THE CONFERENCE BOARD newsletter Fall 2002 Charles R. Shoemate on the Mario Monti Briefs Challenges Facing Business The Conference Board Mario Monti, European Commissioner for Competition, gave The Conference Board’s and Restoring Public Trust Board of Trustees a timely update on economic and legal relationships between the United States and Europe. Charles R. Shoemate was Chairman, He explored a wide range of issues, from President and CEO of Bestfoods until it was how to deal with illegal cartels and mergers acquired by Unilever in 2000. He became to liberalizing trade. Monti said that jurisdic- an advisory director in 2001. He is a tions in Europe and the United States are Director of Cigna Corporation, International working closely together and reach agreement Paper Company, Texaco Inc. and is a on the vast majority of cases before them. former Chairman of the Board of Trustees Cat The Conference Board. Q: What is the greatest single challenge facing business? What are the barriers Charles R. Shoemate to success? Shoemate: The single greatest business challenge is to maintain worldwide eco- open markets, can produce sustainable eco- nomic liberalization and growth. nomic growth and improvement in the well Mario Monti (center), Commissioner, Competition Directorate-General, European Commission, at In the short term, the barriers are the dis- being of all that participate in the “system.” The Conference Board’s Trustees Meeting in Europe. trust and the crises of confidence in the busi- The barriers to success are in some ways ness establishment that have resulted from inherent in the strengths of the system. Per- the high-profile failures in a few large U.S. sonal choice, linkage of rewards to personal corporations. Although the most recent effort, freedom of action, openness, and problems have involved questionable transparency are what make the system work No Double-Dip Ahead accounting and ethical lapses in U.S. cor- and also what allows excesses and abuse to porations, none of the world’s businesses or occur. The good news is that the benefits of U.S. economic growth will rise in the third governments is immune from excesses that free enterprise and open economies are and fourth quarters of 2002, according to the undermine confidence. widely recognized and they are firmly estab- latest analysis from The Conference Board. I can recall crises of confidence in Eastern lished. Open political systems are also adept “The recent U.S. stock market declines will and Western Europe, Asia, and Latin Amer- at self-correction. have a bigger impact on businesses than con- ica, all resulting from some type of excess or Q. What must happen to restore public sumers, as companies drive profitability and abuse. The crises of confidence in the devel- and investor trust? cash flow to meet market expectations,” says oping world have historically resulted from Shoemate: In the recent U.S. problems, Gail D. Fosler, Senior Vice President and Chief issues about how the benefits of free market restoration of public and investor trust Economist of The Conference Board. “A so- capitalism and open trade regimes are shared requires swift punishment of those who broke called double-dip recession in the United States within the population. Establishment of strong laws or abused the trust. That is inherent in is practically impossible without some unex- democracies is the key in these cases. our free market system. The corrective pected external shock to consumer prices or Q. What about in the long-term? actions currently being undertaken in the national security. The concern going forward Shoemate: Longer term, we will undoubt- United States have been swift and balanced. is now growing deflationary pressures in the edly see other types of excesses or abuses Stronger accounting oversight, improved global business environment and the absence of the economic system, which will require transparency in executive compensation, of any signs of long-term structural strength correction. The good news is that our West- and clarity on responsibility for reporting particularly in emerging markets.” ern free market capitalism, when coupled corporate results are right on the Source: StraightTalk, July/August 2002,The Conference Board with stable, enlightened governments and mark. The high level of publicity of the L CONTINUED PAGE 2 THE CONFERENCE BOARD CONTINUED FROM PAGE 1 transgressions should ensure an equally high level of Blue-Ribbon Commi publicity for the corrective actions. Hopefully, this will re-establish confidence and trust. Proposes Reforms on C Q. What role do you see The Conference Board play- ing in strengthening corporate governance? Shoemate: I see The Conference Board as a very impor- The Conference Board’s Commission on Public Trust