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newsletter Winter 2001/2002 Uncertainty Biggest Threat Is Globalization To World Stability: SyCip Drive Stalling? Shrinking global trade, weak world economies, and continuing fallout from Sep- tember 11 are causing some companies to re-think their global strategies. Robert Kramer, The Conference Board’s Washington SyCip is founder of Asia’s expert on corporate organization, reveals that largest accounting and consulting firm, SGV more companies are trying to regionalize and & Co. He is also a Trustee and a Vice Chair- localize their operations. Companies are show- man of The Conference Board. He is no ing a more cautious approach to investment, stranger to crises. While he was working on intensifying cost containment, beefing up secu- his doctorate at Columbia University, Pearl rity, and examining discipline in their profit Harbor was bombed. He joined the U.S. centers. W While few companies want to return to the armed forces and later was sent to India to break Japanese codes. He has been a major top-heavy regional operations of yesteryear, force in East Asian business growth. When many executives say regional headquarters many business leaders seek new opportu- can add real value in merger and acquisition nities in East Asia, they are told: “Go see activity, new business development, human Washington SyCip Wash.” Mr. SyCip met recently in New York resources support, and strategic planning. with Randall Poe for this interview. regularly to visit destinations throughout Kramer cautions that failure to work out China and an increasing number of pros- satisfactory structures to meet current prob- Q: What’s the biggest threat to economic perous Chinese are traveling abroad. lems is likely to lead to more downsizings, stability? de-layering, outsourcing, and a greater reliance SyCip: Uncertainty. This uncertainty is seen Q: Any suggestions for improving relations on alliances. almost all over the world. The U.S. econ- with the Muslim world? omy holds the key because what happens SyCip: Eventually, the question of a Pales- in the has an impact on the tinian state must be resolved, which, of rest of the world. Unfortunately, the U.S. course, will not be easily accomplished. It economy was already in a downturn before would certainly help the current situa- the events of September 11th. It will take tion if leaders from major Muslim nations, a while to get confidence levels back up. such as Pakistan, Iran, Indonesia, Malaysia, But I’m an optimist. I think we could see and Egypt, speak out strongly against ter- a turnaround by the middle of 2002, if rorism. This type of leadership could help there are no further major incidents. unite Muslims in the cause of peace. This may produce very positive results. Q: In your travels, where do you see eco- nomic strength? Q: How is The Conference Board helping SyCip: India, Russia, and China are hold- business during the present uncertainty? ing up remarkably well—especially China SyCip: By keeping executives informed about where there is continuous yearly improve- what companies are doing to grow and sur- General John M. Keane, Vice Chief of Staff of the ment. You see this in business growth, in vive during these difficult times. Conference United States Army, discusses the Army’s housing, in restaurants, and in the things Board research about changing business response to terrorist attacks and what business consumers are buying. Even tourism is practices and economic conditions is espe- can learn from the military at a special strong. Millions of Chinese now travel cially valuable. The need for executives to Conference Board Human Resources Conference. CONTINUED PAGE 2 THE CONFERENCE BOARD The Business Knowledge Network

