chief Jim Hendricks Cathy Streker, Director of Employee Benefits and Planning at Conference Board Economist Ken Goldstein briefs members addressing the Textron, and Robin Downey, head of Product Management and of the British Parliament during their visit to the Board’s Board’s environ- Development at Aetna, share ideas at a Board meeting in New York. headquarters. mental meeting this spring. AGENDA 2002 THE CONFERENCE BOARD

Asia-Pacific European Calendar

Calendar 2002 European Supply Chain and Purchasing Conference 2002 Asia-Pacific Shared Services Achieving Internet Powered Supply Conference Chain Integration April 16-18, 2002 April 23-24, 2002 Shangri-La Hotel, Singapore Hotel Dorint Schweizerhof, Berlin, Germany

2002 European Strategic Management Forum May 15, 2002 Le Meridien Hotel, London, U.K.

2002 European Human Resources Conference People: Our Only Competitive Advantage May 29-30, 2002 The Renaissance Hotel, Amsterdam, Linda Bardo Nichols, Chairman of the Australia Washington SyCip of The SGV Group and The The Netherlands Post, at a special Conference Board meeting of Conference Board’s Gail Fosler. CEOs in New York.

Paul Tebo of Dupont and Jim Boyt of Alcoa at Maria Eitel, Vice President of Corporate Clive Chajet, Chairman of Chajet Consultancy LLC, the Board’s environmental and safety meeting in Responsibility at Nike, Inc., describes her company’s with Lauren Fisher, Senior Vice President of Palm Springs. new approach to global sourcing at the Board’s Marketing at the American Stock Exchange. They citizenship meeting. addressed the Board’s latest Corporate Image Conference.

At the Board’s 2002 Healthcare Conference: Alan Goldberg, Jack Wirts, Executive Vice President, The Conference Board, with Chair of the eHealth & Privacy Interest Group at the American Bulent Eczacibasi, Chairman, Eczacibasi Holding, at the Board’s Bar Association; Richard Cleland of the Federal Trade Trustees meeting. Commission; Dr. Michael J. Rozen of WellMed, Inc.