International Directory of Business Biographies

International Directory of BUSINESS BIOGRAPHIES International Directory of BUSINESS BIOGRAPHIES VOLUME 2 F-L Edited ...

Author: Neil Schlager

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International Directory of

BUSINESS BIOGRAPHIES

International Directory of

BUSINESS BIOGRAPHIES VOLUME 2 F-L Edited by Neil Schlager Produced by Schlager Group Inc.

International Directory of Business Biographies Schlager Group Inc. Staff Neil Schlager, president Marcia Merryman Means, managing editor Project Editor Margaret Mazurkiewicz

Editorial Support Services Luann Brennan

Composition Evi Seoud

Editorial Erin Bealmear, Joann Cerrito, Jim Craddock, Stephen Cusack, Miranda Ferrara, Peter M. Gareffa, Kristin Hart, Melissa Hill, Carol Schwartz, Bridget Travers, Michael J. Tyrkus

Rights Acquisitions Management Mari Masalin-Cooper, Shalice Shah-Caldwell

Product Design Jennifer Wahi

Imaging and Multimedia Dean Dauphinais, Lezlie Light, Dan Newell, Christine O’Bryan

Manufacturing Rhonda Williams

© 2005 Thomson Gale, a part of The Thomson Corporation.

For permission to use material from this product, submit your request via Web at http://www.gale-edit.com/permissions, or you may download our Permissions Request form and submit your request by fax or mail to:

Cover photographs reproduced by permission of AP/Wide World Photos: (from left to right) Richard D. Parsons, chairman and chief executive officer of Time Warner; Carly Fiorina, chairwoman, chief executive officer, and president of Hewlett-Packard Company; William Clay Ford Jr., president and chief executive officer of Ford Motor Company; and Nobuyuki Idei, chief executive officer of Sony Corp.

Thomson and Star Logo are trademarks and Gale and St. James Press are registered trademarks used herein under license.

Permissions Thomson Gale 27500 Drake Rd. Farmington Hills, MI 48331-3535 Permissions Hotline: 248-699-8006 or 800-877-4253, ext. 8006 Fax: 248-699-8074 or 800-762-4058

For more information, contact Thomson Gale 27500 Drake Rd. Farmington Hills, MI 48331-3535 Or you can visit our Internet site at http://www.gale.com ALL RIGHTS RESERVED No part of this work covered by the copyright hereon may be reproduced or used in any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping, Web distribution, or information storage retrieval systems—without the written permission of the publisher.

While every effort has been made to ensure the reliability of the information presented in this publication, Thomson Gale does not guarantee the accuracy of the data contained herein. Thomson Gale accepts no payment for listing; and inclusion in the publication of any organization, agency, institution, publication, service, or individual does not imply endorsement of the editors or publisher. Errors brought to the attention of the publisher and verified to the satisfaction of the publisher will be corrected in future editions.

LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA International directory of business biographies / Neil Schlager, editor ; Vanessa TorradoCaputo, assistant editor; project editor, Margaret Mazurkiewicz ; produced by Schlager Group. p. cm. Includes bibliographical references and indexes. ISBN 1-55862-554-2 (set hardcover : alk. paper) — ISBN 1-55862-555-0 (volume 1) — ISBN 1-55862-556-9 (volume 2) — ISBN 1-55862-557-7 (volume 3) — ISBN 1-55862-558-5 (volume 4) 1. Businesspeople—Biography. 2. Directors of corporations—Biography. 3. Executives—Biography. 4. Industrialists—Biography. 5. Businesspeople—Directories. 6. Directors of corporations—Directories. 7. Executives—Directories. 8. Industrialists—Directories. I. Schlager, Neil, 1966- II. Torrado-Caputo, Vanessa. III. Mazurkiewicz, Margaret. IV. Schlager Group. HC29.I57 2005 338.092’2—dc22

2004011756

British Library Cataloguing in Publication Data. A Catalogue record of this book is available from the British Library. Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

Contents

PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE vii–viii LIST OF ADVISERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix LIST OF CONTRIBUTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi LIST OF ENTRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii–xxii ENTRIES VOLUME 1: A-E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–466 VOLUME 2: F-L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–505 VOLUME 3: M-R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–457 VOLUME 4: S-Z . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–403

NOTES ON CONTRIBUTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405–410 NATIONALITY INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411–417 GEOGRAPHIC INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419–425 COMPANY AND INDUSTRY INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427–447 NAME INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449–465

International Directory of Business Biographies

v

Preface

Welcome to the International Directory of Business Biographies (IDBB). This four-volume set covers more than 600 prominent business people from around the world and is intended for reference use by management students, librarians, educators, historians, and others who seek information about the people leading the world’s biggest and most influential companies. The articles, all of which include bylines, were written by a team of journalists, academics, librarians, and independent scholars. (See Notes on Contributors.) Approximately 60 percent of the entrants are American, while 40 percent are from other countries. Articles were compiled from material supplied by companies for whom the entrants work, general and academic periodicals, books, and annual reports. With its up-to-date profiles of important figures from the world of international business, IDBB complements the popular St. James Press series International Directory of Company Histories (IDCH), which provides entries on the world’s largest and most influential companies. Leaders of many of the companies covered in IDCH are profiled in IDBB.

INCLUSION CRITERIA

The list of entrants in IDBB was developed by the editors in consultation with the academics and librarians serving on IDBB ’s advisory board. (See List of Advisers.) The majority of people profiled here are current or recent chief executives of large, publicly traded companies such as those found on the Fortune 500 and Global 500 lists of companies compiled by Fortune magazine. Among this group are familiar names such as H. Lee Scott Jr. of Wal-Mart, Carly Fiorina of Hewlett-Packard, John Browne of BP, and Nobuyuki Idei of Sony. Retired or former executives like GE’s Jack Welch and Vivendi Universal’s Jean-Marie Messier also make the list, as do a few deceased individuals who were active in the past few years, including Jim Cantalupo of McDonald’s and Chung Ju-yung of Hyundai. In addition, we have included other high-profile individuals whose companies are privately held or are not large enough to make the Fortune lists but whose influence makes them valuable candidates for study, such as Kase L. Lawal of CAMAC Holdings, Oprah Winfrey of Harpo Productions, and Terence Conran of Conran Holdings. We also mix in upand-coming executives who may not currently be chief executives but who are rapidly gaining prominence in the business


world; among this group are Indra K. Nooyi of PepsiCo and Lachlan and James Murdoch of News Corporation. For these latter categories, we have attempted to highlight female and minority executives who, even in the early twenty-first century, continue to be underrepresented in the upper echelons of the corporate world. Readers should note that our aim was to produce balanced, objective profiles of influential executives, and individuals were not disqualified if they or their companies were enmeshed in scandal. Thus, the set includes articles about executives such as Ken Lay of Enron, Dennis Kozlowski of Tyco International, and Martha Stewart of Martha Stewart Living Omnimedia, all of whom were indicted on criminal charges in the early 2000s.

ARRANGEMENT OF SET AND ENTRY FORMAT

The four-volume set is arranged alphabetically by surname. An alphabetical list of subjects is included in the frontmatter. Within each entry, readers will find the following sections: Fact Box: This section provides details about the subject’s birth and death dates, birth and death locations, family information, educational background, work history, major awards, and publications. For entrants affiliated with a specific company at the time of publication, the Fact Box also includes the company address and URL address, except in cases where the subject is no longer affiliated with a company. Main Text: This section provides a narrative overview of the subject’s life, career trajectory, and influence. The text includes subheadings to assist the reader in navigating the key periods in the subject’s life. Sources for Further Information: This section lists books, articles, and Web sites containing more information about the subject. Also included here are sources from which quotations are drawn in the main text. See also: At the end of most articles is a cross-reference to applicable company profiles in the International Directory of Company Histories.

vii

Preface INDEXES

IDBB includes four indexes. The Nationality Index lists entrants according to their country of birth, country of citizenship (if different from country of birth), and country of long-term residence. The Geographic Index lists entrants according to the country of the headquarters of operation or the country where the subject works (if different from country of the headquarters); the index lists entrants according to their employer at the time of publication as well as significant previous companies where they were employed. The Company and Industry Index lists entrants according to their current and former companies of employment as well the industries in which those companies operate; in this latter index, industries are listed in small caps, while companies are listed in roman font with upper- and lowercase letters. The Name Index lists all entrants as well as other significant individuals discussed in the text.

ACKNOWLEDGMENTS

Numerous individuals deserve gratitude for their assistance with this project. I am indebted to everyone at St. James Press

viii

and Thomson Gale who assisted with the production, particularly Margaret Mazurkiewicz, who provided crucial help at all stages of production; I also thank Chris Nasso, Peter Gareffa, and Bridget Travers for their support. At Schlager Group, Marcia Merryman Means elucidated style matters and coordinated the copyediting and fact-checking process, while Jayne Weisblatt and Vanessa Torrado-Caputo provided valuable editorial assistance. Neil Schlager

SUGGESTIONS WELCOME

Comments and suggestions from users of IDBB on any aspect of the product are cordially invited. Suggestions for additional business people to include in future new editions or supplements are also welcomed. Please write: The Editor International Directory of Business Biographies Thomson Gale 27500 Drake Rd. Farmington Hills, MI 48331-3535


Advisers

Vincenzo Baglieri, PhD Director, Technology Management Department Bocconi School of Management Bocconi University Milan, Italy

Karl Moore, PhD Associate Professor Faculty of Management McGill University Montreal, Canada

Lyda Bigelow, PhD Assistant Professor of Organization and Strategy Olin School of Business Washington University in St. Louis St. Louis, Missouri

Mohammad K. Najdawi, PhD Senior Associate Dean and Professor Department of Decision and Information Technologies College of Commerce and Finance Villanova University Villanova, Pennsylvania

Diane Davenport, MLS Reference Manager Berkeley Public Library Berkeley, California

Judith M. Nixon, MLS Management and Economics Librarian Purdue University West Lafayette, Indiana


ix

Contributors

Elisa Addlesperger

Lauri Harding

David Petechuk

Barry Alfonso

Lucy Heckman

Anastasis Petrou

Margaret Alic

Ashyia N. Henderson

A. Petruso

Don Amerman

Eve M. B. Hermann

Luca Prono

William Arthur Atkins

John Herrick

Trudy Ring

Kirk H. Beetz

Jeremy W. Hubbell

Nelson Rhodes

Patricia C. Behnke

Dawn Jacob Laney

Celia Ross

Mark Best

Michelle Johnson

Joseph C. Santora

Alan Bjerga

Jean Kieling

Lorraine Savage

Jeanette Bogren

Barbara Koch

Thomas Borjas

Deborah Kondek

Carol Brennan

Alison Lake

Jack J. Cardoso

Sandra Larkin

C. A. Chien

Josh Lauer

Peter Collins

Anne Lesser

Stephen Collins

David Lewis

Matthew Cordon

Jennifer Long

Peggy Daniels

DeAnne Luck

Amanda de la Garza

Susan Ludwig

Ed Dinger

David Marc

Catherine Donaldson

William F. Martin

Jim Fike

Beth Maser

Virginia Finsterwald

Doris Morris Maxfield

Tiffeni Fontno

Ann McCarthy

Katrina Ford

Patricia McKenna

Stephanie Watson

Erik Donald France

Lee McQueen

Valerie Webster

Lisa Frick

Jill Meister

S. E. Weigant

Margaret E. Gillio

Carole Sayegh Moussalli

Kelly Wittmann

Larry Gilman

Miriam C. Nagel

Lisa Wolff

Meg Greene

Catherine Naghdi

Timothy Wowk

Paul Greenland

Caryn E. Neumann

Ronald Young

Barbara Gunvaldsen

John M. Owen

Barry Youngerman

Timothy L. Halpern

Carol Pech

Candy Zulkosky


M. W. Scott Cathy Seckman Kenneth R. Shepherd Stephanie Dionne Sherk Hartley Spatt Janet P. Stamatel Kris Swank François Therin Marie L. Thompson Mary Tradii Scott Trudell David Tulloch Michael Vandyke Maike van Wijk

xi

List of Entrants

A

Colleen Barrett

F. Duane Ackerman

Craig R. Barrett

Josef Ackermann

Matthew William Barrett

Shai Agassi

John M. Barth

Umberto Agnelli

Glen A. Barton

Ahn Cheol-soo

Richard Barton

Naoyuki Akikusa

J. T. Battenberg III

Raúl Alarcón Jr.

Claude Bébéar

William F. Aldinger III

Pierre-Olivier Beckers

Vagit Y. Alekperov

Jean-Louis Beffa

César Alierta Izuel

Alain Belda

Herbert M. Allison Jr.

Charles Bell

John A. Allison IV

Luciano Benetton

Dan Amos

Robert H. Benmosche

Brad Anderson

Silvio Berlusconi

Richard H. Anderson

Betsy Bernard

G. Allen Andreas Jr.

Daniel Bernard

Micky Arison

David W. Bernauer

C. Michael Armstrong

Wulf H. Bernotat

Bernard Arnault

Gordon M. Bethune

Gerard J. Arpey

J. Robert Beyster

Ramani Ayer

Jeff Bezos Pierre Bilger

B

Alwaleed Bin Talal

Michael J. Bailey

Dave Bing

Sergio Balbinot

Carole Black

Steve Ballmer

Cathleen Black

Jill Barad

Jonathan Bloomer

Don H. Barden

Alan L. Boeckmann

Ned Barnholt

Daniel Bouton


xiii

List of Entrants Martin Bouygues

Chen Tonghai

Jack O. Bovender Jr.

Kenneth I. Chenault

Peter Brabeck-Letmathe

Fujio Cho

Richard Branson

Chung Ju-yung

Edward D. Breen

Carla Cico

Thierry Breton

Philippe Citerne

Ulrich Brixner

Jim Clark

John Browne

Vance D. Coffman

Wayne Brunetti

Douglas R. Conant

John E. Bryson

Phil Condit

Warren E. Buffett

Terence Conran

Steven A. Burd

John W. Conway

H. Peter Burg

John R. Coomber

Antony Burgmans

Roger Corbett

James Burke

Alston D. Correll

Ursula Burns

Alfonso Cortina de Alcocer David M. Cote

C

Robert Crandall

Louis C. Camilleri

Mac Crawford

Lewis B. Campbell

Carlos Criado-Perez

Philippe Camus

James R. Crosby

Michael R. Cannon

Adam Crozier

Jim Cantalupo

Alexander M. Cutler

Thomas E. Capps

Márcio A. Cypriano

Daniel A. Carp Peter Cartwright

D

Steve Case

David F. D’Alessandro

Cássio Casseb Lima

Eric Daniels

Robert B. Catell

George David

William Cavanaugh III

Richard K. Davidson

Charles M. Cawley

Julian C. Day

Clarence P. Cazalot Jr.

Henri de Castries

Nicholas D. Chabraja

Michael S. Dell

John T. Chambers

Guerrino De Luca

J. Harold Chandler

Hebert Demel

Morris Chang

Roger Deromedi

xiv


List of Entrants Thierry Desmarest

Jim Farrell

Michael Diekmann

Franz Fehrenbach

William Dillard II

Pierre Féraud

Barry Diller

E. James Ferland

John T. Dillon

Dominique Ferrero

Jamie Dimon

Trevor Fetter

Peter R. Dolan

John Finnegan

Guy Dollé

Carly Fiorina

Tim M. Donahue

Paul Fireman

David W. Dorman

Jay S. Fishman

Jürgen Dormann

Niall FitzGerald

E. Linn Draper Jr.

Dennis J. FitzSimons

John G. Drosdick

Olav Fjell

José Dutra

John E. Fletcher William P. Foley II

E

Jean-Martin Folz

Tony Earley Jr.

Scott T. Ford

Robert A. Eckert

William Clay Ford Jr.

Rolf Eckrodt

Gary D. Forsee

Michael Eisner

Kent B. Foster

John Elkann

Charlie Fote

Larry Ellison

Jean-René Fourtou

Thomas J. Engibous

H. Allen Franklin

Gregg L. Engles

Tom Freston

Ted English

Takeo Fukui

Roger Enrico

Richard S. Fuld Jr.

Charlie Ergen

S. Marce Fuller

Michael L. Eskew

Masaaki Furukawa

Matthew J. Espe Robert A. Essner

G

John H. Eyler Jr.

Joseph Galli Jr. Louis Gallois

F

Christopher B. Galvin

Richard D. Fairbank

Roy A. Gardner

Thomas J. Falk

Jean-Pierre Garnier

David N. Farr

Bill Gates


xv

List of Entrants David Geffen

George J. Harad

Jay M. Gellert

William B. Harrison Jr.

Louis V. Gerstner Jr.

Richard Harvey

John E. Gherty

William Haseltine

Carlos Ghosn

Andy Haste

Charles K. Gifford

Lewis Hay III

Raymond V. Gilmartin

William F. Hecht

Larry C. Glasscock

Bert Heemskerk

Robert D. Glynn Jr.

Rainer Hertrich

Francisco González Rodríguez

John B. Hess

David R. Goode

Laurence E. Hirsch

Jim Goodnight

Betsy Holden

Fred A. Goodwin

Chad Holliday

Chip W. Goodyear

Katsuhiko Honda

Andrew Gould

Van B. Honeycutt

William C. Greehey

Kazutomo Robert Hori

Stephen K. Green

Janice Bryant Howroyd

Hank Greenberg

Ancle Hsu

Jeffrey W. Greenberg

Günther Hülse

Robert Greenberg

L. Phillip Humann

J. Barry Griswell

Franz Humer

Rijkman W. J. Groenink Andy Grove

I

Oswald J. Grübel

Nobuyuki Idei

Jerry A. Grundhofer

Robert Iger

Rajiv L. Gupta

Jeffrey R. Immelt

Carlos M. Gutierrez

Ray R. Irani

H

J

Robert Haas

Michael J. Jackson

David D. Halbert

Tony James

Hiroshi Hamada

Charles H. Jenkins Jr.

Toru Hambayashi

David Ji

Jürgen Hambrecht

Jiang Jianqing

John H. Hammergren

Steve Jobs

H. Edward Hanway

Jeffrey A. Joerres

xvi


List of Entrants Leif Johansson

Richard Jay Kogan

Abby Johnson

John Koo

John D. Johnson

Timothy Koogle

John H. Johnson

Hans-Joachim Körber

Robert L. Johnson

Richard M. Kovacevich

William R. Johnson

Dennis Kozlowski

Lawrence R. Johnston

Sallie Krawcheck

Jeff Jordan

Ronald L. Kuehn Jr.

Michael H. Jordan

Ken Kutaragi

Abdallah Jum’ah Andrea Jung

L

William G. Jurgensen

Alan J. Lacy A. G. Lafley

K

Igor Landau

Eugene S. Kahn

Robert W. Lane

Akinobu Kanasugi

Sherry Lansing

Isao Kaneko

Jean Laurent

Ryotaro Kaneko

Kase L. Lawal

Mel Karmazin

Bob Lawes

Karen Katen

Ken Lay

Jeffrey Katzenberg

Shelly Lazarus

Jim Kavanaugh

Terry Leahy

Robert Keegan

Lee Yong-kyung

Herb Kelleher

David J. Lesar

Edmund F. Kelly

R. Steve Letbetter

Mikhail Khodorkovsky

Gerald Levin

Naina Lal Kidwai

Arthur Levinson

Kerry K. Killinger

Kenneth D. Lewis

James M. Kilts

Victor Li

Eric Kim

Li Ka-shing

Kim Jung-tae

Alfred C. Liggins III

Ewald Kist

Liu Chuanzhi

Gerard J. Kleisterlee

J. Bruce Llewellyn

Lowry F. Kline

Lu Weiding

Philip H. Knight

Iain Lumsden

Charles Koch

Terry J. Lundgren


xvii

List of Entrants

M

Vittorio Mincato

Ma Fucai

Rafael Miranda Robredo

John J. Mack

Fujio Mitarai

Terunobu Maeda

William E. Mitchell

Joseph Magliochetti

Hayao Miyazaki

Marjorie Magner

Anders C. Moberg

Richard Mahoney

Larry Montgomery

Steven J. Malcolm

James P. Mooney

Richard A. Manoogian

Ann Moore

Mohamed Hassan Marican

Patrick J. Moore

Reuben Mark

Giuseppe Morchio

Michael E. Marks

Tomijiro Morita

J. Willard Marriott Jr.

Angelo R. Mozilo

R. Brad Martin

Anne M. Mulcahy

Strive Masiyiwa

Leo F. Mullin

David Maxwell

James J. Mulva

L. Lowry Mays

Raúl Muñoz Leos

Michael B. McCallister

James Murdoch

W. Alan McCollough

Lachlan Murdoch

Mike McGavick

Rupert Murdoch

Eugene R. McGrath

N. R. Murthy

Judy McGrath

A. Maurice Myers

William W. McGuire Tom McKillop

N

Henry A. McKinnell Jr.

Kunio Nakamura

C. Steven McMillan

Robert L. Nardelli

Scott G. McNealy

Jacques Nasser

W. James McNerney Jr.

M. Bruce Nelson

Dee Mellor

Yoshifumi Nishikawa

Jean-Marie Messier

Hidetoshi Nishimura

Gérard Mestrallet

Uichiro Niwa

Edouard Michelin

Gordon M. Nixon

Charles Milhaud

Jeffrey Noddle

Alexei Miller

Tamotsu Nomakuchi

Stuart A. Miller

Indra K. Nooyi

Akio Mimura

Blake W. Nordstrom

xviii


List of Entrants Richard C. Notebaert

Howard G. Phanstiel

David C. Novak

Joseph A. Pichler

Erle Nye

William F. Pickard Harvey R. Pierce

O

Mark C. Pigott

James J. O’Brien Jr.

Bernd Pischetsrieder

Mark J. O’Brien

Fred Poses

Robert J. O’Connell

John E. Potter

Steve Odland

Myrtle Potter

Adebayo Ogunlesi

Paul S. Pressler

Minoru Ohnishi

Larry L. Prince

Motoyuki Oka

Richard B. Priory

Tadashi Okamura

Alessandro Profumo

Jorma Ollila

Henri Proglio

Thomas D. O’Malley

David J. Prosser

E. Stanley O’Neal

Philip J. Purcell III

David J. O’Reilly Amancio Ortega

Q

Marcel Ospel

Allen I. Questrom

Paul Otellini Mutsutake Otsuka

R

Lindsay Owen-Jones

Franklin D. Raines M. S. Ramachandran

P

Dieter Rampl

Pae Chong-yeul

Lee R. Raymond

Samuel J. Palmisano

Steven A. Raymund

Helmut Panke

Sumner M. Redstone

Gregory J. Parseghian

Dennis H. Reilley

Richard D. Parsons

Steven S. Reinemund

Corrado Passera

Eivind Reiten

Hank Paulson

Glenn M. Renwick

Michel Pébereau

Linda Johnson Rice

Roger S. Penske

Pierre Richard

A. Jerrold Perenchio

Kai-Uwe Ricke

Peter J. Pestillo

Stephen Riggio

Donald K. Peterson

Jim Robbins


xix

List of Entrants Brian L. Roberts

Richard M. Scrushy

Harry J. M. Roels

Ivan G. Seidenberg

Steven R. Rogel

Donald S. Shaffer

James E. Rogers

Kevin W. Sharer

Bruce C. Rohde

William J. Shea

James E. Rohr

Donald J. Shepard

Matthew K. Rose

Yoichi Shimogaichi

Bob Rossiter

Etsuhiko Shoyama

Renzo Rosso

Thomas Siebel

John W. Rowe

Henry R. Silverman

Allen R. Rowland

Russell Simmons

Patricia F. Russo

James D. Sinegal

Edward B. Rust Jr.

Carlos Slim

Arthur F. Ryan

Bruce A. Smith

Patrick G. Ryan

Fred Smith

Thomas M. Ryan

O. Bruton Smith Stacey Snider

S

Jure Sola

Alfredo Sáenz

George Soros

Mary F. Sammons

William S. Stavropoulos

Steve Sanger

Sy Sternberg

Ron Sargent

David L. Steward

Arun Sarin

Martha Stewart

Mikio Sasaki

Patrick T. Stokes

Paolo Scaroni

Harry C. Stonecipher

George A. Schaefer Jr.

Hans Stråberg

Leonard D. Schaeffer

Belinda Stronach

Hans-Jürgen Schinzler

Ronald D. Sugar

James J. Schiro

Osamu Suzuki

Werner Schmidt

Toshifumi Suzuki

Richard J. Schnieders

Carl-Henric Svanberg

Jürgen E. Schrempp

William H. Swanson

Howard Schultz Ekkehard D. Schulz

T

Gerald W. Schwartz

Keiji Tachikawa

Louis Schweitzer

Noel N. Tata

H. Lee Scott Jr.

Sidney Taurel

xx


List of Entrants Gunter Thielen

Ted Waitt

Ken Thompson

Paul S. Walsh

Rex W. Tillerson

Robert Walter

Robert L. Tillman Glenn Tilton

Shigeo Watanabe Fumiaki Watari

James S. Tisch Barrett A. Toan Doreen Toben

Philip B. Watts Jürgen Weber

Don Tomnitz

Sandy Weill

Shoichiro Toyoda

Serge Weinberg

Tony Trahar

Alberto Weisser

Marco Tronchetti Provera

Jack Welch

Donald Trump

William C. Weldon

Shiro Tsuda Kazuo Tsukuda

Werner Wenning Norman H. Wesley

Joseph M. Tucci Ted Turner John H. Tyson

W. Galen Weston Leslie H. Wexner Kenneth Whipple

U

Edward E. Whitacre Jr.

Robert J. Ulrich

Miles D. White

Thomas J. Usher

Meg Whitman

Shoei Utsuda

David R. Whitwam

Akio Utsumi

Hans Wijers Michael E. Wiley

V Roy A. Vallee Anton van Rossum

Bruce A. Williamson Chuck Williamson Peter S. Willmott

Thomas H. Van Weelden Daniel Vasella Ferdinand Verdonck Ben Verwaayen Heinrich von Pierer

Oprah Winfrey Patricia A. Woertz

Y Shinichi Yokoyama

W

Dave Yost

Norio Wada

Larry D. Yost

Rick Wagoner

Yun Jong-yong


xxi

List of Entrants

Z Antoine Zacharias

Zhang Enzhao Zhang Ligui Zhou Deqiang

Edward Zander

Aerin Lauder Zinterhofer

John D. Zeglis

Edward J. Zore

Deiter Zetsche

Klaus Zumwinkel

xxii


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Richard D. Fairbank ca. 1950– Chairman and chief executive officer, Capital One Financial Corporation Nationality: American.

“new age” (September 9, 1998). Employees were rewarded with stock options in addition to their salaries; senior management as well usually received the majority of their compensation in the form of stock options. Such a method of compensation gave employees on all levels a more vested interest in the success of the company. After federal regulators investigated the company’s lending practices in 2003, the compensation policy was changed, bringing Capital One out of the entrepreneurial era and back in line with traditional banking practices.

Born: ca. 1950. Education: Stanford University, BA, 1972; MBA.

COMPUTERIZED INNOVATION Career: Strategic Planning Associates, 1985–1990, partner and consultant; Signet Banking Corporation, 1990–1994, eventually head of credit-card unit; Capital One Financial Corporation, 1994–, chairman and CEO. Awards: Business Leader of the Year, Washingtonian; Top 10 CEOs, Worth; 50 Best CEOs, Worth; Influential Personalities in Financial Services, Future Banker; Entrepreneur of the Year, Credit Card Management; Excellence in Technology Award, Gartner Group. Address: Capital One Financial Corporation, PO Box 85015, Richmond, Virginia 23285-5015; http:// www.capitalone.com.

■ Richard D. Fairbank, along with his former partner Nigel Morris, was the cofounder of Capital One Financial Corporation, the firm that redesigned the credit model and revolutionized the banking and lending industry in the United States during the 1990s. Fairbank and Morris were able to use the tools of the emerging information-technology industry to target different credit plans toward different customer groups. This database marketing approach to vending credit, known as the “information-based strategy,” made Capital One a major player in the banking industry. In the first eight years of its existence the company that was spun off from Signet Banking in 1994 opened 48.6 million accounts worth a total of $53.2 billion. The company claimed that it created 10,000 new accounts daily in 2002 and that its credit cards were in use in about 12 percent of all American homes. During his early years at the helm of Capital One, Fairbank became known for his loose management style, which was described by Jennifer Kingson Bloom in American Banker as


The impetus for Fairbank’s highly successful career was his understanding of information technology and the impact it could have on the lending industry. In 1987 he and his partner Nigel Morris came up with a radical idea that would permanently change the way credit cards were issued. Most creditcard issuers had been charging holders an annual fee for the privilege of drawing on the issuer’s credit. The pair of consultants’ idea was to drop the annual fee and instead target different credit cards to specific segments of the population. The problem they faced was how to compile the demographics and other statistics that would help them sort out and identify those segments. Thus information technology came into the picture. Fairbank and Morris met with representatives of Oracle Corporation and explained their requirements: they needed a flexible database into which data from a variety of sources—ranging from information compiled by credit-card bureaus to purchased lists of consumers—could be entered. That data would then be manipulated by database-management software in order to produce a variety of reports based on different scenarios. The reports would eventually be used to produce lists of potential customers, who were carefully selected to correspond to the terms the credit-card issuer wished to offer. Such targeted marketing would, the two consultants argued, lead to huge profits based on the large numbers of customers expected to sign up through the program.

SIGNING ON Fairbank and Morris tried for a number of months to sell their targeted-marketing program to traditional banks but met

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Richard D. Fairbank

with little success. A year and a half passed before Signet Bank, a smaller player with offices in central Virginia, took a chance on their system. The young consultants agreed to manage Signet’s credit-card accounts, investing a portion of the profits they earned in the new database model. The basic information-system controls were in place by 1990, and the following year Signet launched its targeted-marketing campaign. Using models compiled over the previous several years as derived from the immense database, Signet was able to offer about three hundred different types of credit-card agreements to their customers, adjusting terms and interest rates to suit their customers’ projected preferences. The other major breakthrough that Fairbank and Morris made possible with their targeted-marketing database was the addition of the abilities to offer customers low introductory interest rates and to transfer balances from one card to another with a lower rate of interest. The introductory “teaser” rates–sometimes as low as zero percent—were meant to attract new customers and were wildly successful. The risks that Fairbank and Morris’s innovations posed met with resistance from executives trained in traditional banking practices. Top executives at Signet as well as at other banking firms doubted that the young men’s system would prove profitable. In 1991 Signet’s real-estate loan business went into a severe decline; in order to offset losses managers wanted to kill the credit-card program that Fairbank and Morris were in the process of refining. At that time, in order to save their plan, the pair conceived of the idea of the balance transfer. Customers could move debt from high-interest accounts to new Signet accounts that offered the very low “teaser” interest rates. Since many of the clientele who were attracted to these offers were low-risk borrowers—and leaped at the chance to lower their debt—the program proved enormously successful. Signet’s credit-card business doubled in size during 1992, the first year in which the corporation used Fairbank and Morris’s new financial models. Fairbank became the head of the credit-card division in 1993, when his former boss David K. Hunt left Signet. Around that time Signet revamped its entire management structure in order to improve efficiency.

tained its independence. By mid-1995 Capital One had entered the ranks of the top-ten credit-card issuers in the United States, with $8.9 billion in receivable income—an increase of 25 percent over the company’s 1994 net earnings. Earnings forecasters predicted further growth of 20 percent during 1996, the company’s third year of existence. Capital One’s main strength lay in the fact that it was not merely a credit-card issuing company but was in fact an information-gathering company that issued credit cards. The database of customer information, painstakingly compiled through years of work at Signet, allowed Capital One to identify the ideal credit-card customers—those that paid parts of their outstanding balances but kept some revolving credit. Such customers were charged interest rates ranging from 13 to 17 percent throughout the industry; Capital One sought these customers out and offered better deals in the hopes of drawing them away from their current card companies. Capital One’s success in identifying prize customers and coaxing them to transfer their accounts was imitated by several other major card-issuing bank houses, including Advanta Corporation, First USA, and MBNA Corporation. Those businesses quickly began to make the same types of customer offers that Capital One had pioneered: reduced introductory interest rates, account-balance transfers, and other special deals. The new competitors spent huge amounts on mass-mailing solicitations; but none had the one advantage that made Capital One such a high-growth performer: the complex customer database and the algorithms that turned the information therein into real market-based strategies.

INFORMATION TECHNOLOGY

STRIKING OUT ON THEIR OWN

As an information-technology–centered corporation one of Capital One’s first challenges was to deal with the mixed IT legacy that it had inherited from Signet. In 1990, in an effort to control IT costs, Signet shipped most of its informationtechnology functions out to EDS. Fairbank and Morris had felt that Capital One could manage its own IT functions more efficiently than EDS, so the two had set out to incorporate those functions into the new company’s structure. They brought in an IT specialist, the CIO Jim Donehey, to meet Capital One’s needs.

Capital One Financial Corporation was created in 1994 when Signet spun off its credit-card business into a subsidiary company; during the following year Capital One outpaced its parent corporation in sales and services. In an interview with Bloom in American Banker, Morris explained that Signet had moved from being a bank that owned a credit-card issuing company to being “a credit-card business that had a regional bank attached to it” (September 9, 1998). Capital One broke away from Signet entirely in 1995; when Signet was later taken over by First Union Corporation, the credit-card issuer main-

Donehey recognized the strengths of Fairbank and Morris’s databases, which were built on the framework designed by Oracle Corporation. However, the material portions of the new company’s IT was in a shambles. An earlier occupant had sandwiched the mainframe system between the building’s kitchen and its restrooms, leaving the data vulnerable to both fire and flood. If Capital One intended to bring major business functions, such as general-ledger accounting, purchasing, payroll, and personnel, safely back to the company from EDS, it needed new equipment, new training for IT staff, and new se-

2


Richard D. Fairbank

curity measures to protect the information. Fairbank, Morris, and Donehey also created new management structures in order to integrate IT more thoroughly into the company’s business processes. IT representatives participated in the daily management of Capital One, unlike at other corporations, where information technology was treated as a support function for marketing and other traditionally organized business departments.

BRANCHING OUT Fairbank and Morris further utilized their customer databases by diversifying from the credit-card business into other areas. One of their first such ventures was into the field of cellular-telephone services; the subsidiary America One Communications was launched in 1995. Rather than investing large sums in basic infrastructure, America One bought dead airtime from existing companies, repackaged it in the form of special deals, and then used its enormous databases to communicate those special deals to those most likely to be interested. America One thrived for five years before Capital One sold its assets off to other telecommunications companies, with the majority of the accounts—representing about 72,000 customers— going to Sprint PCS on September 30, 2000. The success of America One Communications proved that Fairbank and Morris’s information-based strategy could be applied to businesses outside the credit-card field. Fairbank went as far as to claim that the advent of modern electronic databases prefigured a marketing revolution that would rival the technology revolution that had been made possible by the modern microcomputer. He claimed that Capital One had the capacity to customize its products to satisfy the requirements of individual customers even when the company was adding 10,000 new customers each day and offering about 12,000 different variations on its credit products. All this, Fairbank implied, was the result of the targeted marketing he and Morris had pioneered.

RADICAL PAY STRUCTURES Another area in which Fairbank was a pioneer was executive compensation. Unlike other chief executives who received salaries and rewards whether their companies performed well or not, Fairbank and Morris chose to receive most of their compensation in the form of stock options. In 1998 Fairbank received no pay at all—nor any retirement plan contributions or bonuses—despite the fact that Capital One’s earnings had doubled in the previous two years. Analysts noted that Fairbank and Morris essentially bet their executive salaries on the performance of Capital One’s stock. As long as the stock continued to rise, they made money; if it faltered, on the other hand, they lost their incomes. This system as instituted by the


two young executives proved enormously popular with investors jaded by the huge salaries taken by many other corporation heads. OUT OF A PRECARIOUS POSITION Although the systems that Fairbank and Morris created worked well for Capital One, by 2002 their gung-ho tactics and looser-than-ususal management style had attracted the attention of federal and state banking regulators. The regulators questioned the managers’ methods of assessing and managing risk—that is, the algorithms at the very base of Capital One’s success. Those algorithms helped Capital One identify customers who were good credit risks, and the company used its huge portfolio of credit options to woo those customers away from their original banks. Despite the fact that Capital One had achieved an average 30 percent annual return on investments through the use of those algorithms, the threat of federal investigation drove investors away. In addition Capital One’s CFO David M. Willey was notified by the Securities and Exchange Commission that he was being investigated for insider trading, and he resigned soon afterwards. Although the federal investigators ultimately found nothing wrong with Capital One’s model of risk assessment, company stock prices plummeted during the early months of 2003 to about half their value of the previous year. Stock prices rebounded following the successful conclusion of the federal investigation. However, Fairbank and Morris saw this investigation as a sign that Capital One had finally matured and should leave the ranks of brash start-up companies and institute practices closer to those of older banks. They adjusted by revamping Capital One’s decision-making structure; in February 2004 the pair announced that the company would be run by a team of executive decision makers led by Fairbank rather than according to policies brainstormed by Fairbank and Morris on long car trips. Morris himself announced that he would leave the company on April 30, 2004, bringing to a close a partnership that had stretched back almost two decades. See also entry on Captial One Financial Corporation in International Directory of Company Histories.

SOURCES FOR FURTHER INFORMATION

Asbrand, D., “Case: Combining Operation and IT for Profitability at Capital One,” Datamation, September 1997, http://www.wiley.com/college/turban2e/pdf/part4.pdf. Bloom, Jennifer Kingson, “Capital One Says It’s Riding a Tech Revolution,” American Banker, September 9, 1998, p. 6A. ———, “Top Duo Agree to Disagree on Impact of Net,” American Banker, March 23, 1999, p. 13.

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Richard D. Fairbank Brooks, Rick, “Capital One Chairman, President Agree to Lucrative Performance-Based Deals,” Wall Street Journal, May 3, 1999. Byrnes, Nanette, “Coming of Age at Capital One: After a Regulatory Scare, Management Realizes That the Start-Up Era Is Over,” BusinessWeek, February 16, 2004, p. 81.

———, “In Brief: Capital One CEO Leads MasterCard U.S. Board,” American Banker, March 14, 2002, p. 20. ———, “As Morris Steps Aside, Questions on Capital One,” American Banker, April 23, 2003, p. 1. Meece, Mickey, “Balance-Transfer Pioneers Racing the Copycats,” American Banker, May 25, 1995, p. 14.

“Capital One, Sprint PCS Sign Marketing Agreement,” Los Angeles Newsroom, Wireless NewsFactor, October 12, 2000, http://wireless.newsfactor.com/perl/story?id=5254.

———, “Products Secret: Edge Is No Mystery,” American Banker, September 25, 1996, p. 6A.

Kleege, Stephen, “Signet Revamps Consumers Units in Wake of Card Chief’s Departure,” American Banker, June 11, 1993, p. 6.

“Richard D. Fairbank, Chairman and Chief Executive Officer,” Capital One http://www.capitalone.com/about/corpinfo/ officers.shtml.

Kuykendall, Lavonne, “Capital One Proposes New Stock Plan,” American Banker, April 14, 2004, p. 6.

Smith, Geoffrey, “The Bill Comes Due for Capital One: It Loaded Up on Subprime Accounts; Then the Economy Tanked,” BusinessWeek, November 4, 2002, p. 47.

Kuykendall, Lavonne, and W. A. Lee, “Capital One Backing Away from Teasers It Invented,” American Banker, June 14, 2001, p. 1.

“Who Earned the Pay—and Who Didn’t,” BusinessWeek, April 19, 1999, p. 75.

Lee, W. A., “In Brief: Capital One CEO Buys 150,000 Shares,” American Banker, July 22, 2002, p. 20.

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—Kenneth R. Shepherd


■■■

KIMBERLY-CLARK

Thomas J. Falk

In the mid-2000s Kimberly-Clark was the leading global manufacturer of tissue, personal care, and health-care products, also producing premium business, correspondence, and technical papers. The company marketed products with such globally recognized brand names as Cottonelle, Kleenex, Scott, Huggies, Pull-Ups, Kotex, Depend, Tecnol, Kimwipes, and WypAll. Other brands well known outside the United States included Andrex, Scottex, Page, Popee, and Kimbies. The company ran manufacturing operations in 40 countries and sold its products in more than 150 countries. In 2004 Falk directed the realignment of the company’s North American and European operations and established a unit to boost sales in emerging foreign markets. He also gave consideration to the possibility of spinning off the company’s paper, pulp, and timber operations to form a separate company.

1958– Chairman and chief executive officer, Kimberly-Clark Corporation Nationality: American. Born: 1958, in Waterloo, Iowa. Education: University of Wisconsin–Madison, BBA, 1980, Stanford University, MS, 1988. Family: Married Karen (maiden name unknown); children: one. Career: Alexander Grant & Company, 1980–1983, accountant; Kimberly-Clark Corporation, 1983–1984, internal audit staff; 1984–1986, senior auditor; 1986–1987, senior financial analyst; 1987–1989, director of corporate strategic analysis; 1989–1990, operations manager; 1990–1991, vice president of operations analysis and control; 1991–1993, senior vice president of analysis and administration; 1993–1995, group president of infant and child care; 1995–1998, group president of North American consumer products; 1998–1999, group president of global tissue and paper; 1999–2002, president and COO; 2002–2003, CEO; 2003–, chairman and CEO. Awards: Distinguished Accounting Alumnus, Department of Accounting and Information Systems, University of Wisconsin–Madison, 2002; Patrick Henry Award, National Guard Association of the United States, 2003. Address: Kimberly-Clark Corporation, 351 Phelps Drive, Irving, Texas 77038; http://www.kimberly-clark.com.

■ In 2004 Thomas J. Falk was chairman of the board of directors and chief executive officer of Kimberly-Clark Corporation. He worked for Kimberly-Clark beginning in 1983, gradually attaining positions of greater responsibility and authority over the years. As a result of his efforts Kimberly-Clark and Scott Paper operations were successfully combined following the merger that occurred in 1995. Falk was the mastermind behind the structuring of Kimberly-Clark’s global operations and its Go-To-Market project, which improved the manufacturing, distribution, promotion, and sales processes. International Directory of Business Biographies

ADVANCING CAREER Before joining the internal audit staff of Kimberly-Clark in Neenah, Wisconsin, in 1983, Falk worked for the accounting firm of Alexander Grant & Company as a certified public accountant. Falk became senior auditor at Kimberly-Clark in 1984 and senior financial analyst in 1986. He was advanced in rank in 1987 to director of corporate strategic analysis. In 1988, under Kimberly-Clark sponsorship, Falk earned a master’s of science degree in management as a Sloan Fellow at the Stanford University Graduate School of Business. Following his graduation in 1989 Falk became operations manager for infant care at Kimberly-Clark’s Beech Island, South Carolina, diaper plant. Falk was elected vice president of operations analysis and control in 1990. In this role he negotiated a rigorous set of business transactions that resulted in the sale of Spruce Falls Power and Paper, a newsprint subsidiary jointly owned by Kimberly-Clark and the New York Times, which transferred ownership control to employees. Falk was elected senior vice president of analysis and administration in 1991, reporting to the chairman and chief executive officer Wayne R. Sanders. In 1993 Falk was elected group president of infant and child care with responsibility for Huggies diapers, the company’s best-selling product, and Pull-Ups training pants. He became group president of North American consumer products

5

Thomas J. Falk

in early 1995. In this role Falk led the company’s consumer and professional-tissue businesses, U.S. consumer-business services, and U.S. consumer sales. In 1996 Falk took charge of the company’s pulp and newsprint operations as well as the premium and correspondence-papers businesses, the wetwipes business, and the staff-related operations of human resources and environment and energy. Falk was named group president with regards to global tissue and paper in 1998, adding global supervision for the company’s consumer and professional-tissue and wet-wipes businesses to his existing responsibilities. As such Falk was responsible for the company’s worldwide consumer and awayfrom-home tissue, wet wipes, and premium and correspondence-papers businesses.

AS PRESIDENT AND CHIEF OPERATING OFFICER Falk was elected president, chief operating officer, and member of the company’s board of directors in 1999. As president and chief operating officer he was responsible for running Kimberly-Clark’s daily operations. At this time chairman Sanders said of Falk, “Tom is a proven leader and has been instrumental in transforming Kimberly-Clark into one of the world’s leading consumer-products companies. He was the driver behind the successful integration of Kimberly-Clark and Scott Paper, an outstanding acquisition that has created a tremendous platform for continued profitable growth. Operating profit and cash from operations have roughly tripled versus pre-merger rates. In addition, operating margin at almost 18 percent and return on equity at 34 percent have improved by more than 50 percent” (November 17, 1999). While president and COO Falk played a key role in the turnaround of the company’s European operations, the improvements of which added more than $200 million in operating profit to the company’s annual revenues. Falk was responsible for Kimberly-Clark’s global organizational structure and its highly successful Go-To-Market initiatives. By removing unnecessary costs from the company’s supply chain, Falk was able to save more than $400 million between 1997 and 2000. Sanders continued to praise Falk for these efforts: “Through his leadership and his team’s benchmarking efforts, the tissue business has dramatically improved its cost position. Moreover, Tom is a strong advocate of investing in technologies and brands to deliver consumer-preferred products” (November 17, 1999).

AS CHAIRMAN AND CHIEF EXECUTIVE OFFICER Falk was elected chief executive officer in 2002 and additionally became chairman of the board of directors in 2003. He had dealt with the company’s daily operations since 1999, while Sanders had concentrated on communicating with Wall

6

Street analysts and investors about financial affairs. This arrangement worked well because Falk was seen as a more serious counterpart to Sanders, who was comfortable with investors and had a relaxed, clever manner; Falk had a reputation as a financial genius but lacked some of Sanders’s social graces. Over the 1990s the company more than doubled its revenue, to $14.5 billion in 2001 from $6.8 billion in 1991. Most of that growth was attributed to the 1995 acquisition of Scott Paper Company, in which Falk’s participation was instrumental. However positive Kimberly-Clark’s earnings had been from 1991 to 2001, Falk inherited a company with three major weaknesses. First, it had an industry identity as no more than a paper company, in a time when paper products were seen as having low growth potential. Second, the company had yet to resolve a decades-long rivalry with the consumerproducts giant Procter & Gamble Company. Finally, a group of impatient Kimberly-Clark investors were troubled by (and sometimes angry over) a series of missed earnings projections.

MOVING AWAY FROM PAPER At his new position Falk continued to emphasize his dedication and commitment to developing a global organization that delivered high-quality products and high-quality sales and earnings growth. However, he decided to move the company away from paper products and toward health and hygiene products. He wanted to identify Kimberly-Clark as a consumer-products company rather than a paper-products company—as Wall Street analysts continued to believe (and report) even after Kimberly-Clark had clearly shifted its operations. For many years Kimberly-Clark had been sharpening its focus on higher-value products and moving away from the papermaking industry, which had suffered from poor demand and overabundant supply. At the beginning of 2004 Falk announced that the company was further distancing itself from papermaking, in order to increase focus on consumer products, by spinning off its paper, pulp, and timber operations, including Neenah Paper and Technical Paper, along with the Nova Scotia pulp mill Pictou and the Ontario pulp mill Terrace Bay.

K-C VERSUS P&G For a long time, Falk and Kimberly-Clark were mired in a bitter rivalry with chief executive officer Alan Lafley of the Cincinnati, Ohio–based Proctor & Gamble Company (P&G). Competition between the two men and their companies increased in the 2000s as price wars intensified, generic brands grew in popularity, and prospects for new growth diminished. In order to satisfy investors’ curiosity about his ability to produce consistent growth within the company, Falk led the com-


Thomas J. Falk

pany to offer diapers, toilet papers, and paper towels that consumers would be willing to buy at premium prices. Falk had consistently and to a large degree successfully invested in technical innovations such as elastic leg openings to help diapers fit better. With $3 billion in global sales, much of which were within the United States, Kimberly-Clark’s Huggies diapers accounted for roughly 22 percent of its annual revenue.

DIAPER WARS Even though Kimberly-Clark had long dominated the diaper market, which carried higher prices and profits margins, the company had less success in other sectors. For instance, Falk tried to innovate with wet toilet paper, but consumers did not like the idea. However, Falk continued to stress new research and development with the hope that new technology would make more absorbent paper a success with consumers. The P&G leader Lafley made the company’s Pampers diapers a top priority in 2000 with a promise to focus on the company’s biggest brands. P&G invested heavily in upgrading its diapers, adding features such as stretchy sides and overlapping fasteners that could adjust sizes. It also moved to develop premium pull-up diapers, or training pants, for toilet-training toddlers. Between Falk and Kimberly-Clark on one side and Lafley and P&G on the other side, both fought back and forth for the greater market share of diapers by lowering and raising prices, increasing and decreasing the number of diapers per packages, and implementing other strategies. At one point lawyers for Kimberly-Clark sued Proctor & Gamble for false advertising (on television and in other media sources), asserting that P&G advertisers misrepresented Kimberly-Clark’s new Huggies’ Pull-Ups in saying that two-year-olds could easily remove them. P&G did not limit its aggressiveness to diapers. When Lafley was promoted to chief executive officer at P&G, the company was often relying on price increases to reach its quarterly earnings targets. At Kimberly-Clark, Falk could not afford such measures because his smaller company had fewer prod-


ucts and no high-end business, such as P&G’s beauty-care unit, to insulate the company from market fluctuations.

MISSED EARNINGS PROJECTIONS Falk made some advances in minimizing Kimberly-Clark’s identity as a pulp maker, but as of 2004 investors still doubted the company’s ability to continue to grow. Inherent in Falk’s problem was the lack of money available to the company to spend on its brands. In 2003 Colgate-Palmolive Company, another rival, spent about four cents for every dollar of sales on capital expenditures; P&G spent about five cents. Kimberly Clark spent nearly eight cents, leaving less money for advertising and other investments. Falk was unable to invest in Kimberly-Clark’s brands as fully as his more diversified competitors were.

OTHER FUNCTIONS Falk served as a director of Centex Corporation in Dallas, Texas, and as a member on the Dallas Regional Advisory Board for JP Morgan Chase. In addition he was a National Trustee of the Boys and Girls Clubs of America. Falk was a member of the Dean’s Advisory Board of the University of Wisconsin–Madison School of Business from 1997 to 2001.

See also entry on Kimberly-Clark Corporation in International Directory of Company Histories.


“Kimberly-Clark Names Thomas J. Falk President and COO,” PR Newswire, November 17, 1999, http://www.findarticles. com/cf_0/m4PRN/1999_Nov_17/57605768/p1/ article.jhtml. —William Arthur Atkins

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David N. Farr 1955– Chief executive officer, Emerson Nationality: American. Born: 1955. Education: Wake Forest University, BS; Vanderbilt University, MBA, 1980. Family: Married; children: two. Career: Emerson Electric, 1981–2000, various positions, including manager of investor relations, vice president of corporate planning and development, and chief operating officer; 2000–, chief executive officer. Awards: Named one of the Top 25 Managers in Corporate America, BusinessWeek, 2000; named one of the 100 Best Corporate Citizens, Business Ethics, 2004. Address: Emerson, 8000 West Florissant Avenue, St. Louis, Missouri 63136; http://www.gotoemerson.com/ index.jsp.

■ David N. Farr’s entire professional career was spent in key management positions with Emerson (formerly Emerson Electric), of St. Louis, Missouri. In 2000 he became the handpicked successor to chief executive officer Charles F. Knight, who had held the position for 27 years. But it was a challenge for Farr to match the 43 years of consecutive earnings increases at Emerson. Nonetheless, Farr came into his own, pulling the company through a sluggish economy and a delicate restructuring plan to reassure investors that Emerson still had room to grow.

AN EARLY RISER Upon graduation from Vanderbilt University with a master’s degree in business administration, Farr joined St. Louis–based Emerson Electric Company in 1981. Over the ensuing years he mastered a series of key positions, including manager of investor relations, vice president of corporate planning and development, president of the Ridge Tool Division, group vice president for the Industrial Components and

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David N. Farr. Bill Greenblatt/Getty Images.

Equipment Business, president of Emerson Electric AsiaPacific, chief executive officer of Emerson’s Astec joint venture; and executive vice president over Emerson’s Process Control Business. Being thus well seasoned in company operations, Farr was the heir apparent for the top positions at Emerson. In 1999 he became senior executive vice president and chief operating officer, and in October 2000 he was named chief executive officer. Taking over the helm from veteran chief executive officer Knight, Farr had his own ideas about how to put life back into the company.

NEW BLOOD, NEW LIFE At the time Farr took over as chief executive officer, Emerson was enjoying an unbroken four-decade-long chain of prov-


David N. Farr

en consistency and market strength. But therein lay the challenge: Emerson had reached an apparent plateau in growth. Known for its electric compressors and motors, the company had been ready for a long time to try something new. However, Knight had not been impressed with the idea of entering the fields of electronics or faddish technology and had not wanted to upset the positive balance sheets. Morgan Roberts of Manchester Capital Management was quoted in Forbes as saying, “The company’s big weaknesses [were] that it ha[d] no top-line growth and that it [was] so closely aligned with the economy” (December 24, 2001). Farr intended to change all that. He did not fret about bottom lines, nor did he shy away from making tough moves. Responding to the challenge, he told Phyllis Berman of Forbes (December 24, 2001): “We could have made our numbers. But the only way would have been to cut back on developing technological innovations. If we did that, we wouldn’t be prepared when the economy turns up.” He set about to effect change. Industry analysts expected great things. They were shocked when Farr announced that full-year earnings were down and that he intended to close 20 of Emerson’s 350 factories and would need to lay off 10 percent of the company’s 40,000 workers. As Berman noted in Forbes, the compulsion for consistency may have cost Emerson some opportunities, but by freeing himself of that burden, Farr could go for faster growth. During the sluggish economy of 2001 and 2002, Farr spent time implementing change and preparing Emerson for a truly global market. He moved some of the U.S.-based power plants to China and Mexico and acquired the Avansys Power Company of China, with which to integrate operations. Production at the closed U.S. motors and appliance controls plants was moved to Mexico, China, and Eastern Europe. He also began to set up call centers in the Philippines and engineering centers in India and China, taking advantage of trained professionals there. Farr said that his goal was eventually to have half of Emerson’s engineering staff in low-cost countries.

A NEW MANAGEMENT STYLE Farr steadfastly reiterated his continued loyalty to his former mentor and personal friend, Charles Knight. However, both men conceded that they had different management styles and ways to effect change. Whereas Knight had wanted to see consistent earnings for his investors, Farr preferred to seize the opportunity to prepare for future growth and long-term value, even if that meant taking a few steps back to regroup. Farr’s charismatic predecessor had run a tight ship, but Farr had a more informal management style. He did away with the monthly planning conferences, for which the company’s top 100 executives would show up with bulging black binders crammed with figures and results. Instead, Farr simply asked


each of them if his or her division was the scene of technological innovation. If not, he asked whether it was generating more cash. If neither was true, he warned them that they and their divisions might soon be gone. Farr’s replacement planning strategy also differed from Knight’s. Instead of grooming individuals in backup positions one tier down, he met annually with each general manager of Emerson’s 60 divisions to discuss organizational planning down to the middle-management level. Together, they would identify high-potential individuals, irrespective of their current positions or divisions, and enter them in Emerson’s three-stage leadership development program.

THE BOTTOM LINE Emerson was named one of the 100 Best Corporate Citizens for 2004 by Business Ethics magazine. It was the company’s second year to be so recognized. Emerson also remained one of America’s Most Admired companies in Fortune magazine’s annual rankings. Farr was awarded a 39 percent compensation increase for his 2003 performance, having successfully improved the company’s operations and competitive position in the global marketplace, according to Emerson’s proxy statement for that fiscal year. The proxy statement further noted Farr’s “outstanding leadership in another challenging year,” which resulted in stronger balance sheets and goal achievement for global market penetration, sales, and margin improvement. Despite the sluggish global economy, Farr’s good use of that time to restructure ultimately increased Emerson’s share in key markets, including the lucrative process control segment.

See also entry on Emerson in International Directory of Company Histories.


Berman, Phyllis, “Emerson Changes Its Spots,” Forbes, December 24, 2001, p. 66. Cancelada, Greg, “Compensation for Ferguson, Mo.–Based Electronics Firm Chief Rises 39 Percent,” St. Louis PostDispatch, December 11, 2003. ———, “Emerson to Close 30 More U.S. Facilities as It Plans Overseas Migration,” St. Louis Post-Dispatch, January 18, 2002. Guenther, Robert L, “Is It Time to Replace Your ReplacementPlanning Strategy?,” Harvard Management Update, April 1, 2004. “The Top 25 Managers,” BusinessWeek, January 8, 2001, p. 79. —Lauri R. Harding

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Jim Farrell 1943– Chairman and chief executive officer, Illinois Tool Works Nationality: American. Born: 1943. Education: University of Detroit, bachelor’s in electrical engineering, 1965. Career: Illinois Tool Works, 1965–1995, various positions; 1995–1996, chief executive officer; 1996–, chairman and chief executive officer. Address: Illinois Tool Works, 3600 West Lake Avenue, Glenview, Illinois 60025-8511; http://www.itw.com.

■ W. James (Jim) Farrell joined Illinois Tool Works (ITW) in 1965. He was involved in most facets of the business at ITW throughout his career, which ultimately led to him becoming CEO and chairman. ITW is a multinational manufacturer of engineered products and specialty systems, with 625 companies in 44 countries. Founded in 1910, this Fortune 200 company is categorized as a diversified industrial manufacturer. After assuming the position of chairman in 1996, Farrell doubled ITW’s sales by 2001 to $10 billion and increased its earnings by 14 percent. ITW makes products used in the automotive, construction, paper products, and food and beverage industries. Industrial machinery and equipment manufacturing are its primary areas of focus, with secondary sales in food service, food retail equipment, and metal fabrication. ITW serves construction, automotive, food-service, and general industrial markets. The company’s engineered-products segment manufactures nail guns, industrial adhesives, and automotive-transmission components. Other specialty products include paint-application equipment and welding machines.