CONTINUED FROM PAGE 1 share experiences has never been greater, and this is an Growing Corporate Clout area where The Conference Board excels. Its conferences are an important way of making business aware of what for Board Compensation is happening in different industries and in different parts of the world, not just in the United States and Europe. Committees Many of the leading corporations in all parts of the world read the economic forecasts of Gail Fosler, and Compensation committees are gaining clout. Since these use these as guidelines for their own planning. committees determine pay for performance, grant stock Melodee Mahoney, options that can dilute shareholder value, and buy back Q: Do you see new opportunities for The Conference Senior Program company stock to enhance share prices, their members Board in China or Japan? Manager, Center for have a growing impact on overall corporate strategy. A SyCip: There are clearly opportunities there for the Learning, GE new Conference Board study shows how these commit- Board. China and Japan are the two largest economies Capital, at The tees function and provides some decisive “do’s” and in Asia. But the language issue must be resolved. You Conference Board’s “don’ts” regarding compensation practices. A growing may have to translate your research and other publi- 2001 Human worry is whether the members of these committees have cations into Chinese or Japanese to reach the top Resources enough expertise to effectively monitor compensation business leaders. programs and whether they are too dependent on CEOs Conference. This and outside consultants. Q: Are you still trying to instill more professional meeting was pre- The study is based on the experiences of The Conference management in Asian companies? sented in collabora- Board’s Working Group on the Compensation SyCip: Oh yes. Many listed companies still have dom- tion with the United Committee of the Board. inant family interests. They must combine family and States Army. Source: The Compensation Committee of the Board, Research Report professional managers and be more transparent if they R-1306-01-RR, The Conference Board are going to expand. If Asian companies insist on family management, regardless of the competence of At a meeting of The their children, they will be in trouble sooner or later. Conference Board’s It’s just not possible to have generation after genera- Council of Chief tion of very competent children who are interested in Legal Officers, managing business firms. David Boies (right), lead legal counsel Q: Are you seeing growing interest in corporate in the U.S. governance issues in Asia? SyCip: Yes. As more Asian business leaders are educated Government’s law- in western universities, more U.S.-styled business mod- suit against els will evolve. That means more interest in issues involv- Microsoft, and Jon ing boards of directors. China now has 21 companies Groetzinger, Senior listed on the New York Stock Exchange. There is inter- Vice President and Knowledge Management: est there in many governance issues. And this is also true of in Japan and the rest of Asia. American European Growth Force Greetings Q: How do you stay on top of what’s happening While knowledge management is no automatic highway in the U.S.? Corporation. to growth, many companies are effectively mastering it SyCip: I keep informed through media and through to create new products and services and to boost profits. many other sources. As you know, the Wall Street Jour- The Conference Board’s 3rd Knowledge Management nal, the , and Herald Tribune together Conference in this fall focused on a variety of with their sister publications are read by many Asian approaches being used to improve the sharing of crucial business leaders. And, of course, I regularly read The information within organizations Conference Board publications and Gail Fosler’s Already part of the culture at Unilever and other lead- monthly reports. She’s been right so often that you ing firms, it has become a major driver of growth. It’s also have to follow her analysis of economic developments. a key part of business strategy. Victor Newman, Chief Learn- ing Officer of Pfizer Research University: “Business strategy and knowledge management are two sides of the same coin.” But he warned that if knowledge management doesn’t bring The Conference Board newsletter is written by Randall Poe and Carol Courter. Based on an original design by Scott Adams real value and a competitive advantage, it should be rejected. © 2001 by The Conference Board, Inc. All rights reserved. Printed in the U.S.A. It’s not what you know but what you share that counts. The Conference Board and the torch logo are registered trademarks of The Conference Board, Inc. THE CONFERENCE BOARD The Business Knowledge Network

Helping Companies Profit Top Wireless Firms Eye from Tough Times New Growth Strategies

The Conference Board is offering a new online program The world’s leading wireless companies gathered in New to help companies profit during tough economic times. The York for The Conference Board’s Wireless Conference. More new course—“Managing Through a Volatile Economy”— than two dozen senior executives examined the explosive, provides a wide range of management experience, insights, but erratic, growth of wireless technologies and prospects Alan Wexler, Vice and strategic tips. for the next year. Sessions focused on the growing cellular The program is designed to help companies deliver timely, President and war for carriers, new distribution channels, and why Japan cost-effective knowledge to their managers and other Managing Director, and Scandinavia are maintaining their technological edges. employees. The Board is working with Corpedia Education, Technology and Minerva Tautoco-Hobbs, Director of Advanced Tech- a major player in the growing e-Learning market, which Communications, nology at Answerthink, told the meeting that the name of has partnering agreements with Peter Drucker, Tom Peters, Sapient the game has become quality. “It’s the quality of the mobile and The Deming Institute, to provide exclusive content for Corporation, services provided, as well as the technology, that will drive its programs. the wireless market.” She and others cited research show- addressing the To find out how you can utilize this new resource, ing that while companies in both the United States and Board’s Wireless contact John Oldfield at 212 339 0366 or email John. Europe view mobility as important—less than 25 percent [email protected]. Conference. say they will pay more than they do now to acquire it.