and tant player in the current situation in the United States Private Enterprise has proposed a wide-ranging series Hanns Glatz, as it initiates, researches and shares best practices in cor- Delegate of the Board of reforms to strengthen corporate compensation prac- porate governance, transparency of results, and account- of Management, tices and help restore trust in America’s companies and ing disclosure. The record of The Conference Board as DaimlerChrysler, at capital markets. The Conference a non-political, research-oriented business organization Board’s European The 12-member Commission called for the expensing of is well known. This “brand” strength ensures that Council on Corporate stock options and for more independent compensation com- the Blue Ribbon Commission report can contribute to Communications. mittees. Among its other recommendations: compensation meaningful change. committees, not management, should hire and fire com- Q. Do you use Conference Board research? pensation consultants and directors; and top management Shoemate: My former company, Bestfoods, and I were should own substantial amounts of their companies’ stock “heavy users,” in the jargon of the consumer products for specified periods of time. business. We used The Conference Board’s research, con- Upcoming Commission reports will examine corporate ferences, networks, education, and economic reports. governance and accounting and auditing issues. Personally, I found most value in CEO forums and Gail Said the Commission report: “The Commission shares Fosler’s economic insights. I particularly valued the inter- the public anger at the misconduct leading to the cur- national conferences and forums for the global business John Bogle, Founder rent breakdown in public trust.” insights that were developed. and former Chairman, The Commission is co-chaired by Peter G. Peterson, Vanguard Group, Inc., meets the press at a Chairman of The Blackstone Group and former Secre- Conference Board tary of Commerce, and John W. Snow, Chairman, CSX More Consumers meeting. Corporation. Other members of The Conference Board’s Commission are: Buying Online John H. Biggs Chairman, President and CEO A new Conference Board barometer will help business TIAA-CREF strategists find out who’s doing what on the Internet. John Bogle Long known for its Consumer Confidence Index, The Founder and former Chairman Vanguard Group, Inc. Conference Board has created the new Consumer Internet Barometer, which provides a quarterly report of buying pat- Charles A. Bowsher former Comptroller General terns, satisfaction levels, and other critical market infor- Susan Randall, SeniorVice President, Peter Gilbert mation. The new Barometer, launched in October, is a Corporate Business Chief Investment Officer joint effort with Forrester Research and NFO WorldGroup. Services, J.P. Morgan State Employees’ Retirement System Latest findings show that more consumers are buying Chase, at the Shared Commonwealth of Pennsylvania Services meeting in products and services online. While younger families are Geneva. Andrew S. Grove the heaviest buyers, older families are rapidly catching Chairman of Intel Corporation up. But there are widespread concerns about security, Ralph Larsen which is becoming a key for companies trying to land former Chairman and CEO of Johnson & Johnson, repeat business. former Chairman of The Business Council Arthur Levitt former SEC Chairman and former Chairman of the American Business Conference Lynn S. Paine Professor John G. McLean Professor of Business Administration Stephan Fazakas, Harvard Business School Director, European Shared Services, Warren Rudman Ashland International Former Senator, Inc., at the Board’s Paul, Weiss, Rifkind, Wharton & Garrison Shared Services Paul A.Volcker Michael Skapinker, Management Editor at the Financial Times, meeting in Geneva. at the Board’s Corporate Citizenship Conference. former Chairman of the Board of Governors Federal Reserve System THE CONFERENCE BOARD ssion Corporate Citizenship Corporate Compensation Gaining Attention Once seen as a purely philanthropic activity—a source of general goodwill, with no bottom-line consequence— citizenship is becoming a central concern at leading com- panies, according to a report by The Conference Board. More and more companies are accepting corporate cit- izenship as a new strategic and managerial function with bottom-line repercussions that require their attention. Nearly 90 percent of corporate managers report that their companies have a citizenship goal as part of a state- ment of core values or business principles. The study found that these goals have been in place an average of 14 years. While traditional corporate relations, community affairs, and contributions programs predominate,