THE 80/20 MODEL Farrell’s primary business model was based on a decentralized management style, which he termed the 80/20 approach.

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As explained on the company Web site: “Eighty percent of a business’s sales are derived from the twenty percent of its product offering being sold to key customers” (http:// www.itw.com/80_20/about_80_20.html). In other words, Farrell believed that the majority of his company’s efforts should target the 20 percent of customers who purchased the greater numbers of products. Using this philosophy, Farrell targeted his marketing accordingly while dropping smaller buyers and product lines. He told BusinessWeek online, “we think small.” When asked if ITW was inefficient, compared with more centralized companies, he replied, “We’re competitive in the marketplace. . . . It seems to me my decentralized costs are lower than your centralized costs” (September 17, 2001).

“CONQUER AND DIVIDE” Forbes magazine dubbed Farrell’s business style “conquer and divide” (April 16, 2001). Farrell frequently made acquisitions and then broke down the acquired companies into smaller units, putting managers closer to their customers and encouraging them to act like entrepreneurs. He preferred many little deals to fewer large-scale acquisitions. An example of this preference was ITW’s August 2003 acquisition of Acme Packaging Company. Like many successful companies, ITW flourished with a steady pace of acquisitions on Farrell’s watch. BusinessWeek online called Farrell a “shopaholic” based on his having bought more than two hundred companies since 1995, at a cost of over $6 billion (September 17, 2001). Farrell’s style was to buy small, niche companies and increase their efficiency. He also was not averse to selling off what he no longer needed. The company sold its holdings in consumer products such as appliances, cookware, exercise equipment, and ceramic tile. Rather than lay off employees of newly absorbed companies, Farrell preferred to decentralize management and allow greater autonomy to managers, even if it meant a loosely organized corporation. The bottom line showed that this method worked. From 1993 to 2000 ITW’s revenues doubled from $5 billion to $10 billion. Farrell felt that he could keep business managers closer to their customers with smaller, independent units headed by managers acting as entrepreneurs or smallscale CEOs.


Jim Farrell

A SMALL LAG, BUT A PROMISING FUTURE


The years 2002 and 2003 were difficult for the company, with unpredictable North American markets and weak capital spending. At an annual meeting, Farrell said he was waiting for capital investment to pick up. ITW’s reported net income in 2002 was down 12 percent from 2001 to $713 million. ITW’s 2003 operating revenues were $10 billion, and it had 47,500 employees in 2004.

“About 80/20,” Illinois Tool Works.com, http://www.itw.com/ 80_20/about_80_20.html.

To ensure the company’s continuing success in creating high-quality products based on current technology, Farrell promoted outstanding service along with the development of highly engineered products and systems. His decentralized approach allowed for higher spending on marketing, technology, and manufacturing. ITW typically ranked in the top one hundred patent recipients in the United States; in 2003 it had more than 14,000 unexpired patents and pending patent applications worldwide. This commitment to research and development consistently kept ITW’s market share high. In addition to his duties at ITW, Farrell served on the boards of Allstate, Sears, Kraft Foods, United Airlines, and the Federal Reserve Bank of Chicago.

See also entry on Illinois Tool Works Inc. in International Directory of Company Histories.


“Anemic Spending Saps ITW’s Vitality,” Crain’s Chicago Business, May 12, 2003, http://chicagobusiness.com/cgi?bin/ mag/article.pl?article_id=19981&bt=illinois+tool+works &searchType=phrase. “ITW Buys Strapping Manufacturer,” Crain’s Chicago Business, August 17, 2003, http://chicagobusiness.com/ cgi?bin/news.pl?id=9815&bt=illinois+tool+ works&searchType=phrase. Jones, Sandra, and Alby Gallun, “Let’s Make a Deal,” Crain’s Chicago Business, March 15, 2004, http:// chicagobusiness.com/cgi?bin/mag/article.pl?article_id= 21327&bt=illinois+tool+works&searchType=phrase. “Running 600 Businesses at the Same Time,” BusinessWeek Online, September 17, 2001, http://www.businessweek.com/ @@NQ5tgIUQyGzZsRYA/magazine/content/01_38/ b3749033.htm. Tatge, Mark, “Conquer and Divide,” Forbes, April 16, 2001, http://www.forbes.com/forbes/2001/0416/080.html.

—Alison Lake

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Franz Fehrenbach 1949– Chief executive officer, Bosch Group Nationality: German. Born: July 1, 1949, in Kenzingen im Breisgau, Germany. Education: University of Karlsruhe, 1975. Family: Married (wife’s name unknown); children: three. Career: Bosch Group, 1975–1976, trainee; 1976–1978, assistant in the Office of the Executive Management for Electrical and Electronic Engine Equipment Division; 1978–1980, director of Materials Planning and Logistics for Stuttgart-Feuerbach Alternator Plant; 1980–1982, commercial plant manager of Hildesheim Plant, Göttingen Branch; 1982–1985, vice president of Planning and Controlling; 1985–1989, vice president and executive vice president of Finance and Administration; Robert Bosch Corporation, Automotive Group (USA), 1989–1994, executive vice president of Starters and Alternators Division; 1994–1996, president of Starters and Alternators Division; 1996–1997, executive vice president of Finance and Administration for Diesel Systems Division; 1997–1999, president of Diesel Systems Division; 1999–2003, member of board of management; 2003–, CEO. Address: Robert Bosch Industrietreuhand, Robert-BoschPlatz 1, Postfach 10 60 50, D-70049 Stuttgart, Germany; http://www.bosch.com.

Franz Fehrenbach. Fabian Matzerath/Getty Images.

ed to face the challenges of the global economy of the 21st century.

■ One of the largest of the German manufacturing companies and best known for its automotive parts, Bosch Group made power tools, telecommunication components, appliances, thermotechnology equipment, pottery, pipes, earthenware, and automated-assembly machines. As of 2004 Bosch ranked as the second-largest car-parts maker and supplier in the world—after Delphi—garnering annual sales of EUR 36 billion. Bosch employed 236,000 people worldwide, with fewer than half that total—about 91,000—working in Germany. In 2003 Franz Fehrenbach was voted chairman of the board of management (the company’s chief executive officer) of Bosch. Compared to past Bosch CEOs, Fehrenbach was loud, bold, and diverse; he proved to be just what Bosch need-

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ROBERT BOSCH: ORIGINS OF EXCELLENCE Since its founding in 1886, Bosch Group led the car-parts industry in labor-management relations and technical innovation. The founder Robert Bosch instituted the eight-hour day by 1906 as well as welfare and insurance programs for workers and their families. Bosch globalized early by establishing subsidiary plants in Britain in 1898, the United States in 1909, and Japan in 1914. Such plants were confiscated during World War I but recovered in peacetime. During World War II, Bosch, like all German manufacturers, provided armaments


Franz Fehrenbach

for the German army. Recovery from World War II was slow due to the pariah status of Germany, the death of the founder, and the near obliteration of the company’s manufacturing facilities by Allied bombing. After recovering from World War II, Bosch sought to implement the will of its founder by investing company profits in the social fabric of Germany. Thus, in 1964 Bosch changed from a private limited company to a privately held company: the Robert Bosch Foundation was given 92 percent ownership, the Bosch family 8 percent. Subsequently Bosch Group was run like a nonprofit organization—net revenues accrued by the foundation went to philanthropic causes. By 2004 $760 million had been contributed to medical research and education. Bosch CEOs were instrumental to the company’s success; they were typically self-taught—like the founder—discrete, exacting in managerial and technical expectations, global in approach, and community minded. Hans Merkle, the third man to head the company, epitomized the Bosch CEO; his community spirit led him to make Bosch the leading maker of fuelefficiency and emissions-control components.

course of events Fehrenbach noted three things: the importance of building customer relations; how the spread of machine-tool skills coincident with globalization had enabled parts makers in Asia to rival Bosch; and the vulnerability that arose from dependence on a core line of products. During the first half of the 1990s Bosch struggled to cope with competition from Asian automakers who were perfecting cheaper manufacturing techniques as well as achieving greater savings through innovative supply handling—such as Toyota’s just-in-time system. Taking over in 1984, Marcus Bierich diversified Bosch’s component line, concerns, and interests to thwart sales declines. The antilock braking system (ABS), launched in 1985, eventually became a standard feature on most automobiles. When Bosch’s ABS proved insufficient to thwart the competition, Bierich trimmed the workforce and acquired smaller companies in order to further diversify the product line. The acquisition of Allied Signal in 1996 enabled Bosch to take the lead in complete brake systems; by the late 1990s Bosch was healthy once again. Bierich maintained Bosch’s position as a global giant through acquisition and the introduction of new core products but did very little to reform Bosch’s internal operations.

FEHRENBACH ARRIVES AT BOSCH After graduating from college, Fehrenbach found Bosch to be the ideal company at which to realize his aspirations—to improve the automobile itself as well as the society it served. Fehrenbach repeatedly emphasized his company’s philanthropic orientation, high level of employee satisfaction, and reputation for engineering excellence as appealing factors for himself as well as for many other employees at Bosch. Following his training period Fehrenbach worked on Bosch’s safety programs, most notably rollover-prevention systems. Fehrenbach soon began climbing the corporate ladder thanks to his mechanical aptitude, straightforward demeanor, and leadership abilities. Bosch’s leading position in the manufacture of components meeting the demands of environmental regulation allowed the company to charge high prices, set its own delivery schedules, and otherwise hold sway over its customers. In 1984, during Fehrenbach’s second year as a corporate-planning executive, Bosch metalworkers struck, shutting down facilities. As few customers felt loyal to Bosch due to its past haughtiness, many explored alternative sources for parts during the crisis; some never brought their business back. After the strike Bosch resumed its old habits while Fehrenbach went to a Bosch subsidiary in the United States. From there Fehrenbach observed as General Motors (GM) cut its annual purchases of fuel-injector components from Bosch by half in 1991. GM had found a supply of fuel injectors that matched Bosch’s in quality; additionally the parts were cheaper and the manufacturers more cooperative with delivery schedules. Other automakers soon followed GM’s lead, dealing a severe blow to Bosch. Through this


FROM FUEL INJECTORS TO DIESEL Continuing the company’s role in ignition development begun by its founder, Bosch developed the fuel-injection system during the energy crisis of the 1970s. Fuel injection would deliver a spray of fuel directly to the cylinder, allowing for greater control over the amount of fuel consumed; in a world of increasing oil costs the system was an important technological achievement. First placed in the Volkswagen Beetle, fuel injection was a standard feature in 50 percent of cars sold in the United States by 1984 and later became nearly universal. Fuel-injection systems were Bosch’s most important product until 1991. While Bosch as a whole struggled during the 1990s, the divisions under Fehrenbach prospered. As head of the diesel division he led Bosch’s entry into common-rail diesels. His timing was excellent, as car buyers were seeking higher mileage and lower fuel costs; diesel engines delivered both. Thanks to Fehrenbach, diesels helped European drivers accommodate soaring gas prices—by 2004, 43 percent of cars sold in Europe operated on diesel fuel. In 1998 Fehrenbach played an instrumental role in helping Fiat bring to fruition the 3L car, named for its fuel economy of 100 kilometers per 3 liters, or 83.4 miles per gallon. Bosch’s common-rail technology—the industry’s best and already a 20 percent improvement over previous diesel fuel economy—would have meant nothing if Fehrenbach had not been willing to actualize platform sharing in 1997. Historically platforms had been unique to manufacturers—a GM platform

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Franz Fehrenbach

was vastly different form that of a Mercedes. Fehrenbach understood that only the allowance of a global platform for the highest-quality components would lead to an improvement in the automobile and decreased differentiation. In short Fehrenbach acted on a belief in customer-driven development, changing the ways in which the Bosch divisions under his control operated. He understood that in a global economy Bosch would succeed if Fiat did—and if Bosch were more agile in its production techniques, supply, and labor force. In environmentally conscious Germany, only a bold thinker who understood the science and technology of the internalcombustion engine would have encouraged the diesel shift as Fehrenbach did. Unlike in the United States, where the profusion of the sport-utility vehicle (SUV) reversed gains in automotive efficiency, Europeans remained committed to a cleaner automobile. However, few people truly understood the complexity of automobile problems: from pollution to space consumption and from acceptance of auto fatalities to deleterious lifestyles, problems associated with automobiles could only be resolved through a reconstruction of lives and communities. Such a reconstruction would entail an unlikely revolution in governmental thinking and would end, for example, the construction of communities hazardous to the pedestrian. Even ending emission pollution through a changeover to hydrogenbased fuels would demand a radical reform of Western governments, opined a Ford director in the November 7, 2003, issue of Design Engineering. In heading both the fuel-injection components and diesel divisions at Bosch, Fehrenbach employed a ruse first used by U.S. manufacturers. U.S. car-makers had mastered the art of manipulating an environmentally conscious public to buy cars that appeared far more environmentally friendly but were in reality offered only incremental improvements over past models. Fehrenbach pushed the diesel engine in part by touting the facts that it produced less carbon monoxide, a poison to living creatures; less carbon dioxide, a greenhouse gas; and fewer hydrocarbons, which are carcinogens, than cars fueled by ordinary gasoline. However, diesel engines produced similar amounts of nitrous oxides, contributing to smog, and more particulates, noticeable as small black clouds issuing from tailpipes. Evidence mounted throughout the 1990s that particulates from diesel melted ice caps—the black particulates came to rest on white snow, decreasing the snow’s reflective ability and increasing its rate of heat absorption. From a scientific perspective, in other words, the environmental improvements promised by diesel could instead prove to have been globalwarming accelerants. Fehrenbach’s success in the late 1990s enabled Bosch to continue employing the ruse of the “environmentally friendly” car by producing components suited to new, stringent emission standards, masking the shift in pollution streams toward particulates.

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LOOKING FOR A SUCCESSOR Along with his engineering expertise Fehrenbach’s reputation stemmed from his approachable and down-to-earth nature; success followed every department he touched. Following the announcement of his ascendancy to the head of Bosch, one analyst commented in Automotive News Europe, “His division has been the star performer of the Bosch group. It got a jump on the rest and is still growing. They’ve not been caught” (December 16, 2002). Fehrenbach’s ability as a mechanic, his success as an administrator during a strike crisis in the late 1990s, his prosperous guidance of Bosch’s core technical divisions, and his awareness of vulnerability stemming from dependence on core products all made him an obvious candidate to succeed the outgoing CEO. When Hermann Scholl, Bosch’s chairman since 1993, announced his semiretirement, the search began for a new chief executive officer. Analysts and commentators at first assumed that Scholl’s deputy, Tilman Todenhofer, would take charge; the two other leading contenders for CEO, Fehrenbach and Siegfried Dais, were unripe, as both had become limited partners in the late 1990s—too recently for Bosch conservatives. Many further assumed that Scholl would become chairman of the supervisory board and then revive Merkle’s practice of conducting “chief meetings” with Todenhofer and as many as two other top managers—that is, Fehrenbach and Dais. In this way Scholl would effectively remain in control of Bosch in spite of his “retirement.” Instead, the departure of Wolfgang Eychmueller, a full partner, prompted the remaining partners to vote Scholl and Todenhofer to the supervisory board, Fehrenbach to CEO, and Dais to the number-two position.

GLOBALIZING BOSCH: “WE WILL REACH THE TARGET” Fehrenbach changed the role of the Bosch CEO. Far from the traditional, quiet, conservative, discrete leader, Fehrenbach brashly placed Bosch on a new road, firm in his plans for reformulation. His first goal was to take Bosch back to its historic operating margins of 8 to 9 percent, with a near-term goal of 7 percent. When challenged about the audacity of this plan in light of the reported 2004 level of 4.1 percent, Fehrenbach, as quoted in Automotive News Europe, responded unblinkingly, “We will reach the target” (April 21, 2003). The low level of profitability in 2004 reflected a number of unfavorable macroeconomic conditions, including the slow rate of recovery from the post-9/11 economic downturn in both Europe and the United States. Bosch would reach its profitability goal by writing off costs from acquisitions in 2001 and 2003. Fehrenbach’s departure from past CEOs became starker as the world economy recovered. Instead of resuming past practices or boasting of the company’s 2003 sales record, Fehrenbach pushed ahead with structural reform to make Bosch Group profits less susceptible to sudden economic shifts in any partic-


Franz Fehrenbach

ular regional economy, specifically Europe but also the United States. From his first day as Bosch’s chief Fehrenbach used tactics polished during his career at the company and by which he had built his reputation as manager. He sent an email to all employees—characterizing his use of direct communication— outlining his views of Bosch, its workers, and his position. He asked employees to maintain Bosch’s tradition of excellence and to communicate directly to him both affirmative and critical views. He was not disappointed in the response and continued to employ means of open communication with Bosch associates. The new attitude of Bosch’s CEO as well as his new strategy, which reflected the input of the supervisory board, took its first form as Project 2005. As Fehrenbach told Peter Marsh in an interview for the Financial Times, Bosch conceived of the company’s mission in two words: “globalisation and balance” (January 9, 2004). Fehrenbach based this mission on an expected wave of economic change similar to that of the decade before the global downturn of the early 2000s. The new wave would show Europe as a slow-growth area and India and China, with their road-building programs, as large-growth areas. Bosch, therefore, would emphasize operations in the latter regions. In essence Project 2005 changed the Bosch culture in both small and large ways in order to ensure its role in future global economic growth. Fehrenbach implemented benchmarking in each division, transparent account reporting, and just-in-time production techniques in manufacturing. These apparently minor changes had far-reaching consequences— and had been a decade overdue. While committed to the charitable dispositions of the firm, Fehrenbach wanted to change its ponderous nature, which often led to progress by inertia alone. He maintained the traditional rate of investment in research and development—7 percent of sales—but directed those efforts more toward customer-driven approaches, which he had previously employed in cooperation with Fiat. Thus, instead of focusing exclusively on high-performance components and the needs of the car, Fehrenbach wanted Bosch to take into consideration customer satisfaction across the entire spectrum of car consumers. With respect to internal operations Fehrenbach remained committed to Germany but not to the traditional forms of German management-labor relations. His position reflected an emerging consensus on labor among European capitalists in general. In Germany the government and the industrialists had been trying to lower worker benefits and worker pay as a mitigation of unemployment, the lingering problems of German reunification, and the pressures of globalization. For example, the tire maker Continental took the hitherto unheard-of step of increasing its workweek to 41 hours. Workers responded with action, like the wave of strikes in 2002 that affected Bosch plants in Baden-Wuerttemberg.


John Naisbitt, the renowned author of Megatrends, was wrong to predict the wholesale migration of car manufacturing to the third world as the first world became postindustrial with a monopolization of knowledge-sector jobs. While a few countries, like Britain, where postindustrial policies hollowed out industrial power, followed the paths predicted by theorists like Naisbitt, Germany and Japan did not. In particular heavy manufacturing—of, for example, cars and car components— remained the economic backbone of those two countries. They bucked the “megatrend” because the capitalization required per worker by high-skill manufacturing was viewed in those countries as the basis for a high standard of living. Fehrenbach, however, questioned the German paradigm by challenging the Bosch workforce to increase its productivity without receiving increased pay and threatening to move jobs to lower-wage countries if unions did not cooperate. In other words Fehrenbach decided to put Bosch through the kind of downsizing that the automobile industry had implemented in the United States, which championed postindustrialism, savaging the communities of Michigan unless workers agreed to concessions. On average German workers earned an hourly wage of 28 euros over a workweek of 35 hours (38.2 hours in eastern Germany). The shortening of the workweek had occurred through cooperation between German labor and industrial management, like that of Bosch, over the past century. Fehrenbach planned to achieve his profit goal for Bosch though a 12 percent reduction in labor costs, reneging on that history of negotiation. He proposed to the unions—mainly to IG Metall— that workers keep their wage packet but increase their week to 40 hours. The increase in hours per week would in turn necessitate a decrease in the workforce by one of every seven of the 103,000 workers in Germany; an IG Metall spokesman stated in the Financial Times, “That is completely unacceptable” (December 16, 2003). When outright acceptance proved unfeasible, Fehrenbach began the transition to 40-hour workweeks by implementing the increase on specific projects. With respect to automation and the capitalization of the labor force, Fehrenbach acknowledged, “The opportunities for substituting automation for labour are becoming less. And at any rate, installing automation is not cost free. It can be an expensive way to keep productivity levels high” (Financial Times, January 9, 2004). Fehrenbach thus admitted his belief in postindustrial theory and indicated the rationale he would use to cut labor costs. Moreover, Fehrenbach dismissed criticism of global postindustrialism, like the one articulated by Financial Times writer Eamonn Fingelton, based on decades of performance data showing that such investments in productivity do pay off. The bold initiatives contained in Project 2005 were comparatively small. Since the 1960s Bosch had built its reputation and global position on heavy investment in research and development and on the acquisition of smaller companies or por-

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Franz Fehrenbach

tions of larger ones—Bosch owned half of BSH, for example. Fehrenbach intended to maintain that tradition by continuing to spread the diesel gospel and by standardizing the electronic interfaces in engines. With respect to the former approach, Fehrenbach set a modest goal: that 10 percent of new cars sold in the United States by 2010 would be diesels—despite closure of the California market to diesel due to environmental regulations. Fehrenbach was confident that Bosch was better positioned to profit from such a shift than Delphi, which had only recently begun to consider the proliferation of diesel consumer cars and trucks in the United States to be a possibility. With respect to acquisitions Fehrenbach moved Bosch toward halving the percentage of car-component interests in its portfolio—to one-third—and greatly diversifying its manufacturing and geographic interests.

Fingelton, Eamonn, Unsustainable: How Economic Dogma Is Destroying American Prosperity, New York, N.Y.: Thunder’s Mouth Press, 2003. Hammerschmidt, Christoph, “Auto Innovations Bloom, but So Do Architectures—amid Bells, Whistles of Int’l Motor Show, Automakers and Suppliers Call for Standards,” Electronic Engineering Times, September 22, 2003, p. 28. Jacobson, Mark Z., “Control of Fossil-Fuel Particulate Black Carbon and Organic Matter, Possibly the Most Effective Method of Slowing Global Warming,” Journal of Geophysical Research 107, no. D19 (October 2002), p. 4410. Jewett, Dale, “Bosch Gets Direct to the Point: German Supplier’s Direct-Injection Systems Play Key Role in First 3-Liter Cars for Europe,” Automotive Industries, December 1999, p. 56. Kobe, Gerry, “Robert Bosch Corp. Automotive Group,” Automotive Industries, February 1990, pp. 69–70.

See also entry on Robert Bosch GmbH in International Directory of Company Histories.


“Bosch Gets a New Boss,” Automotive News Europe, December 16, 2002, p. 1. “Bosch’s Scholl May Have Found His Successor,” Automotive News Europe, November 4, 2002, p. 3. Bowley, Graham, “Bosch Warns on High German Labour Costs,” Financial Times (London), May 15, 1997, p. 32. Chew, Edmund, “Challenges Await New Robert Bosch Team,” Automotive News, February 24, 2003, p. 22W. ———, “Fehrenbach Already Working to Restore Bosch’s Margins,” Automotive News Europe, April 21, 2003, p. 1. Excell, Jon, “Perfect Piezo,” Design Engineering, November 7, 2003, pp. 51–52.

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Marsh, Peter, “Bosch Chief Ends the Reign of the Quiet Men: Interview with Franz Fehrenbach,” Financial Times (London), January 9, 2004. Marsh, Peter, and Hugh Williamson, “Bosch Seeks Increase to Working Hours,” Financial Times (London), December 16, 2003. Naj, Amal Kumar, “Allied Signal Selling Piece of Auto Unit,” Wall Street Journal, March 1, 1996. Parkin, Brian, “DaimlerChrysler Hit as German Strikes Spread,” Detroit News: Autos Insider, May 13, 2002, http:// www.detnews.com/2002/autosinsider/0205/13/-488472.htm. Robinson, Peter, “Small Is Big: Europeans Push toward ‘3L’ Car,” Ward’s Auto World, March 1998, p. 8. Schroter, Harm G., “The German Question, the Unification of Europe, and the European Market Strategies of Germany’s Chemical and Electrical Industries, 1900-1992,” Business History Review 67 (Autumn 1993), p. 369. —Jeremy W. Hubbell


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Pierre Féraud Chairman and director general, Foncière Euris Nationality: French. Born: In France. Career: Foncière Euris, president and director general. Address: Foncière Euris, 83 rue du Faubourg SaintHonore, 75008 Paris, France; http://www.fonciereeuris.fr.

■ Pierre Féraud was director general and head of Foncière Euris, one of the largest and most successful land management companies in France. Foncière Euris, created by and owned by the financier Jean-Charles Naouri, was established in the late 1980s. The company developed shopping centers, primarily in France but also in Poland. The company also owned apartments and houses in Paris and Marseilles and moved goods throughout France. Primarily, however, Foncière Euris made money for its stockholders through the large stakes it owned in the large French retailers Rallye, Casino, Go Sport, and Athlete’s Foot, the company’s only U.S. holding, which it sold. Foncière Euris also served its stockholders as an agent for the transfer of securities. Foncière Euris was generally regarded as one of the great success stories of modern French financing. Naouri, a former inspecteur des finances, started Foncière Euris in the late 1980s as a way of managing real estate and financing the building of shopping malls. Within months, however, the institution began to invest in retail firms that sold goods ranging from groceries to running shoes. By the beginning of the 21st century Foncière Euris, functioning as a holding group, owned more than 50 percent of the retail holding company Rallye, which in turn owned approximately 50 percent of the groceries and sundries retail group Casino Guichard-Perrachon and approximately 70 percent of the sporting goods retail group Go Sport. Both groups operated not as single retailers but as managers of a broad variety of boutiques specializing in food and sporting goods.


In the early 21st century Groupe Casino was ranked among the top food management firms in Europe, Latin America, and Asia. Its nearly nine thousand stores scattered over 14 countries brought in approximately EUR 23 billion in 2003 net sales alone. Of the nine thousand stores, approximately seven thousand were in France, the other two thousand being located in areas as diverse as Argentina, Mexico, Poland, and Taiwan. Casino also maintained a presence in the U.S. market, where it owned majority stakes in Smart and Final, a warehouse chain that carried catering and restaurant equipment. Many Casino stores in France, where most of the company’s European retail outlets were located, functioned as discount and convenience stores under names such as Petit Casino, Vival, and Spar. In France, Casino was ranked first among convenience store operators. Most Casino stores in France, however, operated in formats such as hypermarkets (under the name Géant) and supermarkets. Casino supermarkets operated under a variety of names, including Casino, Franprix, Leader Price, and Monoprix. Casino also worked in food preparation and management, owning and operating more than eight thousand restaurants under the name Casino Cafétéria. Groupe Casino was responsible for more than 90 percent of Rallye’s net sales in 2003. Rallye’s second division, Groupe Go Sport, specialized in sporting goods retailing. Unlike Casino, Go Sport had only three major boutique names: Go Sport, Courir, and Moviesport. By 2003 the group was managing France’s second–largest integrated sporting goods retail network. Sales that year alone brought the mother companies approximately EUR 638 million. More than one hundred Go Sport stores— most of them in France but smaller numbers penetrating the Belgian and Polish markets—focused on retailing sporting equipment such as golf clubs, fishing rods, bicycle helmets, tennis rackets, and other goods. Go Sport sold this equipment under its brand names Go Sport and Wannabee and sold equipment by major sporting goods manufacturers. In 2003 Groupe Go Sport included not only the equipment retailer Go Sport but also its sports shoe sales subsidiary Courir and its sports apparel sales subsidiary Moviesport. That same year Rallye divested itself of its American sports shoe retailer Athlete’s Foot, selling the branch to the store’s management on the grounds that the U.S. shops were losing too much money. In total Groupe Go Sport sales amounted to just over 3 percent of Rallye’s total net sales.

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Pierre Féraud SOURCES FOR FURTHER INFORMATION

“Euris et Jean-Charles Naouri au pied du mur,” Les echos, September 2, 1997. “Euris, un holding pesant 9,7 milliards de francs,” Les echos, October 29, 1996.

“Rallye et Foncière Euris augmentent leur capital,” Les echos, November 7, 1994. Routier, Airy, “Cette caste qui tient la France,” Le nouvel obs, http://www.nouvelobs.com/dossiers/p2052/a234176.html.

“Le groupe Euris se dote d’un nouveau pôle,” Les echos, May 26, 1994.

“Vie des entreprises chiffres et mouvements capital Foncière Euris: augmentation de 92 millions de francs,” Le monde, November 10, 1994.

“Moulinex ouvre son capital au fonds d’investissement Euris,” Les echos, May 26, 1994.

“Western Europe,” Euroweek, December 14, 2001, p. 40.

Naouri, Jean-Charles, “President’s Message,” Rallye http:// www.rallye.fr/e_president.htm.

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E. James Ferland 1942– Chairman, president, and chief executive officer, Public Service Enterprise Group Nationality: American. Born: March 19, 1942, in Boston, Massachusetts. Education: University of Maine, BS, 1964; University of New Haven, MBA, 1976. Career: Hartford Electric Light Company, 1964–1967, engineer; Millstone Nuclear Power Station, 1967–1976, operating staff; 1976–1978, superintendent; Northeast Utilities, 1978–1980, director of rate regulatory project; 1980–1983, executive vice president and CFO; 1983–1986, president and COO; Public Service Electric and Gas, 1986–1991, chairman and CEO; Public Service Enterprise Group (PSEG), 1986–, chairman, president, and CEO; PSEG Energy Holdings (formerly Enterprise Diversified Holdings Inc.), 1989–, chairman and CEO. Address: Public Service Enterprise Group, 80 Park Plaza, Newark, New Jersey 07101; http://www.pseg.com.

■ E. James Ferland served as CEO, president, and chairman of Public Service Enterprise Group (PSEG) from 1986 up through 2004, making him the longest serving CEO in the energy industry. During his tenure Ferland guided the energy and energy-services company’s growth in its home territory of New Jersey and its expansion into emerging markets around the world. Industry analysts praised Ferland’s guidance of PSEG, which earned about $800 million a year in the early 2000s, beating the Standard & Poor’s electric utilities index by 2.2 percent annually.

In 1967 he joined the initial operating staff of the Millstone Nuclear Power Station and was named station superintendent in 1976, the same year he received his MBA from the University of New Haven. With his sights set on a future in management, Ferland completed the Harvard Graduate School of Business Administration’s Program for Management Development. In 1978 Ferland was assigned to Northeast’s corporate headquarters as director of the rate regulatory project. Two years later he became executive vice president and chief financial officer, rising to the role of president and chief operating officer in 1983. He also served as director of Northeast subsidiary companies and was a director of the Vermont Yankee Nuclear Power Corporation, the Yankee Atomic Electric Company, and the Maine Yankee Atomic Power Company. On July 1, 1986, Ferland was named chairman of the board, president, and CEO of Public Service Enterprise Group, which had been created in 1985 as a holding company for the then 82-year-old Public Service Corporation. Ferland also became chairman and CEO of Public Service Electric and Gas, PSEG’s principal subsidiary, and held this position until 1991. Three years after Ferland took over the reins at PSEG, Enterprise Diversified Holdings (EDHI) was formed to begin consolidation of the company’s unregulated businesses. In 1989 Ferland was named chairman and CEO of EDHI as well, which later changed its name to PSEG Energy Holdings. Over the next decade Ferland would oversee PSEG’s growth in the northeastern United States power market and its eventual expansion overseas. By 1990 Ferland was guiding the company’s development of independent power-plant projects nationwide. In 1995 Ferland and PSEG announced a complete corporate reorganization that would include the creation of a ventures and services corporation. He oversaw the establishment of separate fossil-generation, electric and gas transmission and distribution, and customer-services business units within the Public Service Electric and Gas company, with the heads of each of these units reporting directly to him.

BEGAN AS ENGINEER After receiving his undergraduate degree in engineering from the University of Maine, Ferland began his career in 1964 as an engineer with the Hartford Electric Light Company, a subsidiary of Northeast Utilities located in Connecticut.


FACES DEREGULATION Throughout the 1990s Ferland had kept a steady hand in guiding the company’s expansion, but in 1999 he faced a revolution in the energy business. The New Jersey Board of Public

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E. James Ferland

Utilities began restructuring the way his Newark-based utility holding company would be able to do business in the state’s soon-to-be deregulated energy marketplace. Ferland realized that much of the company’s future was no longer solely in his hands. Anthony S. Twyman of the Knight Ridder/Tribune Business News reported that during an April 1999 shareholders meeting Ferland admitted to those in attendance that he and his colleagues would be “discussing our company’s future without benefit of the most important regulatory decision in our nearly one-hundred-year history” (April 20, 1999). Ferland did know, however, that as of August 1, 1999, New Jersey would institute customer choice of electricity suppliers and mandate an immediate rate cut of 5 percent to be followed by an additional 5 percent reduction in 2003. Despite the uncertainties and adjustments that the company faced as a result of deregulation, in 2000 Ferland continued expansion efforts, directing the company to purchase plants in the Midwest and one in Albany, New York. The company’s global expansion moved forward with work on plants in Poland, Taiwan, and Tunisia, in addition to plants in such places as India, Peru, and Argentina. In 2001 Ferland inaugurated the Central Eolica Alto Baguales wind-turbine project in Coyhaique, Chile. The project, which used state-of-the-art windturbine technology, would provide more than 16 percent of the electric needs of a rural area of southern Chile. The three highly computerized units represented the first wind projects in Chile; they displaced diesel generation, helping to improve air quality. Ferland flew down for the operation’s opening and, in a company press release on E-Wire, stated, “I am excited to be here for the launch of this exciting project and to illustrate PSEG’s commitment to bringing reliable, safe, and environmentally sound energy to customers around the world” (November 14, 2001). GROWS ABROAD TO BROADEN MIX Ferland set his sights on expanding the company’s limited interests in six generating plants in California as part of his effort to transform PSEG from a tightly regulated New Jersey utility into a company with growth potential mostly outside the state’s borders. His strategic plan built on the company’s diverse efforts in the energy field to allow for multiple revenue streams. By 2002 Ferland had led PSEG to become a worldwide diversified energy company serving five million gas and electric distribution customers in North and South America and operating or building more electric-generation plants in North and South America, Europe, the Middle East, Asia, and North Africa. The diversification, noted Ferland, helped the company to balance the negative impact of lower earnings by some of the company’s subsidiaries. He pointed out that reduced earnings in Argentina due to a warm winter in 2001 were counterbalanced by earnings from generation in the United States, trading operations, and other international investments.

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In an April 2003 shareholders meeting, Ferland commented on the company’s attractive mix of energy businesses and said that the company had performed well overall in the turbulent energy market. He pointed out that the company was able to avoid many of the severe problems facing other energy companies, citing liquidity issues as a prime example. As reported by PR Newswire, Ferland noted, “The steps we took to strengthen our balance sheet, along with strong cash flows, have allowed continued access to credit on favorable terms” (April 15, 2003). At the end of 2002 the company’s stock was valued at $32.10 a share; by the end of 2003 its value had risen by 36 percent to close out at $43.80 per share. Ferland admitted that some of the company’s growth decisions had not worked out, especially international ventures in Argentina, Brazil, and India, which reduced profits from overseas investments. On the other hand, his decision to keep the company’s powergenerating plants in the Northeast was a good decision as nearly every other utility in the area was selling theirs. Ferland noted that times remained challenging for all energy companies, including PSEG, as they faced such pressures as the oversupply of power plants, volatile energy prices, and highly demanding capital markets. Overall, as reported by Kevin G. DeMarrais in the Bergen County (N.J.) Record, Ferland noted, “By almost any measure, it was a remarkably successful year for us” (April 21, 2004).

FACES ENVIRONMENTAL AND SAFETY ISSUES Under Ferland’s guidance PSEG grew to produce more power more efficiently than at any other time in the company’s one-hundred-year history. He led the company to become the first to sign up for the 1993 Climate Change Challenge and, as a result, helped the company to achieve the goal of stabilizing its greenhouse-gas emissions at 1990 levels by the year 2000. He also directed PSEG Fossil, a subsidiary of PSEG’s unregulated U.S. generation company, to enter into a voluntary agreement with the New Jersey Department of Environmental Protection to reduce the carbon dioxide emissions rates at its New Jersey–based fossil-fuel power plants by 15 percent (from a 1990 baseline) by the year 2007. He also made the company a charter member of the U.S. Environmental Protection Agency’s Climate Leader Partnership, a greenhouse-gas emissions control initiative. Nevertheless, Ferland had to step up and meet some criticism concerning the company’s three-plant Salem/Hope Creek nuclear power complex. In January 2004 federal regulators asked PSEG to address what they called “work environment” concerns that could possibly have led to safety problems at the plant. The Nuclear Regulatory Commission was primarily responding to complaints from a number of workers that management did not want to listen to employees’ safety and


E. James Ferland

operational concerns. Ferland quickly issued a statement after receiving a letter from the commission outlying their concerns and noted that the company had made several management changes to correct the situation. As reported by Terrence Dopp of the New Jersey Express-Times, Ferland noted that the company had already begun to address some of these issues before being contacted by the commission and added, “We must work diligently to continue this improvement in the workplace environment and believe we have the resources and organization to do so” (January 31, 2004).

LOOKS TO THE FUTURE Ferland stated that his short-term focus on PSEG’s foreign subsidiaries would stress improvement on capital return, as he halted new investments overseas and looked to sell international plants. In the domestic sector he focused more on developing long-term contracts for PSEG’s power-generating plants to supply electricity. In addition to his duties at PSEG, Ferland was active on several boards, including The HSB Group, Foster Wheeler Corporation, the Nuclear Energy Institute, and the Committee for Economic Development. He served on the board of the United Way of Tri-State and chaired the New Jersey Chamber of Commerce and the Public Affairs Research Institute of New Jersey.

MANAGEMENT APPROACH Ferland kept a low profile concerning his business and personal life as well as his approach to management. He was known, however, for his commitment to worker diversity within PSEG and met with the Reverend Jesse Jackson Sr. in 2003 to discuss ways the company could promote further diversity. Ferland showed a consistent ability to adapt to the changing nature of the energy business and focused much of his efforts on running a tight ship. As he told Mark Hand in a 2002 interview for Public Utilities Fortnightly, he had reduced the number of people needed to run the company’s generation operations by 40 percent over the preceding 10 years, and “other parts of the country could benefit from similar kinds of competitive pressures” (June 1, 2002). Ferland often reiterated his goal of making PSEG a diversified company and commented that he believed the retail marketplace for energy companies would continue to face a tough market for some time. Energy analysts noted that Ferland deserved strong recognition for being among the best utility CEOs and strategists. In an article from PR Newswire, Ferland summed up his business philosophy this way: “In an uncertain world, you can be assured we will continue to manage our business for the long haul, with a strong, ongoing commitment to shareholder value” (April 15 2003).


See also entry on Public Service Enterprise Group Inc. in International Directory of Company Histories.


Demarrais, Kevin G., “Sustaining Last Year’s Gains Is Top Challenge for PSEG,” Bergen County (N.J.) Record, April 21, 2004. Dopp, Terrence, “Feds Criticize PSEG on Nuclear Plant Safety,” New Jersey Express-Times, January, 31, 2004, http:// www.unplugsalem.org/ 013104%20salem%20press%20coverage[1].htm. Hand, Mark, “The CEO Power Forum,” Public Utilities Fortnightly, June 1, 2002, p. 42. Johnson, Tom, “Jackson Meets with PSEG on Diversity,” Newark Star-Ledger, August 21, 2003. “PSEG Chairman Inaugurates Wind Farm in Chile,” E-Wire, http://www.ewire.com/display.cfm/Wire_ID/826. “PSEG Chairman Tells Shareholders ‘In 2002’s Tough Market, Company Had Solid Results,’” PR Newswire, April 15, 2003. Twyman, Anthony S., “New Jersey Utility Firm’s Shareholders Meet on Eve of Critical Ruling,” Knight Ridder/Tribune Business News, April 20, 1999. —David Petechuk

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■■■

Dominique Ferrero Former chief executive officer of Crédit Lyonnais; former deputy chief executive of Crédit Agricole Nationality: French.

■ When Dominique Ferrero suddenly resigned his position as deputy chief executive of French banking giant Crédit Agricole in December 2003, the news shook the international banking world. Ferrero, former chief executive officer of Crédit Lyonnais, one of France’s biggest banks, had been instrumental in arranging the huge merger between Crédit Lyonnais and Crédit Agricole. In his new position as deputy head of the combined bank—second only to Jean Laurent, chief executive officer of Crédit Agricole—Ferrero was expected to smooth the differences in corporate culture and management between the two companies in two key areas: corporate banking and investment banking. His departure stopped investors short and led to fears that the new company would not be able to deliver on planned savings and revenues in 2004. Ferrero’s reasons for leaving Crédit Agricole were never publicly given. It was widely speculated by analysts that he had “personality conflicts” with his immediate superior, Jean Laurent. However, both Crédit Agricole and analysts around the world denied that Ferrero left because of any taint of scandal— especially the Executive Life scandal that had cost former Crédit Lyonnais chairman Jean Peyrelevade his new job with Crédit Agricole. Without Ferrero, the analysts said, Crédit Agricole’s ability to meet its forecasts of both expenses and profits became questionable.

Pinault, however, the bank became a major force in European finance. Then, in 1991, Crédit Lyonnais made a questionable investment in a failing U.S. firm, the Executive Life Insurance Company. Executive Life, headquartered in California, had much of its capital invested in junk bonds. When the market for those bonds collapsed in the early 1990s, the company headed toward bankruptcy. Crédit Lyonnais stepped in with an offer to buy Executive Life. When the company’s junk bond portfolio unexpectedly recovered, the French bank reaped a profit of some $872 million. However, in buying the insurance company, and concealing the purchase by making it through a series of holding companies, Crédit Lyonnais knowingly violated a U.S. banking law that prohibited banks from owning insurers. In a court case that lasted more than five years, U.S. attorneys convinced Crédit Lyonnais and the French government to admit culpability and to pay fines totaling about $770 million, believed to be the largest settlement of a criminal case in U.S. history. The fallout from the Executive Life scandal weakened Crédit Lyonnais and made the bank a prime target for the French government’s privatizing campaign in the late 1990s. The company’s publicly owned stock was mostly privatized in 1999. The influx of private cash helped turn the bank around, and soon Crédit Lyonnais was thriving. Although the government retained 10 percent of the company’s stock, another third of the company was put on the market to attract additional capital. In December 2002 Crédit Agricole made a bid equivalent to about $16 billion in cash for the 82 percent of Crédit Lyonnais that it did not already own. The deal, which was finalized the following year, made the combination of Crédit Lyonnais and Crédit Agricole France’s largest bank and one of the largest financial institutions in Europe.

A NEW START SCANDAL SHAKES A CENTURIES-OLD INSTITUTION Long before the merger with its rival banking firm, Crédit Lyonnais had been a mainstay of banking for the French public. The institution was set up by and publicly funded through the French government in the 19th century. As a result the bank was sometimes less of a lending institution and more of a governmental position, used and manipulated by politicians. Under the leadership of men like Peyrelevade and François

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Ferrero, who had played no part in the Executive Life transaction, had a central role to play in the successful merger of Crédit Lyonnais and Crédit Agricole. His departure led to a dip in stock prices for the combined bank, in part because analysts were predicting revenue losses amounting to about 100 million euros. Crédit Agricole management, however, quickly absorbed his position. Ferrero went on to join U.S. investor Merrill Lynch as an advisor in the spring of 2004.


Dominique Ferrero

See also entries on Crédit Agricole and Crédit Lyonnais in International Directory of Company Histories.


Imeson, Michael, “Executive Life Affair Settled at Crédit Agricole,” European Banker, January 2004, p. P1. Kapner, Suzanne, “A Bank Deal Is Weighed in France,” New York Times, September 13, 2002. Kerr, Ian, “Stuck in the Merde,” EuroWeek, January 9, 2004, p. 1. “Key Resignation Reduces Investor Confidence in Crédit Agricole,” Datamonitor, December 17, 2003, http://


www.datamonitor.com/~3bd8fe0769534874b0ed44e44b99 bfab~/industries/news/article/?pid=AA4A8BAF-044B4E54-9D06-9D9A813A9062=NewsWire. Matlack, Carol, “The Humbling of a Tycoon; The Executive Life Scandal Casts a Pall on François Pinault’s Fortune,” BusinessWeek, December 8, 2003, p. 22. Tagliabue, John, “2 Big Banks in France Join Forces,” New York Times, December 17, 2002. Timmons, Heather, “World Business Briefing Europe: France: Merrill Hires Adviser,” New York Times, May 8, 2004. “World Business Briefing Europe: France: Bank Executive Resigns,” New York Times, December 16, 2003. —Kenneth R. Shepherd

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Trevor Fetter 1960– President and chief executive officer, Tenet Healthcare Corporation Nationality: American. Born: 1960, in San Diego, California. Education: Stanford University, bachelor’s degree, 1982; Harvard Business School, MBA, 1986. Family: Married Melissa Foster; children: two. Career: Merrill Lynch Capital Markets, 1982–1984, investment-banking analyst; 1986–1988, associate; Metro-Goldwyn-Mayer/United Artists, 1988–1993, senior vice president; 1993–1995, senior executive vice president and CFO; Tenet Healthcare, 1995–1996, executive vice president; 1996–2000, CFO; Broadlane, 2000–2002, chairman and CEO; 2002–, chairman; Tenet Healthcare, 2002–2003, president, 2003–, CEO. Address: Tenet Healthcare Corporation, 3820 State Street, Santa Barbara, California 93105; http:// www.tenethealth.com.

■ Trevor Fetter took over as CEO of Tenet Healthcare Corporation in 2003 when the company, which owns numerous hospitals nationwide, came under investigation for questionable billing practices. After taking over day-to-day operations of the company, Fetter focused on addressing litigious and investigative issues, stabilizing operations, and cutting costs without sacrificing quality. Known for his low-key approach to management, Fetter was praised by his coworkers and friends for his integrity and honesty, which were an asset to Tenet’s tarnished corporate image.

FROM FINANCE TO ENTERTAINMENT A native Californian, Tenet graduated from Stanford with a bachelor’s degree in economics in 1982 and went to work for Merrill Lynch Capital Managements as an investmentbanking analyst. He then took two years off to earn his MBA at Harvard. After returning to Merrill Lynch, he focused on

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corporate finance and advisory services for healthcare and entertainment companies. Tenet first met and worked for Jeffrey Barbakow at Merrill Lynch. When Barbakow left Merrill Lynch in 1988 to become chairman, president, and CEO of the movie and entertainment company Metro-Goldwyn-Mayer/United Artists, he asked Tenet to join him as senior vice president of MGM. In 1993 Fetter was appointed the company’s senior executive vice president and chief financial officer. According to entertainment industry analysts, Fetter was able to maintain a low profile in a high-profile industry while reducing the company’s debt and instilling corporate financial discipline. Many saw Fetter’s positive personal and business attributes as giving him a bright future in the entertainment industry. In an interview with Vincent Galloro for Modern Healthcare, the global corporate-finance expert Harry McMahon noted that Fetter’s “skills are in short supply in the entertainment industry; his combination of sophisticated financing skills and high integrity, in my experience, is a powerful mix” (June 2, 2003).

BEYOND THE BRIGHT LIGHTS Fetter soon demonstrated that he was not addicted to the glitz and glamour of the Hollywood entertainment industry. Rather, his loyalties appeared to lie with Barbakow. By 1995 Barbakow had left MGM and was head of the newly named Tenet Healthcare, formerly known as National Medical Enterprises. Before long he approached Fetter about joining Tenet. Fetter readily admitted that he knew little about the business of health care; to remedy this lack of insight, he spent a day with a health-care consultant learning all he could about the industry. Although his interest was piqued by the end of the day, he was still unsure that he wanted to shift careers. However, in October 1995 Tenet shocked his friends and colleagues at MGM and in the entertainment industry by deciding to join Tenet. Fetter came on board Tenet as executive vice president; a few months later he was appointed CFO. Many within Tenet’s corporate structure viewed Fetter with skepticism, since he came from outside the ranks and had little experience in health care. From 1995 to 2000 Fetter was responsible for overseeing a wide range of Tenet’s corporate functions in the areas of fi-


Trevor Fetter

nance, law, information systems, human resources, communication, and administration, among others. He also played an active role in planning future strategic initiatives, acquisitions, and ventures.

MOVES ON AGAIN In 2000 Fetter once again shocked his colleagues when he decided to leave Tenet, which at the time was the nation’s second-largest investor-owned health-care-services company. Fetter had been interviewing prospective CEOs for Broadlane, a materials-management company based in San Francisco that spun off from Tenet in 2000. After conducting several interviews, Fetter decided he was best suited for the job. As chairman and CEO of Broadlane, Fetter built a team that began with only 26 employees; by 2002 Broadlane had 280 employees and was one of the leading providers of total cost-management services to the health-care industry. Fetter said that he learned several lessons along the way. He gained experience in building a management team and was privy to an inside look at the hospital industry’s nonprofit sector. He also learned about the tendency toward risk-averse management in the field of health care, as hospitals were hesitant to accept the cost-cutting initiatives suggested by Broadlane. Fetter came to believe that risk aversion was not always the best approach. “If you ever want to truly drive change in healthcare in America, that has got to change,” he told Galloro in Modern Healthcare, going on to say that “seeking better performance has to become ingrained in the culture” (June 2, 2003).

BACK TO TENET AND CONTROVERSY Despite the fact that he had turned Broadlane into a solidly profitable company with sound capitalization, Fetter once again surprised those around him by deciding to step down as CEO. At the behest of Barbakow, Fetter signed on to assume the newly created post of president of Tenet in November 2002. Fetter rejoined Tenet when it was in the midst of turmoil. Just a few weeks earlier the company had been accused by the federal government of applying Medicare’s outlier policy too aggressively. This policy allows hospitals to bill Medicare above the average cost of care under special circumstances, typically involving severely ill patients. Because Tenet’s outlier payments were approximately four times the average hospital’s billings in this area, the company came under investigation by the Department of Health and Human Services. In addition, two surgeons at Tenet’s Redding Medical Center in California were accused of ordering unnecessary heart surgeries and other procedures, and a separate investigation was initiated by the FBI. Fetter took several steps to pull Tenet through its crisis, including instituting a new corporate policy regarding Medicare


outlier payments and voluntarily reducing the amount of outlier payments received by Tenet. Fetter focused on mending and rebuilding relationships with its clients, its workers, and the federal government. These efforts involved coming to agreements with two unions in California—Service Employees International Union and the American Federation of State, County and Municipal Employees—and getting regulatory approval for Tenet hospitals to provide managed-care discounts to uninsured patients. Fetter also oversaw the realignment of Tenet’s 114 hospitals into two divisions and made plans to sell more than a dozen of them. Fetter’s return to Tenet was interpreted as a sign that the company was seriously intent on changing.

ASSUMES CEO POSITION In May 2003 Fetter’s longtime boss and mentor Barbakow finally succumbed to pressure and stepped down from his position as chairman and CEO; Fetter assumed an acting role as head of the company. Although the intent had been for Fetter to hold the position only until Tenet found a replacement, he was named permanent CEO in September. His appointment was praised by company insiders. In an interview with Galloro for Modern Healthcare, Tenet’s nonexecutive chairman Edward Kangas noted, “Trevor has taken the lead in changing the culture and the mentality of Tenet in very short order” (September 22, 2003). Industry analysts, however, questioned Fetter’s appointment, seeing it as a possible continuation of Tenet’s questionable corporate philosophies. In addition, many believed that the appointment of someone from outside the company would have improved Tenet’s standing in negotiation with the federal government. While many conceded that Fetter’s inside knowledge of the company would allow him to make changes faster than an outsider could, the industry analyst Lori Price said in Modern Healthcare, “I personally believe that that plus is more than outweighed by the potential downside of having someone viewed as an insider to settle investigations and go through all that other stuff” (September 22, 2003). Fetter continued to focus on reestablishing Tenet’s adherence to compliance issues with government programs such as Medicare. He stressed cost cutting, asking Tenet administrators to trim approximately $350 million from annual expenses in order to improve corporate efficiency without affecting patient care or safety. He also decided to focus on Tenet’s core markets and identified 14 hospitals that were to be put up for sale or consolidated. By September 2003 the company had sold 10 of the hospitals, with gross proceeds estimated at $738 million, and closed two others. To help improve the quality of services provided by Tenet’s hospitals, Fetter created the position of senior vice president of clinical quality and hired a nationally recognized authority

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Trevor Fetter

on quality of care and patient safety to assume the post. He also launched a company-wide strategy designed to improve overall quality, control, and productivity at Tenet hospitals. As reported in Business Wire, Fetter noted, “I believe there is only one sustainable strategy for health care providers, and that is a relentless emphasis on quality” (July 23, 2003).

terview for the International Herald Tribune, “By getting smaller, we will be able to accelerate the time it takes for a turnaround” (January 29, 2004); Fetter and the company clearly stated that a return to typical industry profit margins would take several years. In the meantime, the investigations into Tenet by the federal government remained ongoing.

MANAGEMENT STYLE: NO HUBRIS

See also entry on Tenet Healthcare Corporation in International Directory of Company Histories.

Industry analysts noted that Fetter was a strategic thinker and a hands-on leader who was known for his integrity. Fetter said that he did not follow management theories focusing on the big picture, but rather looked to specific facts and experiences to help with his decision-making process. Fetter said that he became a more demanding manager thanks to his time building a solid company from the ground up at Broadlane. He stressed having a lean and cohesive management team as the way for a company to accomplish its goals.


Abelson, Reed, “Tenet Healthcare Names Chief,” New York Times, September 17, 2003. “Correcting and Replacing: Trevor Fetter Named Tenet’s Chief Executive Officer,” Business Wire, September 16, 2003, p. 6085.

If there was one belief to which Fetter strictly adhered in terms of management style, it was that overconfidence in the top echelons of management is the downfall of many companies. As he told Galloro in Modern Healthcare, “The most dangerous attribute for any company is hubris” (September 22, 2003).

Galloro, Vince, “Extreme Makover: Tenet’s President Hopes to Restore Company’s Reputation,” Modern Healthcare, May 12, 2003, p. 8.

CONTINUING THE FIGHT

Pollack, Andrew, “Tenet Struggles for Turnaround Firm to Sell 27 Hospitals as Earnings Fall below Expectations,” International Herald Tribune, January 29, 2004.

In January 2004 Fetter announced Tenet’s intention to sell 27 more hospitals by the end of the year, which Fetter estimated would lead to net proceeds of about $600 million. These sales came about largely in response to fourth-quarter earnings that were significantly below the 11 cents per share analysts had expected. Furthermore, Tenet was expected to do no more than break even in 2004. Fetter told Andrew Pollack in an in-

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———, “It’s an Inside Job,” Modern Healthcare, September 22, 2003, p. 6. ———, “Strong Tenets,” Modern Healthcare, June 2, 2003, p. 32.

“Tenet Announces New Initiatives and Leadership to Enhance Clinical Quality and Nursing,” Business Wire, July 23, 2003, p. 5154. —David Petechuk


■■■

John Finnegan 1949– President, chief executive officer, and chairman of the board, Chubb Corporation Nationality: American. Born: 1949, in Jersey City, New Jersey. Education: Princeton University, BA; Fordham University, LLD; Rutgers University, MBA. Family: Married Kathleen (maiden name unknown); children: two. Career: General Motors Acceptance Corporation (GMAC), 1976–1992, various positions in tax department; 1992–1995, executive vice president and chief financial officer; General Motors (GM), 1995–1997, vice president and treasurer; GMAC, 1997–1999, president; 1999–2002, chairman and president; GM, 1999–2002, executive vice president; Chubb Corporation, 2002–, president and chief executive officer; 2004–, chairman of the board. Address: Chubb Group of Insurance Companies, 15 Mountain View Road, Warren, New Jersey 07061; http://www.chubb.com/indexPC.html.

positions over the years in the company’s treasury department, including positions in international banking, foreign exchange, and benefits funding. Then, in 1992, Finnegan became executive vice president and chief financial officer of GMAC. He rose to the positions of vice president and treasurer of GM in 1995. Finnegan moved back to GMAC to take the position of president in 1997. He became both executive vice president of GM and chairman and president of GMAC in 1999, positions he held until 2002. On December 1, 2002, Finnegan was offered and accepted the position of president and chief executive officer of the Chubb Corporation. He took over from Dean O’Hare, who earlier that year had announced his plans to retire by the end of 2002. “I couldn’t be more pleased with my successor,” Mr. O’Hare said in a statement to the National Underwriter Property & Casualty-Risk & Benefits Management magazine (November 18, 2002). “His values, style and personality are an excellent fit with Chubb, and he is an outstanding financial services executive, people manager and strategic thinker. I am confident he is the right person to lead Chubb into the future.” Finnegan also became a member of the board, although for the first time in Chubb’s history the president was not made the chairman of the board. This came about because Finnegan, at the time, had no previous experience in the insurance business.

MEETING THE CHALLENGES AT CHUBB

■ After an impressive career at General Motors (GM) and the General Motors Acceptance Corporation (GMAC), John Finnegan took over as president and CEO of Chubb Corporation, an insurance company. Although he was relatively inexperienced in the insurance arena, Chubb thought that his proven managerial and executive styles, along with his fresh perspectives, were just what Chubb needed to get the ailing company back on its feet.

RISE THROUGH THE RANKS Finnegan was born in Jersey City, New Jersey, in 1949. He received a BA degree in political science from Princeton University, a law degree from Fordham University, and an MBA from Rutgers University. After finishing school, Finnegan joined the tax department of GMAC in 1976. He held several


Founded in 1882, Chubb Corporation was an insurance company known for financial honesty, resolving claims with justice and speediness, providing superior service and products to customers, and sustaining a progressive workplace for employees. The company was also well regarded for its comprehensive homeowners insurance, successful primarily in the more elite markets. Chubb offered property and casualty insurance to companies mainly in the United States, Canada, Europe, Australia, Latin America, and parts of Asia. Finnegan took over at a time when Chubb was under strain from its dealings with asbestos claims. People whose health had been threatened by the use of asbestos were suing many businesses, and insurance companies had to set aside more and more money in anticipation of the litigations. Chubb alone was forced to double its reserves to guard against more asbestos payouts, the amount coming to near $1 billion.