Board Councils Meet in Paris, Munich, Rome

Three prominent Conference Board councils met this fall in Europe. The Council met in Rome for an overview of the changing scene in Italy. Philip Cuddeford of Towers Perrin noted that the cost of the state pension system has been reduced by several reforms but is still too high. He cited new reforms underway, and the need for a private pension system in Italy. The European Council on Investor Relations met in Dean Douglas, Munich to hear from three leaders in the Munich invest- General Manager, ment community: Christine Winkler, fund manager at IBM Wireless e- Activest; Konrad Becker, sell-side analyst at Merck, Finck Business Services, & Co.; and Günter Pollersbeck, journalist at Börse Online. Americas, at the Also, the European Council of Telecommunications gath- Gordon Swanson of Microsoft, chats with Minerva Tautoco- Board’s Wireless ered in Paris at a meeting hosted by Jonathan Stretch, Hobbs of Answerthink, at the Wireless Conference. Vice President of AT&T Business EMEA. Conference. Responding to Terrorism: Zarnowitz: Recession A New Resource Likely to be Short

Critical business responses to terrorism and other issues While the United States has fallen into its first recession are now available from The Conference Board. The in a decade, a consensus is building that it will be both Board’s new reports—entitled Executive Action—deliver mild and short. The terrorist attacks this September clearly rapid information on a wide range of issues. deepened the economic downturn, says Conference Board The new service pinpoints vital resources for execu- Economic Counselor Victor Zarnowitz, one of six mem- tives covering safety and security issues, human resources bers of a special committee at the National Bureau of problems, operational challenges, customer relations and Economic Research that officially determines the begin- branding issues, and community involvement. ning and end of recessions. But he notes that The Con- If you haven’t yet profited from this timely informa- ference Board is forecasting growth of about 1 percent tion, go to the Board’s website: www.conference-board.org. Victor Zarnowitz next year.

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Top Bush Advisor Warns About New Spending Spree

Mitchell E. Daniels, a top economic adviser to President Bush and Director of the U.S. Office of Management and Budget, said that the government is being deluged with spending requests. He told business leaders at The Conference Board’s Annual Meeting that in the aftermath of the terrorist attacks and amid a weakening world economy, a massive increase in government spending could pose a further threat to the U.S. economy. “It might be autumn every- where else, but in Washington, it’s springtime for big spenders,” Daniels said. “Overnight, a climate of fiscal restraint has been dispelled. We now face a great risk of runaway spending, the erosion of the long-term surpluses we have been anticipating, and the erection of a much Mitchell Daniels, larger permanent federal government.” U.S. Budget Top Financial Executives He said government funds are now “the target Director, meets the of opportunistic spending sorties masquerading as press at The Meet in Madrid ‘emergency’ needs.” Conference Board’s Top European financial executives examined latest glob- Annual Dinner in alization trends at a Conference Board meeting in Madrid. New York. Members of the Board’s European Council of Financial Technology Keeps U.S. in Executives heard leaders from the energy and financial services sectors discuss emerging strategies to spur World Productivity Lead globalization. José Luis Palomo, Director of Finance at Endesa, said It’s using, not making, information and communications his company has solidified its leadership position in the technologies that keeps the United States ahead of the energy field and is expanding into new markets and new rest of the world in productivity gains. Europe and many businesses. “Globalization,” he said, is “an unstoppable other parts of the world continue to lag. trend.” Georges Ugeux, head of the New York Stock A new Conference Board study shows that while the Exchange’s international division, said international trad- United States scored sharp gains in productivity during ing now accounts for 11 percent of all trading and is the last half of the last decade, most major European growing. He said recent developments signal further countries suffered declines. The reason is not worldwide growth in the global equity markets. dominance in production. Although the United States leads in the production of computers and semiconduc- tors, such countries as Finland and Japan have compet- Conference Board Indicators itive advantages in wireless communications equipment and robotics. Barbara Babcock, Now in Nine Countries “The gain in U.S. productivity is due more to the use Corporate Vice of information and communications technology than its President and With the launch of new economic indicators in Spain, The production,” says Robert McGuckin, Director of Eco- President of Conference Board now produces Leading Economic Indexes nomic Research at The Conference Board. e-Business Services for nine nations. While under-investment in new technologies and struc- Besides the United States and Spain, the Board’s at Unisys, described tural rigidity keeps Europe behind, the study says reforms indexes now cover France, the United Kingdom, Ger- and the introduction of the euro could give Europe a her company’s new many, Korea, Japan, Australia, and Mexico. Within the long-needed lift. strategy to drive next year, more than 15 nations will be in The Confer- Source: Perspectives on a Global Economy: Making The Most of the Infor- Internet business ence Board’s global indicators network. For the first time, mation Age — Productivity and Structural Reform in the New Economy, at a Conference these timely new indexes provide early warning systems Research Report R-1301-01-RR, The Conference Board Board meeting in for recessions and make it easier to compare the New York. economic health of different nations.

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