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John Finnegan

Finnegan worked with the company in 2003 to raise more money and build a reserve for claims. Because of all his hard work in 2003, Chubb Corporation received a “highly commended” designation by the Reactions Reinsurance Awards for 2003. In January 2004 Finnegan, who had shown a good head for the insurance business, was elected chairman of the board. He remained as president and CEO. In June of the same year Finnegan was asked to join the board of directors of Merrill Lynch and was appointed to the Management Development and Compensation Committee. Merrill Lynch’s chairman and CEO Stan O’Neal voiced his support (June 1, 2004), saying of Finnegan that “he has extraordinary experience as a financial executive and business leader at General Motors and in his present position as chief executive of Chubb Corporation. . . . We have every confidence that John will make an immediate contribution to the governance and business affairs of Merrill Lynch.”

See also entries on Chubb Corporation and General Motors Corporation in International Directory of Company Histories.

“Chubb Announces Succession,” National Underwriter Property & Casualty-Risk & Benefits Management, November 11, 2002, p. 8. “Finnegan Is Chubb CEO,” Insurance & Technology, January 2003, p. 48. Greenwald, Judy, “Chubb Selects Outsider as Chief,” Business Insurance, November 11, 2002, p. 1. “Hits and Has-Beens,” US Banker, December 2002, p. 12. Kelleher, Ellen, “Chubb Seeks Dollars 525m from Capital Markets,” Financial Times, November 26, 2002, p. 30. Marcial, Gene G., “Chubb: Set to Bounce,” BusinessWeek Online, January 27, 2003, http:// netscape.businessweek.com:80/magazine/content/03_04/ b3817144.htm?scriptFramed. “Merrill Lynch Elects John Finnegan to Board of Directors,” June 1, 2004, http://www.ir.ml.com/news/20040601136292.cfm. “Reactions Awards: Primary Insurance Company of the Year— North America, Asia-Pacific, Latin America,” Reactions, http://www.reactionsnet.com/ default.asp?Page=8&PUB=92&ISS=5941&SID=264934.


“Briefly: Pension Funds Take On Safeway,” Star-Ledger (Newark, NJ), March 26, 2004. Chaffin, Joshua, “Chubb Names Outsider for Top Job,” Financial Times, November 4, 2002.

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Ruquet, Mark E., “Chubb Names New Head,” National Underwriter Property & Casualty-Risk & Benefits Management, November 18, 2002, p. 22. —Catherine Victoria Donaldson


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Carly Fiorina 1954– Chairwoman, chief executive officer, and president, Hewlett-Packard Company Nationality: American. Born: September 6, 1954, in Austin, Texas. Education: Stanford University, BA, 1976; Robert H. Smith School of Business at University of Maryland, College Park, MBA, 1980; Sloan School of Business at Massachusetts Institute of Technology, MS. Family: Daughter of Joseph (a law professor and judge) and Madeline (a painter; maiden name unknown) Sneed; married Frank Fiorina (a former AT&T executive), 1985; children: two stepchildren. Career: AT&T, 1980–1989, for Long Lines, sales representative, then various senior leadership positions, then executive vice president, then CEO; 1989–1992, head of North American operations for Network Systems; 1992–1998, officer in Network Systems, then executive vice president for corporate operations; Lucent Technologies, 1998–1999, president of Global Service Provider Business, then president of Consumer Products; Hewlett-Packard Company, 1999–2000, CEO and president; 2000–, chairwoman, CEO, and president. Awards: America’s Most Powerful People, Forbes; Most Powerful Woman in American Business, Fortune, 1999; Honorary Fellow, London Business School, 2001; Top 25 Executives, CRN, 2002; Appeal of Conscience Award, 2002; Seeds of Hope Award, Concern International, 2003; Leadership Award, Private Sector Council, 2004; Alliance Medal of Honor, Electronics Industries, 2004. Address: Hewlett-Packard Company, 3000 Hanover Street, Palo Alto, California 94304-1185; http://www.hp.com.

■ Carleton S. Fiorina, well known as Carly, made her mark as the chairwoman, chief executive officer, and president of the prestigious technology and computer-peripherals company Hewlett-Packard (HP). The first woman to head a Dow 30 company, Fiorina arrived at HP in 1999 to become the first International Directory of Business Biographies

Carly Fiorina. AP/Wide World Photos.

outsider to fill a lead executive position in the company’s 60year history. Time magazine declared her “best line” to be, “My gender is interesting but really not the subject of the story here” (http://www.time.com/time/digital/digital50/17.html). Once she signed on as CEO, her challenge was to maintain HP’s image as a reliable American engineering company and to propel the company into an age dominated by the Internet—a challenge that she would face with success. She recrafted HP’s image from that of a mere printer manufacturer into that of a provider of a comprehensive lineup of Internet products. She overcame formidable obstacles in venturing to merge HP with Compaq Computer Corporation, weathering the public-relations storm and managing to heighten HP’s standing in the technology industry.

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Carly Fiorina

JUST WHAT HP NEEDED? During her time as a student at Stanford University, Fiorina worked as a secretary typing bills of laden for HewlettPackard’s shipping department. After graduating from Stanford with a degree in medieval history and philosophy, Fiorina attended law school for a semester while holding a variety of odd jobs. Before long she left law school and found her comfort zone in corporate America; she would spend 20 years at AT&T and Lucent before returning to HP to become the CEO. During the process of consideration for the position of CEO at Hewlett-Packard, the company’s leadership team was especially impressed by Fiorina’s achievements at Lucent, AT&T’s communications-equipment spin-off. At Lucent she launched a $90 million brand-building campaign that transformed and modernized the company. As group president of Lucent’s Global Service Provider business she was responsible for over 60 percent of Lucent’s revenue, providing systems for network operators and service providers; she increased the company’s growth rate, international revenues, and market share. She built up a reputation for taking risks and assuming leadership of unpleasant but potentially fruitful projects. HP also evidenced interest in Fiorina’s ability to implement sweeping corporate changes while still paying close attention to quarterly earnings. Fiorina was committed to product innovation and the ongoing improvement of technology systems at HP. She consistently sought out ways to improve HP’s image and its ability to deliver high-tech products to consumers. During slow periods she looked to consumer markets, as opposed to business markets, for growth, seeking to increase consumer awareness and use of HP networking, storage, software, computers, and printing products. Prior to Fiorina’s taking the helm, Hewlett-Packard had developed a reputation as a reliable but stodgy company; the new CEO was widely touted as just the fresh face to revamp that tired image. When she arrived in 1999, the company had 87 different product divisions, each with its own CIO and system of production. The company bureaucracy was overwhelming, and managers were sometimes required to clear their decisions with dozens of executives. During her first few months at HP, Fiorina worked to streamline the company’s modes of communication and systems of production. She conducted a systematic review of the company’s business units, trimming superfluous products and personnel in the process. Through her initial reorganization of the 60-year-old company Fiorina whittled the number of divisions down to 12.

THE COMPAQ CONTROVERSY Fiorina faced a period of backlash, however, soon after the novelty of her appointment had faded. Less than two years into

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her term at HP, company profits slumped 89 percent during the big technology dip in 2001, prompting a period of sharp criticism of her leadership. Subsequently, after guiding the $13 billion spinoff of Agilent Technologies, in early 2002 Fiorina initiated plans for a controversial $18 billion merger with the personal-computing giant Compaq Computer Corporation. The goal of the merger was to solidify HP’s position as a leading provider of computing and imaging services. The move would be the largest in information-technology history and was initially viewed with deep skepticism. The potential unification with Compaq sparked very public resistance: Fiorina had to convince government regulators in both Europe and the United States that the move was not anticompetitive. Possible workforce reduction was a bone of contention for both shareholders and employees. The most prominent reason for trouble was the opposition put forth by the families of the company founders. Within HP Fiorina faced an organized no-vote movement—led by Walter Hewlett—while working to narrowly gain stockholder approval for the purchase; she also faced a court challenge from Hewlett, who claimed that she had bought votes from stockholders. Media and employees eagerly followed the courtroom drama, and for a time Fiorina’s previously winning image was tarnished. She allowed the arguments to play out and adhered to her original plan, adamantly insisting that a buyout of Compaq would be the best decision for Hewlett-Packard. Fiorina managed to override Hewlett’s complaints in court and came out on top; the merger was completed in May 2002. Later in 2003 Fiorina made a statement in the San Jose Mercury News in reference to the merger offering a glimpse of her management style: “You cannot manage a company by the daily stock price. You cannot manage a company by the conventional wisdom. Leadership by definition means you are out in front” (April 13, 2003). She acknowledged that HP’s stock prices dropped after the merger but looked back and remembered, “People increasingly understand that the technology industry was consolidating. Our choice was do we lead it or follow it. We chose to lead it” (April 13, 2003).

CREATING NEW PUBLIC AND PRIVATE LEADERS Fiorina noted that among her responsibilities as a leader, she dared to redefine the role of the company, openly vowing to use its profits to benefit communities in need around the world. This approach of redefinition extended to her perception of her company’s role in society. Fiorina was recognized and known for her commitment to the use of business in furthering citizenship and human rights around the world. Fiorina emphasized that leaders in science and technology had the responsibility to participate in public discourse on social issues in both the private and public sectors. In her 2004 commencement address to the California Institute of Technol-


Carly Fiorina

ogy she told the audience, “The people most responsible for making change—the scientists and technologists—don’t have a voice, because they have chosen not to represent their views in a public forum” (June 11, 2004). As an example she noted, “The Silicon Valley of the 20th century has given way to the scientific canyon of the 21st century, with scientists on one side, the general public on the other, and too few guides who can help bring us safely across from one side to the other” (June 11, 2004). She promoted this view of scientists as guides and as leaders in a speech to the Electronic Industries Alliance, telling policymakers in D.C., “Use us more” (May 25, 2004). She exemplified her call for cooperation through her advisorship to the U.S. Space Commission and in her work with the secretary of the Department of Homeland Security Tom Ridge, who turned to her for help in managing the technological challenges faced by that department.

communication among tribal entities and fostering a shared understanding of their heritage and history. Fiorina and HP also worked with UNESCO to modernize computer systems in universities in Eastern Europe. Fiorina spoke extensively on these broader topics of leadership at conferences, forums, and other gatherings. Fiorina once addressed a number of women business owners assembled by the U.S. Small Business Administration along with U.S. president George W. Bush. She was called on regularly to offer remarks on information technology and digital media.

A WAY WITH PEOPLE

Under Fiorina HP was a leader in “corporate citizenship” and created educational initiatives around the world. In accepting the “Seeds of Hope” award from Concern International, she declared, “Contribution to community has always been one of our corporate values” (November 4, 2003). Through Concern International HP worked with underprivileged groups needing assistance striving to improve their social situations through the use of technology. Local citizens created their own microbusinesses and, with the help of technological equipment provided by HP, made strides in communication, energy use, and other areas.

Fiorina inspired admiration and loyalty both within and without her company. BusinessWeek dubbed her as bearing a “silver tongue and an iron will” and highlighted her ability to connect with employees: “As a leader, she has a personal touch that inspires intense loyalty” (August 2, 1999). She sent balloons and flowers to employees when they landed big contracts. She also brought an understanding of people to the organization; she explained to Working Knowledge, a publication of Harvard Business School, “Business is about more than facts. It’s also about powerful emotions and how people react to them” (March 17, 2003). She summed up her style of managing human beings in BusinessWeek: “First, you reinforce the things that work. Then, you appeal to their brains to address what doesn’t” (August 2, 1999).

In a region of India with infrequent, sporadic electricity HP provided solar-powered digital cameras and printers to help citizens start up their own businesses. HP also provided help in southern India for 320,000 people across five rural villages; the company’s goal was to transform the region into a selfsustaining economic community in terms of literacy, employment, and income, with improved access to government, education, and healthcare services.

Her marketing and sales techniques were as calculated and successful as her approach to managing technology systems. BusinessWeek noted that “her coddling of customers at Lucent was legendary” (August 2, 1999). Later the publication complimented her “marketing savvy, energy, and single-minded conviction” and called her the “most-watched woman in business” (May 29, 2003).

In October 2003 HP presented a $10 million Technology for Teaching grant to schools in the United States, from kindergarten through the university level. The grant followed $3.3 million in previous HP technology grants that were provided to 20 American universities that same year. As reported by PR Newswire, the Concern International chief executive Tom Arnold noted, “It is important to recognize corporate leaders like Carly Fiorina who have demonstrated extraordinary leadership on issues of corporate and social responsibility. Ms. Fiorina puts her words into action, forming partnerships with the international humanitarian community” (November 6, 2003). Fiorina, who traveled extensively to Native American reservations during her time at AT&T, led an effort to digitally wire reservations in Southern California as a way of increasing


TECH SAVVY Fiorina’s success was of course also largely based on her ability to master advanced ideas in technology. In another interview with BusinessWeek Fiorina explained how product innovation was a systems approach rather than a process of creating one product at a time. Such an approach flavored her leadership at HP. She noted, “Technology isn’t a silver bullet. The innovation that is going to be most important is the kind that weaves systems and networks together. Security, mobility, rich media would be examples. These require systems approaches. They also require scope and scale, which is why we have been so convinced that the industry will consolidate into fewer, bigger players” (August 25, 2003).

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Carly Fiorina

A MODEL WOMAN Part of Fiorina’s celebrity and appeal, in addition to her aggressive leadership at HP, was the example she set as a female CEO of a prestigious company. In her contribution to the mentoring book Hard Won Wisdom, Fiorina shared her views on the importance of confidence in life and in business: “Having self-possession and self-awareness is important. No one learns who they are or what they are capable of without risk and without mistakes. In the end, you have got to be happy with who you are. You’ve got to be proud of who you are. You’ve got to like who you are” (2001). Through 2004 Fiorina continued to integrate and organize her merged entities. By that time Hewlett-Packard was a $75 billion company with 140,000 employees in 176 countries, billing itself on the company Web site page entitled “Carly Fiorina: Chairman and Chief Executive Officer of HP” as a “leading global provider of computing and imaging solutions and services, which is focused on making technology and its benefits accessible to all.” On the site’s “Executive Team: Carly Fiorina” page, the company declared that Fiorina “led the reinvention of the company many associate with the birth of Silicon Valley.”

See also entry on Hewlett-Packard Company in International Directory of Company Histories.


Anders, George, Perfect Enough: Carly Fiorina and the Reinvention of Hewlett-Packard, Portfolio, 2003. Burrows, Peter, Backfire: Carly Fiorina’s High-Stakes Battle for the Soul of Hewlett-Packard, John Wiley & Sons, 2003. Burrows, Peter, and Peter Elstrom, “HP’s Carly Fiorina: The Boss,” BusinessWeek Online, August 2, 1999, http:// www.businessweek.com/1999/99_31/b3640001.htm. “Carleton S. Fiorina,” Forbes.com, http://www.forbes.com/ finance/mktguideapps/personinfo/ FromPersonIdPersonTearsheet.jhtml?passedPersonId=218157. “Carly Fiorina: Chairman and Chief Executive Officer of HP,” Hewlett-Packard, http://www.hp.be/aesummit/fiorina.html. “Carly Fiorina: Makeup Artist,” Time, “Digital 50” listings, http://www.time.com/time/digital/digital50/17.html. “Concern Worldwide U.S. Presents ‘Seeds of Hope’ Award to HP’s Carly Fiorina,” PR Newswire, November 6, 2003, http://www.prnewswire.com/cgi-bin/stories.pl?ACCT= SVBIZINK10.story&STORY=/www/story/11-05-2003/ 0002052003&EDATE=WED+Nov+05+2003 percent2C+01 percent3A25+PM. “Executive Profiles: Carly Fiorina,” CEO Central, http:// www.surferess.com/CEO/html/carly_fiorina.html.

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“Executive Team: Carly Fiorina,” Hewlett-Packard, http:// www.hp.com/hpinfo/execteam/bios/fiorina.html. Fiorina, Carly, “Catching Up with Carly Fiorina,” interview by Dean Takahasi and Vindu Goel in San Jose Mercury News, April 13, 2003, http://www.siliconvalley.com/mld/ siliconvalley/5624255.htm. ———, Commencement Remarks, Massachusetts Institute of Technology, June 2, 2000, http://web.mit.edu/newsoffice/ 2000/fiorinaspeech.html. ———, Concern International’s “Seeds of Hope” Award Reception, New York, N.Y., November 4, 2003, http:// www.hp.com/hpinfo/execteam/speeches/fiorina/ concern03.html. ———, “A Conversation with Carly Fiorina,” Forbes Fifth Annual CIO Forum, Dallas, Tex., December 2, 2003, http://www.hp.com/hpinfo/execteam/speeches/fiorina/ forbes04.html. ———, “Dare to Dream,” Commencement Address, California Institute of Technology, Pasadena, Calif., June 11, 2004, http://www.hp.com/hpinfo/execteam/speeches/fiorina/ caltech04.html. ———, “Speaking Out: Hewlett-Packard’s Carly Fiorina,” BusinessWeek Online, August 25, 2003, http:// yahoo.businessweek.com/magazine/content/03_34/ b3846632.htm. ———, “Use Us More,” Electronic Industries Alliance Government and Industry Dinner, Washington, D.C., May 25, 2004, http://www.hp.com/hpinfo/execteam/speeches/ fiorina/eia04.html. Germer, Fawn, Hard Won Wisdom: 50 Extraordinary Women Mentor You to Find Self-Awareness, Perspective, and Balance, Perigee Books, 2001. Lagace, Martha, “Carly Fiorina: Heed Your Internal Compass,” Working Knowledge, March 17, 2003, http:// www.hbsworkingknowledge.hbs.edu/ pubitem.jhtml?id=3384&t=leadership. Malone, Michael S., “Failure to Communicate? HP Chief Carly Fiorina Needs to Explain Compaq Merger,” ABCNEWS.com, February 12, 2002, http:// abcnews.go.com/sections/business/SiliconInsider/ SiliconInsider_020212.html. “Profile: HP’s Carly Fiorina,” BBC News, September 4, 2001, http://news.bbc.co.uk/1/hi/business/1524555.stm. Tsao, Amy, and Jane Black, “Where Will Carly Fiorina Take HP?” BusinessWeek Online, May 29, 2003, http:// www.businessweek.com/technology/content/may2003/ tc20030529_9712_tc111.htm. Zarley, Craig, “Carly Fiorina,” CRN, November 12, 2002, http://www.crn.com/sections/special/top25/ top25_02.jhtml?articleId=18822010&_requestid=331815. —Alison Lake


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Paul Fireman 1944– Chairman, Reebok International Nationality: American. Born: February 14, 1944, in Cambridge, Massachusetts. Education: Attended Boston University. Family: Married Phyllis (maiden name unknown); children: three. Career: Family sporting goods store, ?–1979; Reebok International, 1979–, chief executive officer. Awards: Business Ethics; Lawyers Committee for Human Rights; International Human Rights Law Group. Address: Reebok International, 1895 J. W. Foster Boulevard, Canton, Massachusetts 02021; http:// www.reebok.com.

■ Paul Fireman founded Reebok USA in 1979 and as of mid2004 had been the company’s only CEO. Reebok USA was formed when Fireman, attending a sporting goods trade show in London, bought the rights to the Reebok line of custom running shoes from the British shoe company J. W. Foster & Sons. Fireman introduced the first women’s athletic shoe, for aerobics, in 1982, spurring a fitness wear and fashion revolution that molded Reebok into one of the fastest-growing companies of all time. Under Fireman Reebok expanded rapidly throughout Europe and the rest of the world. The Reebok brand eventually became available in more than 170 countries.

DEVELOPING ENTREPRENEURIAL SKILLS Fireman’s sense of timing and ability to predict marketplace trends assured his rapid success when he spotted the J. W. Foster & Sons Reebok shoes, which had been made by hand for elite runners since 1950. Seeing the potential of the Reebok brand name, Fireman persuaded Foster & Sons to sell him the American distribution rights to the shoes. The introduction of Reebok shoes to the U.S. market was not successful at first. The company faced strong competition from other


Paul Fireman. AP/Wide World Photos.

footwear firms, and the average retail price for the Reebok shoes was $60.00 per pair, placing them among the most expensive running shoes in the country. Out of capital in 1981 Fireman sought additional financing. He sold a majority share in Reebok to Pentland Industries, a London-based holding company. By 1984 the partnership was so successful Fireman and Pentland Industries purchased Reebok from Foster & Sons for $700,000. Reebok also began systematic buyouts of competitors and diversification of its product base. Reebok purchased the following brands and companies: Avia, Ellesse athletic and leisure wear, Rockport Shoes, Greg Norman Collection, On-Field, and Boston Whaler, a successful boat manufacturer. Reebok also manufactured footwear under the Ralph Lauren label.

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Paul Fireman

REEBOK UNDER FIREMAN Fireman believed that Reebok was founded as a corporation to make a difference in society. “We felt we were a company that was clearly about freedom of expression and we felt we could express ourselves with better quality, better visuals. We introduced color that this industry never had,” Fireman told Black Collegian (1990). Reebok’s first entry into the U.S. footwear market was the Freestyle athletic shoe, which was made available in a variety of colors from bright orange to cobalt blue. Priced at approximately $60 per pair, Freestyle was among the most expensive athletic shoes in the marketplace. Sales were low at first, but Freestyle eventually became one of the best success stories in the American footwear industry. Fireman’s marketing savvy was essential. Reebok’s efforts in promoting aerobics as a fitness regimen included certification courses for aerobics instructors and publication of fitness newsletters. In the late 1980s the American economy changed, and Nike returned to the number one spot in the footwear industry. Reebok experienced growing pains caused by the hiring of managers who did not have experience in the shoe industry. Building on the success of the Freestyle aerobic shoe, Reebok began diversifying its product lines. Tennis and basketball shoes followed aerobics shoes, as did corporate sponsorships of athletes and events. Reebok introduced “the pump,” a revolutionary type of athletic shoe in 1989. The success of this shoe was followed by the introduction of double-pump athletic shoes in 1991. Marketing of the double-pump shoe was launched with a successful campaign based on the slogan: “Life is short. Play Hard.” In 1992 Reebok began a transition from being a company identified principally with fitness and exercise to being one equally involved in sports. It created a host of new footwear and apparel products for football, baseball, soccer, track and field, and other sports. The company signed numerous professional athletes, teams, and federations to sponsorship contracts. Reebok slipped behind Nike and Adidas to become the world’s number three company in sports shoes. Like its rivals, Reebok felt the effects of a global shift away from its core products. Reebok was slower to rebound than the other two companies despite diversification into other footwear and clothing lines.

FIREMAN AS A HUMANITARIAN Fireman maintained a strong stance for human rights. In 1986 Reebok became one of the first companies to pull out

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of South Africa because of that country’s practice of apartheid. In 1988 Reebok International sponsored the Amnesty International Human Rights Now tour, which featured artists such as Sting, Peter Gabriel, and Bruce Springsteen. Fireman established the Reebok Human Rights Award program and with the musician Peter Gabriel and the Lawyers Committee for Human Rights founded Witness, an organization that provides communications equipment to activists working on the front lines to document human rights abuses. According to Amnesty International, “Through Fireman’s personal courage and vision, Reebok’s embodiment of creativity, freespiritedness and individualism has gone beyond public relations to support and nourish the rights of others.”

FIREMAN’S IDEOLOGY Fireman was an unlikely candidate to lead a successful multinational corporation. A college dropout, he became a quintessential entrepreneur of the 1980s. Reebok succeeded on the basis of its goal to serve as a role model and maintain a corporate culture different from most and still be financially superior. Fireman maintained a fresh outlook in his day-to-day running of the company, and his goals were long-term. Fireman stated when reporting the company’s first-quarter earnings for 2004, “We believe that the investments we are making in advertising and marketing as well as in our supply chain, information systems and other areas of our Company are appropriate and necessary for our long-term growth prospects.”

See also entry on Reebok International Ltd. in International Directory of Company Histories.


Kazi-Ferrouillet, Kuumba, “Straight Talk from the Top Reebok,” Black Collegian 21, no. 2 (November/December 1990), pp. 130–134. “Reebok Reports First Quarter 2004 Earnings,” http:// www.reebok.com/us/about/ir/press/2004/Q1_2004.htm. “Running Fast for Over a Hundred Years,” http:// www.reebok.com/us/about/history/1990.htm. “The Third Annual Amnesty International USA Media Spotlight Awards: Corporate Leadership—Reebok,” http:// www.amnestyusa.org/events/media1999/honorees/ reebok.html. —Beth G. Maser


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EARLY BACKGROUND IN ACCOUNTING

Jay S. Fishman

Fishman was the son of a print shop owner and grew up in the Bronx. He left New York to attend the Wharton School of Business at the University of Pennsylvania. He earned a bachelor’s degree magna cum laude from the university in 1974 and completed a master’s degree in accounting the same year. As a student, however, Fishman did not envision becoming a chief executive at a major firm. “My goal was to get out of college and make a living,” he later told the Saint Paul Pioneer Press (November 20, 2003).

1952– Chief executive officer, St. Paul Travelers Companies, Incorporated Nationality: American. Born: November 4, 1952, in New York, New York. Education: University of Pennsylvania, BA, 1974; University of Pennsylvania, MS, 1974. Family: Son of Edward (print shop owner) and Shirley Cantor; married Randy Lee Chapman; children: two. Career: Coopers & Lybrand, 1974–1979, audit supervisor; American Can Company, 1979–1983, director, mergers and acquisitions; Goergen & Sterling, 1983–1986, senior vice president; Shearson Lehman Brothers, 1986–1989, senior vice president, merchant banking; Commercial Credit Company, 1989–1991, executive vice president and chief financial officer; Primerica Corporation, senior vice president and treasurer, 1991–1994; Travelers Group, 1994–1998, senior vice president, vice chairman, and chief financial officer; 1998–2000, president and chief executive officer; 2000–2001, chairman, president, and chief executive officer; St. Paul Companies, 2001–2003, chairman, president, and chief executive officer; St. Paul Travelers Companies, Incorporated, 2003–, chief executive officer. Address: St. Paul Travelers Companies, Incorporated, 385 Washington Street, St. Paul, Minnesota 55102; http:// www.stpaultravelers.com.

Fishman returned to New York in 1974 after accepting a job as an audit supervisor for the accounting firm of Coopers & Lybrand. He held the job from 1974 through 1979, when he left to take the position of director of mergers and acquisitions for the American Can Company in Greenwich, Connecticut. He continued his rise into upper management when he was appointed senior vice president for the private investment and leveraged buyout firm of Goergen & Sterling in Greenwich in 1983. Three years later he was hired by the financial consulting firm Shearson Lehman Brothers in New York City to serve as senior vice president for merchant banking. Fishman remained with Shearson Lehman until 1989, when the Commercial Credit Company in New York City hired him as executive vice president and chief financial officer. He held that position until 1991, when he became the senior vice president and treasurer for the Primerica Corporation. The job at Primerica was Fishman’s first position in the insurance industry, where he eventually made his mark.

A TOP INSURANCE EXECUTIVE

■ Jay Fishman became a major player in the insurance industry when he orchestrated the merger of the St. Paul Companies, Incorporated and the Travelers Insurance Group in 2003. After spending several years in accounting and the financial services industry, Fishman became president and chief executive officer of Travelers when the company was acquired by Citigroup in 1998. He left Citigroup in 2001 to become the chairman, president, and chief executive officer of the St. Paul Companies. He proceeded to clean up St. Paul’s troubled financial record by cutting costs and promoting efficiency as well as setting up the company’s merger with Travelers. Known for being affable and down to earth, Fishman also earned a reputation for intensity.


The insurance industry experienced a number of mergers in the 1990s, some of which directly affected Fishman’s career. Primerica acquired the Travelers Insurance Group in 1994 and appointed Fishman senior vice president, vice chairman, and chief financial officer of Travelers. He served in that capacity until 1998, when Travelers merged with Citicorp to form Citigroup, a company that provided an array of financial services. During the same year that Citigroup was formed, Fishman was named president and chief executive officer of the Travelers Group. In 2000 he added the title of chairman of Travelers Group. Fishman was considered a leading candidate to replace Sanford Weill, the chairman and chief executive officer of Citi-

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Jay S. Fishman

group. Weill announced in 2000 that the company was devising a plan for choosing his successor. It was not clear, however, when Weill would actually step down; moreover, Fishman was interested in assuming greater responsibilities. “He wanted to run his own company and report to a board of directors and take a company to a whole new level of performance,” said Evan Lindsay, an executive recruiter. “That was not going to happen soon at Citi” (October 12, 2001). The St. Paul Companies, Incorporated, the oldest corporation in Minnesota, lured Fishman from New York in October 2001, selecting him as their chairman, president, and chief executive officer. The timing of Fishman’s hire was critical for the company, which had experienced losses of $658.7 million in the third quarter of 2001 as a result of the September 11th terrorist attacks. Fishman moved quickly after his arrival in Minnesota. “I am going as fast as I can,” Fishman said regarding his strategic plans, just one week after taking the helm of his new company (October 24, 2001). Fishman’s priorities were to promote long-term earnings growth and reduce expenses. One analyst said of the new CEO, “If he was walking down the hall and saw a paper clip, the Fishman rule is you pick it up and recycle it. I can tell you [St. Paul’s] expense line will become much smaller” (October 24, 2001).

New Jersey. Despite Fishman’s intense management style, he was regarded as pleasant and down to earth.

REUNION WITH TRAVELERS Travelers was unexpectedly spun off from Citigroup in 2002, a year after Fishman took over at St. Paul. During that time, Fishman had put his company in better financial shape, earning the same level of revenue with a thousand fewer employees. St. Paul made a major move in 2003 when it announced that it would merge with Travelers to form the St. Paul Travelers Companies, Incorporated. Analysts said that Fishman’s drive and focus had paid off, and they regarded him after the merger as a major figure in the insurance business. “Fishman is right up there with the big guys,” said analyst Michael Dion. “Industry folk like myself love hearing him talk not only about his company but about the industry and trends” (November 18, 2003). Fishman took the title of chief executive officer of St. Paul Travelers in 2003. He was expected to assume additional duties as chairman of the board in 2005.

See also entries on Citigroup Inc., Commercial Credit Company, Primerica Corp., and Shearson Lehman Brothers Holdings Inc. in International Directory of Company Histories.

A DEMON BOSS Fishman believed that a major key to the success of an insurance company is an adequate understanding of the industries that the company insures. During his first few months at the St. Paul Companies, the firm had to reevaluate its policies about insuring such industries as aviation and health care. Within five months of taking over at St. Paul, Fishman announced that he was eliminating 11 percent of the company’s workforce and dropping some of St. Paul’s more expensive units. A significant casualty was the division that sold medical malpractice insurance, which was closed because the company was paying out more in claims than it was collecting in premiums. Fishman developed a reputation for being an intense leader. An article in the New York Times referred to him as a “demon boss” (March 27, 2002). During his first year at St. Paul, his wife and children remained in New Jersey while Fishman, known to be an insomniac, devoted much of his time to the company. He often called together his employees for informal dinners to discuss business strategies, even outlining his plans on a restaurant napkin. He later bought a second home in St. Paul even though his family maintained their home in

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Brady, Matt, “Understanding the Key for St. Paul Chief,” Insurance Chronicle, December 31, 2001. DePass, Dee, “Fishman: ‘I’m Going as Fast as I Can,’ ” Star Tribune, October 24, 2001. ———, “St. Paul Cos. CEO Puts Down Roots,” Star Tribune, August 7, 2002. Hughlett, Mike, “Head of Newly Giant Insurer Started as Bronx Accountant,” Saint Paul Pioneer Press, November 20, 2003. Silverman, Gary, “Jay Fishman Quits Citi to Head St. Paul,” Financial Times, October 12, 2001. St. Anthony, Neal, “Mega Insurance Merger,” Star Tribune, November 18, 2003. Treaster, Joseph B., “Citi Man is Thinking Big but Thriftily in the Midwest,” New York Times, March 27, 2002. —Matthew C. Cordon


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Niall FitzGerald 1945– Chairman and chief executive officer, Unilever PLC; vice chairman, Unilever NV Nationality: Irish. Born: September 13, 1945, in Sligo, Ireland. Education: University College Dublin, BS. Family: Son of William FitzGerald, a customs officer, and Doreen Chambers; married Monica Mary Cusack, 1970 (deceased); married name unknown; children: three (from first marriage), one (from second marriage). Career: Unilever, 1968–1975, accountant; 1975–1976, personal assistant to financial director; 1976–1980, overseas commercial officer; 1980–1987, chief executive of South African food business; 1987–1991, director of Foods and Detergents; 1991–1996, coordinator in Detergents; 1994, vice chairman of Unilever PLC; 1996–, chairman and CEO of Unilever PLC, vice chairman of Unilever NV. Awards: Honorary Knight of the British Empire, 2002; Centenary Medal, Society of Chemical Industry, 2003. Address: Unilever House, Blackfriars, London, EC4P 4BQ, England; http://www.unilever.com.

■ When the Irishman Niall FitzGerald became chairman of Unilever, the gigantic Anglo-Dutch consumer-goods conglomerate, he was the youngest and the first non-English person to be appointed to the position. His leftward-leaning philosophies often contrasted with those of other major corporate executives. He was a tenacious leader who viewed innovation and risk as inseparable partners in successful business ventures and advocated risk management—as opposed to risk aversion—as a fundamental aspect of leadership. His achievements prompted one analyst to call him “one of the darlings of the financial world” (Media Guardian, July 7, 2003). FitzGerald grew up in Thomondgate, Ireland, attending Christian Brothers school and then Saint Munchin’s College, a traditional Catholic school in Limerick, Ireland, where pupils were routinely beaten by the priests. He studied diligently


at University College Dublin and, while there, joined the Communist Party for a brief period. Sarah Ryle wrote in London’s Sunday Observer that FitzGerald described himself as a “child of the sixties, with hair down my back, drawn to the hippie culture of ‘make love not war’” (February 24, 2002).

GREW WITH THE COMPANY Lever Brothers originated in 1884 when the shopkeeper’s son William Hesketh Lever began selling Sunlight soap in the north of England. Unilever was created in 1930 when Lever merged with the Dutch margarine-manufacturing company Margarine Unie. Through subsequent mergers and acquisitions, Unilever grew to possess 1,600 brands, including Bird’s Eye, Dove, Lipton, Sunlight, Wishbone, Sunsilk, Pepsodent, and Bertolli, selling those products in 150 countries and pro-

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Niall FitzGerald

ducing them in 90. In 2003 FitzGerald proudly announced that 150 million times a day, someone somewhere in the world chose a Unilever product. In 1967 FitzGerald began his career with Lever Brothers of Ireland virtually by accident while doing a favor for a friend who was interviewing with the company. As he rose through the ranks, FitzGerald displayed an individualistic if not radical attitude. Rather than the usual company car, he requested a motorcycle; after becoming chief executive of food business in South Africa in 1987, he agitated for desegregated restrooms for his factory workers. In a Corporate Watch article, he described himself as driven and ambitious, with a need for neatness and order but having gained the reputation for creating chaos (1999).

ALL ABOUT BRANDS By the time FitzGerald became cochair with Antony Burgmans, the company had come to symbolize what a BusinessWeek article called “the lumbering ways of European conglomerates” (June 11, 2001). A key part of FitzGerald’s mission for the company was his “Path to Growth” strategy, which revolved around the negotiation of brands. The fiveyear, three-part plan implemented in 1999 aimed at acquiring stronger brands, selling off weaker ones, and reducing the number from 1,600 to two hundred. By 2001 nine hundred brands remained, an effort the BusinessWeek article said conferred FitzGerald with “star status” (June 11, 2001); continued divestitures brought that number to four hundred in 2004. Along the way, Unilever acquired Best Foods—which marketed brands such as Knorr, Hellmann’s, and Skippy—for $24 billion, which was considered a major accomplishment for FitzGerald. Similarly important acquisitions were Ben & Jerry’s for $223 million and Slim-Fast for $2.3 billion. FitzGerald was heralded by one analyst as one of the top food gurus in the world. The Path to Growth plan also included the investing of approximately $6 billion to reduce annual costs by $3 billion. More than one hundred of Unilever’s 350 factories in 90 countries were sold or closed and the work force was reduced by more than 25,000. Jeremy Warner, of the Web publication Independent.co.uk, said that even after the cuts FitzGerald seemed to be admired by his staff and had earned loyalty from his peers. “He’s managed to develop an esprit de corp which is exceptional for a company of such a size and longevity,” said Warner (February 13, 2004). FitzGerald was generally viewed by senior staff as the “good cop” while the cochairman Antony Burgmans was viewed as the “hatchet man” (BBC News, August 21, 2001). FitzGerald shaped the obese, unwieldy Unilever into a modern, high-performance company for which people were proud to work. Even though the company fell well short of its

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targeted sales growth of 5.5 to 6 percent in 2003, FitzGerald was still heralded as the company’s savior. “Unilever wasn’t exactly slipping into the sea when he became chairman, but it would by now have been doing so but for the changes he managed to push through,” commented Warner (February 13, 2004).

BUILDS BRANDS BY UNDERSTANDING PEOPLE FitzGerald was passionate about brands. “I want us to be (and I want us to be recognized to be) the very best brandmarketing company in the world. I want my company to be brand-obsessed—from the board to the factory floor,” he said while receiving the Publicity Club of London Cup on behalf of the company (Unilever press release, November 21, 2003). In a speech on October 14, 2003, to the Institute of Grocery Distribution Annual Convention, FitzGerald addressed several areas he felt were necessary to consider in building brands. One was to understand consumers as shoppers and to develop brands to meet their needs. Another was to unlock the creativity and enterprise of employees so that they could stimulate the growth of Unilever’s brands. With respect to understanding shoppers’ needs, FitzGerald said that the concept of the “typical consumer, in a typical supermarket, doing a typical once-a-week shop” was no longer valid because of the huge number of choices available (Unilever press release, October 14, 2003). Thus, Unilever implemented a Europe-wide project aimed at better understanding consumers. Although this research concept was not original, he said, the fact that Unilever’s brands were on almost every aisle in the supermarket—from laundry and cleaning products to personal care products to foods and beverages—allowed the company to analyze the consumer across a very broad spectrum. The goal of the project was to synthesize data collected across cultures, identify differences and similarities in shopping behavior, and then share that information with retailers to enhance prosperity for the supplier, the retailer, and the consumer alike. “The importance of cooperation between manufacturer and retailer is profound. We can only continue to build and create new brands by using our combined understanding of consumers to find solutions that satisfy their everchanging needs,” he told his audience (Unilever press release, October 14, 2003). With respect to endeavoring to unlock imagination and creativity in his research-and-development and marketing teams, two dimensions FitzGerald focused on were consumer insight and risk taking. He stated that manufacturers must always be one step ahead of consumers, knowing what they want even before they know themselves, figuring out where they are headed, and placing brands there. He declared intimacy to be the key to succeeding in this area, adding that the process was an art: “the ability to turn intimacy and insight into a compel-


Niall FitzGerald

ling brand proposition—that is alchemy: the magic process of turning base metal into gold” (Unilever press release, October 14, 2003).

ZERO RISK, ZERO INNOVATION To develop this creative art in his R&D team, he encouraged them to push the research envelope. If something went wrong, he wanted them to learn from it and move on. When addressing his audience while accepting the Publicity Club Cup, he stressed the importance of innovation and risk, two factors “joined at the hip. Zero risk, zero innovation” (Unilever press release, November 21, 2003). He believed many companies shied away from risk; he promoted it, declaring that leaders necessarily work from high-risk positions. Differentiating between leadership and management, he saw managing as coping with complexity and leadership as coping with change. “Good managements bring a degree of order and consistency. But the leader must allow some chaos—even create chaos to liberate the risk taker. It’s about emotional leadership,” he added, with reference to creating an environment in which people feel they have permission to take risks and creating leaders who can develop followers (Unilever press release, November 21, 2003). He would go as far as to offer incentives and rewards to encourage risk because, he believed, wellcalculated risks brought big rewards, particularly in brand marketing. FitzGerald learned most of his business strategy from personal experience, admitting “cheerfully” that he made many mistakes in his career. One such mistake was the idea of putting scrubbing agents into Persil laundry powder. People rushed to try the product, which consequently shredded their clothes. Luckily, commented FitzGerald, Unilever leadership recognized that “part of the growth of any leader who has the courage to take risks is also to learn how to work through the consequences of failure” (Unilever press release, October 14, 2003). He emphasized that the right to risk must come with the right to fail; holding a leadership position meant being tolerant of the occasional failure while not using it as an excuse for poor performance. “One of my best bosses had a philosophy that people who didn’t make enough mistakes should be fired,” he said during his London Cup acceptance speech (Unilever press release, November 21, 2003).

SPOKE HIS MIND FitzGerald was known for speaking his mind, drawing criticism from some sectors for being a staunch and outspoken advocate of free trade. An article in Corporate Watch described him as “one of the masterminds behind global corporate exploitation” (Autumn, 1999). Maximizing profits, the authors said, meant cutting costs, which meant minimizing workers’


pay. The authors said that while FitzGerald donated generously to charities and ran the London Marathon—sponsored by Unilever’s Flora brand, with proceeds going to Save the Children—one of FitzGerald’s friends commented: “Don’t be fooled by the charm. There is real steel underneath. You don’t get to where he is without being very hard” (Autumn, 1999). FitzGerald always defended Unilever’s globalization policy. Ryle quoted him as saying, “I do get upset when people have a go at multinationals if they include us in that, because I know what we do. Whether Birmingham or Bangladesh, we apply the same principles” (February 24, 2002). He was always quick to point out and proud of the fact that Unilever was ever-conscious of, and indeed heavily committed to, the environment, sustainable fishing and agriculture, the crisis concerning fresh water, and wage-rate terms. He stressed that Unilever was a global company and that, in order for its business to continue to grow and profit, it was therefore his business to find ways to help developing nations become prosperous and wealthy—“because 85 percent of the world’s population lives in the developing world” (February 24, 2002). FitzGerald condemned the developed world’s restrictive practices. He pointed out that if the Organization for Economic Cooperation and Development allowed free-trade access to sub-Saharan countries, those countries would take in more than $20 billion annually in revenue. Instead, they received $14 million yearly in foreign aid, which, he said, ended up in the pockets of only a very few. In fact, as the one-time head of Unilever’s South Africa business who befriended President Mbeki, FitzGerald developed a real concern for the country. He was quoted on the Food Ingredients First Web site as saying: “If I thought I could do something effective for Africa—not just run some grand institution, but actually achieve something—I would do it” (February 16, 2004). Never one to mince words, FitzGerald criticized “fat cat” executive pay, called excessive pay-outs to ousted executives a “potential cancer” in society, and entered the emotional and controversial issue of a common European currency by pushing for the United Kingdom’s adoption of the new monetary unit (Inland Review, March 15, 2003). He declared that British business would be unforgiving of a decision not to do so.

THE “LIFER” LEAVES After a hugely successful career with Unilever, FitzGerald stunned England, Europe, and the entire business world when, on February 14, 2004, he announced his planned retirement on September 30 of that year. Not one to leave his company dangling, he devised a strategy to carry it through to 2010 and to streamline the boards of Unilever PLC and Unilever NV. In the unique new structure, the director of each board would come up for reelection each year. FitzGerald said, “By the end of this year we will have completed the Path to Growth pro-

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Niall FitzGerald

gram and, in the interests of an orderly succession, Patrick Cescau, Foods director, should be in place in good time to carry our strategy to the next stage” (Unilever press release, February 12, 2004).

“Understanding People to Build Brands,” Unilever press release, October 14, 2003, http://www.unilever.com/news/speeches/ 2003English_10788.asp?ComponentID=10788&source pageid=301#1.

See also entry on Unilever PLC/Unilever N.V. in International Directory of Company Histories.

“Unilever Board Changes,” Unilever press release, February 12, 2004, http://www.unilever.com/news/pressreleases/ EnglishNews_11363.asp?ComponentID=11363&source pageid=289#1.


“Unilever Chief’s Anti-bribes Line,” BBC News, August 21, 2001, http://news.bbc.co.uk/1/hi/business/1501124.stm.

Cheating’dun, Maurice, and Mark Mendacious, “He Has Donated to Building Cooperation and Peace in Northern Ireland, and Has Run the London Marathon for Charity. Now He Is a Corporate Executive Intent on Maximising Profits at Any Cost,” Corporate Watch, Autumn, 1999, http://www.corporatewatch.org.uk/magazine/issue9/ cw9cm2.html Media Guardian, “Niall FitzGerald,” July 7, 2003, http:// media.guardian.co.uk/top100_2003/story/ 0,13483,990395,00.html. “Risk Brings Rewards in Brand Communication,” Unilever press release, November 21, 2003, http://www.unilever.com/ news/speeches/2003English_10805.asp?ComponentID= 10805&sourcepageid=301#1. Ryle, Sarah, “That’s Not Sir to You,” Observer, February 24, 2002.

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“Unilever Co-Chairman Plans African Development Role,” Food Ingredients First, February 16, 2004, http:// www.foodingredientsfirst.com/ newsmaker_article.asp?idNewsMaker=5113&fsite=AO545. Warner, Jeremy, “Outlook: Hard Act to Follow as FitzGerald Quits Unilever,” Independent.co.uk, February 13, 2004, http://news.independent.co.uk/business/comment/ story.jsp?story=490804. “Wyman Debate—15 March 2003,” Inland Review, March 15, 2003, http://www.inlandrevenue.gov.uk/news/ wyman_debate_05-03.htm.

—Marie L. Thompson


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Dennis J. FitzSimons 1950– President and chief executive officer, Tribune Company Nationality: American. Born: June 26, 1950, in Queens, New York. Education: Fordham University, BA, 1972. Family: Married Ann Christie (1980); children: two. Career: Stock-transfer company, 1972, account officer; Grey Advertising, 1972–1973, assistant buyer; Peters, Griffin, Woodward, 1973–1975, marketing representative; Blair Television, 1975–1977, marketing representative; TeleRep, 1977–1981, account executive, then program salesman; Viacom, 1981, director of sales and marketing; 1982, director of sales and marketing for WVIT-TV; Tribune Company, 1982–1984, director of sales; 1984–1985, station general manager of WGNO-TV; 1985–1987, vice president of operations for Tribune Broadcasting; 1987–1991, vice president and general manager of WGN-TV; 1992–1994, president of Tribune Broadcasting’s Tribune Television Division; 1994–2003, executive vice president of Tribune Broadcasting; 2000, executive vice president; 2001–2003, president and COO; 2003–2004, CEO and president; 2004–, chairman, CEO, and president. Awards: Broadcaster of the Year, Broadcasting & Cable, 2003. Address: Tribune Company, 435 North Michigan Avenue, Suite 600, Chicago, Illinois 60611-4101; http:// www.tribune.com.

■ Dennis J. FitzSimons spent two decades rising through the ranks at the media giant Tribune Company before being appointed CEO in 2003. Prior to his appointment FitzSimons spent most of his time at Tribune overseeing the company’s many television stations, where he aggressively fostered and maintained Tribune’s status as a broadcasting powerhouse. Despite his previous success FitzSimons’s appointment as CEO represented a departure from tradition for Tribune, the nation’s second-largest newspaper company and fifth-largest International Directory of Business Biographies

Dennis J. FitzSimons. John T. Barr/Getty Images.

broadcast television group: he was the first CEO not to have served as a publisher of the flagship newspaper, the Chicago Tribune. Known by industry analysts and colleagues as an accomplished manager, FitzSimons was renowned for handling a large amount of work and pressure in an understated and calm style.

FORGOES PLANS FOR LAW CAREER FitzSimons graduated from Fordham University with a degree in political science and was thinking about going to law school when he took an intermediary job as an account officer at a stock-transfer company. Shortly afterwards, however, he was laid off, as the economy went into recession. He then obtained a position at Grey Advertising as an assistant buyer and, as he told Karissa S. Wang of Electronic Media, found that he

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loved the work. He noted, “I realized that the guys who were selling time were making more than the people who were buying time. So I decided to check out that side of the business” (April 23, 2001). FitzSimons became a marketing representative for several companies, including TeleRep in 1977, for which he worked in both Chicago and New York. His first position at TeleRep was as an account executive selling national advertising spots for television stations. He then became a program salesman, hawking the company’s package of original television movies, an innovative effort that gave independent television stations and some affiliates fresh prime-time programming. The job demanded a hectic pace, and FitzSimons found himself traveling to up to five different cities each week. In 1981 FitzSimons became a director of sales and marketing for Viacom, conceiving the idea of producing a commercial television version of a PBS program on Wall Street hosted by Louis Rukeyeser. FitzSimons then became director of sales and marketing at Viacom’s WVIT-TV in Hartford, Connecticut. Within a year he was recruited for the top sales post at WGN-TV in Chicago; Tribune executives had believed that station advertising time was being undersold. In an interview with Steve McClellan for Broadcasting & Cable News, FitzSimons explained that his “job was to get the sales research right and then price it right” (April 14, 2003). FitzSimons successfully accomplished his goal by reorganizing the sales department at WGN and consequently boosting the station’s market share of advertising revenue by nearly five percentage points in a single year. As a result he was promoted to general manager of WGNO-TV in New Orleans, which the Tribune had recently purchased. After a brief but successful stint there, FitzSimons found himself back in Chicago serving as vice president of operations; he was essentially the numbertwo man of the Tribune’s television division. In this position he coordinated most of the television group’s activities and helped integrate the Tribune’s recently purchased KTLA-TV of Los Angeles. In 1987 FitzSimons was promoted to vice president and general manager of WGN, the Tribune’s flagship station.

FACES NEW CHALLENGES In his new position at WGN FitzSimons faced novel challenges, as the nature of the television business began to change. Cable access broadened and a proliferation of specialized stations went on the air; a programming bidding war broke out. The cost of programming shot up, and FitzSimons had to increase the efficiency of station operations so that new programs could be afforded. One of FitzSimons’s major accomplishments at WGN, where he became president in 1992, was the agreement he fi-

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nally reached with the National Basketball Association commissioner David Stern. The NBA and WGN engaged in several court battles over who would control the station’s nationally televised Chicago Bulls schedule. The eventual accord was important because televising the Bulls games, which were becoming popular thanks to the team’s improvement and the appeal of its superstar Michael Jordan, helped WGN dominate the Chicago sports market and attract additional advertising. In 1994 FitzSimons was appointed executive vice president of Tribune Broadcasting. At the time the Tribune had six stations; FitzSimons would go on to guide the Tribune through numerous acquisitions, such as those of WPHL-TV in Philadelphia and WLVI-TV in Boston. FitzSimons went on to serve as president of Tribune Television from 1992 to 1994 and was appointed executive vice president of Tribune Broadcasting Company in 1994. By 1996 Tribune stations occupied some 22 percent of the U.S. television market, and FitzSimons stated that he believed the company’s stations had the potential to occupy up to 35 percent of the market. In 1997 FitzSimons was appointed president of Tribune Broadcasting Company. Two years later he played an instrumental role in the acquisition of the Times-Mirror company, which boasted such publications as the Los Angeles Times, the Hartford Courant, and Newsday. FitzSimons was named executive vice president of the Tribune Company in January 2000 and assumed overall responsibility for the Tribune’s efforts in broadcasting, publishing, interactive media, and the operations of Major League Baseball’s Chicago Cubs, which Tribune owned. By 2001 the company had a roster of 22 stations, due largely to FitzSimons’s efforts over the years.

BECOMES CEO In 2003 FitzSimons was appointed president and CEO of the Tribune Company. Although he was known primarily as the company’s veteran “television guy,” the appointment, said Diane Mermigas in Electronic Media, recognized that FitzSimons had “demonstrated a keen appreciation for both the distribution and content sides of the ledger” (January 27, 2003). By the time he took over the reins, FitzSimons had a healthy appetite for acquisitions. He had been involved in plans to attempt to own both a daily newspaper and a broadcast station in the same market, a circumstance that was disallowed by a Federal Communications Commission (FCC) ruling that generally barred such monopolistic media ownerships. The Tribune had already been granted a waiver to own both the South Florida Sun-Sentinel in Fort Lauderdale, Florida, and WBZL-TV in Miami, but joint operation of the two had been barred; FitzSimons became frustrated as he waited for the FCC to rule on the matter. In an interview with Doug Halonen of Electronic Media, FitzSimons stated, “If we’re going to be able to compete effectively, we need to be able to consolidate” (May 27, 2002).



As the CEO FitzSimons turned his sights on making the Tribune a leading media player by making bold program moves for the Tribune stations and acquiring more big-market TV stations. One of his goals was to extend the distribution of the superstation WGN, increasing coverage from 57 million to 70 million homes. He kept his eye on the possibility of newspaper-television cross-ownership, emphasizing the purchase of additional newspapers. Shortly after becoming CEO, he told Mermigas of Electronic Media, “Tribune will be bigger and in the top tier of its core broadcasting and newspaper businesses 24 months from now, as scale will be increasingly important in a fragmented marketplace” (January 27, 2003).

MANAGEMENT STYLE: A TRUE GENTLEMAN Many industry analysts expressed strong reservations over the manner in which a television executive would get along with print-media veterans who tended to look down on the broadcast end of the business. Yet company insiders noted that a review of FitzSimons’s performance over the years quickly allayed those fears. Robert E. Le Blanc, a media technology consultant, told Brian McCormick of Crain’s Chicago Business, “Dennis spent his life in the TV business. But when the time came to represent other constituencies, he quickly went from being a TV guy to being a Tribune guy” (May 6, 2002). FitzSimons’s transition from a strict focus on television to widened efforts in print and other media in the late 1990s showed that he was a quick study who could apply his broadcasting expertise to the issues facing the company’s print publications. FitzSimons was known for being able to handle a tremendous workload under pressure while maintaining a calm and in-control demeanor. In Broadcasting & Cable, McClellan quoted Ward Quall, the one-time WGN general manager, as noting that FitzSimons was “unflappable” and “a gentleman’s gentleman” (April 14, 2003). Company insiders noted that FitzSimons was less buttoned-down than his predecessor and more outgoing. He was respected not only throughout the industry but also within the company’s executive hierarchy. He was known for having a balanced approach in that he was aggressive but not overly so and tenacious while maintaining his personal appeal with both clients and colleagues. FitzSimons was also able to combine his business acumen with a commitment to community service. While working at WGN he founded the annual Bozo Ball, a black-tie event that raised nearly $4 million for a youth center in one of Chicago’s tougher neighborhoods. “In a sea of basic-


cable networks,” FitzSimons told McClellan, “broadcasters have an edge by serving communities well” (April 14, 2003).

EMPHASIS ON BIGGER . . . MAYBE Although the Tribune owned 11 larger newspapers, 26 broadcast-television stations, one national cable station, a stake in a television syndication studio, a Major League Baseball team, 50 Internet sites, and one radio station when FitzSimons took over, he maintained that the company needed to continue to get bigger and better. He pursued cross-media ownership with zeal, believing that it offered advertisers options to reach every possible demographic in a single market. Nevertheless, if FCC regulations remained unchanged, FitzSimons and the Tribune would be forced to sell some of either its television stations or newspapers when broadcast licenses expired. Nevertheless, FitzSimons remained true to his philosophy of growth. He told Jeremy Mullman in Crain’s Chicago Business, “The nature of the media business over the past 25 years is that you’re either growing or you’re out” (June 2, 2003). In addition to his duties at Tribune, FitzSimons sat on the boards of several organizations, including the Advertising Council, the Robert R. McCormick Tribune Foundation, the Television Operators Caucus, and the Big Shoulders Fund.

See also entry on Tribune Company in International Directory of Company Histories.


Halonen, Doug, “Tribune Won’t Wait for FCC,” Electronic Media, May 27, 2002, p. 1. McClellan, Steve, “Tribune’s Chief Is Second to None,” Broadcasting & Cable, April 14, 2003, p. 15. McCormick, Brian, “Meet Trib’s Next CEO,” Crain’s Chicago Business, May 6, 2002, p. 4. Mermigas, Diane, “May Buy WB, Start Chicago Sport Channel,” Electronic Media, January 27, 2004, p. 4. Mullman, Jeremy, “Media Muscle,” Crain’s Chicago Business, June 2, 2003, p. A75. Wang, Karissa S., “The Evangelists: Dennis FitzSimons,” Electronic Media, p. 19. —David Petechuk

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Olav Fjell 1951– Strategic and financial adviser, First Securities ASA Nationality: Norwegian. Born: June 28, 1951, in Tromso⁄ , Norway. Education: Norwegian School of Economics and Business Administration, MSc, 1975. Family: Married Else (maiden name unknown; a nurse); children: three. Career: Kongsberg Va ˚penfabrikk, 1975–1987, held various positions, eventually becoming chief financial officer; Bergen Bank—later, Den norske Bank, 1987–1995, held various positions, eventually becoming executive vice president for corporate client development; Postbanken, 1995–1999, managing director; Statoil, 1999–2003, chief executive officer; First Securities ASA, 2004–, strategic and financial adviser for development of Nordic banking operations. Address: First Securities ASA, PO Box 1441, Vika, N-0115 Oslo, Norway; http://www.first.no/weblink/bank/ wlhoved_first.nsf.

■ Olav Fjell, a banker turned industrialist, returned to his financial roots when he became the financial adviser for First Securities ASA. A quiet man who guarded his privacy and who prized openness and ethical behavior, he became embroiled, ironically, in one of the largest scandals in international business. He was born in Tromso⁄ , Norway, in 1951. His father was an army officer, so the Fjell family moved around during Fjell’s younger years. In a 2001 interview with Solveig Haavik, he described himself as a “gypsy who helps out”; this description may have had its roots in his youth. Following in his father’s footsteps, Fjell enlisted in the military and became a lieutenant in the Norwegian army. After leaving the military, he enrolled in the Norwegian School of Economics and Business Administration (Norges Handelsho⁄ yskole) and graduated in 1975 with an MSc in business economics. Throughout the course of his career, which took him into international weapons dealing, banking, oil and petroleum,

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Olav Fjell. Cornelius Poppe/Getty Images.

and finance, he managed to guard his private life, shielding his family from public scrutiny. Clearly involved in the lives of his children, he served as head of the parents’ board for the Asker (Oslo) school marching band, missing only one meeting during the period from 1994 to 2000. He took great pride in the 1999 musical debut of his children.

˚ PENFABRIKK KONGSBERG VA Fjell’s first position after graduation was with the historic munitions manufacturer Kongsberg Va˚penfabrikk (KV), which later became Kongsbergs Gruppen. When Fjell joined KV in 1975, the industrial giant was beginning to experience hard times. By 1981 the company and its computer equipment division (faced with closure) negotiated a sale of high-tech tools to the Soviet Union. This deal, which the United States


Olav Fjell

claimed had compromised the security of the North Atlantic Treaty Organization, was a symptom—not the cause—of the great difficulties when Fjell took over as financial director. In 1987 KV entered into a policy of major restructuring by selling off its civilian operations (most notably, Kongsberg Albatross, which was the core of its maritime activities). Fjell directed an “asset write-down” for the company, selling off KV’s industrial gas turbines division and its equity stakes in several other companies.

BERGEN BANK AND DEN NORSKE BANK In 1987 Fjell accepted a position in pure finance with Bergen Bank, a commercial bank that specialized in financial services. In 1990 it became part of Den norske Bank (DnB). Fjell was DnB’s executive vice president for corporate clients, a position for which he was uniquely suited. He continued with DnB until 1995, when he became the first managing director of Postbanken.

POSTBANKEN Postbanken, the Norwegian state-owned retail supplier of financial services (specifically in the nation’s post offices), was established in 1995 with Fjell as its chief. This was Fjell’s introduction to working for a state-controlled company and his first opportunity to apply the cost-cutting experience and intraorganizational administration he had learned at KV. In 1998 Postbanken entered into merger negotiations with two other Nordic banks (Christiania Bank and Fokus Bank). The talks failed in September of that year but, undeterred, Postbanken approached DnB, Fjell’s old employer. Early in 1999 DnB, which was Norway’s largest bank at the time, merged with Postbanken, creating a financial giant in Scandinavia with total assets of NOK 215 billion ($41 billion). Postbanken continued to operate under its own name, but as a limited company. The merger took four years of restructuring and cost cutting (including the loss of 450 jobs). The deal was announced in late March and, in August, Fjell’s employment move to Statoil was announced.

STATOIL Statoil (originally called Den Norske Stats Oljeselskap) was established in 1972 to develop and manage Norwegian North Sea oil reserves. In the following years its area of activity expanded to encompass global oil and gas markets, making it Norway’s largest energy company. It was also an exporter of natural gas into the European mainland. Considering all this, there was some surprise when Statoil announced that Fjell would become president and chief executive officer of Statoil on September 24, 1999. Although he had been on good terms


with prominent company members, Fjell was a complete outsider to the oil industry. However, what made him so appealing to Statoil officials, it was explained, was that he had no preconceived philosophies. Though Fjell was aware of the enormous problems he would be facing, his basic logic gave him a confident outlook. Quoted by Jeff Share in the August 2000 issue of Pipeline & Gas Journal, Fjell said, “What matters is how efficiently you manage your resources, what you do with them, how you create value by gaining positions in the marketplace and satisfying customer needs.” His first problem was the issue of privatization of the stateowned company, which was the reason why his predecessor, Harald Norvik, resigned. At the onset, Fjell declared himself willing to work within the dictates of the board—although he was also reported as being in favor of partial privatization. Fjell worked to secure a partial merger with the state’s direct financial interests—oil industry interests that were owned by the state but managed by Statoil. In 2001 the state sold 17.5 percent of its shares to private investors, making Statoil partially privatized. His second task was the strengthening of Statoil’s core areas of activity through its investment strategy and through cost cutting by 20 percent (which included staff reductions of fifteen hundred positions). It was his assessment that Statoil had grown too rapidly and had invested too broadly—both without justifiable return. In comments before energy executives at the 19th annual Cambridge Energy Associates Conference, Fjell stated that Statoil had to alter its business practices in order to survive and prosper. He said that he saw a need for investment, both in the infrastructure of the company and in the production of oil and natural gas, as well as for increased marketing, trading, and product development. Furthermore, he proposed that the structure of the company’s ownership would be altered: it would no longer be simply the manager of Norway’s energy resources; instead, it would be a private (or semiprivate) company with a listing on the stock exchange. This change in ownership was part of his mission to see Statoil among the world’s top firms by 2005. Fjell’s corporate philosophy included a strong emphasis on environmental, social, and financial responsibility. He told the World Economic Forum, of which he was a founding member, “Indicators related to health, safety, environment and employee satisfaction are thus used for determining my bonus and form part of my performance review.” With words that would haunt him later, he continued, “So far, there are no indicators covering bribery and corruption, security and human rights and development—but these topics are on the board’s agenda and are thus indirectly part of the review of the CEO” (quoted by Alison Maitland in the January 20, 2003, issue of the Financial Times).

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Olav Fjell

He was also influential in increasing the number of women on the board of directors. In Statoil’s 2002 annual report, he said that it was the company’s goal to have women in 20 percent of its senior managerial positions. In that year, the company added three women to its board of directors. On this issue, the BBC reported Fjell’s statement that “a good balance between men and women . . . adds to the quality of the board” (August 8, 2002). Under his vigorous guidance and direction, Statoil was restructured in 2000 (part of which was the disposal of much of its U.S. assets). Late in 2002 he announced an increase in Statoil’s production of oil. By January 2003 he was considering an eventual merger with Statoil’s biggest competitor, Norsk Hydro. Later that year Statoil aided Norsk Hydro in its takeover of Saga (then Norway’s third-largest energy company—behind Statoil and Norsk Hydro). While the CEO of Statoil, Fjell served as speaker at the 16th Work Petroleum Congress in Calgary, Canada (June 2000), and as a member of the General Organizing Committee for the Annual European Energy Conference in Bergen, Norway (August–September 2000). He is also a member of the World Economic Forum. Late in 2003, however, the “Irangate scandal” surfaced, a scandal that quickly ended Fjell’s career at Statoil. During the previous year Fjell had approved an 11-year, $15 million contract with Horton Investment, $5.2 million of which had already been paid through a Swiss bank account. Horton was a consulting company owned by a London-based Iranian, Abbas Yadzi, and registered in Turks & Caicos (a tax haven). Yadzi was alleged to have close ties to the Iranian government, most specifically to Mehdi Hashemi Rafsanjani, the son of a former Iranian president and an executive with the Iran Fuel Consumption Optimization Organization (IFCO), a subsidiary of the National Iranian Oil Company. Statoil cancelled the contract because, it said, an internal audit had raised concerns about bribery. Details were leaked to the Norwegian press and Norway’s National Authority for Investigation and Prosecution of Economic and Environmental Crime (Oekokrim) began an investigation to determine whether Statoil had broken a national provision against influencing foreign officials. Although Fjell and Statoil terminated the contract in mid-September 2003, Norwegian police raided the company offices on September 11, 2003. Both the U.S. Securities and Exchange Commission (SEC) and the Iranian government opened investigations into the matter (the SEC because Statoil was listed on the New York Stock Exchange and the Iranians because of the implications of corruption). Hashemi, whose position with the IFCO was at risk, threatened to sue everyone who accused him of having a role in the scandal. Iranian authorities demanded copies of the internal documentation held by the Norwegian government and then reacted angrily when that paperwork was not forthcoming.

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Statoil also experienced internal turmoil from the scandal. Chairman Leif Terje Lo⁄ ddso⁄ l, having neglected to inform the board of the contract, resigned in October. Meanwhile, Fjell received an initial vote of confidence from the board. But after senior whistle-blowers, including the senior vice president for corporate audit, briefed the board about Fjell being less than completely honest with the board, he was pressured to resign. At an emergency board meeting held on September 22, 2003, he resigned from Statoil with a severance package of nearly $1 million a year for the following five years.

LEGACY TO STATOIL There was no question that Statoil became a very different company under Fjell. His fall from the company had to do with ethical issues, not business ones. After his departure, Statoil remained a partly privatized firm (the state did not step in to resolve internal issues), it still adhered to high ethical standards (the Fjell scandal was seen as an extreme irony), and it continued to be committed to a policy of overseas expansion beyond the Norwegian fields.

FIRST SECURITIES ASA Employees of Elcon Securities ASA founded First Securities ASA in 1999. In June 2002 the company was owned in thirds: by the employees, by SpareBank 1 Group, and by FörengingsSparebanken, the investment vehicle of SwedBank, which held an option to increase its ownership to 51 percent by June 2005. In addition to its headquarters in Oslo, First Securities had two other offices in Trondheim and Stavanger, Norway. On January 23, 2004, the Norwegian press reported that Fjell would join First Securities ASA in Oslo as a strategic and financial consultant with responsibilities in Nordic investment banking. First Securities is an investment group that is owned in thirds by its employees, SpareBank 1 Group, and FörengingsSpareBank. It has four offices in Norway in addition to its headquarters in Oslo.

See also entry on Statoil ASA in International Directory of Company Histories.


“European Stock Watch,” BBC News Online August 8, 2002, http://www.uea.ac.uk/llt/scandstudies/nor/bbc2002 aug8.html. George, Nicholas, “Statoil Loses Chief and Reputation,” Financial Times, September 24, 2003, p. 32. Haavik, Solveig, “Solveig Haavik mo⁄ ter Olav Fjell” (Solveig Haavik Meets Olav Fjell), O⁄konomisk Rapport, October 2001.


Olav Fjell Maitland, Alison, “Inside Track: Tools to Build a Reputation,” Financial Times, January 20, 2003, p. 10. Mellgren, Doug, “Statoil CEO Resigns amid Investigation,” Associated Press, September 23, 2003.

———, Statoil news release, September 23, 2003, http:// www.statoil.com/STATOILCOM/ SVG00990.nsf?opendatabase〈=en=41256A3 A0055DD31C1256DA90081DD5C.

Share, Jeff, “Massive Restructuring—Energy Giant Must Change to Prosper,” Pipeline & Gas Journal, August 2003.

—Barbara Gunvaldsen


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■■■

John E. Fletcher 1952– Managing director and chief executive officer, Coles Myer Nationality: Australian. Born: 1952, in Melbourne, Victoria, Australia. Family: Married Nola (maiden name unknown); children: three. Career: Brambles Industries, 1974–1982, accounting, operating, and senior management positions; 1982–1984, general manager of Transport Division; 1984–1986, commercial director; 1986–1988, managing director of CHEP Australia; 1988–1993, managing director of Brambles Australia; 1993–2001, CEO; Coles Myer, 2001–, managing director and CEO. Address: Coles Myer, 800 Toorak Road, Tooronga, Victoria 3146, Australia; http://www.corporate.colesmyer.com.

■ Over the course of his career, John E. Fletcher pulled two of Australia’s ailing businesses out of slumps at considerable profit to shareholders. While the better part of his career was spent with Brambles Industries, an international business-tobusiness industrial-services company, he later took the helm of Coles Myer, Australia’s largest retailer. Some analysts and corporate executives saw his switch from service to retailing as holding the potential for failure; Fletcher did not share their opinions. He confidently commented to a reporter, “Brambles wasn’t a small company. It had 40,000 employees, it was multibranded, and it operated in 26 countries. That gives you some experience in managing diversity and complexity” (November 14, 2002).

TURNED BRAMBLES INTO AN INTERNATIONAL POWERHOUSE The Australian-based Brambles, a building-materials and transport company, was established in 1875. By the time Fletcher stepped down from his position as CEO, it provided business-to-business industrial services in more than 30 countries worldwide. Although planning his retirement for March

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2001, he stayed with the company to negotiate a longanticipated merger with the British engineering giant GKN, a deal that was finalized later that year for £7 billion. Brambles went through a period of rapid international growth in the 1980s, and Fletcher was a major driving force behind that growth and the company’s development into one of Australia’s truly multinational corporations. The turnaround rewarded shareholders generously. In an address to the company’s annual general meeting on November 10, 2000, the day he announced his retirement, Fletcher noted that Brambles had shifted from earning 64 percent of its profits in Australia in 1994 to earning 66 percent offshore in 2001. During that six-year period, he led the company in realizing a 15.4 percent annual growth rate, which he credited to the company’s dedicated staff worldwide. Fletcher was also quick to admit to failures. In his address at the annual general meeting in November 2000, he noted: “We didn’t get everything right. We made some mistakes, but that generally comes with progress.” When Fletcher announced his planned retirement for March 2001, he delineated the five-year strategic plan he had already developed for the company and left shareholders with a vision. “We will have built a stronger Brambles, a better Brambles: the world’s first truly global industrial-service company with global brands,” he said at the November 2000 annual meeting. The chairman Don Argus said that Fletcher was leaving the company in a strong position and with a clear strategy. He also said Fletcher’s service was outstanding and that having successfully run an international company for eight years was a tribute to his skill, determination, and resilience.

BARELY RETIRED—HIRED Although Fletcher had planned to retire, members of the board of Coles Myer had different ideas for him. Following the merger of G. J. Coles supermarkets and the Myer Emporium department-store chain in 1985, Coles Myer became Australia’s biggest owner and operator of retail stores. By 2004 the company employed 165,000 people and owned and operated more than a dozen retail brand chains, including Bi-Lo supermarkets, Coles supermarkets, Coles Express Shell Service Stations, Kmart, Liquorland, Myer Grace Brothers, Target, and Officeworks. However, as the 21st century began, Coles Myer


John E. Fletcher

was suffering under falling sales, poor stock decisions, and tumbling stock prices and was looking for a way to stop the decline. After a four-month-long international search the board approached Fletcher, who accepted the offer they made and assumed the role of managing director and CEO on September 10, 2001. Not everyone was enamored with the choice, however, including the board member Solomon Lew. Although Fletcher had gained an impressive reputation at Brambles, he had no retail experience; he even admitted to Michael Rowland of Radio National that until just a few days before their interview, he had never been into a supermarket and had no desire to enter one (August 18, 2001). Fletcher was undaunted by the challenge he faced. He felt his business skills to be the most important factor in the equation, not the type of business in which he had honed them. He did acknowledge, however, that with no experience in retail he would have to negotiate a steep learning curve and would need to spend a significant amount of time in supermarkets and department stores. “I’m going to have to learn fast. But I think I’ll learn fast enough to understand when someone’s got a proposal that’s going to create value; and if he doesn’t, he’ll only do it once,” he told Rowland (August 18, 2001). Martin Duncan, the retail analyst from Macquarie Equities, commented in an interview with Radio National that Fletcher had an excellent business reputation. He expressed confidence in Fletcher’s logistics and supply-chain experience and felt that Fletcher’s lack of retail experience would allow him to make decisions people with emotional ties to the industry could not. “It would be hard to walk away from some of the things that Coles has been doing for the last few years if you were an out-and-out retailer. So he can perhaps take a harder approach” (Daniel, March 30, 2002). Fletcher’s appointment brought confidence to Coles Myer investors: while Brambles shares fell 10 percent following his departure, Coles Myer shares soared 13.7 percent the day Fletcher’s appointment was announced and another 1.9 percent the following day.

CLEANED HOUSE, CHANGED CORPORATE CULTURE Fletcher wasted precious little time in letting his executive team know how he would approach the challenge before him. He indicated that strategic plans would be reassessed, all opinions would be considered, nothing was sacred, and everything was up for debate. His first task was to launch “Operation Right Now,” a company-wide strategic review under which upper management received a major shakeup. After receiving his first management report in early 2002, he was unimpressed with the corporate culture. He found it lacked cohesion and failed to foster communication or cooperation. He felt that the


company’s clothing retailers—Target, Kmart, and Myer Grace Brothers—were competing with each other instead of pulling together as a team in the best interests of the corporation; many top executives from the different businesses had never even met. Under Fletcher’s plan for cultural change, the businesses would share a common goal rather than cannibalize each other. In a first step toward cohesion, Fletcher took two hundred of his top executives from around Australia and New Zealand to a three-day retreat in Melbourne. For some, it was their first corporate meeting. A new company slogan arose from that conference: “Group first, brand second, both winning.” He was determined that his senior executives and top two hundred managers would work together as members of one company rather than of eight different ones. Fletcher’s plan included streamlining and cutting costs by 5 percent, or approximately AU$300 million, by 2004. He would slash top-level bureaucracy in the supermarket and department-store arenas and centralize administrative functions. He received four direct reports when he first stepped in as CEO; a year later he received eleven. His plan also called for some large capital expenditures—of approximately AU$800 to AU$900 million annually over a four-year period—primarily on information technology, supply chains, and logistics. This sum was about AU$200 million higher than most analysts had predicted it would be. His radical changes stirred up considerable animosity in some quarters, particularly with the board member Lew.

UNREST AT THE TOP Lew, an entrepreneur who created a small dynasty out of his father’s failing clothing business, was asked in 1983 by the Myer family to invest in their financially struggling clothing chain. He did so, becoming chairman of Coles Myer in 1991. Along the way, he developed a reputation for being somewhat of a bully, perpetually believing his way was the right way. Although he owned a substantial chunk of the company, “being director of Coles Myer was still his passport to recognition and respectability,” one close observer was quoted as saying in an article in the Sydney Morning Herald (November 23, 2002). Lew vehemently opposed Fletcher’s vision for Coles Myer, did not like his independent management style (Fletcher seldom sought Lew’s advice), and disagreed with his concept of cultural change. Following the company’s annual meeting in November 2002, the chairman Rick Allert announced that eight of the ten board directors, including Fletcher, had recommended that shareholders not reelect Lew at the next annual meeting, stating that they wanted a harmonious board that would provide full support to Fletcher and his team. They noted that some of Lew’s director-related entities—companies on whose board he served—and other parties with whom he

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John E. Fletcher

had business ties, supplied goods to Coles Myer’s competitors. Fletcher, meanwhile, had committed to taking Coles Myer from being not only the largest but also the most successful retailer in Australia. Allert stated that during Fletcher’s first 12 months, he had brought a “new perspective, different culture, and an inspiring style of leadership. There is genuine enthusiasm in the business and the results are beginning to speak for themselves” (November 16, 2002). Adele Ferguson cited Fletcher as saying prior to the board meeting, “Lew’s reelection would cause me to revisit my role”; in other words, Fletcher virtually forced shareholders to choose between him and Lew, a stance that set a precedent in Australia’s corporate world. “A chief executive is, in effect, deciding who should be on his company’s board, rather than the board deciding on the chief executive” (November 14, 2002). Shortly thereafter, Lew was voted off the board entirely following the largest public reelection campaign in the corporate history of Australia.

HITTING THE TARGET When addressing shareholders at the company’s annual general meeting on November 26, 2003, Fletcher said Coles Myer would continue its “rigorous and disciplined approach” to business management and capital investment in order to ensure continued growth. “This team is committed to unlocking the full potential of our combined businesses for our customers and for you, the shareholders, for the first time in Coles Myer’s history,” he said. Indeed, in 2003 Coles Myer shares rose more than 20 percent, well outperforming the broader market increase of about 6 percent, and the company achieved a better-than-expected net profit of AU$455 million for the year. Second-quarter sales reached AU$8.6 billion, an increase of 14.5 percent over the 13 weeks ending January 25, 2004. Fletcher was confident that the company would reach a net-profit target of $800 million by 2006.

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See also entries on Brambles Industries Limited and Coles Myer Ltd. in International Directory of Company Histories.


Allert, Rick, “Time for Change to Coles Myer Board,” The Age, November 16, 2002, http://www.theage.com.au/ articles/2002/11/15/1037080914736.html. “Chairman’s and Chief Executive’s Address to the Annual General Meeting, Sydney,” Brambles Industries, November 10, 2000, http://ir.brambles.com/brambles/investorcentre/ shareholder/agm/agmdownloads/docs/2000-11-10aus.pdf. Coles Myer, “Coles Myer Second-Quarter Sales Up 14.5 Percent,” news release, February 12, 2004, http:// corporate.colesmyer.com.au/shared/ SecondQuarterSales_120204.pdf. Daniel, Zoe, “Analyst’s Response to Coles Myer Moves,” Radio National, March 30, 2002, http://www.abc.net.au/rn/talks/ 8.30/busrpt/stories/s519862.htm. Ferguson, Adele, “Strategy: Fletcher Returns Fire,” BRW.com, November 14, 2002, http://brw.com.au/stories/20021114/ 16916.asp. Fletcher, John, “Address by CEO,” Coles Myer, November 26, 2003, http://corporate.colesmyer.com.au/shared/ 261103CEOsAddressAGM2003X.pdf. Hewett, Jennifer, “Director’s Cut But the Show’s Not Over,” Sydney Morning Herald, November 23, 2002, http:// www.smh.com.au/articles/2002/11/22/ 1037697879113.html. Rowland, Michael, “Coles Myer’s New Billion-Dollar Man,” Radio National, August 18, 2001, http://www.abc.net.au/ rn/talks/8.30/busrpt/stories/s348509.htm.



■■■

William P. Foley II 1944– Chairman, chief executive officer, and president, Fidelity National Financial Nationality: American.

focused on the customer. In a November 1992 article in California Business, he said, “It takes years to get the business, one deal at a time. But once you get it, you have customers for life, as long as you treat them properly.” Foley was also one who never stood still, always looking forward to his next move. “We’re always looking over our shoulder,” he said in the Santa Barbara News-Press in August 2002. “So when things are good, that’s the time to prepare.”

Born: 1944, in Austin, Texas. Education: U.S. Military Academy, BS, 1967; Seattle University, MBA, 1970; University of Washington School of Law, JD, 1974. Family: Son of Robert P. Foley; married Carol J. Johnson, 1969; children: four. Career: Streich, Lang, Weeks, Cardon & French, 1974–1976, associate; Foley, Clark & Nye, 1976–1984, partner, president, and director; Land Resources Corporation, 1983–1984, president and CEO; Fidelity National Financial, 1984–, chairman, president, and CEO; CKE Restaurants, 1993–2000, CEO; 1993–, chairman. Awards: Semper Fidelis Award, Marine Corps Scholarship Foundation, 1997; Businessperson of the Year, Orange County Business Journal, 1997. Address: Fidelity National Financial, 601 Riverside Avenue, Jacksonville, Florida 32204; http://www.fnf.com.

■ William P. Foley II was considered one of the most successful entrepreneurs and businessmen in the real estate services and specialty finance industries. In 1984, while running his own law firm, Foley organized a group of investors and led a leverage buyout of a small title insurance company in Phoenix, Arizona. Twenty years and more than 80 acquisitions later, that local firm (then called Fidelity National Title Insurance Company) became the largest title insurer in the country. Foley was credited with recognizing early on the growth opportunities in the title insurance industry. Through dozens of shrewd and complicated acquisitions and effective operational management, he led Fidelity to the top position in the title insurance industry in 2000, following its acquisition of Chicago Title Corporation. By 2003 Fidelity controlled 30 percent of the title insurance market, with annual revenues of $7.7 billion. Foley ascribed his success to one core principle: staying International Directory of Business Biographies

THE DEAL MAKER Foley was interested in business early on. While attending the U.S. Military Academy in the 1960s, he preferred managing his stock portfolio to completing his studies, by his own admission. He fulfilled his military commitment by overseeing defense contracts at Boeing Company in Seattle as an air force officer. After his discharge, he earned a degree in business from Seattle University and then a law degree from the University of Washington. After receiving his law degree, Foley joined the Phoenix firm of Streich, Lang, Weeks, Cardon & French in 1974 and, two years later, established Foley, Clark & Nye, where he stayed until 1984. It was during this period—while handling the legal work for a local savings and loan (S&L) company— that Foley first came in contact with Fidelity National Title Insurance Company, a small title insurer in Phoenix. Though it was a rather unglamorous and arcane business, title insurance was critical to companies, lenders, and home owners. The policies issued by title insurers shielded real estate title holders from losses that occurred from claims filed against a property. Foley helped the S&L company acquire Fidelity in 1980 and then watched as its revenues grew from $6 million to $40 million during the next three years. Foley saw the potential for greater growth at Fidelity, so he formed an investor group to purchase the company in 1984. The gamble paid off handsomely for Foley, who left his law practice to become chairman, chief executive officer, and president of the business that same year. The company went public in 1987 and began a series of acquisitions over the next 13 years that catapulted it to the top position in the title insurance industry. Fidelity’s consistent growth was attributed to Foley and his management team’s aggressive acquisition of regional and, ultimately, national title insurance firms across the country. Fo-

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William P. Foley II

cusing on residential real estate and businesses in core states like California, Texas, and Florida, Fidelity grew rapidly during the late 1980s and early 1990s. “Every year, our revenue would go up by 50 percent, 100 percent,” said Foley in the Florida Times Union (September 1, 2003). While Foley executed dozens of acquisitions after Fidelity became a public company, three deals stand apart as key contributors to the company’s growth. The first was the 1987 acquisition of Western Title Insurance Company, which gave the Arizona-based Fidelity a major presence in California. Almost overnight, according to Foley, “we had a 25-county operation in California” (Florida Times Union, September 1, 2003). The acquisition prompted the company to move its headquarters from Scottsdale, Arizona, to Irvine, California, that same year. The second event was the acquisition of Meridian Title Insurance Company in 1992. At the time of the deal, Meridian had operations in 15 states and about $140 million in annual revenue. The Meridian acquisition gave Fidelity “a national presence,” according to Foley (Florida Times Union, September 1, 2003), and it propelled it to the number-seven position in the title insurance industry. The third major event was the boldest one of all: the 2000 acquisition of the second-largest title insurer in the country, Chicago Title Corporation. With the purchase of Chicago Title, Fidelity went from being the fourth-largest to the largest title insurance company in the United States.

bara News-Press (August 12, 2002). He tried to “delegate to strong managers.” Indeed, Foley has been criticized for axing executives at companies he acquired and replacing them with his own people. “If people are the problem, we get rid of them. If there are structural problems . . . we fix them,” he said to the Orange County Business Journal (January 5, 1998). Another core competency of Foley and his executive team was the ability to find good acquisition candidates. In Cathy Taylor’s article in the Orange County Register, Foley described his approach to selecting these companies, stating that his first criterion “is to find companies that have been mismanaged” (October 29, 1995). According to Foley, he typically looked for the characteristics that led to his purchase of Fidelity in 1984: ineffective managers who miss growth opportunities and ignore their customers’ changing needs. He then researched the company’s financial records and tried to identify the reasons why it was not increasing its revenue or adding to market share. Afterward, Foley created a “to do” list to fix the company and then negotiated hard for the acquisition. “I tell them, ‘Here are the things you have to fix; that’s why you have to lower the [asking] price.’” Foley negotiated for a final price below net asset value, meaning total assets minus debt, goodwill, patents, and other intangibles. Foley and his team were also patient when negotiating an acquisition, spending two or three years to close a deal. “We will keep changing and tuning [the offer], from a tax standpoint, from a GAAP (accounting) reporting standpoint,” he added (Orange County Register, October 29, 1995).

KEY BUSINESS AND LEADERSHIP STRATEGIES A number of important business strategies and leadership skills have guided Foley’s management of Fidelity from the beginning. In California Business, the reporter Philip Capelle described the way Foley and his early partner, Frank P. Willey, transformed Fidelity after their leveraged buyout of the company, “Foley and Willey decided to curb the company’s dependence on independent agents and to emphasize direct selling through [its] employees. This approach gave Fidelity control over costs” and the ability “to avoid the kinds of losses incurred by competitors” (November 1992). Foley and Willey also steered Fidelity’s business toward the more stable residential sector, as opposed to commercial real estate. The move proved prescient by anticipating the U.S. real estate boom of the 1990s. Foley was also a disciple of the management guru Tom Peters, and like Peters, he instilled a core value of superior customer service throughout Fidelity’s subsidiaries. Toward that end, Foley sought out talented executives to run his operations, and he credited his ability to delegate as a key ingredient to his company’s success. “I’m a very good delegator, so that’s one of the reasons the company has grown like it has,” he explained to the Santa Bar-

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PROBLEMS ALONG THE WAY Not all deals worked out as well as Foley envisioned. In the mid-1990s, as it attempted to diversify into other businesses, Fidelity failed to close several deals, including a couple of hostile takeovers. Foley reported to the Florida Times Union that acquisitions were “difficult for us because we were just a small company. We were very aggressive. . . . The reality was we were never very successful at [hostile takeovers]. We irritated a lot of people and we wasted a lot of time. So we stopped it.” Foley added, “[Executing hostile takeovers] wasn’t my style” (September 1, 2003). Foley also admitted that his ambitious deal making could get out of control. “I’m my own worst enemy; I keep finding transactions to do” (Forbes, September 23, 1996). The Fidelity holding company also had interests in the restaurant industry, with its CKE Restaurants subsidiary (of which Foley served as chairman of the board and CEO). CKE operated a number of regional restaurant chains, including Hardee’s, Carl’s Jr./Green Burrito, Rally’s, Checkers DriveIns, Home Town Buffets, Galaxy Diners, and Taco Bueno. In 1999 it was the fourth-largest seller of hamburgers in the United States, after McDonald’s, Burger King, and Wendy’s.


William P. Foley II

Though Foley helped turn CKE around after he took it over in 1993, the company began losing money in the early 2000s. In the fiscal year ending January 2003, it lost $150 million. The 1997 acquisition of the Hardee’s chain of 2,400 restaurants turned out to be more problematic and costly than Foley had anticipated. The deal appeared cheap at the purchase price of $327 million, but it turned out that more than five hundred of the units, which were franchised to a company named Advantica Corporation, were prepared to break away from the acquisition. CKE was forced to invest another $420 million to buy out Advantica and keep the units—located mostly in the Southeast—on board. The extra costs doubled CKE’s debt, which the company struggled to manage.

FUTURE DIVERSIFICATION Though Fidelity never lost money in its 20-year history under Foley, it aggressively diversified its services beginning in the 2000s to withstand the cyclical downturns in the real estate market. “Our downside is that we’re subject to the real estate cycle,” Foley reported to the Santa Barbara News-Press (August 12, 2002). “We’re attempting to diversify to get into more consistent revenue streams that will produce a recurring income stream and after-tax profit performance for our organization.” To this end, Fidelity expanded into other forms of real estate services, such as flood insurance, mortgage insurance, property and casualty insurance, appraisal services, and the home warranty business. It also made a number of acquisitions of real estate and finance technology companies, such as Alltel Information Services, Sanchez Computer Associates, WebTone Technologies, and Aurum Technologies. These acquisitions positioned Fidelity as a technology-solution business in the real estate and financial services industries, not just an insurer. Such a “plan-ahead-for-survival” strategy fit with Foley’s temperament as a person. “In the spring and summer, prepare for the fall and winter. That’s what we’re all about” (Santa Barbara News-Press, August 12, 2002).


See also entries on CKE Restaurants, Inc. and Fidelity National Financial Inc. in International Directory of Company Histories.


Basch, Mark, “Fidelity National’s Move to City Has Worked out Well; Earnings Are up in Quarter as Company Continues to Make Big-Time Acquisitions,” Florida Times Union, January 29, 2004. ———, “The New Kid in Town, Fidelity National, Isn’t Standing Pat; Company Sees Diversification as Key Element for Its Future,” Florida Times Union, September 1, 2003. Bergsman, Steve, “Fidelity Unit Has Big Plans,” Mortgage Banking, March 2002, pp. 68–72. Bernstein, Charles, et al., “Gobbling Up Hardee’s: How Much Is Too Much for CKE?” Restaurants & Institutions, June 1, 1997, p. 24. Capelle, Philip, “How Tom Peters Helped One Title Company Thrive in a Bad Market,” California Business, November 1992, p. 16. Ferguson, Tim W., “Indigestion,” Forbes, October 4, 1999, p. 102. Fried, Ian, “Bill Foley: He’s All over the Place and in Your Face,” Orange County Business Journal, January 5, 1998, p. 1. Lubove, Seth, “Inexperience Pays,” Forbes, September 23, 1996, pp. 60–61. Taylor, Cathy, “To Deal Maker Foley, It’s Easy: Just Buy Low,” Orange County Register, October 29, 1995. “Technology: Tech Vision—One Stop Mentality Drives Consolidation—The Desire to Source Technology Solutions from One Vendor Rather Than Several Is on the Rise among Banks and This Is Helping to Feed an M&A Trend, Believes Jim Wilson,” Banker, March 1, 2004. Zate, Maria, “Santa Barbara, Calif.–Based Fidelity National Financial Keeps CEO Busy,” Santa Barbara News-Press, August 12, 2002. —Mark Scott

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Jean-Martin Folz 1947– Chief executive officer, PSA Peugeot Citroën Nationality: French. Born: January 11, 1947, in Strasbourg, Alsace, France. Education: École Polytechnique and École des Mines, engineering degree, 1971. Family: Son of Robert Folz and Marianne Bock; married Marie-Claire Picardet; children: two. Career: French Ministry of Industry, 1972, mining engineer; French government, 1974–1975, adviser to the Minister of Commercial and Craft Industry; 1975–1976, adviser to the Minister for Quality of Life; Ministry for the Quality of Life, 1976–1977, assistant director; Office of the Secretary of State for Industry, 1977–1978, director; Rhône-Poulenc Polymères, 1978–1981, factory manager; 1981–1984, senior vice president; Jeumont-Schneider, 1984–1987, assistant general manager, later chief executive officer (CEO) and chairman of the board; Péchiney, 1987–1991, managing director; Eridania Béghin-Say, 1991–1996, managing director; PSA Peugeot Citroën, 1996, managing director of Peugeot Automobiles (Automobiles Peugeot); 1996–1997, managing director of automobile division; 1997–, chief executive officer and member of managing board. Awards: Forbes Global Businessman of the Year, Forbes, 2001; Man of the Year, Journal de l’automobile, 2002; Manager of the Year, Challenges and A. T. Kearney, 2003. Address: Peugeot Groupe, 75 Avenue de la GrandeArmée, 75116 Paris, France; http://www.psa.fr.

■ Jean-Martin Folz was an unlikely choice to lead PSA Peugeot Citroën. Folz was a former bureaucrat who seemed likely to be eaten alive by competition unfettered by state control, yet the Peugeot family saw something in him that led them to make him the heir to the chief executive officer Jacques Calvet. By 2000 PSA Peugeot Citroën had risen to become the second-best-selling automobile manufacturer in Europe; by

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Jean-Martin Folz. AP/Wide World Photos.

2001 it was the sixth largest in the world. The Peugeots themselves purchased more shares, giving them 37 percent of the company’s stock, while Folz was regarded as one of the world’s best automobile manufacturing executives.

AN UNUSUAL BUREAUCRAT In 1974 Folz went to work as a government bureaucrat serving upper-level French cabinet officers and made an unusually rapid climb to become director of the Office of the Secretary of State for Industry. He was noted for his relentless passion for work, arriving at work by 6:00 a.m. and writing a speech for his minister by 6:30 a.m. He was straightforward, and the French press reported that he offended ministers with his bluntness. He was pushed out of his civil service career in 1978 but found a job with Rhône-Poulenc Polymères, run-


Jean-Martin Folz

ning a factory that he quickly reorganized to be more efficient and profitable. Folz then accepted a position in 1984 with JeumontSchneider, a manufacturer of heavy equipment, and rose rapidly to become the company’s leader. He was hired in 1987 by Péchiney, Europe’s largest aluminum manufacturing company, as the heir to the chief executive officer Jean Gandois. Gandois quickly found himself compared unfavorably with Folz, who worked much longer hours than his boss and became more influential. Gandois subsequently forced him out of the company. In 1991 Folz became the managing director of Eridania Béghin-Say, a French and Italian company that produced sugar and cooking oil. It was his work at Eridania Béghin-Say that caught the attention of the Peugeot family. Folz was first offered the position of managing director of the Peugeot division in 1995; he finally accepted it in February 1996, with the understanding that he would eventually succeed the flamboyant chief executive of PSA Peugeot Citroën, Jacques Calvet.

KEEPING PEUGEOT INDEPENDENT Folz kept a low profile for two years after joining PSA Peugeot Citroën, speaking softly and never drawing attention away from his boss. He visited all 14 of his company’s factories and studied every automobile marketplace. Coworkers found his thinking incisive and brilliant. Folz succeeded Calvet as chief executive officer on October 1, 1997. He remained publicityshy but quickly set to work remaking the company. PSA Peugeot Citroën’s factories were one-third idle in 1997, and the company had lost $380 million on a gross of $25.6 billion. Its share of the European automobile market stood at only 11.8 percent. Folz cut costs by merging the research and development and manufacturing departments for the Peugeot and Citroën divisions. At the same time, he established separate and competitive advertising departments to define each make as a unique and desirable brand. He called this innovation his “one group, two brands” strategy. In addition, he spearheaded the development of new, stylish designs for each vehicle model manufactured by his company. Folz began a careful expansion of PSA Peugeot Citroën in January 1998 by announcing that the company would build a new factory in Brazil. DaimlerChrysler approached PSA Peugeot Citroën about purchasing the company in 1999, but Folz spurned the offer. That year PSA Peugeot Citroën sold 2.2 million automobiles in Europe alone. By 2000 PSA Peugeot Citroën had become the sixth-largest automobile manufacturer in the world, with 5 percent of the world market and three million automobiles sold. Its share of the European market had risen to 12.1 percent. It netted $1.5 billion on a gross


of $40 billion. “The key to succeeding in this car market is to rapidly produce cars as varied and attractive as possible . . . at a competitive cost,” said Folz (BusinessWeek, April 17, 2000). In 2000 he introduced the Citroën Xsara Picasso minivan, the Peugeot 206 convertible, and the Peugeot 607 luxury sedan, which featured a revolutionary new particulate filter that made its diesel engine less polluting and more fuel-efficient than standard gasoline engines.

SUSTAINING GROWTH Although he was modest and relaxed, Folz inspired his employees with his realistic production goals, and he oversaw the distribution of $173 million dollars in employee bonuses in 2000. In 2001 Folz planned the introduction of 26 new models over the next few years, while his company’s factories ran at full capacity 24 hours a day, seven days a week, every week of the year. PSA Peugeot Citroën’s share of the European market grew to 14.8 percent, and its stock had tripled in value since 1997. The Brazilian factory opened in 2001, while PSA Peugeot Citroën bought 26.9 percent of China’s Dong Feng Motors, an assembly factory that began manufacturing and selling cars using PSA Peugeot Citroën’s techniques. By 2002 Folz was regarded as one of the finest automobile executives in the world. That year the Peugeot 206 became Europe’s best-selling automobile. PSA Peugeot Citroën sold 3.27 million vehicles, up 4.3 percent in a year that saw a decline of 0.6 percent for the industry as a whole, and it netted $1.78 billion on a gross of $57 billion. The company had 5.7 percent of the world market and 15.5 percent of the European market. Folz negotiated an alliance with BMW to create more economical gasoline engines in the summer of 2002. In 2003 PSA Peugeot Citroën was fourth in automobile sales in China, where it invested $120 million to expand its joint venture with Dong Feng. It spent $750 million to build a plant in Trnava, Slovakia, and invested $1.6 billion in a joint venture with Toyota Motor Corporation to build a factory in the Czech Republic. The company also invested $1 billion to upgrade its existing plants.

See also entries on Eridania Béghin-Say S.A., Péchiney S.A., PSA Peugeot Citroën S.A., and Rhône-Poulenc Polymères S.A. in International Directory of Company Histories.


Folz, Jean-Martin, “PSA Peugeot-Citroën: Europe’s Second Largest Carmaker Enjoys Fastest Growth,” Auto Industry, March 1, 2003, http://www.autoindustry.co.uk/features/ articles/article-PSAPCE146.

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Jean-Martin Folz Heller, Richard, and Susan Kitchens, “Businessman of the Year: Triumph of the Understudy,” Forbes.com, December 24, 2001, http://www.forbes.com/global/2001/1224/046.html. Tierney, Christine,“Can Peugeot Go It Alone?” BusinessWeek, April 17, 2000, p. 20. —Kirk H. Beetz

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Scott T. Ford 1962– President and chief executive officer, Alltel Corporation Nationality: American. Born: 1962. Education: University of Arkansas, BS, 1984. Family: Son of Joe T. Ford (retired Alltel CEO) and Jo Ellen Wilbourne Ford (daughter of Allied Telephone Company founder Hugh Randolph Wilbourne Jr.); married, 1984; children: three. Career: Stephens Group, 1986–1996; Alltel, 1996, director and president; 2002–, chief executive officer. Address: Alltel Corporation, 1 Allied Drive, Little Rock, Arkansas 72202; http://www.alltel.com.

■ Scott T. Ford, the president and chief executive officer of the Alltel Corporation, made his first business deal at the age of 12 with his father, Joe T. Ford. The two agreed that Scott would never work at Alltel. Joe wanted to spare his son what he himself had endured since coming to work for his father-inlaw, Hugh Wilbourne Jr., in 1959. After the passage of the Telecommunications Act of 1996, however, the Fords rethought their agreement, and, at age 35, Scott Ford became executive vice president of Alltel. Within two years he was appointed CEO, following in the footsteps of his grandfather Wilbourne, who formed Allied Telephone Company in 1943 in Little Rock, Arkansas. Allied merged with Mid-Continent Corporation in 1983 to form the Alltel Corporation. Joe T. Ford, married to Wilbourne’s daughter, became the president of Alltel, while his son, Scott, received a finance degree from the University of Arkansas. After graduating from the Walton College of Business at the University of Arkansas, Ford went to work at Merrill Lynch, where he sharpened his skills in acquisitions. After two years he moved to the Stephens Group in Little Rock. Stephens, an investment firm, was also one of Alltel’s largest stockholders. Ford continued gaining experience and a reputation for his energy and acquisitions acumen. After eight years


his boss, the legendary Arkansas businessman Jack Stephens, suggested to Ford’s father that the son should be brought into Alltel to help the company handle the changes occurring in the telecommunications industry. Ford wasted no time acquiring purchases for the rural telecommunications company. By 2004 he had been at the forefront of Alltel’s most lucrative acquisitions, hostile and friendly. Ford eased into the company not only at a crucial time in the industry, but also at a time when his father began thinking of retirement. Even though many detractors thought Ford received the job because of his relationship with the head of the company, he soon showed his aggressive and stubborn tenacity in moving Alltel into the expanding field of wireless communications.

EARNS REPUTATION IN ACQUISITIONS WITH STEPHENS GROUP At the Stephens Group, Ford served as the assistant to Stephens, working mostly in private wealth management. His experience with mergers and acquisitions at Merrill Lynch came in handy at Stephens, where he served on the team that managed some of the company’s largest mergers. Ford’s first big opportunity came in 1990 when he worked in the background on a deal to purchase Holly Farms by Tyson Foods. He learned a lesson during this transaction with Tyson when the food powerhouse led with a low price. Tyson “led with a twenty-five percent premium, and it ended up costing them fifty percent,” Ford explained to Telephony (October 15, 2001). “When you start low everyone knows you’re starting low, so everyone assumes you’re going to have a series of escalations. When you start high, they have to wonder whether there’s an escalation at all or whether they’re running the risk of getting zero.” When the Stephens Group went after the Donrey Media Group in 1993, Ford was the point man for the purchase. He said that at the time he was perfectly content working in acquisitions, but when Joe Ford asked him to come on board at Alltel in 1996, Scott decided that he could not turn down the offer. As he said to a writer for Arkansas Business, “How many times does your father come to you, with a real belief—and you can see it in his eyes—that you could help him?” (July 1, 2002).

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Scott T. Ford

ACQUISITIONS WIZARD GROWS COMPANY Starting as an executive vice president at Alltel, Ford soon began climbing the ranks. By 1997 he had been appointed president of the company. Alltel also reported sales of 3.26 billion in computers, wireless, and wireline phone service in 1997. Under Ford’s leadership, the company began aggressively buying smaller telecommunications companies and offering a full range of services to customers. Ford credited the company’s competitiveness with the larger markets to its decision to offer one-stop phone service. Bundling local phone service, long distance, wireless, paging, and Internet access helped bring new customers to the company. In 1997 Alltel combined its wireless and wireline businesses into a vertical offering for customers. By 1998 the company began billing all of its offered services on one bill, something most customers appreciated. Ford cited Alltel’s previous track record in acquisitions as his reason for continuing that trend. By 1998 Alltel had acquired at least 250 businesses over its 50 years of existence. The purchase of Cellular Plus in Georgia in 1998 brought in more than 23,000 new customers. However, the largest purchase of that year came when Alltel successfully bid for 360 Communications, Sprint’s former cellular operation. Th following year Alltel merged with Aliant Communications in Nebraska.

FORD MAKES LARGEST ACQUISITION BY STANDING FIRM From the time Ford took over at Alltel until 2001, he spent $12 billion in purchasing smaller competitors. He laid out this money even though the revenues for Alltel hovered around $7.5 billion. In 2001 Ford was ready for the biggest acquisition yet when he bid for CenturyTel, a rural carrier in Monroe, Louisiana. The first offer, in August 2001, was $6.1 billion, or $43 per share, a 40 percent premium over the actual trading price. CenturyTel turned it down because it wanted to sell only the wireless portion of the company and retain a strong local core of phone business. Ford wanted the whole thing, and when CenturyTel refused the offer, Alltel went public with the information that CenturyTel wanted to sell their wireless market. In turn, CenturyTel sued Alltel, and industry analysts assumed the merger was off forever. Ford believed that the purchase of CenturyTel would enable Alltel to become the dominant rural market, both wireless and wired, and the lawsuit did not deter him from his path. Industry insiders praised his move as a smart preemptive strike by Alltel before the industry heavyweights realized the benefits of developing the rural markets.

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But CenturyTel, with its solid base in markets in the rural South, did not overlap Alltel’s market, and CenturyTel had also achieved its success through acquisitions. By October of 2001 the offer from Alltel had increased to $9 billion, and again CenturyTel turned it down. Tom Burnett, president of Merger Insight, told Telephony that CenturyTel was merely playing hard to get. “Lawsuits are fairly standard,” said Burnett. “It’s the way you build a moat around the castle. You discourage Alltel by showing them you’re going to fight hard and be a pain in the ass, which will eventually motivate them to raise the price” (October 15, 2001). After a standoff of nearly six months, Ford decided to buy only the wireless portion of the business, for $1.65 billion, expanding Alltel’s hold on the southern wireless market.

STRONG PROFITS IN A SHAKY BUSINESS Even though Ford did not get exactly what he wanted from CenturyTel, Alltel continued to exert its presence in the field of telecommunications. By the end of 2002, as others in the business suffered, Alltel prospered. Ford told Business Week in November 2002, after his appointment as CEO, that Alltel’s success came from fiscally responsible moves and continued acquisitions. He noted his family’s history of running the company with the strategy of maintaining a strong balance sheet. He also credited the markets that Alltel had developed. While not going after the major U.S. metropolitan centers but staying steady in the smaller cities and rural areas, Alltel rode the ups and downs in the business with ease. Ford said that both upswings and downswings in the economy greatly affect the large urban areas, while the smaller markets do not feel the pinch as swiftly. To further solidify its balance sheet, Alltel sold its financial services business for $1.05 billion in 2003, giving it earnings of $1.33 billion, up from $924 million in 2002.

MANAGEMENT STYLE AND STRATEGIES Ford’s management style included careful and watchful consideration of the competition. Although Ford might have been tempted, he resisted the urge to jump into the new technologies developing as the new millennium began. He told Telecommunications Reports in 1998 that he was concerned about each of his competitors, but he would wait before jumping into wireless loops, a newly emerging wireless technology. In order to compete against the industry giants, Ford stressed local customer service with a good product and pricing that would take care of being swallowed by others, such as BellSouth or AT&T. Even while Ford expanded Alltel’s services, customer satisfaction remained at the forefront of company policy.


Scott T. Ford

Ford’s success in these areas did not stop the telecommunications union from questioning some labor practices of Alltel. In 1998 the Communications Workers of America let Alltel know that employees needed to be given the same consideration as customers. Charges against Alltel included union breaking and increasing costs of health insurance to workers. Not all customers felt that Alltel treated them fairly, either. A class-action suit filed in Florida in 2002 accused Alltel of using bait-and-switch tactics with new customers. The charges said that the fine print in the contract allowed Alltel to raise prices during a one-year contract period when most customers believed that they were signing up for a set price. Perhaps mindful of these difficulties, when Ford was appointed CEO of Alltel in 2002 he stressed the importance of communication with employees and shareholders. He was also vocal in his insistence that the traditional long-distance carriers were finished in the telecommunications business, and until they were gone, companies like Alltel would be slow to grow. Until that happened, Ford said, he would continue Alltel’s policy of not passing along the cost of competition between too many communications companies to the customer. He told Arkansas Business, “You don’t charge your best customers your worst business price. They switch. You can’t build a sustainable business that creates jobs, provides good service and really earns a good return for shareholders over a long period of time thinking that way” (July 1, 2002). An editorial in Telephony portrayed Ford as “articulate and effusive in describing his vision of where he planned to take Alltel” (October 15, 2001). And even though some insiders suggested that Ford’s appointment was a form of nepotism, others credited him for bringing new life to the company. Telephony called Ford a contradiction because his youth and easygoing manner were coupled with the intensity required to be a hard-hitting executive and the experience to match—no matter what the reason was for his appointment. A profile of Ford in the same issue of Telephony cited his penchant for participating in team-roping rodeos, which explained much about his style of business leadership. He has competed in national team-roping finals, with $100,000 of prize money for the winner. Ford said the pressure of the


money and the competition made the sport all the more exciting for him. He practiced the same type of pressure in some of his acquisitions for Alltel, while maintaining an assured sense of confidence. Even when the tensions were high between Ford and CenturyTel’s founder, Clarke Williams, Ford laughed at the sniping going on between the two firms. In fact, when Williams made a sarcastic response to one of Ford’s bids, Ford smiled with admiration for Williams’s style, according to Telephony. And even though Ford lost the chance to acquire all of CenturyTel in 2001, industry analysts said his tenacity in the deal sealed his reputation as a businessman who could withstand high-stakes risks. By 2004 Alltel’s earnings met Wall Street’s expectations, but Ford continued to strengthen the balance sheet. He eliminated 600 positions within the company, while consolidating wireless and wireline portions of the business. Even as the wireless industry appeared to be ready for more consolidation, Ford announced that Alltel would buy $750 million of its own shares because there were no major acquisitions on the horizon. Ford maintained that there was no better way to invest the company’s profits than in its own shares.

See also entry on ALLTEL Corporation in International Directory of Company Histories.


“Alltel Uses Convergence to Consolidate Market Position,” Telecommunications Reports, March 2, 1998, p. 47. Gubbins, Ed, “Never Blink,” Telephony, October 15, 2001, p. 38. “Looks Can Be Deceiving,” Telephony, October 15, 2001, p. 9. Turner, Lance, “Scott Ford Ascends at Alltel: Third Generation Takes Reins at Arkansas’ Telecom Giant,” Arkansas Business, July 1, 2002, p. 1. —Patricia C. Behnke

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William Clay Ford Jr. 1957– Chairman, chief executive officer, and president, Ford Motor Company Nationality: American. Born: May 3, 1957, in Dearborn, Michigan. Education: Princeton University, BA, 1979; Massachusetts Institute of Technology, MBA, 1984. Family: Son of William Clayton Ford Sr. (Ford Motor Company executive) and Martha Firestone Ford; married Lisa Vanderzee; children: four. Career: Ford Motor Company, 1979–1982, production planning analyst and manager of New York division; 1982–1983, analyst for North American auto operations; 1984–1985, international financial specialist; 1985–1986, planning manager for car production development; 1986–1987, director of commercial vehicles marketing for European division; 1987–1989, managing director of Switzerland division; 1989–1990, manager of Ford truck operations; 1990–1993, director and executive director for business strategy of Ford Auto Group; 1992–1994, general manager of climate control division; 1994–1995, vice president of commercial vehicle tracking center; 1995–1999, chairman of corporate financial committee; 1999–, corporate board chairman; 2001–, president and chief executive officer. Address: Ford Motor Company, 1 American Road, Dearborn, Michigan 48126-2798; http://www.ford.com/ en/default.htm.

William Clay Ford Jr. AP/Wide World Photos.

a reluctant one (USA Today, October 31, 2001). Ford’s comment nevertheless reflected his ongoing concern for the company he had served for almost two decades: “But when I saw what was happening to our company, I thought I could help us.”

■ William Clay Ford Jr. was the great-grandson of Henry Ford Sr. After earning his BA from Princeton University, he began a lifetime of service in the family firm, culminating in his appointment as president and CEO in 2001. A strong environmentalist and progressive manager, he sought to rescue Ford from serious financial trouble arising from the Firestone tire scandal and the perceived mismanagement of his predecessor, the Australian-born Jacques Nasser. Ford, tremendously likable, sought to use his name and extensive experience within the company to revive the firm. “I certainly never sought this job,” said Ford, implying his takeover of the family firm was

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THE UN-FORD: EARLY CAREER William Clay Ford Jr. was born into the most American of American car companies. The very name “Ford” for decades had been a synonym for mass production, midwestern conservatism, and the memory of the brilliant but often quirky genius who created much of the American way of life in the 20th century. The number-two carmaker in the world was also, unlike General Motors (GM), a family firm. The company was run by Henry Ford from its foundation until 1945. Edsel



Ford, son of the founder and the heir apparent, had died in 1943 but not before fathering three sons and one daughter. The eldest, Henry Ford II, ran the company from 1945 until 1979. The youngest, William Clay Ford Sr., was born in 1925. Bill Ford Sr. began working for Ford in 1949 and went on to design Lincolns and eventually serve as vice chairman of the Ford Motor Company. He married Martha Parke Firestone, a member of the family whose firm provided Ford’s tires for decades. Their son, Bill Ford Jr., was born in 1957. Bill Ford Jr. was a product of his generation, his family, and the company itself. The culture of Ford, like its founder, was an unusual mixture of the conservative and the dynamic. Henry Ford was a cultural conservative who hated unions, dabbled in anti-Semitism, promoted classic midwestern values, and in the end almost destroyed his company through his rigid management style. On the other hand, he was also a pacifist and a cultural revolutionary who inaugurated the automobile age and transformed the world far more than many political leaders did. Upon the founder’s death, Bill’s uncle, Henry Ford II, encouraged the innovative, revolutionary side of the company culture. He hired and promoted the liberal Democrat Robert McNamara in the 1950s; he updated the firm’s finances and created the popular Falcon model. In the 1960s, as Bill was growing up in Dearborn, Lee Iacocca showed how to make a stylish popular car, the Mustang, and how to turn it into a marketing triumph for Ford. Born at the end of the baby–boom generation, Bill Ford came of age as Ralph Nader and other consumer advocates were causing millions of people to question the safety of American cars and the social conscience of American business. This milieu greatly influenced the outlook of the young Ford as he entered adulthood and launched his career. Ford’s senior thesis at Princeton, “Henry Ford and Labor: A Reappraisal,” suggested that even then he was formulating a progressive business philosophy. Bill Ford began working for the Ford Motor Company as a production analyst. When Ford joined the company in 1979, the firm was no longer run by a member of the family. Bill’s uncle, Henry Ford II, stepped down a matter of days before Bill joined the payroll. Iacocca, the heir apparent, departed for Chrysler. A series of other leaders followed as chairman over the next two decades: Philip Caldwell, Harold Poling, Philip Baron Jr., and finally, in 1993, Alex Trotman. Bill Ford entered the family firm at a time when Detroit’s golden decade of the 1960s had given way to the lean years of the 1970s and 1980s. The American automobile industry was struck first by the rise in oil prices and next by the rapid surge in popularity of Japanese imports. Hundreds of thousands of Bill Ford’s generational peers deserted their customer loyalty to Ford to purchase fuel-efficient Toyotas and Hondas. Bill Ford served as an analyst, a financial specialist, and a planning manager between 1979 and 1984. After earning his


MBA at the Massachusetts Institute of Technology in 1984, he served in other midlevel positions, usually as a planning manager in Europe, in the area of truck operations, and finally in climate control, an area near to his heart. Ford became a director in 1988 and took on his first major post as chairman of the finance committee in 1995. The 1990s were better years for the company, which was then under the chairmanship of Alex Trotman. Ford’s sport utility vehicles (SUVs) from 1993 onward spearheaded a return to profitability. Bill Ford once again witnessed the pattern that had characterized Ford’s company history. Long years of unrewarding sales would be ended by a breakthrough in which a popular car or vehicle would create a sensation and permit Ford to reap both popularity and profit. The Thunderbird, the Falcon, the Mustang, and then the Explorer and the Taurus fit the pattern. By 1998 Ford was gleaning outstanding profits. After serving for many years in a score of middlemanagement positions, Ford was tired of working for the company. He continued to chair the financial committee but devoted most of his time to running the Detroit Lions football team. In 1999, however, Trotman retired, and Ford took his place as chairman. The positions of president and CEO were assumed by Jacques Nasser. Both Bill Ford and the company entertained high hopes for Nasser, his personal choice for CEO. The talented Lebanese Australian was the perfect image of the new Ford global manager. His goal, which Bill Ford shared, was to overtake GM. Nasser’s expected long tenure lasted less than two years, however. Seeking to emulate Jack Welch of General Electric, Nasser purchased Volvo and other companies. He hired women and minorities and sought to shake up the culture of one of the most traditional companies in the United States. He ended job security, hired many outside executives, and brought in a grading system for employees. With Ford earning $7 billion in 1998 versus only $9.7 billion for GM and Chrysler combined, Nasser was supremely confident, despite his growing unpopularity as a manager. The Nasser plan might well have succeeded had it not been for the Firestone disaster. In 2000 a number of mysterious accidents involving Ford Explorer SUVs began occurring. The vehicles were tipping and causing fatalities. Ultimately, investigators determined that the culprit was the Firestone tires that were standard on all Ford Explorers; they were exploding and causing the SUVs to spin out of control. Nasser sought to contain the criticism with a public relations campaign, but it was not enough to restore public confidence in the company. The long relationship between Ford and Firestone ended, and Ford’s stock, credibility, and reputation sank. Between 2001 and 2002 the company lost $6.4 billion. In October 2001 Nasser resigned as CEO, and Bill Ford took the helm.

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“I BLEED FORD BLUE”: THE FORD RESTORATION When Bill Ford took the company mantle at age 45, many felt that he was the only person who could rescue the fourthlargest company in the world from a possible meltdown. He was, after all, a Ford. Unlike Nasser, he was popular. He knew the company and had served it for 20 years in almost a score of positions. Some observers, however, were skeptical. Bill Ford had a long résumé, but it was filled with middlemanagement positions. How much experience did he have in the overall executive direction of a company, especially a giant such as Ford? Ford’s management style emerged as one of his major assets. Nasser trod upon thousands of toes, but Ford sought to rally everyone around his person. The first Ford to run the company in more than 20 years, he not only invoked the Ford brand, he was part of that brand. Bill Ford knew his company and recognized that Ford was not General Electric. One could prune the Detroit-based midwestern Ford culture, but it could not be jettisoned. From the moment he took over, Ford recognized that the only course for the company was to return to its roots. “We need to get our focus back on the basics of our business,” Ford said in his first public remarks as CEO, which were quoted by Micheline Maynard in The End of Detroit. Those basics, said Ford, were “building great cars and trucks.” There was a creative tension in Bill Ford between the profit-minded great-grandson of Henry Ford and the socially conscious environmentalist. He sought to mix realism and idealism. Unlike his critics Ford saw no hypocrisy or contradiction in being a green automaker. In one sense, he derived his ultimate inspiration from the founder himself. In the new century being friendly to the environment was, in the long term, being competitive. Hydrogen fuel cells, not hydrocarbon engines, were the wave of the future, and the Japanese were already miles ahead of Ford in the application of this technology. Highly symbolic of Bill Ford’s vision was his renovation of the River Rouge plant. This giant Dearborn facility had once turned out thousands of tanks and airplanes in war and thousands of Fords, Lincolns, and Ford trucks in peacetime. Much of River Rouge was a decaying ruin until Bill Ford began erecting a totally new manufacturing complex, which was scheduled to open in 2004. The clean, modern factory was to be surrounded by a huge garden and a series of wetlands. The facility itself was heated by solar panels. Bill Ford’s environmentalism naturally included the newest Ford vehicles, the design of which he had long overseen. In early 2001 he unveiled the Ford Escape, a hybrid SUV. Environmentalists were instantly upset. Ford, they said, was betraying them by even making SUVs. Ford responded by reminding them that he was in the business of creating jobs, shareholder profits, and vehicles. The environment was important, but cars and even SUVs fit into it.

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Despite the debut of the Escape, the company stock in 2002 lost a full 60 percent of its value. Ford knew he would have to make some very painful decisions. He visited plants and made speeches, playing upon his name and family reputation. The Toronto Sun quoted him saying, “I bleed Ford blue” (June 15, 2002). Ford cut 22,000 people from the payroll, slashed $3 billion in costs, closed five plants in the United States, and cut back Ford’s operations in Europe. As he furloughed workers, sold off businesses, and closed plants, he appealed to the company brand and family reputation to help soften the pain. Already living in Ann Arbor, Michigan, instead of the traditional Grosse Pointe, Michigan, mansion, Ford even gave up his own salary. Being a mixture of the old and the new allowed Bill Ford to step into the roles of company savior, healer, and surgeon. Outside his office were huge pictures of his great-grandfather, and yet the man displaying them was a black belt in the Korean martial art of tae kwon do, an environmentalist, a guitar player, and a student of Buddha. The great-grandson of one of America’s fiercest union-busters was one of its most proemployee and even pro-union managers. He refused to tamper with Ford’s pensions, even though maintaining them was very expensive to the company. Ford differed from his ancestor in another way. He was a listener, not an autocrat. According to the Toronto Sun, he insisted, “I listen a lot. I encourage a lot. This company is too big for any person to run. I don’t care who you are” (June 15, 2002). By the beginning of 2004 Bill Ford boasted of his company’s partial recovery. Ford’s profits for 2004 were forecast at approximately $3.5 to $3.8 billion. Recalls of vehicles were down by 70 percent. The company, however, was still in serious danger. Early in 2003 Ford was overtaken by Toyota in worldwide car sales for the first time. The Ford pension system was $5 to $6 billion in debt, and Standard and Poor’s in the autumn of 2003 relegated Ford’s debt to one step above junk bond status. In Britain even Vauxhall now sold more fleet cars than Ford. Ford faced very grave problems in Europe. Though highly profitable in the 1970s, Ford of Europe was losing tens of millions of dollars annually. Ford designs simply had little appeal to style-conscious Germans and Italians, who shunned the Ford Fusion and Fiesta. The Ford Focus still sold, but new designs were needed. “We need to give more sex appeal to our European products,” Ford commented to the Daily Telegraph (January 17, 2004). Not only were unappealing designs hurting Ford’s global image, but the company was also tarnished by a culture in which labor and management fought continually and various Ford Europe branches sought to undermine one another. The Ford Motor Company was doing better under Bill Ford’s leadership, but many of the objectives he set for the company were being eroded in Dearborn by the same culture



of infighting that weakened Ford in Europe. Managers, unions, and various departments had not yet learned to work together as they did in Japan. Ford managers, too, still tended to live in denial of the Japanese challenge. Unlike Bill Ford, who quietly set modest expectations and then hoped to exceed them, many company managers still boasted of Ford’s greatness. Perhaps a new technique here or there, they felt, might solve the problem and restore Ford’s brand and position. While Ford could produce a winning car such as the Taurus, it often could not capitalize on the abilities of its designers owing to a culture of overconfidence, internal competition, and short-term thinking. Although he had led the company to partial recovery, Ford recognized that investors needed to be assured that he could deliver steady growth in the future instead of the boom-andbust cycle that was well entrenched in Ford’s history. The key to Bill Ford’s success as a manager and to the future of his company lay in his ability to transform the culture into one in which quality, customer satisfaction, and cooperation were paramount.

RETURN OF THE WHIZ KIDS: BILL IN HENRY II’S FOOTSTEPS By the middle of 2003 Bill Ford had steadied his company, which showed first-quarter earnings of almost $900 million, profits of $500 million, and a market share rebounding to 21.2 percent. Ford now had time to think about the long-term strategy to meet the deadly challenge of Toyota. Bill Ford borrowed a page from company history. When his uncle, Henry Ford II, faced financial meltdown and a triumphant GM in 1946, he brought in the brightest thinkers to reinvent the whole Ford strategy. Robert McNamara and other young “Whiz Kids,” as they were called, restructured Ford’s accounting and management systems and pioneered the successful Falcon compact. Bill Ford commissioned his chief financial officer, Allan Gilmour, to recruit a comparable team. Bill Ford recognized that management is not a one-man show. The magnitude of the challenge facing the Ford Motor Company called for the most qualified team possible, one that included the next generation of Ford leaders. Ford wondered aloud in Forbes “where the world’s going to be in 10 or 20 years.” He then continued, “Are we aligned to get there?” (June 23, 2003). The world Ford envisioned would be one in which Toyota might overtake General Motors, hybrids would dominate, China would be an important market, and consumers would demand environmentally sustainable, fuel-efficient vehicles. The Ford Motor Company of the future would depend less upon Mercury and Lincoln and more upon Volvo, Jaguar, and Land Rover. All automakers were facing saturated markets in North America and perhaps Europe. Only through joint ven-


tures could they compete, so that even Ford and GM would have to share common auto frameworks to compete with Japan. Ford knew he faced a gargantuan challenge in competing with Japan, for Toyota and Honda were already several years ahead in hybrid car technology (cars that combined electric batteries with an internal combustion engine). Critical as this area was for Ford, the need to extricate the company from its financial hole had taken its toll on the research and development of Ford hydrogen cars. Still, Bill Ford planned to have a hybrid Escape SUV and a Futura sedan on the road by 2004 and 2005. Ford set a turnaround goal of making $7 billion in profits by 2007. His idealism, very much alive, was tempered by realism. He remained an environmentalist, but he recognized that the solvency of Ford depended upon continued market share and profits. When he scaled back the target of a 25 percent increase in fuel efficiency, many environmentalists felt betrayed, until Bill Ford reminded them that without staying in business, Ford could do little for anyone’s environment. As long as gasoline was cheaper than bottled water in the United States, Americans would still want gas-guzzlers, and there was little Ford could do except make the best and safest ones they could. If Americans did not buy them from Ford, they would buy them from Toyota. In the meantime, Ford would have to perfect its own flexible vehicle assembly system, which would cut assembly costs by one-tenth and changeover costs by onehalf, helping Ford to compete with Toyota and save as much as $2 billion annually. The flashy new Futura and nine other models could then be turned out with the same chassis on the same line. As he moved to his long-term goal of company renewal and unveiled aggressive new ads featuring a talking Ford Focus badgering customers to buy it, Bill Ford recognized that he faced an uphill battle, but he could take comfort in having his family and his company’s history of surprises behind him.

See also entry on Ford Motor Company in International Directory of Company Histories.


“Bill Ford Jr.—Calling the Boss to Account,” Minneapolis Star Tribune, February 18, 2004. Brinkley, Douglas, Wheels for the World: Henry Ford, His Company, and a Century of Progress, 1903–2003, New York: Viking Press, 2003. Cox, James, and David Kiley, “Ford Jr. Takes on Role He Was Born to Play,” USA Today, October 31, 2001. English, Andrew, “Ford’s Rocky Road to Recovery,” Daily Telegraph, January 17, 2004. Hakim, Danny, “Ford Heir Says Nation’s Affair with the Car Has Lost Its Zip,” New York Times, August 8, 2002.

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William Clay Ford Jr. Keller, Maryann, Collision: GM, Toyota, Volkswagen and the Race to Own the 21st Century, New York: Currency Doubleday, 1993. Lacey, Robert, Ford: The Men and the Machine, New York: Ballantine Books, 1986. Maynard, Micheline, The End of Detroit: How the Big Three Lost Their Grip on the American Car Market, New York: Currency Doubleday, 2003.

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Muller, Joann, “Bill Ford’s Next Act,” Forbes, June 23, 2003, pp. 74–80. Stein, Jason, “William Clayton Ford, Jr.,” Toronto Sun, June 15, 2002. Truby, Mark, “Bill Ford Jr. Carries on Family Traditions,” Detroit News, June 9, 2003.

—David Charles Lewis


■■■

Gary D. Forsee 1950– Chief executive officer and chairman of the board, Sprint FON and Sprint PCS Nationality: American. Born: 1950, in Kansas City, Missouri. Education: University of Missouri–Rolla, BS, 1972. Family: Married Sherry (schoolteacher; maiden name unknown); children: two. Career: Southwestern Bell, 1972–1987, positions in operations; AT&T, 1987–1989, vice president of service operations; Sprint, 1989–1991, general manager and vice president of government systems division; 1991–1993, president of government systems division and president of business services group; 1993–1994, senior vice president of staff operations for long-distance division; 1994–1995, interim chief executive officer of PCS (wireless) division; 1995–1997, president and chief operating officer of long-distance division; Global One, 1998–1999, president and chief executive officer; BellSouth Corporation, 1999–2000, executive vice president and chief staff officer; BellSouth International, 2000–2001, president; Cingular Wireless, 2001, chairman of the board; BellSouth, 2002, vice chairman of the board; Sprint, 2003–, chief executive officer and chairman of the board. Awards: University of Missouri–Rolla, professional degree, 2000. Address: Sprint World Headquarters, 6200 Sprint Parkway, Overland Park, Kansas 66251; http://www.sprint.com.

■ Until 1989 Gary D. Forsee was an obscure figure, a civil engineer by training, who had worked his way up the corporate ladder at Southwestern Bell and its parent company, American Telephone and Telegraph (AT&T). In 1989 he accepted a job at Sprint that precipitated the first of the court cases that may represent Forsee’s broadest and longest-lasting influence on American businesses, influencing the way millions of employment contracts would be written and interpreted. His shift from Global One to BellSouth in 1999 set further International Directory of Business Biographies

Gary D. Forsee. AP/Wide World Photos.

precedents, and his spectacular move from BellSouth back to Sprint had a broad effect on the relationships between contractual employees and their companies. During the 1990s Forsee established a reputation as a solid leader who could navigate businesses through thorny alliances. He became one of the most sought-after executives in the telecommunications industry because he had experience in every facet of the business and understood the relationships among wireless and wire-line communications, data-driven communications such as the Internet and voice-driven communication, and video and audio technologies. Further, he was sharpminded, with superb skills for dealing with people. The combination of Forsee’s wide-ranging knowledge and management skills made him the object of battles between giant corporations, with billions of dollars at stake. In 2003 these circumstances resulted in Forsee’s being in a position to engineer a

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Gary D. Forsee

radical restructuring of Sprint, perhaps creating a new corporate model for 21st-century service industries.

CORPORATE FIRES When Forsee graduated from college with a degree in civil engineering in 1972, he joined Southwestern Bell, part of AT&T. He worked in various offices of AT&T, mostly in New Jersey and Washington, D.C. Records of his early years at AT&T are scant, but possibly it was while working in New Jersey and Washington that he began to develop the homesickness for Kansas City that would later affect some of the most important decisions of his career. In 1987 Forsee was appointed vice president for service operations for AT&T, where his steady personality and extensive knowledge of telecommunications operations could help AT&T develop a good reputation for serving customers. When the U.S. government decided to reorganize all of its communications systems to prepare the country for 21stcentury technology, AT&T was one of the winning bidders on the lucrative contract, with Sprint being the other: The two companies were expected to work together on the project, dubbed FTS 2000.

THE BITTERNESS OF JOINING SPRINT, PART 1 Sprint had its headquarters in Overland Park, Kansas, near Kansas City, Missouri, and a desire to return to his hometown may have motivated Forsee to take a job in December 1989 directing Sprint’s half of the FTS 2000 program; he was named general manager and vice president of Sprint’s government systems division. AT&T sued Forsee and Sprint, claiming that Forsee had proprietary information belonging to AT&T and citing a “noncompete” clause in Forsee’s contract with AT&T that forbade his working for a competitor of the company. Michael Schlanger of the King & Spalding law firm represented Forsee in a state court in Alexandria, Virginia. It was obvious that what Forsee knew about AT&T’s work on FTS 2000 would be applied to his work on Sprint’s FTS 2000, but this appeared to benefit both AT&T and Sprint because he would be in a position to help the companies coordinate their efforts. Noncompete clauses were common in employee contracts, especially in the telecommunications industry, where a competitive edge could mean millions of dollars in revenue. Yet Schlanger and Forsee successfully argued that the noncompete wording in Forsee’s contract was too restrictive, and in 1990 the court allowed Forsee to join Sprint. The ruling was a blow to the noncompete clause tradition in corporate law. From February 1991 to February 1993 Forsee served as president of both the government systems division and the

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business services division of Sprint. In March 1995 he was named president and chief operating officer of Sprint’s longdistance services. (Also that year he was appointed to the board of trustees of the March of Dimes, a volunteer position.) As chief operating officer of long-distance services, Forsee revealed a flair for creativity as well as for making canny decisions. From 1995 to 1998 Sprint’s long-distance services’ revenues grew 23 percent to $1.1 billion, thanks partly to marketing and pricing strategies such as the Fridays Free program for business customers.

GLOBAL ONE In February 1998 Forsee was named president and chief executive officer of Global One, a joint venture of Deutsche Telekom, France Telecom, and Sprint. The companies had founded Global One in January 1996, with each owning onethird of the joint venture. The object of Global One was to offer companies doing international business a unified source for all of their communications needs, simplifying customers’ international communications and saving them money. In 1997 Global One had $1.1 billion in revenues but lost money. It fell behind its earning schedule, making Sprint, in particular, impatient. When the projection for Global One’s making a profit was moved back by two years, Forsee was chosen in 1998 to replace the former president and CEO. Forsee was responsible for both finances and operations for a venture that had 30,000 business customers and 3,900 employees scattered through numerous outlets in 65 countries. Deutsche Telekom tried to buy Italy Telecom, which miffed France Telecom, whose management perhaps thought Deutsche Telekom was breaking the trust of the partners in Global One by trying to offer international services on its own. The two companies’ bickering placed Forsee in the difficult situation of keeping the disagreement from breaking up Global One while he tried to meet Sprint’s demands that the young venture start making profits soon. Further, he seemed to have been unhappy with working in Brussels, Belgium, where Global One had its headquarters. In July 1999 he resigned from Global One.

BELLSOUTH In September 1999 BellSouth Corporation hired Forsee as executive vice president and chief staff officer. BellSouth, headquartered in Atlanta, was a company on the rise. Its ambitious chairman of the board, Duane Ackerman, was expanding operations throughout the world. Forsee had the demanding responsibilities for all employee governance and for BellSouth’s domestic operations. His contract with Sprint contained a noncompete clause, but Sprint took the high road and agreed to release him when BellSouth promised that Forsee would not, at least at first, work in BellSouth’s long-distance


Gary D. Forsee

operations. Even so, it seems to have been understood by all parties that Forsee would eventually help BellSouth with its broadband and long-distance operations. Forsee impressed his coworkers with his quick mind and his careful managing of people, and he was very well liked. He worked on wire-line and wireless communications, on cable television, digital television, the Internet, other datatransmission services, marketing, and the Yellow Pages. In 1999 BellSouth tried to buy Sprint, only to have WorldCom intrude near the end of negotiations with a higher bid, killing what would have been a $129-billion merger. In 2000 government antitrust regulators disallowed WorldCom’s purchase of Sprint. In September 2000 BellSouth made Forsee president of BellSouth International. At the time, BellSouth had 34 million customers in 19 countries and was forming ambitious alliances with regional companies, especially in Latin America, where business was burgeoning. In May 2001 BellSouth allied with Central America’s StarMedia to expand wireless communications in Latin America; the number of wireless users in the region was growing by 28 percent per year. In November 2001 BellSouth restructured its organization to put wholesale and retail operations into domestic operations under Forsee, who became vice chairman of the board for BellSouth on January 1, 2002, after the previous vice chairman, Jere Drummond, retired on December 31, 2001. Therein may have been the seeds of the great corporate struggle that was played out on a world stage in early 2003. When Forsee became vice chairman, outsiders assumed it meant that he was Ackerman’s heir, to become chairman of the board when Ackerman retired. Certainly Forsee’s responsibilities showed a great deal of trust on the part of Ackerman and the board of directors, who gave Forsee not only Drummond’s responsibilities but also those of the retiring president of network services, Charlie Coe. However, Forsee had the example before him of the vice chairman Drummond, another heir apparent who never got the chairmanship. Moreoever, Ackerman’s contract ran to at least 2006 (perhaps 2007). The position of vice chairman could have been as far up BellSouth’s corporate ladder as Forsee would go.

Forsee had been given a great deal of trust at BellSouth, where he was admired. On the other, Sprint offered him its top two jobs now rather than later, and he would return to his hometown of Kansas City if he rejoined Sprint, where he knew most of the management. He asserted in court documents that his principal reason for wishing to rejoin Sprint was that he would be going home, and there is no reason not to believe that this was, in fact, his foremost motivation. The press found out about the job offer before Ackerman did; Forsee did not tell Ackerman of the offer until January 29, 2003. On January 30 Ackerman and BellSouth’s board of directors offered Forsee more money and more responsibility if he would remain with BellSouth. On January 31, with Forsee trying to call Ackerman throughout the day but not reaching him, BellSouth obtained a restraining order, probably after 5 p.m., against Forsee. Cingular, a wireless joint venture between BellSouth and SBC, soon joined a lawsuit against Forsee and Sprint. On February 3, 2003, a restraining order was issued against Forsee and Sprint.

THE BITTERNESS OF JOINING SPRINT, PART 2 Sprint was in a difficult situation in late 2002. Its ambitions for expansion into world markets had crashed; it laid off 17,000 employees worldwide from October 2001 to February 2003. In December 2002 alone it cut 1,200 jobs, 3 percent of its remaining workforce. On February 5, 2002, the Wall Street Journal reported tax troubles for the company’s CEO and chairman of the board, William T. Esrey, and its president and chief operating officer, Ronald LeMay. Although they had both set up tax shelters recommended by Sprint’s auditors, Ernst & Young, the Internal Revenue Service was auditing the 1999 and 2000 tax returns for both men. Ordinarily, the company and its officers would have weathered the bad news, taking no action until the government declared its conclusions, but recent scandals at Enron and other corporations made Sprint wary of how the news would affect its customers. It was a public relations nightmare even if the IRS exonerated Esrey and LeMay. Further, Esrey had lymphatic cancer and was undergoing treatment.

Forsee had plenty of work to do. He dealt with government regulations, marketing, BellSouth’s wire-line and wireless networks, external affairs, and the Yellow Pages. In 2002 BellSouth had 600,000 digital subscriber line (DSL) customers, and 70 percent of its lines were ready for DSL, but this percentage had to improve. The company had 65,000 employees and $20 billion in revenue. Forsee coordinated the demands of DSL and other new technologies, the employees, and the revenues. He was well compensated for this, earning $7.3 million in salary, bonuses, and stock benefits for the year.

Forsee may have looked like a godsend to Sprint’s board of directors. He was regarded as thoroughly ethical, he knew most of Sprint’s operations, and he had a reputation for making good decisions, getting even the most trying ones right. His patience with people would be valuable in a corporation stressed by falling sales and job losses. Sprint also held attractions for Forsee besides returning to his home, working with people he knew and liked, and holding the top positions at a telecommunications giant. Sprint, with 26 million customers in 70 countries and $27 billion in revenue for 2002, offered him a great challenge and considerable power.

Then, in December 2002, Sprint offered its positions of CEO and chairman of the board to Forsee. On the one hand,

In its lawsuit BellSouth cited a “restrictive covenant” in its contract with Forsee, meaning a noncompete clause that for-


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Gary D. Forsee

bade him to take a position with a competitor for 18 months after leaving BellSouth’s employment. BellSouth also cited a confidentiality clause, the Georgia Trade Secrets Act, and the doctrine of “inevitable disclosure,” which meant that Forsee would inevitably use BellSouth’s trade secrets if he worked for Sprint, because the two had very similar markets. “It would be like the CEO of Coca-Cola defecting to PepsiCo, taking with him the company’s marketing strategies and secret product formula,” asserted BellSouth’s February 2003 filing with the court (Law.com, March 7, 2003). It was BellSouth’s contention that Forsee knew all of BellSouth’s plans for the next three years and could damage the company by taking advantage of this knowledge on behalf of Sprint. During the period of restraining orders and court appearances, BellSouth continued to pay Forsee’s high salary and may even have hoped he would continue to work for the company. King & Spalding, which had represented Forsee in 1989–1990 when AT&T sued him, had drafted Forsee’s BellSouth contract. In January 2003 King & Spalding joined with the Sonnenschein law firm to represent Forsee, with Michael Schlanger as Forsee’s lead lawyer. BellSouth’s lawyers tried to have both Schlanger and King & Spalding barred from the case because of a conflict of interest, but their efforts were denied. By then the case was being covered in media around the world, and in America it had broad implications for employment contracts. Could employers insist that employees restrict their job options? Cases for lesser lights had generally gone in favor of employers and the noncompete clauses. The case was argued in Fulton County (Georgia) Superior Court before Judge Stephanie B. Manis. Sprint’s senior vice president, Liane Pelletier, filed an affidavit with the court, arguing that government regulation of the telecommunications industry was so great, requiring so much disclosure, that there really were few actual trade secrets. Although it was a thin argument, it touched on an aspect of BellSouth’s claims that seemed to backfire: the “inevitable disclosure” doctrine. Georgia’s constitution forbade restraint of trade; indeed, Geogia’s right-to-work laws were second in strength only to California’s. If the disclosure was inevitable, then the confidentiality aspect of BellSouth’s argument equated to preventing Forsee from practicing his trade with any company, meaning he could not find work. Forsee’s lawyers contended that BellSouth’s arguments meant he could not work in at least 34 states and 14 foreign countries. More telling was the argument against the noncompete clause preventing Forsee to work for any competitor of BellSouth’s for 18 months. The clause was too broad and too vague, insisted Forsee’s lawyers. On February 11, 2003, Judge Manis struck down the noncompete restrictions in Forsee’s BellSouth contract. She called the geographical restrictions unenforceable, said that other restrictions were unreasonable because they prevented Forsee from pursuing too wide a range

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of types of jobs, and declared the noncompete clause too restrictive, too broad, too vague, and void. Thus, in 1990 and 2003 Forsee dealt two telling blows to employment restrictions in contracts. The implications extended far beyond Virginia and Georgia: noncompete clauses could be too restrictive, broad, and vague and could prove to be unenforceable anywhere in the United States. A standard clause that was routinely used to intimidate employees became of dubious legality because of the awareness to its unfairness brought by Forsee’s cases. Judge Manis ordered Forsee and BellSouth to go to arbitration for no more than 30 days on aspects of the confidentiality issues. BellSouth appealed Judge Manis’s ruling to the Georgia Supreme Court, but the appeal was rejected. In March 2003 an arbitration hearing was held before Judge William H. Webster, former head of the FBI and the CIA. The court order allowed Webster to consider only the confidentiality and tradesecrets clauses of the contract. On March 18, 2003, Judge Webster made his decision, declaring that from March 19, 2003, to March 19, 2004, Forsee could not lobby for Sprint in areas where BellSouth had business, could not participate in decisions about marketing that competed with BellSouth and Cingular, and could not participate in acquisition and merger discussions. Sprint’s board of directors was required by Judge Webster to acknowledge the restrictions placed on Forsee for the one-year period. Apparently Forsee abided by the spirit as well as the letter of Webster’s decision, and it seems that he never gave away BellSouth’s confidences. On March 19, 2003, Forsee became CEO of Sprint and joined its board of directors; he did not attend board meetings when restricted subjects were discussed. Esrey and LeMay remained with Sprint to help with the transition of authority, leaving on May 14, 2003, when Forsee became chairman of the board. He created a national strategy for Sprint that emphasized “bundling” all of Sprint’s resources into packages customers could purchase, with bundles tailored to suit specific kinds of customers, and he directed the simplifying of the process by which customers ordered services. In September 2003 International Business Machines Corporation and Sprint formed an alliance to consolidate customer service, saving Sprint hundreds of millions of dollars per year, and Forsee reorganized Sprint into two groups: business customers and general consumers. In January 2004 Sprint allied with Samsung, Sanyo, Toshiba, and RealNetworks to offer 3-D games on cell phones, enable customers to download television clips, and provide both voice and data services over multiple platforms. In April 2004 Sprint combined its FON and PCS (wireless) stocks, exchanging one-half FON stock for one PCS stock, in an effort to make Sprint stock easier to understand. See also entries on AT&T Corp., BellSouth Corporation, and Sprint Communications Company, L.P. in International Directory of Company Histories.


Gary D. Forsee SOURCES FOR FURTHER INFORMATION

Anderson, Charlie, “Sprint Reorganization Could Bring Thousands of Worker Layoffs,” New Mexico Business Weekly, September 26, 2003. Bischoff, Glenn, “BellSouth Forsees Consolidation,” TelephonyOnline, December 3, 2001, http:// telephonyonline.com/microsites/ magazinearticle.asp?mode=print&magazinearticleid=135144 &releaseid=&srid=11357&magazineid=7&siteid=3.


Bonavia, Mark, and Melinda Tiemeyer, “Sprint Names Gary Forsee Chief Executive Officer,” Financials.com, http:// www.financials.com/c/info/story.cfm?storynum=427775. Conley, Janet L., “BellSouth, Sprint Litigate over Exec,” Law.com, March 7, 2003, http://www.law.com/jsp/ article.jsp?id=1046833522587.

—Kirk H. Beetz

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■■■

STRONG RECORD AT GTE

Kent B. Foster

A native of North Carolina, Foster attended North Carolina State University and received a degree in electrical engineering. After graduating, he served for three years in the U.S. Air Force and attained the rank of captain. He also earned an MBA from the University of Southern California during his military service. After leaving the Air Force, he became a supervising engineer with GTE Corporation. Foster quickly demonstrated his leadership skills at GTE, where he was appointed in 1976 to his first executive position as vice president of operations.

1944– Chief executive officer and chairman of the board, Ingram Micro Nationality: American. Born: 1944, in North Carolina. Education: North Carolina State University, BS, 1965; University of Southern California, MBA, 1969. Family: Married; children. Career: GTE Corporation, 1970–1976, supervising engineer; 1976–1977, vice president of operations; 1977–1978, regional vice president of network engineering and construction; 1978–1980, vice president of network planning, engineering, and construction; 1980–1981, vice president of planning and analysis; GTE Telephone Operations, 1981–1983, vice president of marketing and business planning; GTE Northwest, 1983–1985, president; GTE Telephone Operations, 1985–1989, group vice president; 1989–1995, president; 1993–1999, vice chairman of the board; GTE Corporation, 1995–1999, president; Ingram Micro, 2000–2001, president; 2000–, chief executive officer and chairman. Awards: Distinguished Engineering Alumnus Award, North Carolina State University, 1993. Address: Ingram Micro, 1600 East Saint Andrew Place, Santa Ana, California 92705; http://www. ingrammicro.com.

■ After a career spanning nearly 30 years at GTE Corporation, Kent B. Foster became the president, CEO, and chairman of Ingram Micro, the world’s largest wholesale provider of information technology (IT) products and services. Foster had helped to transform GTE from a local telephone service provider to a global leader in telecommunications services. After assuming leadership of Ingram Micro in 2000, Foster guided his new company through an unsettled period to stand on solid ground with a strong profit margin. Industry analysts described Foster’s management style as calm, self-effacing, and focused on long-term goals rather than short-term changes.

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Foster proved himself over the next several years in different positions in network engineering and construction, corporate planning and development, and marketing and business planning. He was named president of GTE Northwest in 1983 when he was only 38, becoming the youngest operating president in the company’s history. He served as group vice president of GTE Telephone Operations from 1985 to 1989 and as group president from 1989 to 1995. Foster became the CEO of GTE in 1995, a position he held until late 1999, when he retired after merger talks between GTE and Bell Atlantic. According to industry analysts, Foster decided to leave when he learned that he would not be part of the management of the merged companies. Despite his decision to leave GTE, Foster had earned a reputation as a competent leader who had helped to make the corporation a leading telecommunications company offering a broad array of products and services, including local telephone service, nationwide long-distance wireless service, and directory and networking services ranging from dial-up Internet access to Web-based applications. He redirected GTE’s focus to the Internet and data services and led the company’s reentry into long-distance telephone services. Another major accomplishment was Foster’s decision to change the company’s cost structure to make it a more efficient competitor for local telephone business during deregulation. This change turned around GTE’s core wireline business, which represented about 60 percent of its operating revenue. Industry analysts noted that Foster was able to keep GTE on an even keel through bad as well as good times, including one period of downsizing and other periods of rapid revenue growth and expansion. One industry analyst told reporter Scott Campbell, “He kept earnings growing at a pretty consistent clip” (Computer Reseller News, March 13, 2000).


Kent B. Foster

A SHORT-LIVED RETIREMENT After Foster had retired from GTE, he planned to relax for a few months and think about what he wanted to do next. In January 2000, however, he received a call from Jerre Stead, the chairman of Ingram Micro. Foster had known Stead as a former customer during the early 1990s, when Stead had served as the executive vice president of AT&T Global Information Solutions. Stead offered Foster the opportunity to replace him as CEO and president of Ingram Micro. Foster was approved by the company’s board after two months of interviews and negotiations. He was also slated to become chairman when Stead retired in May 2001. Stead remarked that the board thought the job was a good fit with Foster’s experience, which included “implementing an Internet strategy from a service standpoint,” something Foster did at GTE (Computer Reseller News, March 13, 2000). Many industry analysts were reserved at first about Foster’s appointment, citing his lack of experience with product distribution. Foster, however, was pleased and optimistic about his new opportunity. Ingram Micro’s long-term objective was to become the leading service provider of logistics and business automation, thus leveraging the company’s worldwide infrastructure in 34 countries to support its rapid growth. Foster had the task of making this vision a reality. The AsianPulse News quoted Foster as saying, “Our objective will be to develop the opportunities and changes required in this rapid-fire industry to take this company to the next level” (March 7, 2000).

A CHALLENGING BUSINESS CLIMATE Despite his initial optimism, Foster and his new company confronted a tumultuous market. By the time he arrived in 2000, Ingram Micro was already losing market share and many of its top-level executives as it struggled with the Internet’s threat to traditional distribution channels. Furthermore, the entire global economy was experiencing a significant slowdown, especially the American technology market. Over the next year Ingram Micro’s sales and profits continued to lag as a result of the slow economy, but Foster began to win the praise of industry analysts for placing the company on a steadier footing. Before Foster’s arrival, Ingram Micro had made a number of cutbacks that led to smaller-market clients taking their business elsewhere because of high turnover among Ingram Micro’s sales account managers. At times these clients had difficulty getting any attention from the company’s account managers. In response to complaints, Foster emphasized the importance of timely and efficient service to the management team at Ingram Micro. He guided the company into developing new support services aimed at small- and mediumsize businesses, which represented a rapidly growing segment of the market. Industry analysts praised Foster for repairing


frayed relationships with the solution provider executives who had criticized Ingram Micro for ignoring them in favor of large dot-com businesses. Tommy Wald, the president and CEO of Netforce Technologies and an Ingram Micro customer, commented, “I’ve been very impressed with [Foster’s] ability to understand our issues as a reseller and develop strategic policies that will help us be more successful” (Computer Reseller News, November 12, 2001). Although Ingram Micro had posted $31 billion in sales in 2000 and Foster had answered many of its customers’ complaints, the company continued to struggle that year with the most challenging business environment in its history. Foster noted in an interview, “This is the sharpest downturn in the economy I have ever seen. It was almost as if in the latter part of November [2000] something happened and no one can put their finger on it” (Computer Reseller News, March 12, 2001). Worse was to come. The company’s sales fell 13 percent to $16.6 billion during the first nine months of 2002, while operating income fell 22 percent to $54.2. Ingram Micro lost a total of $264.9 million during this troubled period. Foster worked hard to keep customers, investors, and employees calm as he consolidated company facilities and laid off employees. He also led the company through a close examination of its various products, vendors, customers, and countries of operation. Despite the cloudy economic picture, analysts credited Foster with strengthening Ingram Micro’s overall balance sheet. Moreover, the company’s gross margins steadily improved during the first two years of his leadership, rising from 4.7 percent in 2000 to 5.5 percent in 2002. The industry analyst Robert Anastasi said in an interview, “You have to give the company a decent grade—[Foster] and the company—on where they are. I was very encouraged with the details of their restructuring plan” (Computer Reseller News, November 18, 2002).

TURNAROUND AND RECOVERY Foster was soon recognized by his peers as an effective chief executive. Ingram Micro won several industry awards in the first two years of Foster’s leadership, including being listed in 2002 by Fortune as one of America’s most admired companies and by IBM as Distributor of the Year in six of seven categories. Foster worked throughout 2003 on making Ingram Micro the leading provider of information technology solutions. His second goal for the year was to continue increasing the flexibility of the company’s cost structure and maximizing its operating income. In 2004 the company announced that its firstquarter earnings were $37.6 million, or 24 cents a share, which met the analysts’ mean estimate and bracketed the company’s own figure of 23 to 25 cents a share. Ingram Micro had improved significantly on its record from the previous year, when

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first-quarter earnings had been $10.1 million or 7 cents a share including charges. Ingram Micro’s overall first-quarter sales rose 15 percent in 2004 from $5.47 billion to $6.28 billion. Foster commented, “We’re starting to see demand for [information technology] products emerge” (Los Angeles Times, April 30, 2004).

grand schemes for the future, predicting growth rates, or presenting glorious images of his abilities and accomplishments. Foster said during the interview, “I don’t want to talk about myself or my prior job because it is irrelevant” (Computer Reseller News, March 20, 2000).

Even though Foster expected less impressive results for Ingram Micro in the second and third quarters of 2004, he remained optimistic about the future of the world’s largest IT provider. He was particularly enthusiastic about the company’s new Choice Advantage program, which refurbished virtually every aspect of its customer service offerings. The program grouped pricing, shipping, sales, and technical support features into three levels that allowed clients to select the range of services best suited to their businesses. Foster commented in an interview in Computer Reseller News, “We felt there had to be a better way of custom-fitting our services to our customers” (April 12, 2004).

LEADERSHIP MODELS

MANAGEMENT STYLE Industry analysts observed that Foster’s approach to management gave his executives considerable leeway in making decisions. He was also considered a consensus-oriented team builder who helped his executives concentrate their attention on the most important tasks. One reporter commented, “Foster’s mantra to his management team [is]: ask each and every day what Ingram Micro can do to make solution providers more successful in the marketplace” (Computer Reseller News, March 26, 2001). Considered a highly competent executive, Foster was also known for his low-key approach to management. Although he was regarded as soft-spoken, colleagues and analysts alike remarked that he did not back away from a challenge. He proved himself to be an effective leader with a strong entrepreneurial spirit and an ability to keep his focus. When Foster was appointed president and CEO of Ingram Micro, his predecessor Jerre Stead commented in AsiaPulse, “He has a track record of successfully uniting multiple business units made up of more than 100,000 employees behind a single purpose and objective to enable change, encourage team work and deliver consistent results” (March 7, 2000). Foster was asked on one occasion whether he had some advice for new managers. He responded, “The group needs to have a common understanding of where they are and where they want to be and when.... Once you do those two things, the manager’s job is pretty much finished” (Computer Reseller News, November 18, 2002). Foster also acquired a reputation for being straightforward with management, customers, and even reporters. When he took the job at Ingram Micro, he never pretended that he knew everything about the business or the industry in general. As one journalist noted, Foster didn’t come aboard outlining

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Foster maintained a steady hand in guiding Ingram Micro and continued to emphasize better customer service as the most effective way to improve his business. Known for his interest in reading as well as physical fitness, Foster was especially fond of biographies of the first presidents of the United States. He often spoke of his admiration for Thomas Jefferson, John Adams, and other leaders of the young republic. He said on one occasion, “As I look back, I wonder why we were so lucky to have this group of people” (Computer Reseller News, November 18, 2002). In addition to Foster’s duties at Ingram Micro, he was a member of the boards of the Campbell Soup Company, the J. C. Penney Company, and the New York Life Insurance Company.

See also entries on Bell Atlantic Corporation, GTE Corporation, and Ingram Micro Inc. in International Directory of Company Histories.


Burke, Steven, “The Final Cut—Foster’s Sharp Focus,” Computer Reseller News, March 26, 2001, p. 22. Campbell, Scott, “Ingram Micro’s Future Lies in New CEO’s Hands,” Computer Reseller News, March 13, 2000, p. 116. “CRN Interview: Kent Foster, CEO, Ingram Micro,” Computer Reseller News, March 12, 2001, p. 108. “CRN Interview: Kent Foster, CEO, Ingram Micro,” Computer Reseller News, April 12, 2004, p. 22. Crux, Mike, and Eric Hausman, “15—Kent Foster: Chairman & CEO, Ingram Micro—Foster Is Respected and Has Brought a Certain Calmness to the Distributor,” Computer Reseller News, November 12, 2001, p. 113. “Ingram Names New CEO,” AsianPulse News, March 7, 2000. Longwell, John, “No. 19—Kent Foster,” Computer Reseller News, November 18, 2002, p. 126. Markowitz, Elliot, “Knowing When to Say Nothing,” Computer Reseller News, March 20, 2000, p. 15. Pham, Alex, “Ingram Posts Threefold Rise in Quarterly Profit,” Los Angeles Times, April 30, 2004. —David Petechuk


■■■

Charlie Fote 1949– Chairman, president, and chief executive officer, First Data Corporation Nationality: American. Born: 1949, in Connecticut. Education: Central Connecticut State University, BS, 1971. Career: Framingham Trust, vice president of operations; First Data Corporation (then owned by American Express), Omaha First Data Resources unit, 1975–1981, director of special projects; American Express Money Order Division, 1981–1985, vice president of finance and planning; American Express Travel Related Services’ Data Based Services Group, 1985–1989, executive vice president; First Data Corporation, Integrated Payment Systems subsidiary, 1989–1991, president; 1991–1998, Payment Services businesses, 1997–1998, executive vice president, and Merchant Services businesses (additional responsibilities); First Data Corporation,1998–2002, president, chief operating officer; January 2002–, chief executive officer; January 2003–, chairman of the board. Address: First Data Corporation, 6200 South Quebec Street, Greenwood Village, Colorado 80111; http:// www.firstdatacorp.com.

■ Electronic commerce and payment company executive Charles T. “Charlie” Fote assumed the title of chief executive officer of First Data Corporation on January 1, 2002, and became chairman of the board effective January 1, 2003, succeeding Henry C. “Ric” Duques, who had been the company’s chairman since its inception in 1992. In 2003 First Data was the country’s largest debit- and credit-card transaction processor, the largest merchant processor, and the dominant processor of consumer money transfers. With market capitalization of $26 billion, annual revenues of $7.6 billion, annual earnings of $1.3 billion, and about 29,000 employees worldwide, it handled electronic payment, issuance of credit, debit, smart, and stored-value cards, and merchant


transaction-processing services. It provided these services for about 3 million merchants (through the company’s subsidiary TeleCheck) and 1,400 card issuers, including such well-known customers as Wal-Mart and J. P. Morgan Chase. These transactions—including more than 11 billion credit- and debit-card transactions each year—were valued at more than $1 trillion at the beginning of 2004. The global company also handled cash payments (through money transfers and money orders) in 169,000 locations in more than 195 countries and territories through its agent network Western Union, which First Data acquired in 1996. It also provided check processing and verification services throughout the United States, United Kingdom, Australia, Canada, Mexico, Spain, and Germany. As of 2003 First Data conducted over 1,100 transactions per second while servicing its customers, including its secondlargest customer, the U.S. Postal Service. According to Fote, First Data performed tasks that banks did not usually want to do—for instance, sending out bills and organizing checks, selling and servicing point-of-sale terminals, gathering money from merchants, and guaranteeing that money was available at stores around the world. First Data distributed 5.8 million pieces of mail every day and printed 125 million statements every month while providing consumers and businesses with payment validation.

THE ROAD TO PRESIDENT AND CEO Before joining First Data, Fote was employed as the vice president of operations for Framingham Trust. He first joined First Data—then owned by American Express, the international credit-card leader—in 1975 as director of special projects with the company’s First Data Resources unit in Omaha, Nebraska. He became vice president of finance and planning with American Express Money Order Division in 1981 and executive vice president of American Express Travel Related Services’ Data Based Services Group in 1985. Fote served as president of First Data’s Integrated Payment Systems subsidiary in Englewood, Colorado, from 1989 until 1991, when he was promoted to executive vice president of First Data. In that role, he was responsible for the Payment Services businesses. In 1997 he was given added responsibilities with the Merchant Services businesses. In 1998 he became president and chief operating officer of First Data.

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Charlie Fote

Even before taking over as CEO and chairman, Fote was instrumental in moving First Data’s headquarters from Atlanta to the Denver, Colorado, area in 2001 when the company began to concentrate more on its international markets. Fote felt that Denver offered a better location for a global emphasis. At the time of the move, the international component of First Data’s business had grown from zero to 25 percent in just ten years. Fote expected that percentage to double over the following decade.

AN EYE TO THE FUTURE Although Fote sharpened First Data’s focus on its core business—handling credit-card transactions for retailers—he consistently looked to innovation in both services and technology. He noted in 2003 that First Data generated more than half its annual revenue from products that had not existed a decade earlier. First Data’s expanded exposure to the credit-card market reflected Fote’s belief that this market would grow even more rapidly as PIN-based (personal identification number–based) systems, including credit-card payments, gained reliability. Fote stated that electronic authentication at the point of sale was moving toward a technology that would all but eliminate illicit use of credit cards. Fote also helped organize eOne Global, a research and development partnership with Goldman Sachs, Boston Consulting Group, and General Atlantic Partners. Its first project was CashTax, a tax-payment project that as of 2003 processed 40 million payments annually for corporate customers. Fote countered domestic e-payment companies, such as PayPal, with First Data’s own MoneyZap, which is an international venture. In addition, Fote focused on new sources of revenue, such as retail establishments where credit cards were not currently accepted. His expansion plans included the debit-card market, the nation’s fastest-growing transaction segment. Fote grew First Data into the largest PIN-based debit-card processor in the country, servicing more than 95,000 automatic teller machines. Fote used First Data’s Western Union subsidiary to launch a string of innovative new products to make electronic transactions faster and easier. A new service called PayCash let customers make Internet purchases in cash: Western Union forwarded money to the merchant at the point of purchase. Fote said future product innovations would allow merchants and customers to make and track transactions through mobile applications such as cell phones. With U.S. payments in cash and checks down to about 70 percent and expected to drop below 40 percent by 2010, Fote

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was also preparing for the transition from a cash to a cashless society. First Data processed about $425 billion in electronic payments in 2001, including $20.7 billion in Internet transactions.

A LEARNING COMPANY Fote believed not only that technological change was occurring faster and faster, but also that it was becoming more widely distributed around the world, as opposed to being merely concentrated in a few advanced countries. In this increasingly challenging environment, he judged that his company would achieve its goals by attracting smart, talented people who liked to compete. One of Fote’s techniques for maintaining his company’s technological edge was working with the Fielding Graduate Institute (FGI) to provide a customized e-learning program to sharpen his employees’ organizational development skills. Courses approved by the top manager included performance management and coaching, electronic learning, organizational learning, virtual teams, and collaboration. The FGI program coordinated with a number of initiatives that Fote applied after assuming the helm of First Data. One of these initiatives was the creation of an Organizational Development (OD) Center of Excellence at the corporate level. It provided the company’s OD professionals with their own dedicated staff and specialized reporting structure.

SOPHISTICATED BUT DOWN-TO-EARTH Fote had a reputation for being sophisticated, yet also down-to-earth. Colleagues credited him with “street smarts” and noted his hands-on style of management. He insisted on daily conference calls with upper managers to create and maintain accountability. He was not averse to doing the job— whatever that job might be. For instance, when he sat on the board of directors of the South Metro Denver Chamber of Commerce in the early 1990s, the chamber moved to new offices. The chamber’s president, Brian Vogt, recalled that “Charlie was one of the board members who showed up to carry boxes. He epitomizes the CEO as leader. He’s bigger than life, but there he was helping us out one afternoon” (Moore). Former First Data chairman and CEO Henry “Ric” Duques said of Fote upon Fote’s nomination as chairman of First Data: “Charlie has proven himself to be a truly exceptional leader. He brings a combination of superior operating expertise as well as strong strategic vision of where we want First Data to be in five, ten years. I know he will take First Data to new levels of excellence” (press release, February 7, 2001). Brian Vogt aptly summarized Fote’s personality: “He’s savvy,


Charlie Fote

he’s bright, he’s funny, and he’s tough. He’s pretty much an ideal when it comes to the kind of business leader we really need in this time” (Moore). In substantial part due to Fote’s vision and abilities, First Data ranked as the 43rd-best-performing company in the nation, according to BusinessWeek magazine, and Fortune, in its 2003 list of “Most Admired Companies,” rated the company as first in its industry. Forbes’s “2003 Top 500 Companies” listed First Data as America’s 84th-largest corporation based on its composite scores for sales, profits, assets, and market value.


“First Data Announces Chief Executive Officer Succession Plan,” PRNewswire, company press release, February 7, 2001, http://www.prnewswire.co.uk/cgi/news/ release?id=62667. Moore, Paula, “Fote Brings First Data Headquarters to Denver,” Denver Business Journal, October 12, 2001, http:// denver.bizjournals.com/denver/stories/2001/10/15/ focus4.html.

—William Arthur Atkins

See also entry on First Data Corporation in International Directory of Company Histories.


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■■■

Jean-René Fourtou 1939– Chairman and chief executive officer, Vivendi Universal Nationality: French. Born: June 20, 1939, in Libourne, France. Education: École Polytechnique, MS, 1960. Family: Wife Janelly (maiden name unknown). Career: Bossard & Michel, 1963–1972, engineering consultant; Bossard Consultants, 1972–1977, member, board of directors; Bossard Consultants, 1977–1986, chief operating officer; Rhône-Poulenc, 1986–1999, chairman and chief executive officer; Aventis, 1999–2002, vice chairman of management board; 2002–, honorary chairman; Vivendi Universal, 2002–, chairman and chief executive officer; International Chamber of Commerce, 2003–, president. Awards: Named an officer of the Légion d’honneur; named Commandeur of the Ordre National du Mérite. Address: Vivendi Universal, 42 avenue de Friedland, 75380 Paris Cedex 08, France; http://www.vivendi universal.com.

■ Jean-René Fourtou transformed the chemical group Rhône-Poulenc into a successful international company. In July 2002 he could not resist a new challenge—to get Vivendi Universal on its feet again. It was not an impossible mission for this former consultant, who had also led the Bossard group and had put his conception of management into practice at Rhône-Poulenc. With his consultancy experience, Fourtou focused on the value of teamwork and decentralization of power.

NETWORKING SKILLS AND EARLY CAREER Fourtou was adept at networking and profited from his many business friendships. Early on, his acquaintance with the French president Valéry Giscard d’Estaing put him in line to become the CEO of Rhône-Poulenc. Later, his relationship with Jurgen Dormann, CEO of Hoechst, directed him to a po-

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Jean-René Fourtou. AP/Wide World Photos.

sition at Aventis. And it was Claude Bébéar, CEO of Axa, who led him to Vivendi Universal. Fourtou’s career was helped by influential friends who pushed him in the right direction. Fourtou’s first significant professional experience was in acquisition and development at Bossard, an international logistics-oriented group offering consulting services in strategic management, with three strong marketing centers—in Europe, the United States, and Asia and the Pacific. Following the group’s privatization, he worked to establish the company in the United States and then forged a French-German partnership with Hoechst, from which was born Aventis. To secure the success of Aventis, he kept on the president of Hoechst and took on the position of vice president. He also promised to withdraw when the venture got off the ground. In May 2002 Fourtou gave Igor Landau the direction of Aventis.


Jean-René Fourtou

ALMOST RETIRED Fourtou gave up his position at Aventis to become the vice chairman of its supervisory board, with a view to spending more time with his family. But for this aficionado of tennis, good wine, and meals with friends, retirement did not last long. Indeed, just two months later, in July 2002, Fourtou, at the age of 63, took on the challenge of reviving Vivendi Universal when he became CEO of the company, replacing JeanMarie Messier. Nothing would have prepared Fourtou to play the role of media superman, and he was surprised to find himself in the spotlight. But Claude Bébéar, president of the supervisory board of Axa and administrator of Vivendi Universal, declared: “Jean-René Fourtou is not afraid of challenges. It is clear that he may have not expected to find the group almost broke. Faced with this tough work, he could have chosen to leave. Instead, he told us: ‘We roll up our sleeves, and we go for it’” (Challenge.fr, October 2002).

ACTION IN THE FACE OF AN EMERGENCY In 2002 Vivendi Universal, a Franco-American group diversified in media, telecommunications, and environmental services, was looking for a high-level French manager who had proved successful in resolving crises. The manager’s mission would be to evaluate the financial situation and define and realize a strategy to reorganize the group. When he arrived, Fourtou expected to stay only a few months. The day after his nomination he declared: “I have priorities. Today I have only two: solve the accounts crisis and to elaborate a strategy. For the rest, we will see later” (Challenge.fr, October 2002). After eliminating the risk of bankruptcy, Fourtou knew that he had to tidy up the portfolio of Vivendi Universal. With the privatization of Rhône-Poulenc in 1993, he had learned to work under the markets’ pressure, but despite the strains, he always had made effective decisions. His strategy for Vivendi consisted of writing down EUR 12 billion in assets over 18 months, reducing expenses, building a new management team, keeping employers and trade unions informed, revising the financial management system, and developing a new plan for the future. In the first year and a half, he improved the finances of Vivendi Universal by refocusing the group on media and telecommunications. Fourtou proved that he knew how to act forcefully in a crisis. The company needed such a leader, capable of freely managing, to reassure the markets and return value to the shareholders. Fourtou’s boldest move came at the end of 2002, when he chose to increase company debt by EUR 4 billion as a way to take control of the mobile phone subsidiary SFR, at that time coveted by the British company Vodafone. The move was a success, since the block of shares for which Vodafone had offered to pay EUR 11 billion grew in value to EUR 16–18 billion by early 2004. Moreover, SFR shortly became the main source of profit for Vivendi.


In the course of 30 months Fourtou managed to release the financial stranglehold on Vivendi. The amount of the company’s previous debt, more than EUR 35 billion, was reduced to less than EUR 5 billion by the end of 2004. One financial analyst declared that Fourtou’s priority was not to focus on the size of the company’s portfolio but rather on how to spend this money. His plans with respect to the market were enacted opportunistically, in the moment. Fourtou refined his ideas gradually. As Robert de Metz, who orchestrated the transfers, specifies: “We move at the same time on three or four ideas. If plan A does not work, we always have a Plan B, C and D.”

MANAGEMENT STYLE “Organizing is not about putting things in order; it is about giving life,” Fourtou asserted. He maintained a distance from his subordinates and was not given to motivational corporate training. He was described as a skillful and clever diplomat, but he did not care about his “image.” He was not an impressive man, but he did not care to impress. He simply moved ahead with the task in hand. A former administrator of RhônePoulenc, Serge Kampf, founder of Cap Gemini, highlighted his “incredible stubbornness,” characterizing Fourtou as a “street fighter,” a pugnacity he had developed in childhood. Nevertheless, Fourtou was an excellent negotiator. Seeing business as a power struggle, he knew how to dramatize and bluff. According to Henri Lachmann, CEO of Schneider, “He has his trump cards; he has nothing to lose or to prove.” In 2002 he put this skill to good use when he told creditors that he would take them to court if they could not work out a better deal than they were offering. Some critics said that he sometimes acted too quickly, without thinking through a problem. Others criticized him for focusing on what the company had to sell and not better managing the resources they held. Although his skill as a strategist was debated, Fourtou was still considered a good manager. When he arrived at Vivendi Universal, he brought together a new and very effective management team. He understood how to create a climate of trust, making himself accessible without becoming overly familiar with his staff, and delegating responsibilities. His style was to look at the big picture, not the everyday details. As JeanFrançois Pontal, the former CEO of Orange and a former colleague of Fourtou’s at Bossard, put it, “Give him a bone, and he will make a dinosaur.” At the same time, Fourtou was called cynical and sometimes manipulative. As one former colleague at Rhône-Poulenc said, for him “truth can be sculpted.”

LOOKING TO THE FUTURE By 2004 Vivendi Universal was out of danger and looking toward a new goal. Some analysts believed that Vivendi should

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consider selling or spinning off its disparate businesses. Fourtou strongly disagreed with that perspective, focusing instead on an ambitious plan to transform Vivendi Universal into a European media giant. Although he was very secretive about the project, he confessed to exploring many ideas and continued to say, “I do not exclude anything.” See also entries on Rhône-Poulenc S.A. and Vivendi Universal S.A. in International Directory of Company Histories.


Bourboulon, François, “Vivendi Universal à la mode Fourtou,” Journal du net, September 26, 2002, http:// www.journaldunet.com/0209/020926vivendi.shtml Carreyrou, John, “How CEO Put Troubled Vivendi Back on the Road to Survival,” Wall Street Journal, September 3, 2003.

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Clow, Simon, “Vivendi’s Asset Mix Poses New Problem; CEO May Have Restored Balance Sheet, but Remaining Businesses Share Little Crossover,” Wall Street Journal, May 27, 2004. Mattei, Jaqueline, “Dossier Fourtou: Jean-René Fourtou, un pompier pour Vivendi Universal,” L’Expansion entreprises, July 4, 2002. Nora, Dominique, “La troisième vie de Jean-René Fourtou, L’Expansion economie, April 29, 2004. Université Laval, “Vivendi Universal; Grandeur et décadence,” 2003, http://etudiants.fsa.ulaval.ca/projet/gie-64375/ Vivendi/indexdown.htm. Woessner, Géraldine, “Vivendi Universal doit choisir entre le téléphone et les jeux vidéos,” L’Expansion, August 7, 2002.

—François Therin


■■■

H. Allen Franklin 1944– Former CEO, president, and chairman of the board, Southern Company Nationality: American. Born: 1944, in Corner, Alabama. Education: University of Alabama, BS, MS. Family: Married Brenda (maiden name unknown), 1963; children: two. Career: Pratt & Whitney Aircraft, 1967–1970, various positions; Southern Company, 1970–1979, various engineering positions; Alabama Power, 1979–1981, assistant to executive vice president; 1981–1983, senior vice president; Southern Company Services, 1988–1994, president and CEO; Georgia Power, 1994–1999, president and CEO; Southern Company, 1999–2001, president and COO; 2001–2004, president, CEO, and chairman of the board. Awards: Named Most Respected CEO, Georgia Trend, 2002; named one of Top 100 Influential Personalities in Georgia, Georgia Trend, 2002.

■ Southern Company operated as one of the largest electrical distributors in the United States. It controlled Alabama Power, Georgia Power, Gulf Power, Mississippi Power, and Savannah Electric utilities and reached over four million electricity customers in the South in the early 2000s. Starting in an engineering position in 1970, H. Allen Franklin ultimately came to head the company in 2001, with a conservative style and philosophy that earned him the respect of both customers and competitors.

SMALL TOWN BEGINNINGS PROVIDED FOUNDATION FOR VALUES Franklin was born in the small farming and coal-mining town of Corner, Alabama. Growing up in the 1950s, he and his siblings were instilled with an early respect for education. His father had been orphaned and never made it past the seventh grade, instead farming by day and working in a coal mine


at night. His mother was a schoolteacher. His parents raised him with strong work ethics and a sense of honesty and fairness to others and freedom from debt—values that carried over into adulthood. He neither smoked nor drank and seldom got into trouble as a boy. Remembered as even-tempered and a good communicator, he was the all-American boy who farmed, attended church on Sunday, and went to bed early. Young Franklin was easily bored. His favorite teacher taught him chemistry to keep him occupied. In high school Franklin was popular and was voted “Most Likely to Succeed” by his classmates. He also saved the day for his school with a game-clinching play as a football running back in 1961. He married his high school sweetheart in 1963, when they were both just 18. Franklin considered a career in farming, though his sister wanted him to become a teacher; in the end, economics won out. Franklin decided to attend the University of Alabama, with blessings and financial backing from his parents and young wife, who took a job to help him through school. He did not disappoint them. Reading a job placement listing on campus, Franklin decided that the engineering field held the most promise for income and opportunity. He earned both a bachelor’s and master’s degree in electrical engineering from the university. Upon graduation, Franklin accepted a job with Pratt & Whitney Aircraft in southern Florida and later worked for the company in Connecticut. Wanting to return home, he joined Federal Electric Corporation in Huntsville, Alabama, to work on Saturn 5, the rocket used to push the Apollo astronauts to the moon. After the moon landing, Franklin was hired by Southern Company in 1970, where he worked in various engineering positions for the next nine years.

EARLY VALUES PAID OFF Southern, an electrical power giant, had a reputation for a conservative management style. It did not take long for the company to notice Franklin, who had developed a reputation as a calm thinker who used his analytical engineering mind to dissect every major decision the company made. Added to that were his communication skills and the ability to speak his mind and articulate his concerns. Despite ongoing demands for engineering expertise, Southern put Franklin on the management track. He began by serv-

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H. Allen Franklin

ing as assistant to the executive vice president at Alabama Power in 1979 but by 1981 had risen to senior vice president. In 1988 he became president and chief executive officer of Southern Company Services, followed by stints as president and chief executive officer of Georgia Power in 1994. Returning to the main company, Franklin took over as president and chief operating officer of Southern in 1999. He reached the pinnacle in 2001, when he was named president, chief executive officer, and chairman of the board.

A CONSERVATIVE VISIONARY The transfer of power from the charismatic and theatrical former CEO A. W. “Bill” Dahlberg to the calm and conservative Franklin was smooth, done with style and class. In an interview for Georgia Trend magazine, Dahlberg described his successor as “detailed.” He went on, “People probably thought I was more emotional and more flamboyant. I’d laugh and smile and fly off the handle. I’ve never seen Allen lose his temper” (May 2002). For his part, Franklin told the same interviewers that changes he made would be “thoughtful, gradual and with a full knowledge of what’s happened in the rest of the country.” That conservatism translated into company gains for Southern, at a time when other utilities giants were wallowing in the mire of scandal or fair weather mediocrity. In the aftermath of the Enron fiasco and California’s energy blackouts, Southern steered clear of controversy. When others joined the momentum of deregulation and radical restructuring, Southern held the line. The conservative strategy paid off. The company’s stock performance in 2001 was its best ever. Even the federal government came to Southern, and to Franklin, for advice, counsel, and testimony on energy issues.

LIMITED EXPANSION INTO OTHER INDUSTRIES Franklin was not so conservative as to forgo contemplating opportunities outside electric power distribution. With positive results, Southern quietly and carefully ventured into providing wireless communications services in its U.S. utility territory and wholesale fiber-optic services in its Southern Telecom unit. Franklin also approved of collateral energy marketing operations, including energy consulting and management services for businesses and institutions. In 2001 Southern spun off its global energy company, Mirant Corporation, which then acquired a majority stake of the wholesale gas-marketing business of TransCanada PipeLines. The move made Mirant the number-two gas marketer in North America and the top exporter to the United States. “Our strategy is to focus our efforts in the Southeast, the area

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we understand best, and stick to electric power, the business we know best,” Franklin told Georgia Trend (January 2002). Waiting for the right moment, Franklin seized the opportunity to quietly enter the natural gas retail market. That opportunity came during bankruptcy hearings for Georgia’s New Power Company. After spinning off Mirant, Southern formed a new subsidiary, Southern Company Gas and, with bankruptcy court approval, acquired New Power’s gas customers for $58 million. It, too, was a calculated smart move. When the gas market was opened to competition in Georgia in the mid1990s, a great deal of confusion was generated over billing issues and customer service. Franklin sat back and watched, waiting for the initial shakeout to pass. With New Power’s demise, Franklin decided the time was ripe, but he was quick to note that Southern’s business was tied to power generation and long-term contracts, not to natural gas price volatility. This gave Southern long-term staying power in an otherwise uncertain market. Moreover, it allowed Southern to operate in a geographical and demographic area already served by the company. In future years Franklin hoped to concentrate on the company’s traditional, regulated business, with a goal to incrementally expand its area coverage beyond the Southeast. He also planned for Southern to sell additional energy-related products and services to its existing customers. The company also worked to maintain its reputation for top customer satisfaction.

A GOOD CORPORATE CITIZEN Franklin’s conservative style also carried over into civic and social responsibilities. In 1999 he proudly announced Southern Company and Georgia Power’s involvement in the largest employee electric vehicle lease program in the United States. He played a key role in efforts to improve water quality and generate goodwill for his company after environmentalists criticized it because of its reliance on coal-burning plants. In his careful, articulate manner, Franklin conceded that no one wanted a power plant in his backyard but that they would have to be built “for the greater good.” Franklin also assumed an active role in supporting the National Minority Supplier Development Council as well as heading up the Metro Atlanta and Georgia Chambers of Commerce, the Central Atlanta Progress, and the local Boy Scouts.

See also entry on The Southern Company in International Directory of Company Histories.


H. Allen Franklin SOURCES FOR FURTHER INFORMATION

Bentley, Tim, “Power Player,” Georgia Trend, May 2002, p. 16. “The Power and the Glory,” Georgia Trend, January 2002, p. 29. —Lauri R. Harding


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■■■

Tom Freston 1945– Chairman and chief executive officer, MTV Networks Nationality: American. Born: 1945. Education: Received undergraduate degree from Saint Michael’s College; New York University, MBA, 1970. Family: Married (wife’s name unknown; divorced); married Kathy Law (a model and actress), c. 2000; children (first marriage): two. Career: Benton & Bowles, 1970, account executive; 1970s, founder and owner of clothing-export business; MTV Networks, 1980–1987, director of marketing and various key posts in sales and programming and then vice president; 1987–, chairman and chief executive officer. Awards: Mipcom Personality of the Year, Reed Midem Organization, 2001. Address: MTV Networks, 1515 Broadway, New York, New York 10036; http://www.mtv.com.

Tom Freston. © Gregory Pace/Corbis.

APPAREL BUSINESS PROVIDES A FOUNDATION

■ Tom Freston joined MTV Networks in 1980 when it was a fledgling enterprise establishing the first television station devoted to the broadcast of music videos. After being appointed CEO in 1987, he oversaw the expansion of MTV Networks into a multibillion-dollar global corporation and the leading multimedia entertainment company oriented toward children, teens, and young adults. Under Freston’s leadership, MTV Networks created some of the strongest brands in television, with certain shows receiving industry-wide record ratings and revenues. Freston also directed MTV Networks’ ventures into recorded music, radio, feature films, publishing, and the Internet. Known for his passion for business, Freston was acknowledged among coworkers and industry analysts for fostering the freedom necessary for innovative thinking and maintaining a globally oriented outlook.

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Freston grew up in suburban Rowayton, Connecticut. After receiving his MBA from New York University, he became an account executive with the Benton & Bowles advertising firm in New York. Freston left the company when he was 24 and moved to Aspen, Colorado, and later to the Caribbean, supporting himself as a bartender. He eventually traveled to India and set up a clothing-export business in New Delhi, which quickly prospered, shipping garments made in India as well as Afghanistan to retailers in the United States, Europe, and South Africa. According to Freston, his experience with India’s convoluted business laws taught him a great deal about navigating around the many roadblocks that can arise in marketing. In an interview with Jim Cooper for Mediaweek, Freston noted, “I felt that anything after that would be easier, and that’s large-


Tom Freston

ly been true” (April 17, 2000). Freston also commented that the apparel and music businesses have many similarities, in that both must stay relevant to the target consumers or audience, whose tastes can rapidly change.

noted that running such a youth-oriented enterprise necessitated a constant search for new concepts, shows, and music, adding that after about “three months you have to change everything” (November 1989).

FROM KABUL TO CABLE

A GLOBAL OUTLOOK

At the end of the 1970s Freston was forced to shut down his clothing business due to new American trade laws, and he returned to the United States. Interested in pursuing a career in the music business, he answered an advertisement in Billboard magazine for people to work on establishing a television channel devoted to the airing of music videos. In 1980 Freston was hired as director of marketing for MTV. To help the station get off the ground and become familiar to consumers, Freston and others traveled around the country drumming up support from affiliate television stations and record companies. In the process, they handed out MTV buttons at airports and even slapped MTV bumper stickers on rental cars.

After winning back audiences and advertisers to MTV Networks’ three core channels—MTV, Nickelodeon, and VH1— Freston set his eyes on the global market and within two years had made MTV available in 24 countries. In 1988 the company’s gross revenues were up 34 percent from the previous year, to $222 million. By 1994 MTV Networks’ international business represented almost 25 percent of the company’s revenues. In 2003, 80 percent of the company’s revenues were generated outside the United States.

When MTV finally reached the airwaves in 1981, it was a hit with the public as well as with record company executives, who saw a new marketing outlet through which to increase record sales. Freston soon attained posts in sales and then in programming. The initial surge in MTV’s popularity died by the mid-1980s; ad sales slipped from $74.4 million in 1985 to $65.7 million in 1986.

APPOINTED CEO When MTV’s parent company, Warner Amex, sold MTV to Viacom, Freston was one of the few executives who had been with MTV from the beginning to stay on board. Freston, who was made a co-president of MTV, was mentioned as the possible new CEO, but many Viacom executives were unsure that he was CEO material. Still, MTV was floundering, and the consensus was that bringing an outsider into the insular MTV culture might make matters worse. Freston was appointed CEO of MTV in 1987. Freston immediately set out to regroup and revamp the company. He overhauled the ad-sales group and fostered a closer working relationship between the advertising and programming sides of the business. As a result, total ad revenues at MTV rose more than 40 percent over the next year. Knowing that the attention span of his young audience was limited, Freston established an atmosphere of creativity among programmers. In 1985 Freston oversaw the creation of the Video Hits 1 (VH1) station and was also put in charge of Nickelodeon, the children’s channel that came under the MTV Networks banner when MTV was purchased by Viacom. In an interview with Steven Beschloss for Business Month, Freston


Freston also guided the company into other industries, such as film production, and established joint ventures to create businesses such as MTV’s record club and the Comedy Central network. According to industry analysts, Freston’s greatest triumphs may have been his championing of a continuous stream of successful new programs, such as Yo! MTV Raps, Behind the Music for VH1, and Rugrats and Blues Clues for Nickelodeon. By 2002 Freston showed that he still had the knack for programming when he approved production for The Osbournes, a reality show about the eccentric rocker Ozzie Osbourne and his family that was soon commanding a record $135,000 per 30-second commercial. Freston believed that The Osbournes, a show with nontraditional appeal, would become a multibillion-dollar international hit, and he proved to be right.

MANAGEMENT STYLE Industry analysts and coworkers characterized Freston as a demanding boss, but one who sparked loyalty in his employees. In an interview with Jim Cooper for Mediaweek, Herb Scannell, who served as president of VH1, noted, “You want to do right by Tom, because he hasn’t succeeded based on fear and intimidation” (April 17, 2000). Freston was also noted for his ability to understand the many aspects of the entertainment industry, from programming to financial analyses to merchandising. He had a global outlook and tried to create value for shareholders. Above all, he was committed to recognizing the importance of brand. Freston told David Lipke for a Women’s Wear Daily article, “A brand is a big advantage in a time of rapid change” (November 18, 2002). In an interview with Cooper for Mediaweek, the industry analyst Sandra Kresch summed up Freston’s managerial abilities this way: “Above all else, he is personally passionate

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Tom Freston

about the network, and that passion has let him go places with the business that someone who saw it only as a business would never see” (April 17, 2000).

A GUIDING LIGHT As of 2004 Freston had thrived and succeeded as MTV Networks’ CEO for nearly two decades, with MTV continuing as a cornerstone of youthful television viewing. The company’s $27 billion business in 2002 represented the single largest asset for its parent company, Viacom. MTV Networks’ revenues and operating cash grew by approximately 11 percent over 2003, and the company had averaged more than $1 billion in sales annually. Freston guided MTV Networks into a company comprising eight major domestic networks, 13 domestic digital networks, and more than 30 international outlets.

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Beschloss, Steven, “HA! Tom Freston Gets the Last Laugh,” Business Month, November 1989, p. 64. Cooper, Jim, “The Ghost in the Machine,” Mediaweek, April 17, 2000, p. 51. Guider, Elizabeth, “The Music Man,” Variety, October 8, 2001, p. A1. Higgins, John M., “MTVN: Freston’s Mission,” Broadcasting & Cable, June 9, 2003, p. 1. Lipke, David, “The MTV Beat,” Women’s Wear Daily, November 18, 2002, p. 13. Mermigas, Diane, “Freston Swears by ‘The Osbournes,’” Electronic Media, June 10, 2002, p. 2.

—David Petechuk


■■■

Takeo Fukui 1944– President and chief executive officer, Honda Motor Company Nationality: Japanese. Born: November 28, 1944, in Tokyo, Japan. Education: Waseda University, BS, 1969. Career: Honda Motor Company, 1969–1979, engineer; Honda R&D Company, 1979–1982, chief engineer; Honda Racing Corporation, 1982–1983, chief engineer; 1983–1985, director; 1985–1987, executive vice president; Honda R&D Company, 1987–1988, managing director; Honda Racing Corporation, 1987–1988, president; Honda Motor Company, 1988–1990, director; Honda R&D Company, 1990–1991, senior managing director; Honda Motor Company, 1991–1992, general manager of Motorcycle Development; 1992–1994, general manager of Hamamatsu Factory, Motorcycle Operations; Honda of America Manufacturing, 1994–1996, executive vice president and director; Honda Motor Company, 1996–1998, managing director; Honda of America Manufacturing, 1996–1998, president and director; Honda R&D Company, 1998–2003, president; Honda Motor Company, 1999–2003, senior managing and representative director; 2003–, president and CEO.

Takeo Fukui. Photograph by Itsuo Inouye. AP/Wide World Photos.

Address: Honda Giken Kogyo Kabushiki Kaisha, 17-1, 2chome, Minami-Aoyama, Minato-ku, Tokyo 10778556, Japan; http://world.honda.com.

■ Takeo Fukui, a veteran Honda engineer, has taken a wellestablished route to the top spot at Honda Motor Company, a company that started out as a small motorcycle company in Hamamtsu, Japan, in 1959 but steadily grew into a leading manufacturer of such products as all-terrain vehicles, automobiles, generators, lawn mowers, marine engines, motorcycles, personal watercraft, and power equipment. The traditional path taken by Fukui is one that has long been dictated by company policy, which emphasizes Honda’s engineering-oriented corporate culture. He was drawn initially to Honda because, at that time, it was the only Japanese car manufacturer involved with Formula One racing and the research and development necessary to develop such vehicles.


Fukui’s career as of 2004 had spanned more than three decades with Honda. During this time, his widespread duties focused primarily on engineering, racing, and research and development. During the course of his outstanding career he worked with the team that developed the landmark CVCC (compound vortex-controlled combustion) engine. The cleaner-burning engine vaulted the Honda Civic in 1975 to the ranks of the first car to meet the strict U.S. Clean Air Act standard without the use of a catalytic converter. Another success for Fukui was in leading Honda’s motorcycle racing team to a string of championships in the 1980s. A third accomplishment under his direction was the Japanese launch in 2001 of Honda’s successful Fit subcompact car.

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Takeo Fukui

ENGINEERING WITH HONDA Fukui started his career in April 1969 as an engineer— working with Hiroyuki Yoshino, then CEO, and Nobuhiko Kawamoto, an engineer who later assumed the Honda presidency—on the Honda project team that developed the CVCC engine. He was assigned to the engineering team that eventually met for the first time the challenging exhaust emissions standards of the U.S. Clean Air Act. According to Todd Zaun, writing in the Wall Street Journal (July 10, 2003), Fukui had a strong competitive nature even in his early days with Honda. A superior reported that during early government tests for a new Honda Civic, Fukui applied excessive lubrication to the test car’s engine so that it would operate at peak performance. The application succeeded in raising the car’s fuel-economy rating; however, a government official quickly realized what had happened and forced Honda to retest the car. Although Fukui does not deny the tale, he admits, “The truth is, as part of my nature, I don’t like to lose.” By the first quarter of 1979 Fukui had been appointed the chief engineer at Honda R&D Company, and three years later he was selected to be chief engineer at the Honda Racing Corporation. After losing a string of races during the late 1970s, Fukui abandoned research on a sophisticated four-stroke engine technology and returned to the older, but tested, twostroke design. Soon, Fukui was leading his racing team to nearly a decade-long series of victories, including Honda’s first world championship within the World Grand Prix 500cc class. At that time, according to the Wall Street Journal, Fukui said, “Ultimately, the result is everything.” By December 1983 Fukui had attained his first management position, that of director for the Honda Racing Corporation. Then, in September 1985, he was promoted to executive vice president of the Honda Racing Corporation and, in May 1987, was promoted to president, along with additional duties as managing director of the Honda R&D Company. At this time, Fukui felt that he clearly understood automobile racing and the technology it took to develop such a program, having benefited from thoroughly discussing racing technology (and “racing spirit”) with the race-car innovator and Honda founder Soichiro Honda. A year later, in 1988, Fukui was again promoted, this time to director of the Honda Motor Company. By this time, Fukui had assumed overall responsibility for motorcycle development, which he supervised from 1987 to 1992. The early 1990s saw Fukui assume the positions of senior managing director at the Honda R&D Company; general manager at Motorcycle Development, Honda Motor Company; and general manager at the Hamamatsu Factory, Motorcycle Operations, Honda Motor Company. The Hamamatsu Factory possessed one of Honda’s more multifaceted manufac-

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turing facilities, producing a complex mix of products that included auto transmissions, motorcycles, and power products. By mid-1994 Fukui had become executive vice president and director of Honda of America Manufacturing (HAM) in Ohio. Two years later, in 1996, he became HAM president and also the managing director of Honda Motor Company. Fukui assumed this leadership role at a time of innovation for the North American automobile/motorcycle complex. With increasing U.S. demand for Honda products, Fukui guided HAM to a significantly expanded operation in production, design, number of models, and suppliers. Before assuming the positions of president and chief executive officer of Honda Motor Company, Fukui was president of Honda R&D Company (starting in 1998); a year later (1999) he was promoted to senior managing and representative director (in charge of motor-sport activities, including Formula One Grand Prix racing) of the Honda Motor Company. At the end of June 2003 Fukui attained the highest positions at Honda, president and chief executive officer. He brought to these roles his expertise in research and development, engineering, construction, environmental technology (including pollution-control technologies), racing activities, and the manufacturing of automobiles, motorcycles, and power products.

CRITICAL U.S. EXPERIENCE Michael Flynn, director of the University of Michigan’s Office for the Study of Automotive Transportation, emphasized the need for Honda’s top executives to have extensive experience in the United States, its largest market. In addition, Mary-Beth Kellenberger, an industry analyst with Frost & Sullivan, stated that executive selections at Honda (such as Fukui’s) demonstrate the company’s emphasis on engineering and R&D knowledge, with a special stress on manufacturing and sales. Like all previous Honda presidents selected to lead worldwide operations, Fukui had the necessary experience in the U.S. market and with manufacturing, engineering, and research and development. Specifically, beginning in 1994, Fukui was vice president and later, in 1996, president of Honda of America Manufacturing. He directed the Ohio manufacturing plants at Marysville, East Liberty, and Anna, where Honda, as of the early 2000s, had about 13,000 employees who were making such automobiles as the Accord, Civic, and Element. Beginning in 1998 Fukui ran the huge manufacturing and engineering operation of the Honda R&D Company in Ohio, Honda’s research and development branch.


Takeo Fukui

GOALS FOR MEETING CHALLENGES IN THE EARLY 2000S Fukui assumed the helm at Honda during an increasingly challenging time. Several crucial areas were showing signs of weakness for Honda, weaknesses of which Fukui was well aware when he shaped his goals for directing the company. The all-important U.S. market was continuing to post solid sales, but its rate of growth had slowed, in part because of the 2002 Iraqi war and the sluggish economy during the first three years of the 2000s. In Japan, Fukui recognized that Honda faced increasing competition from the Toyota Motor Corporation and a rapidly growing Nissan Motor Company. To meet these challenges, Fukui formulated several goals. His first goal was to initiate a new plan of development, which would take effect with the 2005–2006 fiscal year. At that time, Fukui intended to direct the company toward medium-term growth within its worldwide business arenas and to concentrate on improving the quality and technological advancement of Honda products and the degree of motivation of its employees. He was especially interested in fuel-cell technology in future transportation. Moreover, Fukui intended to focus on strong vehicle performance. One way to ensure high standards of vehicle performance, he believed, was to maximize the company’s exposure to Formula One racing. Fukui also planned to concentrate on heightening what the automobile industry termed the “fun-to-drive quotient” of Honda vehicles. As he saw it, the fun-to-drive factor derives from Honda’s concept of a comprehensive package of ride, styling, equipment, and performance. Another goal was to continue strengthening the global network put in place by Yoshino during his five-year tenure as president of Honda R&D. By expanding and integrating Honda’s global operations, which stretched from the United States to England to Indonesia, Fukui hoped to push the network into the rapidly expanding Chinese market and other developing Asian markets. Fukui planned to more than double production in China during 2004, as the company expected demand by Chinese consumers to grow rapidly. However, because Honda is Japan’s second-largest car-manufacturing company, Fukui was critically aware that he needed to focus on revitalizing Honda’s Japanese operations, which, as noted, had seen increasing competition from Nissan and Toyota. Finally, Fukui intended to aggressively pursue Honda’s continued expansion in the U.S. market. In pursuing these goals, Fukui conceived of Honda as more than an automobile maker. Instead, he thought of Honda as a “mobility” company, involved in many modes of transportation, including new areas such as airplanes. In fact, Fukui


planned to build a “Honda Civic of the Sky,” a twin-engine, four- to five-passenger jet with improved aerodynamics, an engine that would deliver a 20 percent increase in fuel efficiency over traditional small jets, and new lightweight composite materials for the fuselage.

PRIORITIES Fukui did not focus on volume target or market share; instead, customer satisfaction was his first priority, as well as consistently improving product image. His philosophy stemmed from this priority: satisfying customers and improving products expand sales and, in turn, produce plant expansion. Unlike most automakers, who build their plants first and then calculate market share based on production capacity, Fukui pointed out that he intended do the opposite so as not to diminish quality and performance. According to GrandPrix.com, Fukui stated his intent to focus the company on “establishing the technology that will drive the 21st century auto market” (“Honda’s New Boss Is a Racer”). In Fukui’s view, Honda must continue to meet the challenge of a global community by both respecting and understanding other countries’ cultures when introducing Honda products into those societies. As of 2004 Honda was progressing in many and varied directions, led by Takeo Fukui, a fiercely competitive and experienced engineer.

See also entries on Honda Motor Company Limited, Nissan Motor Co., and Toyota Motor Corporation in International Directory of Company Histories.


“Honda’s New Boss Is a Racer,” GrandPrix.com, http:// www.grandprix.com/ns/ns11052.html. Nelson, Dave, Rick Mayo, and Patricia E. Moody, Powered by Honda: Developing Excellence in the Global Enterprise, New York: John Wiley & Sons, 1998. Sakiya, Tetsuo (translated by Kiyoshi Ikemi), Honda Motor: The Men, the Management, the Machines, New York: Kodansha International/USA, 1982. Shook, Robert L. Honda: An American Success Story, New York: Prentice Hall, 1988. Zaun, Todd, “New Honda CEO Faces Big Drop in Japan Sales,” Wall Street Journal, July 10, 2003. —William Arthur Atkins

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■■■

Richard S. Fuld Jr. 1946– Chairman and chief executive officer, Lehman Brothers Holdings Nationality: American. Born: April 26, 1946, in New York City, New York. Education: University of Colorado, BA, 1969; New York University Stern School of Business, MBA, 1973. Family: Son of Richard Severin Fuld and Elizabeth Schwab; married Kathleen Ann Bailey; children: three. Career: Lehman Brothers, 1969–1984, managing director; Shearson Lehman Brothers, 1984–1990, vice chairman; Lehman Brothers, 1990–1993, president and co-CEO; 1993, copresident and co-COO; 1993–1994, president and COO; Lehman Brothers Holdings, 1993–1994, CEO; 1994–, chairman and CEO. Address: Lehman Brothers Holdings, 745 Seventh Avenue, New York, New York 10019; http://www.lehman.com.

■ The original Lehman Brothers were the German Jewish émigrés Henry, Emanuel, and Meyer Lehman, who started their firm around 1850. As family-business owners they would have appreciated the continuity of the company man Richard Fuld, himself Jewish. Fuld began his career at the firm in 1969—at the end of an era, when the last members of the Lehman family ceased working at the firm. Over a 30-year career Fuld helped transform Lehman from a bond house into a major investment banker. With 2003 sales of $17 billion, Lehman Brothers was an investment bank known as an aggressive trader. The firm offered investment and merchant banking services as well as the underwriting of equities and fixed-income products (such as bonds and other debts), asset management, institutional sales, and private client services. In addition Lehman traded stocks, currency, derivatives, and commodities. After being weakened by economic turmoil in Russia, Lehman was growing again, forming joint ventures for investment banking with the Bank of Tokyo-Mitsubishi and for online bond offerings with

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SOFTBANK. The firm was also a leading online bond offerer in the United States. Its 2003 acquisition of Neuberger Berman brought assets under management past the $116 billion mark.

FROM THE TRADING FLOOR TO THE EXECUTIVE SUITE Richard Fuld joined Lehman in 1969 as a commercialpaper trader and earned his reputation running the firm’s fixed-income business. In the early 1980s at the age of 37 Fuld became the supervisor of both the fixed-income and the equities divisions, overseeing all trading at Lehman. Fuld had met with great success as a trader, but his skills as a manager were less obvious. His interactions with coworkers were decidedly limited; when he did speak, he tended to use monosyllables.


Richard S. Fuld Jr.

He was notoriously described in Ken Auletta’s 1987 book, Greed and Glory on Wall Street: The Fall of the House of Lehman, as “the ‘digital mind trader,’ someone who spent so much time in front of his green screen or making rat-tat-tat decisions that he was no longer human.” Yet with his new responsibilities Fuld had 22 managers reporting to him in divisions that accounted for two-thirds of the company’s profits. Fuld excelled, and in 1982 his divisions generated record profits.

AN EXECUTIVE SURVIVES A CUTTHROAT CULTURE Fuld, who earned his MBA from New York University at night, was considered by many in the industry as one of Wall Street’s supreme traders. One Lehman partner said of Fuld in Investment Dealers’ Digest, “This is a very smart guy, tough as nails” (August 24, 1992). As reported by Fortune, a notorious temper earned Fuld, a weightlifter, the nickname “gorilla” (December 11, 1995). Toughness was a prerequisite to surviving Lehman’s cutthroat corporate culture. Intense acrimony nearly brought the firm to its knees in 1984, due to a power struggle between the firm’s top trader and top investment banker, and again in early 1990, due to a clash between the Shearson Lehman chief executive and the chairman of American Express.

A TENSE TRIUMVIRATE The history of Lehman Brothers could justifiably fill several books, with a chapter or two devoted solely to the firm’s relationship with American Express. Shearson/American Express acquired Lehman Brothers in 1984; six years later Shearson Lehman Brothers split its operations into a Shearson retail division and a Lehman Brothers Investing banking/trading division. A primary figure during this period was Fuld. After the 1990 operations split, Fuld became co-CEO of the Lehman Brothers division, sharing the title with J. Tomilson Hill. The pair of executives comprised two-thirds of a power struggle that also involved Fuld’s longtime protégé T. Christopher Pettit. Pettit, the West Point graduate who joined Lehman in 1977, worked side by side with Fuld for much of his career and emerged in the early 1990s as a controversial rally-the-troops leader. Pettit managed to insert fixed-income executives personally loyal to him in top operating positions firmwide, provoking tensions between him and Fuld. Hill was ultimately ousted by the American Express Company chief executive Harvey Golub; Pettit and Fuld, meanwhile, would meet with further confrontation later on.

HEADED FOR DISASTER In the mid-1990s Lehman Brothers mirrored a dysfunctional family intent on tearing itself apart. After the company


finally reclaimed its independence in 1994—having been spun off from American Express 10 years after it was first acquired by the firm—infighting abounded. The squabbles had the potential to ruin Lehman at a crucial moment in its history. On the competitive front, the company had claimed a commanding position in the bond business, but it had yet to obtain a significant presence in the high-margin businesses crucial to success in investment banking. In 1994 Lehman Brothers’ ranking in Institutional Investor’s poll sank to number nine after the company had claimed the top position for three consecutive years in the early 1990s. Lehman also lacked a major international presence overseas. When the smoke from the spin-off process cleared, Fuld emerged unscathed. His fixed-income division was the only segment of Lehman Brothers making any significant money. One head of debt-capital markets at a rival Wall Street house noted in the Financial News, “If Dick and his bond team had walked to, say, Morgan Stanley, it is likely that Lehman would have folded within six months” (March 25, 2002).

A KEY RELATIONSHIP FAILS Fuld, who was named chairman in April 1994, made substantial human-resources changes after his company broke free from American Express. One of the most notorious personnel shake-ups involved his protégé Pettit. A fallout between the mentor and younger employee arose after Pettit was given dayto-day operating control of the company and overstepped his boundaries. Pettit made a few dubious moves—essentially in attempts to give himself more power—and his relationship with Fuld deteriorated. As news of Pettit’s alleged affair with a subordinate spread throughout the firm, tensions between him and his mentor were exacerbated further. In April 1996 Fuld stripped Pettit of his day-to-day business responsibilities and removed most of his handpicked executives. Six months later Pettit resigned. Just a few months afterward he was killed in a snowmobile accident on his 52nd birthday. Through the beginning of the 21st century Fuld refused to discuss the matter publicly.

LEHMAN’S DURABILITY THROUGH STRIFE After regaining its independence, Lehman raised its return on equity to nearly 14 percent in 1996, from the low of 3 percent reached just after the firm was spun off from American Express. Roy C. Smith, the professor of finance at New York University’s Stern School of Business, called Lehman “a cat with 19 lives” in the New York Times, commending the company on its ability to survive a slew of stressful changes; he noted, “They’re a bit like an accordion—they can squeeze when they want to. They’re amazingly durable. Some of the credit for that goes to Fuld” (June 3, 1997).

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Richard S. Fuld Jr.

A NEW TEAM TAKES OVER Fuld would come to change the leadership in each of the company’s three major operating units—investment banking, equities, and fixed income. He focused the company’s investments in high-margin businesses like mergers and acquisitions and also equities by recruiting several expensive hires. In January 1997 Fuld approved $48 million for additional executive compensation—a full $46 million of that was earmarked for the investing, banking, and equities divisions, leaving just $2.4 million for the fixed-income division’s recruits. His strategy was crystal clear: move Lehman away from its age-old reliance on fixed income. Such a shift could not happen overnight, but that did not prevent Fuld from feeling pressure. As reported by Investment Dealers’ Digest, in addressing analysts at a 1997 meeting Fuld said, “The process of building our high-margin businesses and shifting our overall business mix takes time. It starts with leadership at the top, then at the next level, then the talent needed to meet client needs and produce revenues. Once all that is in place, it takes time to get the resources to work together properly to build or expand relationships, and create revenues” (August 25, 1997). As Fuld worked to get his company back on track, he was forced to contend with endless rumors and speculation that Lehman was on the market for purchase. He remarked in the New York Times, “We are building a strong independent investment bank. We are certainly not looking to be bought” (June 3, 1997).

A TRAGEDY FOCUSES A FIRM Lehman’s investment-banking business began to seriously take root in the midst of a massive crisis: the September 11, 2001, terrorist attacks and the loss of the firm’s World Financial Center headquarters in downtown New York. The midtown Sheraton Hotel became the company’s temporary central offices. There, instead of grouping bankers by the type of financing in which they specialized—the typical setup— management grouped bankers by industry. So for the first time the bankers who underwrote debt and the bankers who put together stock offerings worked side by side in the same makeshift office—a cocktail lounge. The setup worked so well that the arrangement was retained when the company moved into its new headquarters in 2002, resulting in increased communication among bankers and more innovative financing solutions for clients. In the past the company had measured success on individual bases; after the restructuring, noted Fuld in BusinessWeek, “it was all about the team” (January 19, 2004).

THE TOP OF THE CEO PAY CHARTS In 2001, amid the global recession and stock-market collapse, Wall Street firms felt the economic pains most of all.

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Lehman at least outperformed the industry; Fuld’s reward was a 2001 compensation package worth $105 million, making him the fourth-highest-paid chief executive in the United States. Most Wall Street chief executives—including those at Goldman Sachs, Morgan Stanley, and J. P. Morgan Chase— reduced their pay packages at the time. Despite Fuld’s laudable performance in turning Lehman Brothers around, outsiders criticized his payment package as irresponsible in a year during which shareholders—even those who owned a piece of Lehman—suffered: Lehman’s stock had started the year at around $75 and finished at around $65. Ian Kerr of Financial News described 2001 as “the type of year when small shareholders and retail investors might have gawked at the investment bankers’ seaside mansions in the Hamptons and the boats in Sag Harbor and asked, ‘But where are the customers’ yachts?’” (March 25, 2002).

THE KEYS TO SUCCESS Fuld was a long-term player and knew that better days were ahead. Lehman’s rebound continued in the first few years of the millennium, as the firm earned a reputation for its stellar management through three primary accomplishments: First, the company kept employees’ salaries in line with earnings, with the ratio of compensation costs to gross revenues hovering around 51 percent. Second, Lehman maintained a strong focus on U.S. government bonds, global fixed income, and credit derivatives at a time when the equities and investmentbanking markets were losing propositions. Finally, the firm retained its best managers by handing them substantial portions of stock in the firm. In 1994 employees owned 4 percent of Lehman; by 2004 they owned 35 percent. In 2001 the firm allocated $544 million for stock-based pay, accounting for 15.8 percent of its total compensation expenses, as compared with the 6.4 percent allocated for such purposes at Merrill Lynch. Fuld’s message to new recruits: If you join us, we promise to make you rich—perhaps seriously rich. And he delivered on that promise—by 2002 the company was teeming with self-made millionaires. Despite its success, Lehman Brothers still lingered in the shadows of such megafirms as Goldman Sachs and Citigroup. Although its market cap grew from $2 billion in 1994 to $15.8 billion in early 2002, the firm still lacked the type of balance sheet that would allow it to make a significant acquisition.

NOT JUST A BOND HOUSE In October 2003, after several painful years of sitting on the sidelines, Lehman Brothers seized on an opportunity to expand its business. Thanks to historically low interest rates, the bond market exploded—along with Lehman’s profits—and a sizable acquisition finally proved financially feasible. The tar-


Richard S. Fuld Jr.

get was Neuberger Berman, a money-management firm focusing on the affluent. In 2004 Lehman Brothers acquired Neuberger Berman in a deal valued at $2.63 billion. For Fuld the Neuberger acquisition was the realization of a strategy he had been espousing since the mid-1990s: to diversify the company’s business and lessen its reliance on the bondtrading market. The company expected the acquisition to increase its percentage of fee-based revenues from 13 percent to 21 percent. The move put Fuld’s company on equal footing with Morgan Stanley, Merrill Lynch, and Goldman Sachs, all of which had significant money-management businesses. In Neuberger Berman, Lehman had obtained a firm with $63.7 billion under management, a well-regarded cadre of mutual funds, and a slice of the sought-after business of financialservices provision to high-net-worth clients. As quoted in the New York Times, Fuld said in a conference call, “Neuberger Berman is one of the largest and most respected, independent, high-net-worth managers. When Neuberger is combined with our existing wealth and asset-management group, Lehman Brothers will emerge as one of the leading providers of services to a highly desirable marketplace” (July 23, 2003).

ed downturn in bonds. In a nod to Fuld’s efforts, Blaine A. Frantz, the senior credit officer at Moody’s Investors, told BusinessWeek, “It is a much more diversified shop than it was five or six years ago, and it operates in an extremely disciplined fashion” (January 19, 2004).

ONE OF THE “TOP CEOS” Another nod from Wall Street came in January 2004 when Institutional Investor ranked Fuld first in its annual Best CEOs in America survey in the Brokers & Asset Managers category. Plenty of room for improvement, however, existed within Lehman Brothers’ overseas operations. The company was ranked fourth in European M&A work in 2002, with a market share of 19 percent, but it fell from number eight to number nine in the global rankings for announced mergers. As of early 2004 one of Fuld’s goals was to improve the company’s overseas market share, partly by appointing two top executives in Asia and Europe to the company’s executive committee. In good times and bad Fuld displayed unquestionable consistency and strength. One would expect nothing less from the leader of one of the top investment firms in the world. In a tough business few proved tougher than Richard Fuld.

A POWERHOUSE EMERGES In 2003 Daily Deal awarded Lehman Brothers the “Top 5 Global M&A Announcements of 2003 Deal of the Year” for its consultation with Travelers for the company’s $16 billion merger agreement with St. Paul Companies. All told Lehman consulted on $99 billion worth of U.S. mergers and acquisitions in 2003, increasing its market share by 6.2 points to 18.9 percent, according to Thomson Financial. That gave the firm the lead in mergers and acquisitions in the industry, over Credit Suisse First Boston, Merrill Lynch, and J. P. Morgan Chase. Among major Wall Street firms, Lehman claimed fourth place in mergers and acquisitions overall, up from ninth in 2002. In 2003 the company raised $314 billion in debt and equity issues for clients, cementing its position as the number-two underwriter of securities in the United States—behind Citigroup—up from the number-four spot in 2002. Lehman Brothers’ success stories were largely a byproduct of Fuld’s focus on offering a complete array of financial services, including advisement on corporate merging, raising capital, hedging risk, and making debt payments. Fuld’s transformation showed foresight. As the economy picked up, bond insurance was expected to soften; Lehman’s investmentbanking operations would be the counterbalance to the expect-



Auletta, Ken, Greed and Glory on Wall Street: The Fall of the House of Lehman, New York, N.Y.: Warner Books, 1987. Cooper, Ron, “Can a Troika Take Lehman Up a Level?” Investment Dealers’ Digest, August 24, 1992, p. 16. Horowitz, Jed, “Does Lehman Finally Have It Right?” Investment Dealers’ Digest, August 25, 1997, p. 16. Kerr, Ian, “Fuld’s Pay Sheds Light on Lehman,” Financial News, March 25, 2002. Thomas, Landon, Jr., “Lehman to Buy Neuberger Berman for $2.6 Billion,” New York Times, July 23, 2003. Thornton, Emily, “Lehman’s New Street Smarts,” BusinessWeek, January 19, 2004, p. 62. Truell, Peter, “Is Lehman Ready to Take the Plunge?” New York Times, June 3, 1997. Tully, Shawn, “Can Lehman Survive?” Fortune, December 11, 1995, p. 154. —Tim Halpern

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S. Marce Fuller 1960– President and CEO, Mirant Corporation Nationality: American. Born: 1960, in Wetumpka, Alabama. Education: University of Alabama, Tuscaloosa, BS, 1983; Union College, MS, 1984. Career: General Electric, 1983–1985, applications engineer; Alabama Power (subsidiary of Southern Company), 1985–1988, staff engineer; Southern Company, 1988–1990, corporate finance senior analyst; Southern Company Services (subsidiary of Southern Company), 1990–1992, assistant to the chief executive officer; Mirant, 1992–1994, international project director; 1994–1997, senior vice president and then executive vice president of North America division; 1997–1998, president and chief executive officer of North American energy marketing; 1999–, president and chief executive officer. Awards: Named one of the 50 Most Powerful Women in Business, Fortune, 2001. Address: Mirant Corporation, 1155 Perimeter Center W., Atlanta, Georgia 36338; http://www.mirant.com.

■ S. Marce Fuller was one of very few female CEOs at the helm of a U.S. Fortune 500 company in the early 2000s. She became president, chief executive officer, and a member of the board of directors of Mirant, a Georgia-based energy provider, in July 1999. In 2001 she was named to Fortune magazine’s list of the 50 Most Powerful Women in Business, ranking fifth. She took over when Mirant was a subsidiary of Southern Company, but under her direction the company acquired a trading and marketing branch and in April 2001 was spun off from the parent company. By year’s end, Mirant had become Georgia’s eighth-largest company and one of the top five marketers of natural gas and electricity in the United States. In addition to operations in the United States, Mirant also had dealings in the Caribbean and the Philippines and owned or controlled in excess of 22,000 megawatts of generating capacity worldwide. Fuller was perceived by associates as a capable, straightforward, and resilient executive.

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FROM ENGINEER TO CORPORATE EXECUTIVE Fuller grew up in Wetumpka, Alabama, wanting to manage a small business. Her grandmother was her role model. In 2001 she told Utility Business, “If there was anyone that I looked up to, it was my grandmother. She seemed to be way ahead of her time.” Following advice from a guidance counselor in high school, Fuller decided to forgo her original plan and pursue engineering. In 1983 Fuller graduated from the University of Alabama with an undergraduate degree in electrical engineering. She earned her master’s degree in power systems engineering at Schenectady’s (New York) Union College. Before completing her master’s, in 1983 Fuller was hired as an applications engineer at General Electric. In 1985 she became a staff engineer in electric system planning for Alabama Power, one of Southern Company’s regulated operating companies. One of her tasks in that position was supporting negotiations for the longterm sale of wholesale power to unaffiliated utilities. Fuller was hired as a senior analyst at Southern Company in 1988, even though she had been warned against taking the job because it was considered a lateral career move. In an article in Georgia Trend (December 2001), she admitted that it had been a risky choice, but she said it had been motivated by a desire to learn about a different area of the company (corporate finance, where she evaluated independent power projects to determine their investment potential) and was “probably the best career move I ever made.” In 1990 Fuller became the assistant to the chief executive officer of Southern Company Services, a subsidiary of Southern Company. She managed a number of special projects, among them the development of a strategy for entering the international power market via the company’s subsidiary, which eventually became Mirant Corporation. Throughout her stints in engineering, marketing, international project development, finance, and executive management at Southern, as well as during her subsequent career at Mirant, Fuller scrutinized and learned from her colleagues’ management techniques. In the Georgia Trend article, she said, “Whenever I’m working with or for someone, I’m studying their style and behaviors. I try to pick out the ones that I think are the best and emulate them. I’d like to think that I’ve gotten the best from all of them.”


S. Marce Fuller

In 1992 Fuller went to work for Mirant Corporation, a subsidiary of Southern Company, as an international project director. Her responsibilities centered on business development in Australia, New Zealand, the Caribbean, and Latin America. In 1994 she was promoted to senior vice president and later to executive vice president of Mirant’s North America division. She oversaw all aspects of management and asset development, including financial performance, financing strategy, environmental compliance, operations, and construction. In 1997 Fuller became the president and chief executive officer of the newly created North American energy marketing business, which serviced wholesale North American customers by providing energy marketing, risk management, and financial services and physically delivering energy commodities to them.

COMPANY THRIVES In July 1999 Fuller became president, chief executive officer, and a director of Mirant. Under her direction, the subsidiary acquired a trading and marketing branch and, in April 2001, was launched from its parent company. Fuller’s daring assessment of a future filled with nonstop opportunities fueled Wall Street’s excitement over the newborn entity. In a letter to shareholders even before the company had separated from its parent company, she predicted Mirant would achieve a market value of $50 billion, experience exceptional growth, and perhaps surpass Southern Company in five years. Company profits soared, and Mirant’s share price in May 2001 rocketed from $22 to $47.20. By the end of the year Mirant had become Georgia’s eighth-largest company and one of the top five marketers of natural gas and electricity in the United States. In 2001 Fuller was named to Fortune magazine’s list of the 50 Most Powerful Women in Business, ranking fifth (two spots behind Oprah Winfrey). In December 2001 Fuller was named chairperson of the newly formed Department of Energy’s Advisory Board, just months after Mirant announced that its earnings from the third quarter had more than doubled from that of the same period the previous year and coinciding with Fuller’s appointment to the board of Earthlink.

AN UNCERTAIN FUTURE Then the Enron bankruptcy and accounting scandal hit the news, and the entire energy sector was affected by the fallout. In less than a year Mirant’s stock price declined about 80 percent, and Moody’s Investors Service downgraded the company’s credit rating to junk status. Credit became hard to come by, and Mirant was forced to adjust its growth plan, cutting its capital budget by 40 percent and selling some assets. The company’s energy-trading business came to almost a complete halt. Fuller and other of Mirant’s senior managers took great


pains to position Mirant as the “un-Enron.” According to Fuller, it was Enron’s business practices and corporate culture of greed and secrecy that had led to its downfall, and that had nothing to do with the energy business itself. There were a few prominent similarities between Mirant and Enron: both engaged in a controversial accounting practice of recording the total value of commodities traded as revenue, which serves to inflate revenue figures, and both employed the beleaguered accounting firm Arthur Andersen as consultant and auditor. But while Enron was alleged to have established hundreds of covert partnerships to conceal escalating debt, Mirant was commended by Wall Street analysts for its transparency in releasing financial data. And in contrast to Enron executives, who dumped millions of dollars worth of shares before the company’s collapse, Mirant executives purchased Mirant’s plummeting shares. Perhaps the greatest difference between Enron and Mirant was that the former mostly traded energy and other commodities generated by others, while the latter marketed electricity produced by its own power plants. As a result of significantly volatile conditions in California’s wholesale power markets in the summer and fall of 2000, some of that state’s utilities were unable to meet financial obligations to many power generators, including Mirant. Pacific Gas and Electric Company and the California Power Exchange Corporation each filed for relief under Chapter 11, and Southern California Edison Company suspended payments to various power generators. While the amounts were in dispute as of July 2003, Mirant estimated that it held some $320 million in claims as a result of the California utility crisis, as well as another roughly $82 million in claims against Enron, which filed for bankruptcy in 2001. Beginning in July 2002 Mirant developed and implemented a strategy that included measures to reduce debt and increase liquidity, such as the sale of investments in Europe and Asia, the cancellation of the purchase or sale of power islands and turbines not essential for Mirant’s ongoing business, the reduction of Mirant’s workforce by some 655 employees, and the sale of some Canadian assets. Despite the success of these moves, Mirant had roughly $1.4 billion of cash and available credit in April 2003, yet it faced approximately $4.5 billion of near-term debt repayments. In July 2003 Mirant filed for bankruptcy. The company’s operations in the Philippines and Caribbean were excluded in the Chapter 11 filings. The bankruptcy was filed to facilitate a comprehensive restructuring and reorganization of the company, and Fuller said worldwide operations would continue uninterrupted and Mirant’s vendors would be paid in full for all services provided and goods furnished after the filing date. Before the filing, Mirant was in negotiations with its bondholders and bank lenders to refinance its existing credit facilities and restructure a large portion of its debt, but Fuller said

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“failure to obtain the timely support of our key lenders” led to uncertainty in the marketplace, which strained the company’s liquidity and jeopardized the viability of its business plan. That, combined with doubt about when power prices would recover and the sluggish U.S. economic recovery, led the company to conclude that bankruptcy was the best option for its stakeholders. On the day of the bankruptcy filing, Fitch Ratings downgraded Mirant’s ratings on senior notes and convertible senior notes to DD from CCC, indicating Fitch’s expectation of likely recoveries in the range of 50 percent to 90 percent; Mirant’s convertible trust preferred securities were lowered to D from CCC, indicating a potential recovery below 50 percent. Under Fuller’s direction, Mirant became competitive in the energy market. As of 2004 Mirant owned or controlled in excess of 22,000 megawatts of generating capacity worldwide. Fuller had a stated commitment to acting with integrity and honesty in conducting business, an approach that was characterized in “The Mirant Mindset,” company values that emphasized that the manner in which results are realized equal the importance of the results. Fuller put a high premium on the nonmonetary rewards of success, such as ongoing opportunities to learn new things. Despite the uncertain future of her

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company, Fuller was perceived as a capable, straightforward, and resilient executive.

See also entries on General Electric Company and The Southern Company in International Directory of Company Histories.


“Bankruptcy Creditors’ Service Newsletter,” July 15, 2003, http://bankrupt.com/mirant.txt. “Caught in Enron’s Undertow,” BusinessWeek Online, February 5, 2002, www.businessweek.com/bwdaily/dnflash/feb2002/ nf2002025_1840.htm. “Fitch Ratings Downgrades Mirant Corp.” Atlanta Business Chronicle, July 15, 2003, http://atlanta.bizjournals.com/ atlanta/stories/2003/07/14/daily17.html. Hardin, Marie, Georgia Trend, December 2001, pp. 41–45. “Twenty Industry Leaders,” Utility Business, June 1, 2001, pp. 60–86. —Amanda de la Garza


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Masaaki Furukawa President, Toyota Tsusho Corporation Nationality: Japanese. Career: Toyota Tsusho Corporation, dates unknown, various positions including president. Address: 9-8, Meieki 4-chome, Nakamura-ku, Nagoya 450-8575, Japan; http://www.toyotsu.co.jp.

■ Masaaki Furukawa became the president of Toyota Tsusho Corporation (TTC), a Japanese trading house that worked with other companies to find the right markets for their products, at a time when its most important customer was the Toyota Motor Corporation. In fact, Toyota Tsusho had been started in 1936 to provide consumer financing for Toyota cars, and Toyota remained one of its main money sources ever since; this was something that Furukawa wanted to change. Furukawa wanted to diversify TTC’s business ventures. Toyota Tsusho’s slogan was “to create new values, have the proper merchant spirit, and never give up,” according to the Yomiuri Shimbun (August 22, 2001). Furukawa subscribed wholeheartedly to this slogan as he led his company to find more numerous and varied business partners.

EXPANDING THE CORPORATION In 1998 the Toyota Tsusho Corporation launched two subsidiary companies in India to produce automobiles for the Toyota Motor Corporation, Japan’s largest automaker. One of the new companies was Toyota Lakozy Auto Limited, set up in Mumbai to sell Toyota sport utility vehicles that had been locally produced. The other subsidiary was Steel and Logistics Center Limited, located in Bangalore. That same year, Furukawa led his company into a joint venture with Mitsubishi Chemical Corporation and the Sinopec Corporation’s Beijing Uanshan Petrochemical Group. The venture was started to manufacture and market for use in the automotive industry polypropylene compounds, which are a high grade of plastic used for molded parts inside a car. The Japanese economy was not doing well in 2001, while competition from overseas was proving to be a threat to some


Japanese companies. Furukawa, however, was reported in the Yomiuri Shimbun as having said, “Toyota Tsusho Corp. has had a reputation as a company that taps a stone bridge to confirm safety but does not cross it. But from now on we will cross the bridge” (August 22, 2001). Toyoto Tsusho strengthened its performance in the food and household goods sector by merging in April 2000 with a Thai company that produced rubber products, the Kasho Company. Furukawa then began to look for new enterprises that could become core businesses for TTC. He was interested in building a worldwide distribution network while keeping TTC’s steel and automotive sales growing. He especially wanted the company to expand into the fields of information technology, environmental concerns, and consumer goods. Furukawa was specifically interested in the environment because ecological projects had gained worldwide attention— particularly the development of cleaner sources of fuel and energy. The Yomiuri Shimbun quoted Furukawa as having said, “I want to convert my company from one relying on Toyota Motor into one that leads the Toyota group” (August 22, 2001). The U.S. company Environmental Systems Products Holdings (ESP) allied itself with Toyota Tsusho in 2002 to bring its patented technologies for vehicle safety and emissions testing to Japan. The venture also launched a new type of emissions testing technology known as loaded mode, which employed a dynamometer to simulate actual driving conditions and provide more accurate emissions test reports. Furukawa also worked with the Nichimen Corporation in 2002 to transfer Nichimen’s Daihatsu Motor Company business to Toyota Tsusho in order to expand Daihatsu’s production and sales. Toyota Tsusho in turn expected the transfer to widen the scope of its own automotive business.

JOINT VENTURES IN NEW PRODUCTS Furukawa considered taking over another Japanese trading house, the Tomen Corporation, in 2003. TTC already owned about 12 percent of the firm, which was heavily in debt. Furukawa met with the head of Tomen, after which the two companies agreed to merge operations by 2005. At the same time Furukawa visited England as part of a tour of TTC’s European holdings. In July 2003 TTC announced plans to enter

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Masaaki Furukawa

into a venture agreement with Kobe Steel and Mitsui to develop aluminum suspension forgings in the United States. The joint venture was called Kobe Aluminum Automotive Products, with TTC holding a 15-percent share. The new company was located in Bowling Green, Kentucky, where factory construction began in August 2003. Production was scheduled to start in June 2005. Furukawa also involved Toyota Tsusho in a joint venture with Toyota Industries and the DENSO Corporation to form a new company called ACTIS Manufacturing. The company was set up to remanufacture automotive air-conditioning compressors. ACTIS was located in a suburb of Dallas, Texas, where its first plant was opened on February 3, 2003. The company was expected to strengthen TTC’s competitiveness in the North American market. Not content with building plants in the United States, Furukawa directed the construction of a new coil center in Apodaca, Mexico, in 2003 to process electrical sheet steel for such automotive parts as transformers and other appliances. That same year Furukawa invested in the ZEON Corporation’s new Zeon Polymix Company in Guangzhou, China. The new company was set up to produce and sell carbon masterbatch (CMB), a raw material used to make rubber parts for automobiles. In June 2003 Furukawa told TTC’s investors that the company was in good standing, in spite of widespread fears of Asia’s soft economy and the effects of the SARS epidemic, a potentially fatal respiratory disease first identified in China in February 2003. “In concrete terms, we are allocating resources to expansion of business domains, focusing first on our core Automotive business, followed by the strategic Ecology, Digital, and Life & Living businesses. We will also strengthen our ability to meet customer expectations by building on our Group’s unique functions and capabilities.” Furukawa had expressed his desire to push ahead and develop new business ventures for TTC; as of early 2004 he had succeeded in doing just that.

See also entries on Tomen Corporation and Toyota Motor Corporation in International Directory of Company Histories.

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“Aichi Steel to Establish a Joint Venture with Shanghai Automotive Industry Group in China,” company press release, April 8, 2002, http://www.aichi-steel.co.jp/ ENGLISH/TOPICS/topics159.htm. “ESP and Toyota Tsusho Create Landmark Alliance to Establish Remote Sensing Vehicle Emissions Testing in Japan,” Business Wire, April 3, 2002. “Japan Comes to the Cotswolds,” What’s New in Industry, December 2003, p. 43. McCulloch, Russ, “Toyota Tsusho Commissions Plant in Mexico to Handle Electrical Sheet,” American Metal Market, May 22, 2003. Mercer, Mike, “Environmental Systems Products Holdings Inc—International Report—Strategic Alliance with Toyota Tsusho Corp,” Diesel Progress, North American Edition, May 2002. “Mitsubishi, Toyota Tsusho, and BYPGC in JV for Automotive PP Compounds,” Chemical Market Reporter. “New President Challenge 2001/Realignment Necessary for Success Amid Shrinking Markets,” Yomiuri Shimbun, August 22, 2001. “North American Compressor Remanufacturer Actis Held Opening Ceremony,” press release, February 4, 2003, http:/ /www.toyota-industries.com/news/release/2003/actis/. “Presidential Visit to the Cotswolds,” press release, December 2003, http://toyotaforkliftscouk.site.securepod.com/ T_News2.asp?NewsID=948&CatID=3&. “Toyota Tsusho Forms 2 Subsidiaries in India,” Asian Economic News, July 5, 1999. “Transfer of Nichimen’s Business Related to Daihatsu Motor Co., Ltd. to Toyota Tsusho,” press release, October 30, 2002, http://www.nichimen.co.jp/eng/news/2002/ e0004.html. Yomada, Michelle, “Toyoto Tsusho, Tomen May Merge Operations,” Australasian Business Intelligence, January 28, 2003. “ZEON Corporation Set to Establish a New Company for the Production and Sale of CMB (Carbon Masterbatch) in Guangzhou, China,” press release, July 24, 2003, http:// www.zeon.co.jp/press_e/030724.html. —Catherine Victoria Donaldson


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Joseph Galli Jr. 1959– President and chief executive officer, Newell Rubbermaid Nationality: American. Born: October 9, 1959. Education: University of North Carolina–Chapel Hill, BA, 1980; Loyola College, MBA, 1987. Family: Son of Joseph Galli Sr. (automotive scrap yard manager) and Lucille (maiden name unknown); married (wife’s name unknown; divorced); married (wife’s name unknown); children: three. Career: Black & Decker Corporation, 1980–1987, various positions; 1987–1989, director of marketing; 1989–1991, vice president of marketing, Accessories and Fastening Group; 1991–1993, vice president of sales and marketing; 1993–1999, president of Worldwide Power Tools and Accessories Group; Amazon.com, 1999–2000, president and COO; VerticalNet, 2000–2001, president and CEO; Newell Rubbermaid, 2001–, president and CEO. Address: Newell Rubbermaid, 10 B Glenlake Parkway, Suite 600, Atlanta, Georgia 30328; http://www.newellrubbermaid.com.

■ Joseph Galli became president and CEO of Newell Rubbermaid in January 2001; he was the first outsider to be named to that position at Newell Rubbermaid or any of its precursor entities in the company’s 99-year history. He proved himself to be a marketing champion capable of launching brands, dominating market share, and enriching the bottom line. The charisma that he mastered in sales paid off in management, where he recruited teams of salespeople who viewed him with the utmost reverence and the fiercest of loyalty. But Galli’s intense leadership style earned him numerous enemies, many of whom were threatened by his accomplishments and viewed him as a corporate liability. A CHILD BORN TO SUCCEED The child of first-generation immigrants, Joseph Galli Jr. inherited both his father’s name and his work ethic. In a tough,


blue-collar environment the elder Galli routinely worked six days a week into his late 70s at the automobile salvage business he operated in Pittsburgh. Like many new Americans the Gallis made success their number-one priority and sacrificed accordingly. The younger Galli’s mother was hospitalized with an infection when Galli was four; when she suspected her son was picking up the broken English of her Italian in-laws, the ailing woman persuaded her doctors to release her ahead of schedule. Throughout Galli’s career his mother pushed him to improve his English and sent him e-mails when she encountered erudite words that she thought he should add to his vocabulary. Galli found early outlets for his competitive drive in athletics. A fierce wrestler in high school, he would immediately run three to four miles if he lost—no matter how late the hour. In college he was a four-year starter on the varsity wrestling team and ACC Champion his senior year, dominating in more than one hundred matches. Whenever he lost, he turned the defeat into motivation to attain victory in the future. As described in BusinessWeek, he once ran 10 miles and jumped rope for an hour by an indoor pool in order to make weight. Said his coach, “Those he couldn’t beat, he outworked. If you told him it couldn’t be done, he’d say, ‘Watch me!’” (December 11, 2000).

A NATURAL SALESMAN After his 1980 graduation Galli took a job as a sales representative with Black & Decker, the leading manufacturer and marketer of power tools and accessories. He visited customers in his North Carolina territory in a van he personally outfitted with a wall of power-tool accessories—not unlike the kind one would see in a Wal-Mart store. Within a year he built the fastest-growing sales territory in the United States. Galli held a variety of positions with Black & Decker, culminating in his being named president of the Worldwide Power Tools and Accessories Group in 1993 at the age of 35. His work ethic was unmatched: he spent more than 75 percent of his time traveling and would routinely show up on weekends at a Home Depot to assist salespeople in giving demonstrations to customers.

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Joseph Galli Jr.

MARKETING GENIUS, MEGALOMANIAC, OR BOTH? Galli built his reputation in marketing, pushing sales of saw blades and drill bits by assigning them catchy names like Piranha and Scorpion. He was credited with developing and launching the DeWalt brand, a $1.5 billion global business that led the power-tool industry. Galli personally crafted a plan to launch the DeWalt brand as Black & Decker’s high-margin entry for skilled tradesmen and consumer do-it-yourselfers. Remembering his own youthful drive, he recruited legions of college students, dubbed “swarm teams,” who trumpeted the DeWalt brand at store openings, union halls, and NASCAR races. The DeWalt team caused sales to balloon from practically zero to $1.4 billion in only seven years. By age 38 Galli was the second-highest paid executive at the company, overseeing the business that provided 64 percent of company revenues. Additionally he played a pivotal role in reengineering Black & Decker’s European, Asian, and Latin American operations. Gary DiCamillo, the former chairman and CEO of Polaroid Corporation, understood Galli well. Both were Italian American and held top roles at Black & Decker in the early 1990s. DiCamillo noted in BusinessWeek, “Galli was the best sales and marketing executive who ever reported to me” (December 11, 2000).

RESULTS ORIENTED, UNDETERRED BY CRITICS But Galli’s hard-charging attitude did not appeal to everyone. Some executives accused Galli of penalizing employees who did not emulate his management style. Galli, aware of the criticism, said he cared only about one thing: performance. As he remarked in BusinessWeek, “It boiled down to results. People said I didn’t like them because of style. And I said no, it was because you missed your numbers” (December 11, 2000). By age 37 he had a falling out with his boss and left abruptly in 1999. Depending upon which source one might view as most credible, Galli either was fired or quit; all agreed, however, that the departure was fast and furious.

NOT AFRAID TO TAKE HIS LUMPS Galli accepted and then quickly reneged on a job offer from PepsiCo in order to take a job with the Internet start-up Amazon as president and COO. The dot-com sweetened its initial offer with a $7.9 million signing bonus. Galli noted in Forbes magazine, “I felt terrible about letting Pepsi down. It was a hard decision, but had I not done what I did, I would always have wondered what that life was like” (October 1, 2001). Still in its infancy, the dot-com industry desperately needed executives from traditional, corporate environments not only for credibility but also to demonstrate that Internet firms

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could deliver real numbers. Despite his efforts to breathe new life into the company, Amazon’s share price plummeted during Galli’s 13-month tenure. His cost-cutting measures, barring software developers from buying $50,000 workstations without prior approval and eliminating a free-aspirin program, did nothing to soften Galli’s image. He ultimately quit, as all his efforts had failed to push Amazon closer to a profit. While his swift exit suggested tension with the Amazon CEO Jeffrey P. Bezos, Galli contended that he was simply eager to run his own business.

WILLING TO SURF THE NET AGAIN Galli said that he learned a lot from his brief stint at Amazon, including the ideal manner in which to make decisions in a quick-paced business environment. Galli remarked in the Philadelphia Daily News, “It’s better to make one hundred decisions with 70 of them right than to make 10 decisions and get nine of them right” (September 18, 2000). Galli next jumped to VerticalNet, an Internet business-tobusiness company, but lasted only 167 days as its chief. Arguably more comfortable in bricks than clicks, Galli accepted a job as president and CEO of Newell Rubbermaid. Around that time an ugly cartoon in the Philadelphia Business Journal took a direct shot at Galli. The satire portrayed him as a rat fleeing a sinking ship in a Rubbermaid tub. Galli stated in Forbes, “I went through some things I don’t ever want to do again. I’m a stronger and less naive manager than I ever would have been” (October 1, 2001).

TAKING THE TOP JOB AMIDST A SALES SLUMP In January 2001 Newell Rubbermaid’s financial picture was bleak. The $6 billion acquisition of Rubbermaid by Newell had yet to prove its worth. Newell had been generally profitable while Rubbermaid had been financially beleaguered, yet Newell had had a much lower public profile than Rubbermaid. The merger meant instant access to the consumer cachet attached to the Rubbermaid name and entry into new sales channels like supermarkets and Amway distributors. Upon Galli’s arrival sales were off 2.4 percent and net income was down 42 percent. The combined entity’s shares had fallen 53 percent from Newell’s high of $49 in 1998. Most alarmingly for Galli, Newell Rubbermaid’s sales force seemed dangerously out of touch with its customers. As reported in Fortune magazine, one employee told a shocked Galli that it was a bad idea to visit retail customers because “they might ask you for something” (December 30, 2002). Not surprisingly, customers interpreted that complacent attitude as an invitation to take their business elsewhere. Lowe’s removed Rubbermaid storage containers from a Pennsylvania distribution center comprising 110 stores, exchanging them for the


Joseph Galli Jr.

products of the competition. Wal-Mart eliminated $75 million in Rubbermaid home products from its shelves.

STICK TO YOUR GUNS Galli cleaned house in the company, firing members of upper management and bringing in new—that is, unspoiled— talent in entry-level sales positions. The focal point of his strategy to turn around the company and make an indelible mark as CEO was a management initiative known within company confines as “Phoenix”—a reference to revival. After a brief training program, groups of young, overly ambitious future sales superstars were sent to the front lines, spending long, intense days in retail locations, doing whatever they could to win back customers. Galli told Fortune, “This is the single most important thing we’re doing” (December 30, 2002). The initiative was somewhat successful. After six consecutive quarters of declining sales the company posted sales increases in 2002. In a later particularly successful quarter, sales in the company’s eight key retail accounts—including WalMart, Home Depot, and Lowe’s—spiked 19 percent. Again recalling his own precocious drive, Galli went to college campuses to recruit “green reps” who would be responsible for continuing to enhance sales figures. Perhaps choosing those with whom he could most identify, Galli scouted out charming jocks and go-getter sorority presidents. When asked about his hiring strategy by Fortune, Galli said he looked for “achievers—and more often than not, that’s outside the classroom” (December 30, 2002). Despite the fact that most of the Phoenix charges were 23-year-olds, they were treated like seasoned, savvy employees. Galli encouraged them to take ideas to the company’s corner offices, arranging for them to give presentations to upper management. Many were promoted to midlevel sales, marketing, and other positions, and a generation of Galli believers began infiltrating the company. A lover of Napoleon who read 10 books on the French leader and was fascinated by the rapport he created among his followers, Galli relished the loyalty he inspired from his own troops.

LEADING CHANGE WILL NOT PLEASE EVERYONE Further cost-cutting measures instituted by Galli included the closing of more than 80 facilities, including Rubbermaid’s flagship plant in Wooster, Ohio, and the firing of 12,000 employees. But few measures created more resentment than his decision to cancel the company’s annual Lake Geneva golf retreat, which cost $1 million and took two hundred top execu-


tives away from their offices for a week. As Galli told Forbes, “Some don’t like my style, but guess what? We’re not running a country club here. We’re going to win. We’re going to be a company that makes our numbers” (October 1, 2001). Not surprisingly, some of the executives that Galli fired turned against him and vented their resentment in Internet chat rooms. Attempting to exploit Galli’s perceived weaknesses, they called him “Little Joe” and sharply criticized his use of corporate jets and the company’s $20 million NASCAR sponsorship. Someone went as far as to send an anonymous warning package to Forbes; included was a letter purportedly from a 20-year company veteran demanding that Galli be stopped before he ransacked the company.

A “DIFFICULT JOURNEY” Galli’s strategy to cut costs and reenergize sales failed to yield the quick turnaround for which he had hoped. In 2003 Wall Street slashed Newell Rubbermaid’s stock price by 25 percent. BusinessWeek named Galli one of the worst managers of 2003. Hoping for a symbolic new beginning, he moved the company’s headquarters to Atlanta. But even Galli acknowledged the tough road both behind and ahead; in a letter to stockholders quoted in the Atlanta Journal Constitution, he wrote, “Make no mistake, it has not been an easy journey” (April 18, 2004).

See also entry on Newell Rubbermaid Inc. in International Directory of Company Histories.


Barrett, Amy, “He Pours Gas on the Fire,” BusinessWeek, December 11, 2000, p. 52. Bond, Patti, “New Start for Newell,” Atlanta Journal Constitution, April 18, 2004. Boyle, Matthew, “Joe Galli’s Army,” Fortune, December 30, 2002, p. 134. Hinkelman, Michael, “VerticalNet B-To-B Boss Galli Is a Risk Taker with Bricks-and-Mortar Know-How and New Economy View,” Philadelphia Daily News, September 18, 2000. Upbin, Bruce, “Rebirth of a Sales Man,” Forbes, October 1, 2001, p. 94. —Tim Halpern

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Louis Gallois 1944– Chairman, Société Nationale des Chemins de Fer Français Nationality: French. Born: 1944, in Montauban, France. Education: École des Hautes Études Commerciales; École Nationale d’Administration. Family: Married (wife’s name unknown); children: three. Career: French Government, 1972–1989, various posts for the Ministry of Economy and Finance, the Ministry of Research and Industry, and the Ministry of Defense; Société Nationale d’Étude et de Construction de Moteurs d’Aviation, 1989–1992, chairman and CEO; Aérospatiale, 1992–1996, chairman and CEO; Société Nationale des Chemins de Fer Français, 1996–, chairman. Address: Société Nationale des Chemins de Fer Français, 34 rue du Commandant Mouchotte, 75699 Paris Cedex 14, France; http://www.sncf.fr.

■ Louis Gallois was appointed chairman of the French national railway company Société Nationale des Chemins de Fer Français (SNCF) in 1996. As chairman, Gallois helped SNCF blaze a trail as France’s primary provider of local and longdistance passenger and freight service. He also helped establish SNCF’s Eurostar joint venture, shuttling passengers between Paris and London via the Channel Tunnel. Described by colleagues as slightly shy but disciplined, Gallois was among an elite corps of fast-track administrators who were trained to oversee France’s state enterprises and business policies after World War II.

FROM OBSCURITY TO THE SPOTLIGHT Born in Montauban in the southwest of France, Gallois graduated from the École des Hautes Études Commerciales and also attended the École Nationale d’Administration. Beginning in 1972 he worked in relative obscurity in various

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Louis Gallois. AP/Wide World Photos.

posts for France’s Ministries of Economy and Finance, Research and Industry, and Defense. In 1989 he emerged in the spotlight when he was named head of the Société Nationale d’Étude et de Construction de Moteurs d’Aviation (Snecma), a state-run enterprise involved in developing and manufacturing civil and military engines for Mirage jet fighters and Airbus airliners. Gallois made a good first impression on colleagues. He visited the company’s factories on the periphery of Paris and appeared to be more businesslike than his predecessor had been. Over time, however, critics noted that Gallois was unsuccessful in resolving many of Snecma’s basic problems, including an overabundance of workers, inflexible work practices, protectionist pricing, and corporate extravagance. In July 1992 Gallois was appointed chairman and CEO of Aérospatiale, the state-subsidized company involved in


Louis Gallois

France’s aerospace and defense industries. Although widely credited with extensive restructuring and cost cutting, Gallois could not keep the company from losing money on an epic scale. Many analysts noted that Gallois was hindered by the fact that the industry was precariously divided between state and private ownership. Nevertheless critics of Gallois, as noted by Ian Verchere in the European, complained that he “failed to transform” the business “into a profitable operation while continuing to call on the state for lavish injections of capital to stave off bankruptcy” (April 18, 1996). For his part Gallois accused the French government of endlessly vacillating over whether to provide the additional funding that he needed to institute privatization and a new economic order within the company.

FROM AERONAUTICS TO THE RAILWAYS At the end of 1996 Gallois moved from space to the railways when he was appointed to head Société Nationale des Chemins de Fer Français, France’s national railroad. Gallois stated that his goals were first to win back lost business and then to make SNCF the number-one public-service organization in Europe. His corporate plan included a new focus on developing strategies for maintaining traffic volume and a commitment to the company’s clients. By 2000 he was able to tell the International Railway Journal, “The customer is clearly now at the heart of the enterprise, and everybody is fully aware that the customer is the real boss of SNCF” (June 2000). In his second stage of planning Gallois aimed to achieve 11 percent growth in passenger traffic and 15 percent growth in freight between 2000 and 2002; he hoped to capture some of Europe’s growing rail traffic through the implementation of continentwide initiatives. He oversaw the renovation of the train company’s coaches, many of its oldest vehicles, and its one thousand train stations and also purchased a large number of additional railcars. He renewed and expanded the company’s diesel and electric locomotive fleets and ordered more than 150 locomotives to prepare for a doubling of the company’s freight traffic over the coming 10 years. Gallois also began to ambitiously expand SNCF throughout France and Europe by making acquisitions. He took over the Swiss wagon-hire company Ermewa and obtained a controlling interest in Via-GTI, France’s leading private operator of urban, suburban, and interurban rail services. He strengthened existing cooperation between SNCF and German railways, most notably by working with the Germans on joint specifications for the next-generation European high-speed train, which in France was referred to as TGV, or “Train à Grande Vitesse.”


MANAGEMENT STYLE Colleagues and industry analysts called Gallois a strong leader who firmly believed in forming consortia while working to raise the profiles of the companies for which he worked. Verchere, writing in the European, noted that Gallois gave “the impression of being a disciplined individual deeply imbued with Cartesian logic” (April 18, 1996). Analysts noted that Gallois strongly emphasized managing development costs and aggressively reducing overall spending. As a result he was often forced to make tough decisions, such as to lay off workers, in the course of achieving the optimal balance between saving money and preserving the company’s skill base. As he told Julian Moxon of Flight International, “When you save money, you have to take into account the jobs you are destroying, and the money you lose as a result. If you want independence, and if you want products completely fitted to your needs, you have to make compromises” (January 3, 1996). Gallois was intent on managing French state-subsidized businesses such that they could compete with aggressive U.S. companies. As noted by Moxon, Gallois emphasized that in order to compete Europe needed to become united and cultivate “a domestic market with alliances in order to create common industrial interests” (January 3, 1996).

CRITICISM AND TROUBLES Some industry analysts believed that Gallois’s direction of SNCF was hampered by politics to the point where he was effectively unable to manage. They noted that he had failed to achieve one of his primary goals of jump-starting the company’s disastrously weak freight business. As a result the company remained mired in financial difficulties. After recording poor financial results in 2003, including a loss of EUR 300 million, Gallois presented the French government with a draft budget for 2004 that provided for pay raises of only 1 percent and eliminated 3,500 jobs. To protest, railway trade unions called a strike on January 21, 2004. Analysts noted that Gallois seemed to face an impossible task in attempting to put the company on track because he was obligated to deal with various governments of different political persuasions while also keeping the company’s union workers appeased. In addition to his duties at SNCF, Gallois was a member of the boards of directors of Thales and of the École Centrale des Arts et Manufactures.

See also entries on The Aérospatiale Grou and Société Nationale des Chemins de Fer Français in International Directory of Company Histories.

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Louis Gallois SOURCES FOR FURTHER INFORMATION

Gallois, Louis, “SNCF Intends to Be a Leading Player in Europe,” interview in International Railway Journal, June 2000, http://www.railjournal.com/2000-06/scnf.html. Jackson, Derrick Z., “A French Lesson on Rail Transit,” Boston Globe, July 5, 2002.

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Moxon, Julian, “French Connections,” Flight International, January 3, 1996, p. 22. Verchere, Ian, “When Impish Charm Meets Gallic Logic,” European, April 18, 1996, p. 32.

—David Petechuk


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Christopher B. Galvin 1950– Former chief executive officer and chairman of the board, Motorola Nationality: American. Born: March 21, 1950, in Chicago, Illinois. Education: Northwestern University, BS, 1973; J. L. Kellogg School of Management of Northwestern University, MBA, 1977. Family: Son of Robert Galvin (chairman of the board, Motorola); married Cynthia (maiden name unknown), 1979; children: two. Career: Motorola, 1967–1973, part-time salesperson, two-way radio division; 1973–1984, salesperson, radio division; 1984–1990, general manager, Tegal semiconductor unit; 1990–1993, senior executive vice president and assistant chief operating officer; 1993–1995, president and chief operating officer; 1995–2003, chief executive officer; 1999–2003, chairman of the board.

■ Christopher B. Galvin was an enigmatic man. By turns he was dynamic, decisive, and aggressive but also slow, cautious, and hesitant. He was an intense and determined leader but at the same time an intellectual given to thinking over problems. As he rose through the ranks of Motorola, he impressed coworkers with his decisiveness, but when he became the company’s CEO, he inherited the leadership of a huge corporation that was profoundly troubled by marketplace shifts and changing technology. He seemed defeated in his effort to internalize and understand all of the company’s complexity, trying to create a new set of relationships among his company’s parts that were both profitable and honorable.

SCION Even as a child, Galvin was intense and mature for his age. While his siblings played games, he chose to work, shoveling sidewalks or selling homemade butter door to door to earn money. During his college years, he worked summers selling


Christopher B. Galvin. AP/Wide World Photos.

Motorola’s two-way police radios in Chicago. After finishing his undergraduate studies, Galvin became a full-time salesperson for Motorola’s radio division while he worked toward his master’s degree, which he completed in 1977. Galvin was soon given an opportunity to prove himself at the company. Motorola’s dominance in the pagers market had been challenged in the early 1980s by Japanese companies that sold their products below cost. Galvin was put in charge of the company’s so-called Operation Bandit along with Motorola’s director of manufacturing, T. Scott Shamlin. The goal of the operation was to restore Motorola’s competitive edge in the pagers market by making radical changes in manufacturing. With over 20 million possible number configurations, a pager usually took 27 days to make. Shamlin and Galvin, however, designed a new production process for use at a plant in Boyn-

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Christopher B. Galvin

ton Beach, Florida, that turned out pagers in only two hours apiece. After the success of Operation Bandit, Galvin joined his father on Motorola’s board of directors in May 1988. He then rose to the positions of senior executive vice president and assistant chief operating officer in 1990, moving up to become president and chief operating officer in 1993. The mid-1990s were a heady time to be in charge of Motorola. The company netted $1 billion on $17 billion in sales in 1994 and peaked with 60 percent of the world’s wireless telephone market in 1995. In 1996 it began a steep decline, however, falling to 26 percent of the market as leaner and more aggressive companies like Nokia introduced smaller and more stylish telephones.

TROUBLE AND TEMPORARY TURNAROUND Galvin became Motorola’s CEO in January 1997. He made his first major blunder by keeping the company focused on analog telephones for the next two years, even though customers were switching to digital equipment. Nokia eventually took the world lead in market share from Motorola. Galvin also committed Motorola to investing heavily in Iridium, a space-based wireless system with 66 orbiting satellites, by backing the system with $800 million in bonds in 1997. In April 1998 Galvin reorganized Motorola by combining 30 smaller units into one large communications division in an effort to end the internal bickering that was slowing development of new products. Galvin delegated authority to subordinates in his first years as CEO, allowing his managers the freedom to make shortterm decisions without going through the corporate bureaucracy for permission. His management style, however, had the unintended consequence of his subordinates’ failing to tell him about problems. When Galvin became chairman of the board in 1999, Motorola seemed to be making a strong turnaround, its stock rising from a 1998 low of $38.38 per share to $100.19. Motorola shifted telephone production to digital wireless models, and its small V-series units sold well. In May 1999 Galvin directed Motorola’s purchase of General Instruments, a broadband cable manufacturer, as part of a strategy that would allow customers to connect to the Internet from their telephones. Motorola’s profit was $1.3 billion that year, and the kindly and thoughtful Galvin was well liked by his employees.

RETREAT Galvin finally discovered in 2000 that some of his managers had been covering up their failures and fired 11 of Motorola’s 19 upper-level executives. He then trimmed $750 million from the company’s operating costs. Motorola’s stock peaked at $134 per share in April 2000 before dropping to $86.75 in

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May. At the same time the company lost $2.6 billion on its investment in Iridium, which it transferred to Boeing. Some executives suggested selling Motorola’s semiconductor manufacturing division at the same time, but Galvin refused. Between 2000 and 2003 Galvin laid off over 60,000 employees and closed four semiconductor and pagermanufacturing plants. There was controversy over his receiving a high salary while his company declined, as he was paid over $11 million in 2002. By 2001 Motorola held only 14 percent of the wireless phone market. In May of that year Motorola’s stock fell to $15 per share, rising to only $16.75 in July. Galvin then decided that managing by delegation was an unworkable approach. He reorganized Motorola’s corporate structure to eliminate layers of middle management while he took a more active part in managing Motorola’s major divisions. Galvin remained popular on the personal level, as his associates considered him a pleasant person. Introspective by nature, he tried to absorb and comprehend all aspects of Motorola’s business and spent long hours developing strategies that would benefit the entire company. This habit slowed his decision making, and he appeared to be losing touch with the rapidly evolving high-technology marketplace. Ever an optimist, however, he insisted that “all [the company’s] problems are solvable” (BusinessWeek, July 16, 2001). The company’s slide continued into the following year. In July 2002 Motorola’s shares dropped to $11.98 each. Galvin owned 14 million shares with options on 2.7 million more, so he felt the deep decline in Motorola’s market value as much as did the company’s other investors. Other Motorola executives repeated their earlier suggestion to sell Motorola’s semiconductor manufacturing division with an eye to focusing on wireless telephones, but Galvin again said no. He believed that he was finally turning the company around and could save all the divisions that he had inherited from his grandfather and father. The board of directors had changed in recent years, however, with Galvin family loyalists having been replaced by outsiders. These new directors wanted to divest some of Motorola’s less profitable holdings. Galvin was forced to resign as CEO and chairman on September 17, 2003, although he was guaranteed an office and salary for two years while remaining as an adviser to the new leaders. Motorola’s semiconductor products sector was finally spun off in October 2003.

See also entry on Motorola, Inc. in International Directory of Company Histories.


Alster, Norm, “A Third-Generation Galvin Moves Up,” Forbes, April 30, 1990, pp. 57–59.


Christopher B. Galvin Crockett, Roger O., “Chris Galvin on the Record,” BusinessWeek, July 16, 2001, p. 76. ———, “Motorola,” BusinessWeek, July 16, 2001, pp. 72–75. —Kirk H. Beetz


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Roy A. Gardner 1945– Chief executive officer, Centrica; chairman, Manchester United Nationality: British. Born: August 20, 1945, in England. Education: Strode’s College. Family: Son of Roy Thomas Gardner (carpenter) and Iris Joan (maiden name unknown); married Carol Ann Barker, 1969; children: three. Career: British Aircraft Corporation, 1963–1975, accountant for Concorde project; Marconi Space & Defence Systems, 1975–1984, finance director; Marconi Company, 1984–1985, chief finance director; STC, 1986–1991, executive director; STC Communications, 1989–1991, managing director; Northern Telecom Europe, 1991–1992, CFO; GEC Marconi, 1992–1994, managing director; British Gas, 1994–1997, executive director; Centrica, 1997–, CEO; Manchester United, 2001–, chairman. Awards: Knights Bachelor, Queen of England, 2002. Address: Centrica, Millstream, Maidenhead Road, Windsor, Berkshire SL4 5GD United Kingdom; http:// www.centrica.com.

■ Sir Roy A. Gardner was named chief executive of the British gas, electric, and energy company Centrica in 1997. Under his leadership the company successfully diversified into financial and telecommunications services, with Gardner becoming one of the most influential executives in British business. He also served as chairman of Manchester United, the company that ran the wildly popular English football (in America, soccer) team of the same name. Colleagues and analysts noted that Gardner was a fast learner who had a low-key business approach that was bolstered by strong self-confidence and temerity.

FROM FOOTBALL TO LEDGERS Gardner grew up on the Surrey and Middlesex fringes of London. His father was a carpenter who also held a series of

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other jobs, including pub manager and works engineer. Gardner pushed himself hard as a teenager, running a paper route and finding employment at the local bean factory. He told Andre Davidson of Management Today, “I was just so keen to work and earn money” (April 2003). Gardner wanted to be a professional footballer but did not have the necessary talent. Instead he worked hard in school, and after finishing his studies he joined an accounting apprentice program at British Aircraft Corporation (BAC). Gardner recalled that he did not consciously set out to be an accountant but simply saw the BAC job as a good stepping-stone. He worked on the Concorde jet project and saw BAC undergo substantial changes as it formed a new commercial-aircraft division. Part of Gardner’s job was to tell many employees that they had become redundant and would be laid off; he found the task hard but necessary, and it taught him a lesson. He told Davidson, “That was a good starting place. I learnt how to cope with the process of change, and that helped me in later life” (April 2003). Gardner was recruited by Marconi Space and Defence Systems, a subsidiary of the General Electric Company (GEC), in 1975; there his career rapidly progressed as he became a group finance director. Gardner soon caught the eye of the parent company GEC’s boss, Arnold Weinstock, who recruited Gardner to help him run the subsidiary STC in 1986. STC was sold to Northern Telecom in 1991, at which company Gardner spent a year as chief financial officer before returning to GEC. Gardner wanted to succeed Arnold Weinstock at GEC but eventually realized that the job would go to Simon Weinstock, Arnold’s son.

A BRAVE LEAP Gardner realized that he was making a giant leap of faith when he chose to join British Gas in 1994. Although entering an entirely different industry, he was lured by discreet indications on the part of the chairman Dick Giordano that he might one day end up running the company. As executive director of the board Gardner was credited with helping to transform the company’s fortunes by renegotiating massive contracts calling for the company to buy gas at prices above market rates. In 1997 he helped carve British Gas into two separate companies: British Gas and Centrica.


Roy A. Gardner

At that point Gardner was given the choice of which company he wanted to head; he chose Centrica, partly because he found the British Gas corporate culture to be too bureaucratic. He assembled his own management team and then acted on his vision for the company’s future. He eventually led the former component of British Gas into the realms of electricity, home services, road services like AAA, credit cards, savings and loans, telecoms, and other businesses throughout North America and Europe. By 2004 Gardner had led Centrica through a period of what appeared to be unstoppable expansion, in the process achieving long-term dominance of Great Britain’s retail power market. Gardner and the rest of Centrica’s board of directors proposed a final dividend of 3.7 pence per share to be paid to stockholders in June 2004. When combined with the interim dividend of 1.7 pence per share paid in November 2003, the total dividend for 2003 was 5.4 pence per share. The total payout-per-share increase of 35 percent, noted analysts, reflected the company’s continuing confidence in the outlooks for both cash flow and earnings in the medium term. By then Gardner had turned his attention to honing his group’s existing strategies rather than seeking further growth through acquisitions. He told David Gow of the Guardian, “I think we have a model which is capable of being replicated internationally” (May 24, 2003).

MANAGEMENT STYLE: LOW KEY BUT EFFECTIVE Described as quiet, shy, and considerate, Gardner’s low-key approach to management was successful in spite of the fact that, as colleagues pointed out, communication was not his strong point. His years of business apprenticeship to successful leaders like Weinstock taught him a lot; in fact he credited Weinstock with instilling in him the ongoing need to pay attention to details. Gardner was noted for being a great team builder and motivator who was not autocratic and listened well.

haven’t done anything that we didn’t believe would create shareholder value, and that will continue to be the case” (April 2003).

CONTINUED TO LEAD In addition to his leadership of Centrica, Gardner became chairman of Manchester United in 2001. Some questioned his decision to devote valuable time and energy to helping run Europe’s largest professional football organization. Gardner countered that he did not follow the team slavishly during the week and that he had dropped other nonbusiness commitments in order to make time for Manchester United. In 2002 Gardner gained the formal title of “Sir” before his name when he was designated a Knights Bachelor by Elizabeth II of England. Despite his success Gardner did face some questioning, especially after Centrica’s stock fell to a three-year low in mid2003. Gardner believed that the hit on Centrica stock had been prompted by misguided investor nervousness. He reassured the public that he would not attempt to achieve growth through overly costly acquisition but would continue to guide the company by measuring its performance against a welldefined strategy. In Utility Week the analyst Wesley McCoy noted that Centrica was “sending strong signals that it will prove the doubters wrong” and concluded that investors believed “in him enough to go along for the journey” (June 20, 2003). In addition to his duties at Centrica and Manchester United, Gardner was president of the Careers National Association, chairman of the Employers’ Forum on Disability, and a trustee of the Development Trust.

See also entries on Centrica plc and Manchester United Football Club plc in International Directory of Company Histories.


Analysts commented that Gardner was a wise strategist whose vision led him to expand on Centrica’s strength— supplying products with quality service to a large volume of domestic customers—by cross-selling with other products, addressing consumer needs with respect to home, car, and phone services. They noted that Gardner was able to see the link between British Gas’s existing service businesses and the public’s basic needs in financial services and telecommunication. Gardner explained his strategy to Davidson in Management Today: “There is a common theme behind everything we do. We don’t supply a service the customer doesn’t want, and we


Gardner, Roy, “The Andrew Davidson Interview: Sir Roy Gardner,” Management Today (London), April 2003, p. 68. “Gardner’s Baby,” Utility Week, June 20, 2003, p. 17. Gow, David, “Gas Chief Simmers with Anger,” Guardian (London), May 24, 2003, p. 30. Newton, Paul, “Home and Away Goals,” Utility Week, September 20, 2002, p. 18. —David Petechuk

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Jean-Pierre Garnier 1947– Chief executive officer, GlaxoSmithKline Nationality: French. Born: 1947, in Le Mans, France. Education: Louis Pasteur University, MS, PhD; Stanford University, MBA, 1974.

Before joining SmithKline Beecham, Garnier had served as president of Schering-Plough’s U.S. business. During his 15 years at Schering, he held various management positions, including general manager of several overseas subsidiaries. In 1983 he joined the U.S. Pharmaceutical Products Division, serving as vice president of marketing. He was then named senior vice president and general manager of the over-thecounter business and assumed responsibility for sales and marketing for the U.S. prescription business before taking on the job of president.

Family: Married; children: three.

A TALENTED FRENCH DOCTOR

Career: Schering-Plough, 1975–1983, various management positions, including general manager of several overseas subsidiaries; U.S. Pharmaceutical Products Division, 1983–?, vice president of marketing, president; SmithKline Beecham, 1990–1994, president of North American pharmaceutical department; 1994–1995, chairman of pharmaceuticals; 1995–2000, chief operating officer; 2000, CEO; GlaxoSmithKline, 2000–, chief executive officer.

As soon as Garnier became the head of GlaxoSmithKline (GSK), a giant health-care group, the French CEO had to face a tricky situation: the access of poor countries to medicines. Indeed, at that time, 39 laboratories were suing the South African government for using cheap generic medicines to treat AIDS. GSK, the main manufacturer and worldwide leader in this area, was one of the initiators of the lawsuit, which was thought to have been lost in the arena of public opinion. In the end, GSK gave up the lawsuit before the action could damage the image of the company. The other companies involved in the suit soon withdrew their cases as well. Garnier had made a calculated strategic choice. David Earnshaw, director of the Belgian office for Oxfam International, stated that among all the CEOs in the pharmaceutical business, Garnier was the most likely to lead the industry in such a move.

Awards: Chevalier de la Légion d’Honneur, French government, 1997; Oliver R. Grace Award for Distinguished Service in Advancing Cancer Research, Cancer Research Institute, 1997; named one of the 50 Stars of Europe, Business Week, 2001; Marco Polo Award, US-China Foundation for International Exchange, 2001; Humanitarian Award, Sabin Vaccine Institute, 2002; Legend Lifetime Achievement Award, Eastern Technology Council, 2002; Lifetime Achievement Medal, Fulbright Association, 2002. Address: GlaxoSmithKline plc, 980 Great West Road, Brentford, Middlesex TW8 9GS, United Kingdom; http:// www.gsk.com.

■ Jean-Pierre Garnier assumed the role of chief executive officer of GlaxoSmithKline in December 2000, with the merger of SmithKline Beecham and Glaxo Wellcome. Garnier had joined SmithKline Beecham in 1990 as president of its pharmaceutical business in North America and served as chairman of the pharmaceuticals division from 1994 until his appointment as chief operating officer in 1995. He was elected to the company’s board of directors in 1992. He became chief executive officer-elect in December 1999 and chief executive officer in April 2000.

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Garnier’s strategic acquiescence to public opinion was an important choice. The public, in general, does not countenance the notion that companies consider health care, especially for the poor, to be a source of profit for themselves. As Garnier put it, “A western business model cannot be applied to medicine,” adding that GSK had a noble goal: to improve health care in the world (Bauchard, 2001). His moral sense, his charisma, and his solid business acumen made this strong, tall, and dynamic man one of the most respected French CEOs in the United States and put him at the top among worldwide pharmaceutical leaders.

DEVELOPING ENTREPRENEURIAL SKILLS Garnier was a brilliant student. “He has always had the genes of a boss . . . ambitious, determined and upright,” assert-


Jean-Pierre Garnier

ed Jean-Louis Muller, one of his former university classmates from l’Université Louis Pasteur in Strasbourg (Bauchard). By age 25, Garnier had completed an MS in pharmaceutical science and a PhD in pharmacology. As a Fulbright Scholar, he then earned an MBA at Stanford University, in California, in 1974. There, the young Frenchman discovered the importance of the human factor in an organization, a lesson that was invaluable in seeing him through many company mergers. Garnier always kept in mind what he had learned while studying for his MBA at Stanford. At that time, most students were embracing finance and marketing. Everyone wanted to know more about linear programming and accounting, but for Garnier these subjects were too black and white. He preferred to study organizational behavior. This topic covered the intersection of personal needs and company needs, the concept of teamwork, the ways in which to lead a team to realize its objectives, and how to organize people in a company to move forward toward a single goal and to succeed. Such courses were not the most popular in the 1970s. They were considered “too soft,” but for Garnier they were crucial, the most useful ones he took (Verney). He had many opportunities to apply them in the course of his career.

FROM SCHERING-PLOUGH TO GLAXOSMITHKLINE Garnier began his career at Schering-Plough in the marketing department and held a dozen different positions in seven countries over 15 years. He then became one of the only nonnatives, which happens very rarely, to manage the national subsidiary of a British laboratory. Garnier explained: “I had to create ‘internationalism’ where I was, because few examples preceded me.” In his collaboration with the Dane Jan Leschly at SmithKline Beecham, he learned the value of being surrounded with different personalities. “Opposite points of view allow for better decision making” (Bauchard). He soon gained fame for his knowledge of science, his marketing skills, his facility for simplifying issues, and his focus on the essentials. Garnier could plan and execute three or four objectives a year, and his high expectations in all areas of business, along with a personality that was viewed as cold, at least on the surface, could intimidate. A former colleague said of Garnier that he could “discourage dissent—even though he appreciates it—unless it happens in small group” (Bauchard). In December 2000 the $195 billion merger between rival British drug companies Glaxo Wellcome and SmithKline Beecham was finalized, and Jean-Pierre Garnier moved rapidly to ensure that GlaxoSmithKline maintained its leading 6.9% share of the $317 billion global drug business. In this way Garnier demonstrated that drug mergers could be a success and a fast success. He reshaped the company’s huge research and development effort into competing teams to enhance productivity. The payoff should be interesting since the company is


determined to launch 15 new drugs by 2005, and according to Jean-Pierre Garnier, it is just a start.

CONCERNS FOR PATENT ISSUES In developing drugs, a scientist first looks at a disease or a pathological condition to find the root cause. Perhaps it is an enzyme. With trial and error, a chemical might be found to block the enzyme. The chemical would then be tested for toxic effects, in animal studies and then in Phase I human trials, in which a very small amount of the chemical is administered to volunteers. If the product proves safe for human consumption, the company provides it to patients with the disease, to see whether it has the desired effect. If a drug is successful on this small scale, called a Phase II trial, the study group is enlarged to perhaps four thousand or five thousand patients. When this trial is complete, a drug company sends the complete information to the FDA for approval of the drug. With FDA approval, the drug can be marketed. The average cost of developing a pharmaceutical can range from $300 to $500 million. Scientists need to examine thousands of possible drugs to find one that shows efficacy and meets with approval. Even at the stage of a clinical trial, perhaps 80 of 100 products will not make it to the end. In Garnier’s view, and in the context of the lengthy drug research and approval process, the issue of patents was vital. Devising and implementing a patent policy were the keys to the success of a company. Indeed, the cost of producing pharmaceuticals is very low; the most money is not spent on manufacturing but on development. If an effective drug is launched on the market without a patent, it can be instantly copied. Garnier firmly believed in patents as a way to push forward research into new drugs. As he put it, “There would be no economic incentive, no payoff. Patents are the means to reward people who do research. . . . Virtually 99 percent of all pharmaceuticals on the market today were discovered and developed by the industry, not by universities” (Verney). Still, patents have a limited life, just seventeen years in the United States. This was a concern to Garnier, who thought that patent law should be reviewed and reconsidered. A patent for a drug has to be taken out when research begins, not when the product goes to market. By the time a drug reaches the consumer, a company might have put seven years into research. Garnier complained, “We then only have only seven or eight years left on the market, after which it is legal to make ‘generics.’ The price crashes, and we don’t make any more money. We are given just seven or eight years to recoup our investment, get a return, and pay back the shareholders” (Verney).

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Jean-Pierre Garnier

MANAGEMENT STYLE With revenues of EUR 29 billion, GSK was born from the merger of Glaxo Wellcome and SmithKline Beecham. The company is evenly matched with Pfizer, the other leader in the pharmaceutical field. In research and development, the nerve of a pharmaceutical company, Garnier and his team applied a model already tested by the antibiotic division of SmithKline: researchers were given the independence of a startup in taking the creative steps necessary to find a promising new drug, and they also benefited from a financial interest in the results. “It is not about playing a better game than our competitors; it is all about creating an ongoing climate of innovation and an exploratory state of mind,” asserted Garnier (Bauchard). This strategy also focused on anticipating and concentrating on new products. Garnier was aware that being a pioneer is risky, especially if the market is not ready: “Many products have failed because they arrived on the market too early. On the other hand, people who think the world cannot change are not successful in business” (Verney). Garnier liked challenges and faced one with the merger of Glaxo, a very British company, and SmithKline, with its more American focus. With his dual citizenship (French-American), Garnier had a clear sense of American business culture; at the same time, he did not deny his European origins, which enabled him to be a bridge between cultures. His French touch and his solid family spirit spoke to Americans’ traditional values. Charles Pizzi, president of the Chamber of Commerce of Philadelphia, declared that Garnier had transformed GSK into a “citizen company,” granting funds to charity and cultural activities (Bauchard). It was Garnier’s view that an understanding of human nature played a major part in his company’s success. If the majority of a company’s employees have a common objective, they take pleasure in their work. Likewise, if workers are not happy, they will not perform well. A business is successful when employees work in a positive atmosphere and when they feel as if they are making a positive contribution. Business practices have less of an effect on the bottom line than the employees’ state of mind. Creating such a business climate can be challenging. Garnier believed that his generation focused more on understanding marketing techniques and only much later discovered that the human factor was most important. In the business strategy of GSK, certain decisions are made at the lowest levels of the company. “People like to have a sense of control. Here we don’t want managers to have exclusive power; we want them to coach. By recruiting good players, we will have a better team” (Verney). Garnier stressed the value of working together, having a common goal, believing in the company, striving for success, and having a sense of personal responsibility. These were not mere ideals; Garnier put them into practice as a result of his belief that every employee had the power to influence the future of the company. Without

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this mindset, he thought, a company becomes merely a bureaucracy and loses its soul. The company’s positive mission of providing health care was also an advantage.

HUMANITARIAN AID In the early 2000s GSK launched a humanitarian program to eradicate the disease elephantiasis, which affects 110 million people in the third world. Drug treatment can cure this disease, but the countries where it is prevalent cannot afford to purchase the medicine. Through GSK, Garnier decided to offer it. With proper treatment—just one pill per person—it was thought that elephantiasis could be eliminated in the space of twenty years. Thus, there was strong motivation to make the effort, but Garnier was aware that it would take a great deal of work to sustain such a commitment. In 2004 Garnier was still at work, trying to “convert” the elders of Glaxo to his vision and building a new corporate culture, before the next acquisition of this “serial mergerer.”

See also entries on GlaxoSmithKline plc, Schering-Plough Corporation, and SmithKline Beecham plc in International Directory of Company Histories.


Albanese, Virginie, “Jean Pierre Garnier, CEO de GSK,” Pharmaceutiques, no. 87 (May 2001): 18–19, www.pharmaceutiques.com/ phq/mag/pdf/phq87_jpgarnier.pdf. Bauchard, Florence, “Jean-Pierre Garnier, les médications du french doctor,” Enjeux, Les Echos, no. 170, June 2001, pp. 48-52. “Dr. Jean-Pierre Garnier,” GlaxoSmithKline, http:// www.gsk.com/bios/bio_garnier.htm. Fombrun, Charles J., and Cees B. M. Van Riel, Fame and Fortune: How Successful Companies Build Winning Reputations, Upper Saddle River, NJ: Financial Times Prentice Hall, 2003. “Garnier, Jean-Pierre,” World Economic Forum, http:// www.weforum.org/site/knowledgenavigator.nsf/Content/ Garnier%20Jean-Pierre. “Jean Pierre Garnier,” BIO 2003 Newsroom, http:// www.bio.org/events/2003/media/brunchjpg.asp. “Jean-Pierre Garnier,” BusinessWeek Online, June 11, 2001, http://www.businessweek.com/magazine/content/01_24/ b3736656.htm.


Jean-Pierre Garnier Verney, Zoë, “Un entretien avec Jean-Pierre Garnier, directeur Général de Glaxo Smithkline, nouveau no. 1 de la pharmacie dans le monde,” www.stanford-fr.org/web/details/ jpgarnier.html. —François Therin


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Bill Gates 1955– Cofounder and chairman, Microsoft Corporation Born: October 28, 1955, in Seattle, Washington. Education: Attended Harvard University, 1973–1975. Family: Son of William Henry Gates II (attorney) and Mary Maxwell (teacher); married Melinda French (Microsoft manager), January 1, 1994; children: three. Career: Lakeside Programming Group, 1968–1969, founder; Traf-O-Data, 1970–1973, founder; Microsoft Corporation, 1975–, founder and chairman; 1975–2000, CEO; 1992–1998, president. Awards: U.S. National Medal of Technology, 1993; Chief Executive of the Year, Chief Executive, 1994; President’s Medal of Leadership Award, New York Institute of Technology, 1995; Louis Braille Gold Medal, Canadian National Institute for the Blind, 2002; Knight Commander of the Order of the British Empire, 2004. Publications: The Road Ahead (with Nathan Myhrvold and Peter Rinearson), 1995; Business @ the Speed of Thought, 1999. Address: Microsoft Corporation, 1 Microsoft Way, Building 8, North O, Redmond, Washington 98052-6399; http:/ /www.microsoft.com.

Bill Gates. AP/Wide World Photos.

A PRECOCIOUS PIONEER

■ William Henry Gates III cofounded the Microsoft Corporation in 1975, built his software company into the one of the most successful businesses in the world, and established himself in the process as the world’s richest man. Although Bill Gates started Microsoft as a small business based on a single innovative software program that he had helped to develop, his real genius was his business acumen. As the long-time CEO of Microsoft, Gates was able to borrow and integrate other computer programmers’ innovations and sell them to a new and rapidly expanding home computer market. In 1985, 10 years after Microsoft was founded, it had $140 million in revenue, which grew to $28 billion by 2002. One of the pioneers of home computing, Gates proved himself to be a technological visionary and software applications guru. According to industry analysts, he also demonstrated that he was a shrewd marketing strategist as well as an aggressive corporate leader.

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Gates grew up in a prosperous area of Seattle, Washington, with his parents and two sisters. The son of a lawyer and a schoolteacher, Gates attended a public grade school and then the Lakeside School, a private college preparatory institution. It was at Lakeside that he first became interested in the relatively new field of computer programming, met his friend and future business partner Paul Allen, and developed his first computer software program at the age of 13. In 1968 the Lakeside School was still purchasing computer time on a machine owned by General Electric, as computers were extremely expensive in the late 1960s. Gates and his friends from Lakeside became fascinated with the machines and formed the Lakeside Programmers Group to try to make money in the computer field. The Programmers Group pri-


Bill Gates

marily earned its founders free computing time on machines owned by a company in Seattle. Gates and Allen then formed a company that they called Traf-O-Data. They put together a small computer for measuring traffic flow and made about $20,000. The company remained in business until Gates and Allen graduated from high school. Although Gates was interested in computers, he enrolled at Harvard University with the intention of becoming a lawyer like his father. By the time he was a sophomore in 1975, however, Gates was more interested in computers and electronics than in his pre-law studies. What became the Microsoft Corporation grew out of two college undergraduates’ bluff and bravado. Gates’s old friend Allen showed him an advertisement for a kit to build a home computer. The two called the computer’s manufacturer, MITS, saying that Gates had taken a primary computer language called BASIC and adapted it for the machine. When MITS expressed interest, Gates and Allen ignored their studies and spent the next four weeks frantically working on turning their boast into reality. In an interview in Money, Gates later recalled, “One little mistake would have meant the program wouldn’t have run. The first time we tried it was at MITS, and it came home without a glitch” (July 1986). Having written the first computer language for a personal computer, Gates and Allen established the Microsoft Corporation in 1975. The name “Microsoft” was formed from the words “microcomputer” and “software.” Gates then dropped out of Harvard in 1976 and focused on building the new business. He believed that there was a market for computer software and that the market was going to expand rapidly as affordable computers were developed for home use.

RIGHT PLACE—RIGHT TIME Although Gates rightfully earned credit for building one of the fastest-growing and most profitable companies ever established, Microsoft started out on a shaky foundation. Gates and Allen had sold their first commercially developed software for $3,000 and royalties. Before long, however, Microsoft found itself unable to cover its overhead. Even though Gates and Allen received royalties, their software was also pirated by computer hackers. This piracy led Gates to write an “Open Letter to Hobbyists,” which said that computer software should not be copied by the then relatively small computer community without the developer’s permission. Gates also recognized at this point in time that the future of computer software lay in owning a standard software package to be used on most computers. By the late 1970s the computing giant IBM had plans for marketing a personal computer for home use. They approached Microsoft to develop the standard operating system for their home computer models. Gates and Allen then went out and purchased for $50,000 an operating system called Q-


Dos, which had been developed by Seattle Computer. Q-Dos was compatible with the Intel processor that IBM intended to use. The two then adapted the Q-Dos system and presented it to IBM. Money magazine quoted Gates as recalling, “We bet all our resources on that system” (July 1986). Gates had learned well his early lessons in the software business. He insisted that IBM make Microsoft the exclusive software licensee for their home computers, meaning that all IBM products would have Microsoft operating systems. Furthermore, Gates negotiated a contract that allowed Microsoft to retain the right to manufacture and license the software, which he and Allen had named MS-DOS, to other manufacturers. Because there were three other operating systems for microprocessors at that time, Gates didn’t own the sole industry standard. But he was well on his way. He and Allen made MSDOS the most attractive system to computer manufacturers because Microsoft offered a flat-fee license rather than a perunit contract. Gates and Allen also encouraged software developers to create programs that would broaden their system’s capabilities. Their strategy was a huge success because manufacturers initially saved money. In addition, the software developers had an easier job designing such single applications as word processing for use on computers made by other manufacturers. These negotiations demonstrated that Gates was willing to defer immediate earnings for much greater future profits. His plan was based on building a mass of users for Microsoft products, which would mean the company would own the industry standard. Once Gates’s company owned the standard, it could then revert to selling its software at per-unit prices rather than general licenses. While the contract with IBM placed Microsoft on its way to legendary business growth, it also established a precedent for what some considered Gates’s unsavory business practices. When he and Allen had approached Seattle Computer, the software’s original developer, they omitted to mention that they were in negotiations with IBM to develop their operating system. Seattle Computer later sued Microsoft on the grounds that it had hidden its relationship with IBM in order to purchase Seattle’s system at what turned out to be a bargainbasement price. The two companies came to an out-of-court settlement without Gates or Microsoft admitting to any guilt or duplicity in the original purchase.

MARKETING TRUMPS CHALLENGERS Paul Allen, who had been serving as Microsoft’s head of research and new product development, left the company in 1982 after being diagnosed with Hodgkin’s disease. The following year, Gates faced a major challenge to Microsoft’s domination of operating systems for home computers when a company called VisiCorp developed a mouse-driven computer

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system with a user interface based on graphics rather than the keyboard-based and text-driven system of MS-DOS. Gates quickly recognized that VisiCorp’s system would be the wave of the future because it was much easier for technologically unsophisticated people to use. Even though Microsoft did not have such a system in the works at that point, Gates started an advertising campaign with an announcement at the Plaza Hotel in New York City that a new Microsoft operating system with graphical user interface (GUI) would soon be marketed. This next-generation system was to be called “Windows.” Gates’s announcement was a bluff; the truth was that Microsoft was nowhere near developing such a system. But the marketing ploy worked because people preferred to wait for a system designed to be compatible with their existing Microsoft products rather than undergo the trouble and expense of installing an entirely new operating system. Furthermore, Windows allowed users to avoid buying new software applications to replace the DOS-compatible programs they currently owned. Windows 1.0 was finally released in 1985. That same year Microsoft reported $140 million in revenue, including $46.6 million from overseas users. Microsoft’s growth continued to be relatively smooth in spite of several challenges, in part because the fiscally conservative Gates had financed most of the company’s expansion entirely from its earnings. This cautious approach to financing, however, did not reflect an unwillingness to take risks. In January 1986 Gates launched an ambitious long-term project to develop a new data storage system based on a compact disk, or CD-ROM, that could hold any type of computer file, including music and visual files. In March of that same year, he took the company public. His 40 percent ownership of Microsoft shares made his net worth $390 million by June 1986. Gates had effectively cornered the market for operating software for the vast majority of personal computers (PCs) as well as developing a wide range of other popular programs. He effectively became a billionaire in March 1987, when his company’s stock rose to $90.75 per share, up from $21.50 per share when the company went public. Brian O’Reilly commented a few months later in Fortune, “[Gates] apparently has made more money than anyone else his age, ever, in any business” (October 12, 1987).

GATES SWITCHES GEARS Industry analysts had praised Gates for guiding his company on a path of growth that saw its revenue stream increasing by more than 50 percent per year in a extremely competitive, even cutthroat, market. They credited much of this success to Gates’s ability to capitalize early and effectively on industry trends and his willingness to take risks on such fledgling technologies as Microsoft’s CD-ROM-based software packages,

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which became industry standards. Furthermore, Gates had organized the company’s structure so that it worked concurrently on all phases of a software product’s business cycle from development to distribution. Larry Michels, an early software developer, told Mary Jo Foley of Electronic Business, “Other software vendors have modeled themselves after the hardware business. Microsoft created its own model of how to do business” (August 15, 1988). Although Gates had established himself as a visionary, he did not always hit the mark. For years he had paid little attention to the business potential of the Internet, which led him to say later that he regretted not having focused more closely on Microsoft’s capabilities for e-mail and networking. In 1995, however, he did an about-face and began to redirect the company’s efforts in this area. His success was measured by the fact that Microsoft’s Internet Explorer Web browser had become the industry leader by 2000. Gates’s success in developing a competitive Internet browser, as well as coming out on top of the desktop-database and office-suite wars of the 1990s, proved that he had formed a company nimble enough to jump into a market that others were developing and take the lead away from the competition. In 1998 Gates announced a new phase in Microsoft’s expansion that would allow him to concentrate his energies on strategy and product development. At the same time the company funneled larger amounts of money into improving customer support and feedback. Gates planned to direct the company’s work in such areas as intelligent telephones and television, as well as the integration of such new computer input techniques as speech, vision, and handwriting. Although Windows had already gone through several upgrades, Gates wanted to continue improving its ease of use and reliability. To free himself up for this work, he stepped down as president, a position he had held since 1992, but remained Microsoft’s chairman and CEO.

SHOWDOWN WITH THE GOVERNMENT Microsoft earned $19.75 billion in revenue during the fiscal year 1999. Bill Gates had become an icon not only in the computer and business worlds but also in the eyes of the general public. His ghostwritten book The Road Ahead, which outlined his vision of the future, topped many best-seller lists for more than three months. In spite of Gates’s financial and literary success, however, he found himself facing his biggest challenge yet as the 1990s came to an end. The challenge came this time from the United States government rather than from Microsoft’s competitors. Gates and Microsoft had come under increasing scrutiny for unfair business practices from the time of the court case that followed Microsoft’s purchase of the Q-Dos operating system from Seattle Computer in 1980. In 1993 the U.S. Justice Department


Bill Gates

began an investigation into Microsoft’s contracts with other computer manufacturers that led to an agreement from Gates in 1994 to eliminate some of Microsoft’s restrictions on the use of its products by other software makers. In 1997, however, the Justice Department sued Microsoft for forcing computer makers to sell its Internet browser as a condition of using the Windows system—a de facto violation of the 1994 consent decree. In December 1997 a U.S. district judge issued a preliminary injunction forcing Microsoft to temporarily stop requiring manufactures who sold Windows 95 “or any successor [program]” to install its Internet Explorer. Microsoft appealed the injunction, but the following year the Justice Department and 20 state attorneys general sued Microsoft, charging that it illegally thwarted competition to protect and extend its software monopoly. Although Microsoft won its initial appeal in 1998 to reverse the 1997 decision, Gates soon found himself being questioned for 30 hours over a three-day period in a videotaped deposition for the upcoming antitrust trial. The government finally rested its case on January 13, 1999, and the Microsoft defense team ended its case on February 26. The final oral arguments from each side were presented on September 21, 1999. After the judge presented his findings of fact on the case on November 5, Gates issued a response disagreeing with many of the findings that went against Microsoft. In a statement released to the press as reported by Court TV Online, Gates noted, “Microsoft competes vigorously and fairly. Microsoft is committed to resolving this case in a fair and a factual manner, while ensuring that the principles of consumer benefits and innovation are protected” (November 6, 1999). U.S. District Judge Thomas Penfield Jackson ruled in June 2000 that Microsoft was a monopoly which had illegally exploited the dominance of Windows, at that point installed on over 95 percent of the world’s personal computers. Judge Jackson then ordered Microsoft to be broken up into several smaller companies. It was the most severe antitrust ruling since the breakup of AT&T in 1984. Jackson’s decision was reversed on appeal, however, and the company received a far less severe punishment directed toward restricting some of its business practices. In spite of this relatively favorable outcome, however, Gates continued to battle competitors in American courtrooms over Microsoft’s business practices. In addition, he found himself subjected to litigation in Europe, where Microsoft was once again accused of exploiting its monopoly of Windows to control other computer-related industries, including media-player and server software companies. Despite the controversy over whether Gates had created a company that used its dominance of the desktop computer system to obtain unfair control of newer computer-related markets, Microsoft continued to prosper. Gates stepped down as CEO in 2000 but kept his position as chairman of Microsoft as well as its chief software architect. In 2004 he doubled


the company’s research and development budget to $6.8 billion and began pushing a new Windows personal computer operating system code-named Longhorn.

MANAGEMENT STYLE: WORKAHOLIC Although Gates was long known as a “boy wonder” in the computer and business worlds, his management style was anything but immature. As was noted in a BBC News article, “Gates has come to be known for his aggressive business tactics and confrontational style of management” (January 26, 2004). Although he was considered a charismatic leader within his own company, he was also extremely tough—he fired Microsoft’s first company president after only 11 months on the job. An intense businessman who typically put in 16-hour days and took only two three-day vacations in the first five years after establishing the corporation, Gates was demanding and strong-willed about implementing his vision. Coworkers, clients, and industry analysts also remarked, however, that he did not surround himself with yes-sayers but was more than willing to change his mind if someone convinced him of a better alternative. Analysts also observed that one of the keys to Gates’s success was his ability to focus on the fundamentals of the business while keeping office politics or his own ego from getting in the way. “Most of what I do is leading,” Gates once said in Electronic Business. “Managing applies to the people who work directly for me” (August 15, 1988). Gates was known from the beginning of his career as the epitome of a hard-driving businessman respected by his allies and feared by his competitors. It was his vision that guided Microsoft’s immense success. In addition, Gates had an uncanny ability to tackle both the managerial and technical sides of Microsoft’s operations. He was especially noted for his success as a marketing strategist who priced his products for the mass market rather than computer specialists. In 1999 the Journal of Business Strategy listed Gates among a handful of people who had the greatest influence on business strategy over the last century. Gates also had his fair share of critics. In addition to accusations of predatory and possibly illegal business practices, some analysts remarked that Gates did not really foster in-house product innovation but tended to focus his attention instead on blocking advances by other companies. On the other hand, supporters of Gates’s managerial style and business acumen pointed out that Microsoft continued to prosper even in the midst of the 2002 information technology slump, growing at 20 percent each quarter and posting a phenomenal 35 percent after-tax profit margin. Despite all his financial success, however, Gates remained a fiscal conservative. He was renowned for his penny-pinching traveling habits, demanding that his schedule be filled for the entire day when he was on the road promoting his company.

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NO TIME TO REST Gates was still the world’s wealthiest person in early 2004, with a personal fortune estimated at $60.56 billion. He remained a hands-on leader at Microsoft, however, maintaining an active work schedule as the company’s chairman and chief software architect. As noted by Ron Anderson in Network Computer, “... no doubt his presence [at the company] will make itself known well into the decades ahead” (October 2, 2000). In addition to extending Microsoft’s success, Gates also turned his attention to philanthropy, including the establishment of the Bill and Melinda Gates Foundation. Gates and his wife endowed the foundation with $24 billion to support philanthropic initiatives in the areas of global health and learning. For example, Gates made plans in February 2004 to donate $82.9 million for research to develop a new vaccine against tuberculosis. In addition to his duties at Microsoft and his efforts in philanthropy, Gates sat on the board of ICOS, a company that specialized in protein-based and small-molecule therapeutics.


Anderson, Ron, “Top 10 Most Influential People: No. 2—Bill Gates,” Network Computing, October 2, 2000, p. 51. “Bill Gates’ Response to Microsoft Decision,” Court TV Online, November 6, 1999, http://www.courttv.com/ archive/business/1999/1106/gates_ap.html. Foley, Mary Jo, “Boy Wonder: Microsoft’s Bill Gates,” Electronic Business, August 15, 1988, p. 54. “Interview: Bill Gates Opens Up,” PC Magazine, February 24, 2004, N/A. O’Reilly, Brian, “A Quartet of Hi-Tech Pioneers,” Fortune, October 12, 1987, p. 148. “Profile: Bill Gates,” BBC News, January 26, 2004, http:// news.bbc.co.uk/go/pr/fr/-/1/hi/business/3428721.stm. Schlender, Brent, “On the Road with Chairman Bill,” Fortune, May 26, 1977, p. 72. “Sir Bill and His Dragons—Past, Present, and Future— Microsoft,” Economist (US), January 31, 2004, p. 68. “Strategists of the Century,” Journal of Business Strategy 20, no. 5 (September 1999), p. 27. Tuhy, Carrie, Richard Eisenberg, and Greg Crouch, “Software’s Old Man is 30,” Money, July 1986, p. 54.

See also entry on Microsoft Corporation in International Directory of Company Histories.

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—David Petechuk


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David Geffen 1943– Principal, DreamWorks SKG Nationality: American. Born: February 21, 1943, in New York City, New York. Education: Attended University of Texas, Austin, and Brooklyn College, City University of New York. Family: Son of Abraham Geffen and Batya Volovskaya. Career: CBS Studios, 1961, usher; William Morris Agency, 1964–1966, mailroom employee; 1966–1969, agent; Tuna Fish Records, 1969–1970, CEO; Asylum Records, 1970, principal; Geffen Records, 1980–1994, chairman and CEO; DreamWorks SKG, 1994–, principal. Address: DreamWorks SKG, 1000 Flower Street, Glendale, California 91201; http://www.dreamworks.com.

■ A seminal figure in the entertainment industry, David Geffen was a billionaire who never graduated from college. Having worked primarily as a talent agent and music producer, Geffen had a precise eye for spotting talent and helped develop such stars as the Eagles, Guns N’ Roses, and Nirvana. Joni Mitchell based her song “Free Man in Paris” on Geffen. It is almost impossible to overstate Geffen’s contribution to popular music. Not one to rest on his laurels, along with his powerful peers Stephen Spielberg and Jeffrey Katzenberg, Geffen also launched the most ambitious challenge to the Hollywood studio system in some time. His life epitomized the classic ragsto-riches story. He used his brilliant drive to rise from humble beginnings, vowing to make it at all costs. A complex and often contradictory character, he was openly gay, open about his battles with depression, and seemed to use philanthropy to offset a predatory business nature.

AN INHERITED FIGHT FOR SURVIVAL Geffen’s mother fled Russia around 1917 after the Russian Revolution and never again saw her family except for a sister who, years later, told her that most of their family had per-


David Geffen. © Mitchell Gerber/Corbis.

ished. The news gave her a nervous breakdown and the Ukrainian immigrant was institutionalized for about six months. Geffen told Playboy magazine: “I was six, and the whole episode was confusing and terrifying for me. My mom went from having her own business to being in a hospital. It was embarrassing because all my friends thought she was crazy” (September 1994). The Geffen family suffered financially, and although it had enough money for the essentials, Geffen recalls wearing illfitting clothes. His father, an eccentric career dilettante who could not keep a job, contributed almost nothing and his mother picked up the slack, fearing that her family would have to live on welfare. Throughout his childhood, Geffen worked with his mother in the family’s corset-and-brassiere business in Brooklyn. Geffen credited his mother for forging his work ethic: “My mother taught me to love my work. I learned every-

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thing about business from her. I watched her work. She enabled me to work” (Playboy, September 1994). While his father, who died when Geffen was 18, did little to help the family financially, he clearly inspired his son to seek a life beyond mere survival: “Dad was an intellectual. . . . [Mom] made the money and he read a lot. He wasn’t successful or ambitious. He spoke lots of languages” (New York Times, May 2, 1993).

BEHIND THE MUSIC Geffen barely passed high school and dropped out of college, yearning for a job in the entertainment business. At 18 he worked as an usher at CBS Studios. He next landed a job in the mailroom at the William Morris Agency by falsely claiming that he had graduated from UCLA, because a college degree was required for the job. Leaving nothing to chance, he stole a letter from UCLA that arrived in the mailroom one morning, steamed it open, and forged a note on the university stationery to create the appearance that he graduated. While Geffen’s starting salary was $55 a week working in the mailroom, within five years he had become an agent and made $2 million in 1969. With initial clients such as the Association and Joni Mitchell, he went on to represent many of the stars that would define a generation of music, including Crosby, Stills, Nash, and Young; Janis Joplin; James Taylor; and Bob Dylan. But Geffen did not just manage existing music acts, he helped to create new ones. And in the process he amassed a personal fortune. At age 26 he sold his first music label, Tuna Fish Records, to CBS for $4.5 million. In 1970 he formed Asylum Records, which quickly became one of the most successful record labels in the industry, featuring artists such as Linda Ronstadt, Jackson Browne, J. D. Souther, and the Eagles (the top-selling band for several years). Geffen sold Asylum to Warner Communications in 1972 for $7 million. In 1973 he opened the famous Roxy nightclub on Sunset Boulevard in Los Angeles. In 1974 he scored a coup by luring Bob Dylan away from Columbia Records, giving Dylan his first number one album (Planet Waves) and masterminding his first concert tour since 1965. Geffen quit the entertainment business in 1975 upon learning that he had cancer. Shockingly, in 1980 he learned that the cancer diagnosis had been wrong—a turn of events that set him back on the path to making music. When Geffen Records was founded in 1980, Warner Bros. Records provided 100 percent of the funding for the label’s operations, while Geffen retained 50 percent of the profits. Geffen Records, which produced artists such as Guns N’ Roses, Nirvana, Don Henley, Peter Gabriel, and Aerosmith, quickly earned a reputation as one of the most successful independent labels in the United States. Geffen sold the label in 1990 to MCA—a deal that ultimately earned him an estimated $1 billion in cash and stock and an employment contract that ran until 1995.

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A PERSONAL LIFE THAT TRANSFORMS AN IMAGE Geffen acknowledged that he had a torrid romance with Cher, which began while she was still involved with Sonny Bono and working on The Sonny and Cher Comedy Hour, and he later dated the actress Marlo Thomas. By 1980, however, he had come to terms with his homosexuality, and in the early 1990s he publicly announced that he was gay at an AIDS benefit. Said one of Geffen’s closest friends, designer Calvin Klein: “He just seems so relieved. He felt he could be a role model. Gay men are not necessarily thought of as the shrewdest businessmen in the world. He felt he should do this publicly as well as for himself and he’s really much happier” (Guardian, June 5, 1993). David Geffen ultimately became one of the most important forces in the gay rights movement, accepting numerous accolades and honorariums and becoming a loud voice in the fight against AIDS. When President Clinton was forming a policy regarding gays in the military, Geffen advocated against a ban. He lobbied Washington and took out full-page ads in newspapers.

PLAYING THE PART OF THE MOGUL A billionaire many times over, Geffen acknowledged that his two biggest personal expenses were his $26 million Gulfstream jet, custom stocked with potato knishes, and a $47.5 million estate in Beverly Hills that once was the residence of the Hollywood mogul Jack Warner. Ironically, Jack Warner’s Warner Communications had enriched Geffen earlier in his career by buying his Asylum Records. Geffen was long fascinated by the house, and when he spotted the gates to the estate open one day, he drove in just to catch a glimpse. Years later Jack Warner’s widow died, and a developer tried to subdivide the property, but Geffen reacted immediately. “All of a sudden I got protective about it. So I bought it, with everything in it, instantly. I just bought it with all the furniture, all the scripts, all the Oscars, everything. I mean, this is the home of one of the men who created the town and the industry. . . . I was totally enthralled by the world that this guy had created (Guardian, June 5, 1993).

THE GOLDEN TOUCH Throughout his career Geffen stayed focused on music while consistently demonstrating a willingness to venture into other artistic enterprises. His track record of movie and theater hits is formidable. As a movie producer Geffen financed such films as Risky Business, Beetlejuice, The Last Boy Scout, Defending Your Life, After Hours, Lost in America, Little Shop of Horrors, and Personal Best. The plays he helped produce included Cats, Dreamgirls, Miss Saigon, and M. Butterfly, which was also made into a Geffen film.


David Geffen

PRINCIPLES BEFORE PRINCIPAL David Geffen demonstrated that he could place his personal values above turning a profit, and he did not hesitate to end business relationships that he deemed inappropriate. During a controversy over the violence that rap music seemed to condone, if not endorse, Geffen stopped distributing Def American Records. He said: “It was consistently putting out records I found offensive. I’m not interested in making records about violence against women, and some horrible other images. It was a choice I had to make” (Playboy, September 1994).

AN ENTERTAINMENT TRIUMVIRATE IS FORMED In 1994 Geffen and partners Steven Spielberg and Jeffrey Katzenberg created what they envisioned as a multimedia force for the new millennium. They called themselves the “Dream Team” and their company DreamWorks SKG. Each of the partners, whose last names provided the company name, invested $33 million. Microsoft cofounder Paul Allen provided $500 million in seed money, and Microsoft also invested around $30 million to develop video games. Geffen would lead the music division, Spielberg would oversee the movie sector, and Katzenberg would run the animation division. DreamWorks arranged a $100 million programming deal with ABC, a 10-year HBO licensing agreement worth an estimated $1 billion, and cofounded a $50 million animation studio with Silicon Graphics. DreamWorks announced plans in 1995 to build the first new film studio since the 1930s, just outside Los Angeles in Playa Vista.

PLAYS TO HIS STRENGTHS Geffen reentered the music industry in 1996 and resumed his relationship with Geffen Records when SKG and its two new imprints—DreamWorks Records and SKG—formed a joint venture with the record label Geffen founded 15 years earlier. Under terms of his 1995 partnership with MCA, Geffen Records and parent company MCA would share the profits and cachet that came with being associated with David Geffen and the venerable SKG team, and SKG’s new imprints would gain distribution. MCA saw Geffen as a magnet for top artists and music-industry executives. Said a top music business lawyer: “I’m sure managers of superstar acts with expiring recording pacts have already called David. And any label executive in town would kill to have a job there” (Daily Variety, June 14, 1995).

MCA (now Universal Studios) to develop SEGA GameWorks (video-arcade supercenters featuring SEGA titles and games designed by Spielberg). But while Dreamworks initially fell short of expectations, momentum began to change in 1998. That year the company released the disaster film Deep Impact, Spielberg’s Oscar-winning Saving Private Ryan, and its first two animated films, Antz and The Prince of Egypt, both of which were successful. DreamWorks finished 1998 with the highest average gross per film of all the major studios. Later hits included American Beauty, which won an Oscar for best picture of 1999; Gladiator, which won an Oscar for best picture in 2000 and grossed $187 million; Shrek, which grossed more than $265 million at the box office in 2001; and A Beautiful Mind, a coproduction with Universal Pictures that won Dreamworks its third consecutive Oscar for best picture and grossed more than $140 million. But Dreamworks continued to have troubles. A Web venture failed, and although the company routinely produced network pilots, as of 2004 the only TV hit to have emerged from DreamWorks was ABC’s Spin City. In music, the industry where Geffen usually worked magic, hits were few and far between. In 2000 DreamWorks had only one album, Papa Roche’s Infest, among Soundscan’s top 50.

AN INTIMIDATING MOGUL In 2000 a biography that Geffen authorized, The Operator, was published. Geffen handpicked his biographer, Tom King, a reporter for the Wall Street Journal, but midway through the writing process Geffen stopped cooperating, although he did allow the book to be published. The book tends to portray Geffen as a bully who was willing to sacrifice friends to achieve his enormous wealth. According to the biography, Geffen’s feuds with other entertainment executives, including former Disney executive Michael Ovitz, were legendary. Said Howard Rosenman, a movie producer and friend: “David will do anything for you if you’re his friend. But if you’re his enemy, well, you might as well kill yourself” (Guardian, June 5, 1993). Some of Geffen’s lore is likely the result of the petty jealousies that arise with such a dominant executive. Known to be immensely intelligent, despite never having graduated from college, Geffen was a multimillionaire in the music business at age 25. He had a sharp memory and seldom took notes during business meetings.

A PURPOSE LARGER THAN PROFITS THE DREAM TEAM STUMBLES Early on, DreamWorks produced a string of TV, musical, and film flops and ultimately canceled its film-studio plans. In 1996 the company announced its partnership with SEGA and


Geffen and DreamWorks continued betting its future on animation. The studio began issuing collectible fish figurines representing characters in the 2004 film Shark Tale played by Robert DeNiro, Will Smith, Renee Zellweger, Angelina Jolie, and others. Additionally, DeNiro agreed to screen excerpts

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from Shark Tale at his burgeoning Tribeca Film Festival. DreamWorks also started a Web site, dwkids.com, that featured games, free tickets, newsletters, and information about upcoming films, such as Shrek 2. Geffen claimed that the goal of DreamWork’s animation efforts was not to make money, but rather to build a substantial library of popular culture. Said Geffen: “Steven Spielberg and I have tremendous amounts of money. You can’t spend or even use most of it; it’s just on some financial statement, and other people are playing with it. So I’m not in this because I need or want to make another billion; that would have no value. It’s all in the doing, all in the journey” (Time, March 27, 1995).

medical school or to the University of California. Geffen gave the university complete freedom in deciding how to spend the money. In a press release he said: “I have great respect and affection for UCLA, and my hope is that with this gift, UCLA’s doctors and researchers will be better equipped to unravel medicine’s mysteries—and deliver the cures for tomorrow” (Los Angeles Times, May 7, 2002).

See also entry on DreamWorks SKG in International Directory of Company Histories.


A FOCUS ON PHILANTHROPY Geffen was well known for his philanthropy. He was particularly passionate about gay rights and fighting AIDS, which he said must be everyone’s fight: “HIV infection and AIDS is growing—but so too is public apathy. We have already lost too many friends and colleagues. I hope my gifts will encourage more people to come forward and give generously. In the face of so much death, we must do all we can to support life (Daily Variety, August 10, 1995). Before he helped create DreamWorks, Geffen gave all of his profit from movies and Broadway shows to charities. He also gave two $5 million donations to the arts. He was notably proud that his foundation gave sizable gifts annually to many worthy causes that touched him personally, including AIDS and assistance to Ethiopian and Soviet Jews settling in Israel. Geffen was known to personally answer letters from men with AIDS or families of AIDS patients, some of them even including $10,000 checks. In 2002 he donated $200 million to UCLA’s medical school, the largest single gift ever to a U.S.

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Corliss, Richard, “Hey, Let’s Put on a Show! Start Our Own Multimedia Company! Get Investors to Give Us $2 Billion! Prove the Naysayers Wrong! An Inside Look at the Dreamworks Saga—Act 1,” Time, March 27, 1995, p. 54. Ornstein, Charles, and Stuart Silverstein, “Record Donation to UCLA,” Los Angeles Times, May 7, 2002. Sandler, Adam, “Gotham AIDS Orgs Get $4 Mil from David Geffen,” Daily Variety, August 10, 1995. ———, “MCA’s Dream Comes True; Geffen Reunited with Labels,” Daily Variety, June 14, 1995. Sheff, David, “Interview: David Geffen,” Playboy September 1994, p. 51. Weinraub, Bernard, “David Geffen, Still Hungry,” New York Times, May 2, 1993. ———, “Portrait: The Geffen Game,” Guardian (London), June 5, 1993. —Timothy Halpern


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Jay M. Gellert ca. 1956– President and CEO, Health Net Nationality: American. Born: ca. 1956, in New York City, New York. Education: Stanford University, BA. Career: California Healthcare System, 1985–1988, senior vice president and chief operating officer; Bay Pacific Health Corporation, 1988–1991, president and chief executive officer; Shattuck Hammond Partners, 1991–1996; Health Systems International, 1996–1997, chairman of the board of directors, president, and chief operating officer; Foundation Health Systems (later renamed Health Net), 1997–1998, president and chief operating officer; 1998–, president and chief executive officer.

until 1991, when the company was purchased by Aetna Life Insurance Company. The company underwent restructuring and reorganization, and Gellert’s position was dropped. He then moved to Shattuck Hammond Partners before joining Health Systems International, where he worked as chairman of the board of directors of Health Systems’ two main subsidiaries, Health Net and QualMed. In 1996 he was appointed president and chief operating officer. While Gellert was still with Health Systems, the company merged with Foundation Health Corporation to form Foundation Health Systems, a health insurance provider. Gellert became president and COO of the newly formed company. In 1998 the company was renamed Health Net, and Gellert became president and CEO.

■ Jay Gellert always had an interest in the business side of health care. He worked his way up through the ranks at various prestigious insurance organizations before becoming president and chief executive officer of Health Net. After taking over as head of Health Net, he led the company through many changes, incorporating technology and a previously unheardof cooperation with competing health insurance companies to set up a Web site that would make life easier not only for the insurance companies but for the physicians and patients using it as well. Always interested in ease of application for the end user, Gellert led Health Net into a successful and profitable future.

The first thing that Gellert did as president and CEO was to shut down the unproductive divisions of the company and redirect it toward its core products. According to the San Fernando Valley Business Journal (January 6, 2003), “Those and other cost-cutting measures would help steer the HMO out of a $165 million deficit that year to a $164 million profit by 2000.” Gellert was also interested in improving the ease with which physicians and customers dealt with Health Net. Shortly after Gellert took over as CEO of Health Net, he formed a new division of the company called New Ventures Group. It was started as an individual technology group that centered on creating an easier way for Health Net’s partners and customers to deal with health care, with online services for physicians to prescribe medications and keep records. Managed Healthcare Executive (February 2002) quoted Gellert as having said about the new division, “Everything we do is focused on solutions. . . . We wanted New Ventures to be separate from Health Net because they were to focus on solving problems, not on dealing with all of the bureaucracy that’s a natural part of any large company.” New Ventures was later brought into the company for logistical reasons, but they kept their freer spirit.

THE BUSINESS OF HEALTH CARE

COOPERATION AMONG COMPETITORS

Born in Brooklyn, New York, Gellert attended Stanford University, where he earned a BA. After holding various jobs in healthcare operations in California, in 1985 Gellert joined the California Healthcare System as senior vice president and chief operating officer. In 1988 he moved to Bay Pacific Health Corporation as president and CEO, where he worked

In 2001 Gellert and his vice president, Gary Velasquez, worked on a radical idea to unite the top health insurance competitors in California by standardizing claims and forms on a Web-based system that they could all use, simplifying matters for physicians and patients. They planned to launch Web-based Universal Credentialing DataSource (CAQH), a

Address: 21650 Oxnard Street, Woodland Hills, California 91367; http://www.health.net.


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site that potentially could cut down on 50 percent of administrative expenses in the long run. The Council for Affordable Quality Healthcare, a nonprofit union of more than 20 healthcare networks, was set up to run this system, and Gellert was nominated as one of the chairmen. The system allowed providers to submit one application to one database that met the requirements of all the CAQH health plans. It even allowed physicians to update account information online, sending an alert to all participating organizations when changes were made. This was considered quite a triumph, because it meant that previously battling health insurance groups were working together for the benefit of physicians and their patients. Health Net also partnered with the Boston Company NaviMedix, which had a system that allowed physicians to check patient eligibility online. In one test run in New York, the program cut faulty claims by 75 percent. Because of his success with Health Net, in 2001 Gellert was asked to join the board of directors of Ventas, one of America’s leading healthcare real estate investment trusts.

TURNING A PROFIT News of his innovations spreading, in 2002 Gellert was asked to speak at the IPA Association of America’s Seventh Annual National Meeting. Also in 2002 Health Net posted a 22 percent rise in second-quarter profits, which had not been true for quite some time as the company had been suffering losses for a few years. Gellert credited this rise to the company’s refocused energy, giving Health Net the opportunity to develop better products. According to Clifford Hewitt, a healthcare analyst, Health Net had seen a marked improvement in process, and this improvement could be traced back to 1998, when Gellert had become CEO. His vision and enthusiastic application of improvements were credited as the basis for the company’s turnaround. By 2003 Gellert had focused Health Net on ensuring that claims submitted electronically were turned around as quickly as possible. He paid attention not just to solving problems but also to uncovering their root causes and fixing them. Take the issue, for example, of doctors submitting claims that Health Net never received. Instead of simply resolving an instance of that problem, by 2003 the company was looking to find out why it happened, as a way to stop it from happening again. That same year, Gellert was reappointed chairman of the Administrative Simplification Committee of CAQH.

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Ebeling, Ashlea, “Health Care/Heavy Equipment,” May 21, 2001, Forbes.com, http://www.forbes.com/best/2001/0521/ 088.html. Fox, Jacqueline, “From Turnaround to Turning a Profit: Jay Gellert Has Taken Health Net from a Record-Breaking Deficit to a Record-Breaking Profit in an Industry Where Many Struggle Just to Break Even,” San Fernando Valley Business Journal, January 6, 2003. Gammill, Marion, “FHS May Jettison Its Dental Programs; Sustainable Profits Sought in New Plan,” Los Angeles Daily News, February 12, 1998. “Health Systems International Inc.,” Best’s Review, July 1996, p. 119. McCue, Michael T., “Progressive Behavior: Health Net CEO Jay Gellert Takes Technology and Holistic Medicine outside the Box,” Managed Healthcare Executive, February 2002, p. 14. Pondel, Evan, “Woodland Hills, Calif.-Based Insurer Health Net’s Vital Signs Get Stronger,” Los Angeles Daily News, July 26, 2002. Rabinowitz, Ed, “Simpler All Around: Lightening Doctors’ Administrative Load Can Improve Relationships,” Healthplan Magazine, March/April 2003, http:// www.aahp.org/Content/NavigationMenu/Inside_AAHP/ Healthplan_Magazine/ March_April_2003__Simpler_All_Around.htm. Rauber, Chris, “Gellert’s Leaving Bay Pacific HMO Raising a Hubbub,” San Francisco Business Times, November 8, 1991, p. 1. Rogers, Michelle, “Magazine Technology: Drug Traffic,” HealthLeaders December 2002, http:// www.healthleaders.com/magazine/ feature1.php?contentid=40474. Taub, J. S., “Bay Pacific Sale Gives It Aetna’s Deeper Pockets, San Francisco Business Times, July 19, 1991, p. 3. Webb, Marion, “HMO Exec Salaries Studied as Rates Rise,” San Diego Business Journal, September 3, 2001, p. 1. “Woodland Hills-Based Health Net,” San Fernando Valley Business Journal, November 10, 2003, p. 30. —Catherine Victoria Donaldson


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Louis V. Gerstner Jr. 1942– Chairman, The Carlyle Group Nationality: American. Born: March 1, 1942, in Mineola, New York. Education: Dartmouth College, BA, 1963; Harvard Business School, MBA, 1965. Family: Married Elizabeth Robin Links; children: two. Career: McKinsey & Company, 1965–1978, consultant; American Express Company, 1978–1981, executive vice president and head of charge card business; 1981–1983, vice chairman of the board; 1982–1985, president, Travel Related Services; 1985–1989; chairman and chief executive officer, Travel Related Services; RJR Nabisco, 1989–1993, chairman and chief executive officer; International Business Machines Corporation, 1993–2002, chairman and chief executive officer; The Carlyle Group, 2003–, chairman. Awards: Honorary Knight of the British Empire, Queen Elizabeth II, 2001. Address: The Carlyle Group, 1001 Pennsylvania Avenue, NW, Suite 220 South, Washington, DC 20004-2505; www.thecarlylegroup.com.

■ Louis V. Gerstner Jr. saved International Business Machines Corporation at a time when most people, including Gerstner himself, wondered whether the company was beyond repair. The first outsider to head the computer giant, Gerstner inherited an organization crippled by bureaucracy and created a culture that placed a premium on continually adapting business practices to better serve customers. Gerstner’s fierce, competitive spirit and tough-as-nails management style were not for everyone, and Gerstner made his fair share of enemies. When Gerstner left IBM in 2002, the company was once again a relevant player in the technology market. In 2003 IBM, the world’s top provider of computer hardware, generated $89.1 billion in revenue. As of 2004 it was one of the largest providers of software, being second only to Microsoft, and semiconductors. IBM’s ever-expanding service arm was the largest in the world. International Directory of Business Biographies

Gerstner, the second of four sons, grew up in what he described to Amanda Hall of the Sunday Times of London as a “warm, tightly knit, Catholic, middle-class family” (December 15, 2002). His father drove a milk truck, and his mother was a secretary and a college administrator. Both parents placed high priority on education. Gerstner wrote in his book, “Whatever I have done well in life has been a result of my parents’ influence.” Gerstner and his brothers attended Chaminade High School, a competitive Catholic school. The culture was extremely demanding. Teachers announced grades as they passed back tests to students, and all students knew where they stood relative to the rest of the class. Robert C. Wright, the head of NBC, who was two years behind Gerstner at the school, recalled in Fortune: “It was straight in your face. ‘Do it once, stay late. Do it twice, leave school. Do it three times, we’ll throw you out.’ And there was physical discipline—they wouldn’t hesitate to give you a solid slap.” Gerstner earned a scholarship to Dartmouth College, where he graduated magna cum laude with a degree in engineering. After Dartmouth, he went to Harvard Business School. At age 23 Gerstner took a job as a consultant at McKinsey & Company. Whereas most McKinsey consultants made partner in six or seven years, Gerstner claimed the title in a mere four years. After 12 years at the venerable consulting firm Gerstner was recruited by American Express Company, one of McKinsey’s clients, to run its travel services business. Gerstner told Leslie Wayne of the New York Times, “I wanted to try my hand at running things. I didn’t want to spend my whole life as a consultant” (June 30, 1985).

AMERICAN EXPRESS Gerstner joined American Express in 1978 as executive vice president and head of its charge card business. A year later he was named president of the Travel Related Services group, which was responsible for American Express cards, traveler’s checks, and travel-service offices. When Gerstner began his career at American Express, MasterCard and Visa had begun to compete for the company’s market share. But Gerstner found new uses for the card and found new users. In 1980 most department stores did not accept American Express cards, and Gerstner attacked. By 1985 retail sales were the second-largest use of the card, following airline tickets. College students, physicians, and women were singled out in various marketing

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pushes. Corporations were persuaded to issue cards as a more effective way of tracking business expenses. Gerstner created marketing hooks for new cards. The gold card carried an annual fee of $65 and offered a $2,000 line of credit. The platinum card had a $250 annual fee, a $10,000 check-cashing benefit, and private club memberships for traveling executives. As sales and profits rebounded, Gerstner was promoted to chairman and chief executive officer of Travel Related Services in 1982 and president of the parent company in 1985. Although he claimed the number two position at the young age of 43, Gerstner dismissed the speculation that his success was the product of being a workaholic. Gerstner told Wayne, “I hear that and I can’t accept that. A workaholic can’t take vacations and I take four weeks a year” (June 30, 1985). As chairman and chief executive officer of the Travel Related Services division, Gerstner spearheaded the successful “membership has it privileges” promotion. Gerstner’s division was continually the most profitable in the company and in the entire financial services industry. Despite these successes Gerstner faced a ceiling at American Express. The chief executive, James D. Robinson III, was not expected to retire for another 12 years. The analyst Perrin Long at Lipper Analytical told Jesus Sanchez of the Los Angeles Times: “Lou is a very personable guy. But more than anything else, he is a leader more than a follower” (March 14, 1989). After 11 years at American Express, Gerstner left to become chairman and chief executive officer of RJR Nabisco. During Gerstner’s tenure at American Express membership had increased from 8.6 million to 30.7 million.

FROM CREDIT CARDS TO TOBACCO Some analysts were surprised by Gerstner’s career move, because he lacked experience in the food and tobacco industries. Members of Gerstner’s inner circle, however, believed he had the right skills to run a company like RJR Nabisco. Adam L. Starr, an analyst with First Manhattan Corporation, told Vivian Marino of the Associated Press, “A good manager can work in any industry” (March 14, 1989). At RJR Nabisco, Gerstner earned praise at the executive level for steadying a company that had lacked financial discipline. Employees in the lower ranks, however, were divided in their opinions. Jason Wright, a senior vice president of worldwide communications at RJR, told Betsy Morris of Fortune, “He’s an acquired taste. He gets everybody to buy in on a strategy, and then he doesn’t micromanage. If you expect to be stroked, forget it.” Gerstner also irked some executives with his self-important air. Some workers at RJR Nabisco reported that Gerstner was picky about who could take advantage of the corporate jet and about where they could sit. James W. Johnston, Gerstner’s boss at RJR Nabisco, told Morris, “There’s an element about Lou I don’t get, given how talented he is. He is incredibly concerned about stature, particularly his own.”

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Gerstner’s legacy at RJR Nabisco, where he spent only four years, was too short-lived to be definitive. He helped increase market share by pushing more aggressively into the low-end cigarette market, a strategy that seemed to be a success. Philip Morris & Company, however, responded to RJR Nabisco’s move into low-priced cigarettes with a pricing war that ultimately hurt RJR Nabisco’s profits and stock. Gerstner may have seen the writing on the wall, or he may have been uncomfortable selling tobacco. In addition, the onslaught of lawsuits in the industry was beginning, and the company had been viewed as going downhill as far back as the 1970s.

TAKING OVER A BELEAGUERED GIANT Thomas J. Watson Sr. formed IBM by taking over the Computing Tabulating Recording Company in 1914. The leadership of his son, Thomas Watson Jr., led IBM into the computer age from 1952 to 1972. Gerstner became chairman and chief executive officer of IBM in April 1993 as declining sales of mainframe computers led to crippling losses. The year Gerstner was hired, the company lost $8 billion. Gerstner had to be persuaded to take the job. Although he believed he could bolster the company’s performance, Gerstner was immediately overwhelmed by the task. “I was scared to death,” he told Amanda Hall (December 15, 2002). Bureaucracies that placed little confidence in employees’ abilities to think for themselves had bogged down IBM’s culture. Employees dressed in the corporate uniform of blue suits and white shirts and followed rigid instructions on every aspect of life in the office, including how to run a birthday party. According to Hall, one guide produced for the administrative assistant to Walter E. Burdick (WEB), the personnel director at IBM, contained the following directives: “Surprise birthday parties for WEB staff should be scheduled under the heading ‘miscellaneous’ for 15 minutes. Birthday cakes, forks, napkins and cake knife are handled by WEB’s secretary. AA takes seat closest to door to answer phones” (December 15, 2002). Employees had lost sight of IBM’s reason for being in business. In an interview with Hall months before his retirement, Gerstner looked back on that time: “It was amazing to me when I arrived that we could go for hours in meetings and nobody would talk about a customer. I’d never been to a meeting before where we didn’t start with a customer. Driven by its historical success, the company stopped listening to the outside world. It lived inside a cocoon. When the outside world finally pierced that cocoon and everything began to tumble, the company didn’t know how to respond” (December 15, 2002).

A TURNAROUND STORY Early in his tenure Gerstner told employees, according to William J. Cook of U.S. News & World Report, “Look, guys,



we’ve lost $16 billion in the last three years; Fortune magazine says we’re a dinosaur. Don’t you think we ought to change? I mean, it’s pretty obvious what we’re doing ain’t working.” In his first three months on the job Gerstner made decisions that would forever change IBM. Instead of breaking the company into disparate pieces, a strategy that had been presented before he took over, Gerstner kept it together, repositioning IBM as the company that would help corporations build and run their technology systems using as much IBM hardware and software as possible. Gerstner cut long-term debt from $14.6 billion to $9.9 billion and boosted IBM’s share price from less than $140 to $168. By 1995 IBM had stabilized and by 1996 had proved that it could grow. In 1997 the IBM board validated Gerstner’s strategy by extending his contract five years. By 1999 Gerstner was leading one of the most respected companies in corporate America. By then Gerstner had reorganized the sales force along industry lines, the better to provide customers with specialized services. He cut unprofitable businesses such as IBM’s online service, Prodigy, and bought Lotus Development Corporation. Gerstner conceded that his two biggest mistakes were misjudging the networking market that was ultimately dominated by Cisco Systems and missing the trend of selling personal computers directly to customers, a practice pioneered and mastered by Dell. Lamented Gerstner to Kevin Maney of USA Today, “And here, my marketing background should have helped” (November 11, 2002). The key to IBM’s overall turnaround was Gerstner’s decision to take the company away from its roots as a hardware manufacturer and lead it into services, which included everything from consulting on the design of corporate systems to running a company’s e-commerce operation. The company’s global services unit, which Gerstner started, was an industry paragon. In 2002 services accounted for 40 percent of IBM’s revenue but for only 20 percent of the revenue of Compaq Computer Corporation. Michael Capellas, the chief executive officer of Compaq at the time, told Spencer E. Ante of BusinessWeek, “I’m jealous. Have you noticed that they’ve skirted through the downturn?” Gerstner’s tough management style was a shock to IBM’s employees. Before Gerstner’s arrival employees never quite knew where they stood with their managers, most of whom had a congenial leadership style. Gerstner’s style was the opposite. Before he met with employees, Gerstner required a document establishing the facts and defining the agenda. Gerstner encouraged customers to interrogate his new executive team. And he called employees with queries, never with compliments. As Gerstner described himself to Morris, “I’m intense, competitive, focused, blunt, and tough, yes. That’s fair. I’m guilty. Quite frankly, I am not very comfortable in chitchat. When I go to board meetings, I arrive two minutes before and leave when it’s over. I don’t stay for lunch or go early and have


coffee.” Although he was not one to lavish his executives with praise, Gerstner showed his approval where it counted: in his employees’ compensation plans. Gerstner was an extremely visible executive who maintained an active schedule that kept him in front of clients and employees. A sign in his office bore a quotation from a novel by John le Carré, a favorite author: “A desk is a dangerous place from which to view the world.”

LIFE AFTER BIG BLUE Gerstner resigned as chief executive officer of IBM in March 2002 and as chairman in December 2002. In the e-mail announcing his retirement as chief executive, Gerstner told employees: “Along the way, something happened—something that, quite frankly, surprised me. I fell in love with IBM.” He left behind a corporation that had regained its standing as a powerful player in the information technology market. In the nine years since Gerstner had arrived, the value of a share of IBM’s stock catapulted from $13 to $80, adjusted for splits. While few would argue that Gerstner saved the company, his legacy continued to be debated. Critics said the turnaround was simply the product of financial engineering. Considering he ruled the firm during an unprecedented boom in the information technology market, some analysts wondered whether IBM could have posted even better results. Gerstner said IBM was better off than industry peers who were swept away by “tech mania.” IBM responded to the e-business and network revolution, but Gerstner said his company resisted the temptation to totally revamp its corporation. Gerstner told Hall, “It takes years to create a great company. You don’t create a great company in the media. You create a great company at home, working hard over many years” (December 15, 2002). A lifetime advocate of the importance of quality education, Gerstner created a commission on teaching to develop specific policy recommendations to deal with the teaching crisis in the United States. From 1996 to 2002 Gerstner cochaired Achieve, an organization created by U.S. governors and business leaders to drive high academic standards for public schools in the United States. At IBM Gerstner established Reinventing Education, a strategic partnership with 21 states and school districts whereby IBM technology and technical assistance were used to eliminate key barriers to school reform and improve student performance. Gerstner coauthored the book Reinventing Education: Entrepreneurship in America’s Public Schools. In recognition of his efforts on behalf of public education and for his business accomplishments, Gerstner was designated honorary Knight of the British Empire by Queen Elizabeth II in June 2001. In January 2003 Gerstner assumed the position of chairman of the Carlyle Group, a global private equity firm located in Washington, D.C. He also announced plans to contribute further to education reform and cancer research. Gerstner took

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classes in archeology and Chinese history at Cambridge University. He told Hall he went back to school not to get a degree but “to read and enjoy the process of learning” (December 15, 2002).

Hall, Amanda, “Curing a Sickness Called Success,” Sunday Times, December 15, 2002.

See also entries on American Express Company and International Business Machines Corporation in International Directory of Company Histories.

Marino, Vivian, “Gerstner Departure Leaves American Express without Its Key Strategist,” Associated Press, March 14, 1989.


Maney, Kevin, “Famously Gruff Gerstner Leaves IBM a Changed Man,” USA Today, November 11, 2002.

Morris, Betsy, “He’s Smart, He’s Not Nice, He’s Saving Big Blue,” Fortune, April 14, 1997, p 68.

Ante, Spencer E., and Ira Sager, “IBM’s New Boss,” BusinessWeek, February 11, 2002, p. 66.

Sanchez, Jesus, “RJR Nabisco Hires Gerstner as CEO,” Los Angeles Times, March 14, 1989.

Cook, William J., “The Turnaround Artist,” U.S. News & World Report, June 17, 1996, p. 55.

Wayne, Leslie, “American Express’s Ace in the Hole,” New York Times, June 30, 1985.

Gerstner, Louis V., Jr., Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround, New York: HarperBusiness, 2002.

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—Tim Halpern


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John E. Gherty 1945– Chief executive officer and president, Land O’Lakes Nationality: American. Born: 1945. Education: University of Wisconsin–Madison, BA, 1965. Family: Married Anne (maiden name unknown), 1979; children: three. Career: Land O’Lakes, 1970–1979, attorney; 1979–1981, assistant to the president; 1981–1989, group vice president and chief administration officer; 1989–, CEO and president. Awards: Honorary Recognition, College of Agricultural and Life Sciences, University of Wisconsin–Madison, 1999. Address: Land O’Lakes, Box 64101, St. Paul, Minnesota 55164; http://www.landolakesinc.com.

■ John Gherty was a driving force in the growth and direction of Land O’Lakes since joining the farmer-owned food and agricultural cooperative in 1970. Gherty’s vision for Land O’Lakes took the company’s business global and expanded what was a moderately sized Minnesota cooperative with a solid brand-name product base into an international player. He believed the responsibilities of a corporate leader to include promoting and living the values of the company, a philosophy he embraced both personally and professionally.

THE FARMING LIFE Gherty’s early life was spent in a close-knit rural society where having a career implied being a farmer and living a life that balanced farm, family, and community. Early on Gherty learned lessons about the hardships, joys, and responsibilities of the agricultural life. Even in his youth Gherty considered making social contributions to be important, as demonstrated by his involvement with the local 4-H club and his decision


to serve as its president. He was instilled by his rural nurturing with work habits and an ethic that he would carry through to adulthood. Gherty’s childhood on his family’s dairy farm in New Richmond, Wisconsin, built a foundation of life and community values that he would successfully integrate with his career goals as an adult. In the mid-1980s Gherty left the family farm to earn business, industrial relations, and law degrees from the University of Wisconsin at Madison, ultimately taking him away from the farm. As evidence of his personal philosophy, before selecting a career track, Gherty chose to spend a year “giving back.” In 1968 and 1969, after graduating from college, Gherty served as a VISTA volunteer in Chicago.

IT’S ABOUT BALANCE: CAREER, FAMILY, AND COMMUNITY When Gherty joined Land O’Lakes as an attorney in 1970, he recognized that a company dedicated to the betterment of farmers and the farming lifestyle would to him be the ideal work environment. Within a few years the young executive became assistant to the president. Gherty’s management style was that of a man who led by example. He followed his belief that when leadership came from the top down, it worked. As the keynote speaker for Dartmouth College’s Tuck School of Business Work/Life Symposium on April 11, 2003, Gherty expressed a passionate conviction that business leaders who developed organizational cultures that encouraged employees to blend work, family, and community were able to attract, retain, and motivate a highperforming workforce and to make a positive difference in the lives of their employees. Demonstrating his personal commitment to this philosophy, in his keynote address Gherty related a time when he “shifted a meeting with an important customer from the boardroom to the soccer field so he could watch his daughter’s game” (2003). More commonly, Gherty used the “power of the appointment book” simply to reserve time for family, treating family events with an importance equal to that of any business meeting. A University of Wisconsin press release lauding the recipients of the Honorary Recognition Award reported that Gher-

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John E. Gherty

ty, upon being named president and CEO of Land O’Lakes in 1989, said, “Sometimes people higher up have to remind themselves that someone who is a janitor is just as important” (August 1999). Gherty considered employees—specifically the “right” employees—to be a company’s biggest assets. Gherty created a strong vision for Land O’Lakes that was shared by the board of directors and, by all accounts, was successfully communicated to the cooperative membership and to employees. By creating and following his vision, leading by example, and initiating bold corporate change, Gherty turned his beliefs into action. Under his leadership Land O’Lakes developed a work environment designed to empower all employees to achieve balance between family and work. Gherty maintained that offering work and life benefits to employees never comprised profits, claiming that employees enriched by a balanced life delivered the same productivity without sacrificing quality. He introduced a number of programs designed to enable workers to achieve this balance, including flexible hours, job sharing, part-time work, telecommuting, maternity and paternity leave, childcare and elder-care resources, and rewards for community service.

FROM REGIONAL TO NATIONAL TO INTERNATIONAL Gherty’s vision for Land O’Lakes’ future was not limited to the achievement of balance between life and career for the company’s employees; he aimed to make Land O’Lakes a profitable global power in agribusiness. According to a Feedstuffs interview in July 2003, Gherty was among the first to recognize that significant changes were taking place in agriculture. Throughout the 1990s and into the 2000s Land O’Lakes’ local and regional produce customers would grow in size and begin to look for more from their regional marketers as well as for markets beyond the Corn Belt. When Gherty became chief executive officer in 1989, Land O’Lakes’ business focus rested primarily on regional dairy production and the supplying of scientifically formulated feed and agronomy products. After Gherty assumed leadership, he and the corporation expanded their influence beyond the Midwest cooperative community. According to Terry Nagle, the Land O’Lakes director of communications, in a quote from the company press release, Gherty’s “commitment to agriculture, combined with his leadership and clear vision for what people could accomplish by working together, have created a national cooperative system” (August 1999). Under Gherty’s direction the Land O’Lakes board instituted an aggressive plan of diversification, using acquisitions, mergers, and marketing to expand Land O’Lakes—in less than five years’ time—into one of the largest and most influential dairy and farm-supply cooperatives with a strong national and international marketplace presence.

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Land O’Lakes operated three divisions: dairy products, agricultural products, and international foods. As the company was a cooperative, the management team was answerable to a board of directors that was in turn answerable to the cooperative’s members. As Gherty noted in the Feedstuffs interview, the growth of a cooperative was different from the growth of more traditional businesses: “Land O’Lakes can’t issue stock to raise capital to keep buying market share”; rather, a cooperative must bring “discipline to the businesses that we are in. We have to manage our portfolio” to ensure successful consolidation (July 2003). The company’s significant brand identification was primarily visible in the dairy line. The Land O’Lakes brand name was included on products such as milk, sour cream, cheese, butter, dips, and sauces. The dairy division accounted for more than 60 percent of annual revenues. The agricultural division included the subdivisions of swine, animal feed, and agronomy (the science of agriculture). The swine market proved to be a difficult one for Land O’Lakes; the division struggled to be profitable. Land O’Lakes owned a 50 percent share in Agriliance, the largest American distributor of crop nutrients, crop-protection products, and other agronomic products. A number of joint ventures and mergers occurred in the agricultural division, leading to market presences in specialty corn products, animal feeds, and consumer foods. Land O’Lakes’ international foods group exported branded and food-ingredient products to more than 60 countries. It also developed custom product formulations and packaging and provided logistics and technical support as well as research and development to farmers and agribusinesses in developing nations. A Datamonitor report generated in June 2003 considered Land O’Lakes to be well positioned to build on its expansion from the several preceding years; yet, the report also noted that the company faced intense competition, a sensitivity to rising energy costs, and the need to integrate its acquisitions; in addition the company carried a significant debt burden. Gherty’s remarks in annual reports from the early 2000s confirmed the relevance of these contentions but also expressed confidence in the management team’s plan to ensure continued company growth. Under Gherty’s leadership, Land O’Lakes grew from a successful regional cooperative whose greatest resource was its nationally recognized brand name into a leading marketer in the United States and abroad of dairy-based consumer foodservice products, food and animal-feed ingredients, and agricultural supplies such as feed, seed, crop nutrients, and cropprotection products.


John E. Gherty

FOLLOWING HIS PASSION LEADS TO AWARDS, SERVICE, AND PROFESSIONAL RESPECT Gherty dedicated more than 30 years of his life to Land O’Lakes. His continued efforts to help farmers receive fair returns on their products and his commitment to the cooperative way of life earned him the admiration of colleagues. Gherty received the Honorary Recognition Award from the College of Agricultural and Life Sciences at the University of Wisconsin at Madison. According to a Web article praising recipients of the award, this honor, the highest bestowed by the college, “recognizes people who have made outstanding contributions toward the development of agriculture, protection of natural resources, and improvement of rural living” (August 1999). Gherty in particular earned the Honorary Recognition Award because of his tireless work “to protect the public policy environment in which farmer-owned cooperatives operate, in order to ensure their ability to serve the economic interests of their farmer-owners”; his work “benefited not only Land O’Lakes members, but farmer cooperatives nationwide” (August 1999). Jerome Kozak, the chief executive officer of the National Milk Producers Federation, also praised Gherty’s career, saying that “the dairy industry in Wisconsin would not be the same if it were not for Jack’s leadership of Land O’Lakes during the past three decades” (August 1999). Gherty’s commitment to achieve balance in work, family, and community led him to serve on the boards of directors of numerous national organizations, including CF Industries, the National Council of Farmer Cooperatives, the National 4-H Council, and the Minnesota Life Insurance Company, and to


chair the Graduate Institute of Cooperative Leadership at the University of Missouri–Columbia. Locally he served on the board of the Greater Twin Cities United Way and was a member of the Minnesota Business Partnership. Gherty’s support of education was also significant; he gave substantial financial support to the joint CALS/UW Business School Agribusiness programs and encouraged recruitment of CALS graduates into his organization. He formed the Land O’Lakes Foundation, which provided funds for youth scholarships and supported local 4-H and FFA chapters.

See also entry on Land O’Lakes, Inc. in International Directory of Company Histories.


Boland, Michael A., and Jeffrey P. Katz, “Executive Voice: An Interview,” Academy of Management Executive, August 2003. “Five to Receive Honorary Recognition Awards from the College of Agricultural and Life Sciences,” August 1999, http://www.cals.wisc.edu/media/news/09_00/ Honorary_Recognition.html. Smith, Rod, “LOL’s Gherty Says Scale, Size Require Discipline in Portfolio,” Feedstuffs, July 28, 2003, p. 6. “Work/Life Balance: It’s About Time,” Tuck News, Dartmouth College, Summer 2003, p. 24. —C. K. Zulkosky

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Carlos Ghosn 1954– President and chief executive officer, Nissan Motor Company Nationality: French. Born: March 9, 1954, in Brazil. Education: École Polytechnique, 1974; École des Mines de Paris, 1978. Career: Michelin Corporation, 1978–1981, employee; 1981–1984, plant manager; 1984–1985, head of research and development of earthmover and agricultural tires; 1985–1989, chief operating officer of South American activities; 1989–1990, president and chief operating officer of North American companies; 1990–1996, chairman, president, and chief operating officer of Michelin North America; Renault Corporation, 1996–1999, executive vice president; Nissan Motor Company, 1999–2000, chief operating officer; 2000–2001, president; 2001–, president and chief executive officer; Renault Corporation, 2005–, chief executive officer. Address: Nissan Motor Company, 17-1 Ginza 6-chome Chuo-ku, Tokyo, 104-8023, Japan; http:// www.nissandriven.com. Carlos Ghosn. AP/Wide World Photos.

■ In 2001 Brazilian-born Carlos Ghosn became the first nonJapanese person to head a major Japanese automobilemanufacturing corporation. As the president and chief executive officer of Nissan Motor Company, he broke the traditional Japanese business models that had stifled the automaker’s growth. Within two years Ghosn had led the faltering company into a period of revival, breaking a ten-year string of losses or tiny profits. By the end of the first quarter of 2003, Nissan turned a profit of more than $4 billion. Involving himself in all aspects of the company, from designing to test driving, Ghosn made himself an icon for Japanese business culture by the middle of his second year in office. Ironically, he did so while breaking with many cherished Japanese traditions and protocols: closing plants, laying off workers, and cutting ties with suppliers that did not meet his standards. Ghosn trumped his achievements at Nissan by becoming the only person to head two automakers on two continents.

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He was tapped to follow Louis Schweitzer, his former boss at Renault Corporation, in hopes that he could repeat the successes he had in Japan at Renault’s headquarters in France. Part of that success involved the development of common manufacturing practices, platforms, engine designs, and transmissions and other parts between the two automakers. Renault (which owned 44 percent of Nissan when Ghosn became head of the Japanese company) and Nissan also planned to coordinate such disparate functions of their business as forecasting sales, benchmarking manufacturing processes, and lowering the costs of warranties.

MAKING TRACKS IN THREE CONTINENTS Ghosn (his last name rhymes with “own”) was born in Brazil but moved to France in his teens and received his education


Carlos Ghosn

at the prestigious French schools of the École Polytechnique and the École des Mines de Paris. After completing his second degree, Ghosn began a successful career at Michelin, then Europe’s top tire manufacturing and marketing firm. In 1981, only three years after he joined the company, he was promoted to plant manager at the company’s Le Puy facility. In 1984 he became the head of research and development of earthmover and agricultural tires in Ladoux. The following year he left France, returning to his native continent to become Michelin’s chief operating officer of South American activities. In 1989 he became president and chief operating officer of North American companies, and in 1990 he was promoted to chairman of Michelin North America.

historically were cautious about altering the appearance of their cars. In contrast, Ghosn, according to Alex Taylor in Fortune, took risks by making over almost one-third of Nissan’s product line within a couple of years. “Ghosn wants Nissan to stand for passionate innovation,” said Taylor, “and insists that new products satisfy an unmet customer need” (July 21, 2003). The executive’s record, the Fortune contributor concluded, seemed to forecast great things for the companies he headed.

See also entries on Nissan Motor Co. and Renault S.A. in International Directory of Company Histories.


MAKING WAVES IN JAPAN Ghosn left Michelin for new challenges at Renault, headquartered in Boulogne Billancourt, France. He served as executive vice president for three years before being sent to Tokyo to oversee Nissan Motor Company. Renault had just bought a controlling interest in the Japanese automaker, and Ghosn was dispatched to Tokyo in hopes that he would be able to bring Nissan’s spiraling costs under control. Within months of his arrival Ghosn had laid bare a plan that would not only revolutionize the way business was done at Nissan but challenge some of the basic assumptions that lay at the heart of Japanese business methods. By shutting down plants, laying off workers, and severing ties with underperforming suppliers, Ghosn demonstrated that radical measures could be effective in changing the conservative Japanese business system. He expected the process of making Nissan profitable to take three years; it took only two. Ghosn also changed the look of Nissan’s line of automobiles. The leading Japanese automakers, Honda and Toyota,


“Carlos Ghosn, Nissan CEO,” Time, http://www.time.com/ time/2001/influentials/ybghosn.html. “Carlos Ghosn, Nissan Motor,” BusinessWeek Online, http:// www.businessweek.com/2001/01_02/b3714015.htm. Fonda, Daren, “He Did So Well, Let’s Give Him Two CEO Jobs: Carlos Ghosn Renault,” Time, December 1, 2003, p. 78. Greising, David, “Nissan CEO Carlos Ghosn Lets Team Drive Turnaround,” Chicago Tribune, November 25, 2002. “Meet the People behind the Cars,” Inside Nissan http:// www.nissanusa.com/insideNissan/CorporateBiographies. Meredith, Robyn, “Encore,” Forbes, April 26, 2004, p. 72. Taylor, Alex, III, “Nissan Shifts into Higher Gear: Carlos Ghosn Has Revved Up Profits at the Japanese Automaker. Now He Wants to Go Faster,” Fortune, July 21, 2003, p. 98. —Kenneth R. Shepherd

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Charles K. Gifford 1942– Chairman, Bank of America Nationality: American. Born: November 8, 1942, in Providence, Rhode Island. Education: Princeton University, BA, 1964. Family: Son of Clarence H. (banker) and Priscilla Kilvert; married Anne Dewing, 1964; children: four. Career: Chase Manhattan, 1964–1966, position unknown; Bank of Boston, 1966, loan officer; 1967–1987, successively higher vice president positions; 1987–1989, vice chairman; 1989–1995, president; 1993–1995, chief operating officer; 1995, president and chief executive officer; BankBoston, 1995–1996, president, chairman, and chief executive officer; 1996–1999, chief executive officer; 1997–1999, chairman; FleetBoston Financial Corporation, 1999–2001, president and chief operating officer; 2001–2004, chief executive officer; 2002–2004, chairman; Bank of America, 2004–, chairman. Address: Bank of America, 100 Federal Street, Boston, Massachusetts 02110-2003; http://www. bankofamerica.com.

■ Throughout more than 40 years as a bank executive, Charles “Chad” Gifford showed a capacity to make decisions that fit the requirements of the economic and business environment of the time. Whether the situation demanded attention to the needs of customers, management reorganization, or negotiation of substantial merger agreements, Gifford displayed an openness to change. His interpersonal skills and genuine liking for people fostered success as well. Though he grew up in a wealthy New England family, he conducted himself with understanding and concern for associates and customers from all social backgrounds.

BANKING BECOMES HIS PROFESSION The son of banker Clarence H. Gifford, former chief executive officer of Rhode Island Hospital Trust National Bank,

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Charles K. Gifford. AP/Wide World Photos.

Gifford did not have aspirations to become a banker himself. A New England blue blood, he spent summers in Nantucket and earned a BA in history at Princeton University in 1964. Gifford chose banking as a profession only after he fell in love with Anne Dewing and wanted to marry. He began his banking career in New York City, where many companies provided graduate school-like training. He worked at Chase Manhattan from 1964 to 1966 before joining Bank of Boston, where he cultivated a career. At Bank of Boston Gifford worked in commercial lending, first as a loan officer in 1967, then in various vice president positions. From 1975 to 1977 he headed corporate lending at the London, England, office. In Boston he became the executive of the Corporate Banking Group in 1984. After two years as vice chairman, the company promoted him to president in 1989, with Ira Stephanian as chief executive officer.


Charles K. Gifford

CHANGING BANK OF BOSTON TRADITIONS After Bank of Boston overextended itself in real estate and other investments during the 1980s, Gifford and Stephanian were responsible for returning the company to solvency. More than 200 years old, Bank of Boston needed to discard its pompous, conservative image, and the executive team provided complementary and practical qualities for accomplishing this goal. Stephanian, a middle-class son of Armenian immigrants, brought awareness of the needs of average Americans, while Gifford’s elite connections were balanced with a common touch. Friendly and outgoing, Gifford remembered everyone’s name, including those of the bank’s cafeteria employees and security guards. Gifford and Stephanian changed basic traditions at Bank of Boston by hiring executives from outside the usual pool of elite candidates, promoting minorities, and seeking business from average corporations and average consumers, rather than only the wealthiest. A booster of the local economy, Gifford took pride in the First Community Bank, a subsidiary that offered banking services to poor- and moderate-income people through 14 branches in inner-city neighborhoods.

the latter sought a merger of equals. Gifford, however, wanted Bank of Boston to lead, allowing the company room to compromise certain issues in negotiation. That BayBanks graciously conceded to BankBoston as the simplest and strongest name for the merged company demonstrated a good relationship. As chief executive and chairman of BankBoston, Gifford negotiated a second major merger with Fleet Financial Corporation in 1999, forming FleetBoston Financial Corporation, a $187 billion financial services institution and the eighthlargest bank holding company in the United States. Gifford took the positions of president and chief operating officer with the understanding that he would become chief executive in two years. When he became chief executive of FleetBoston in December 2001, Gifford inherited a company in disarray. He faced problems in Brazil and currency devaluation in Argentina. A loan sale in January 2001 heightened losses when Enron, Kmart, and other large public corporations defaulted; the stock market collapse created losses in private equity and investment banking operations. All these issues negatively affected the company’s share value as well.

NEGOTIATING MAJOR MERGERS

Gifford responded to these challenges by addressing select problems in consumer banking and financial products. His biggest hurdle involved correcting FleetBoston’s poor customer service image, a reputation inherited from Fleet Financial, by renewing consumer trust. Beginning in late 2001, the company hired 500 tellers, opened 26 branches, added 126 automated teller machines (ATMs), and then eliminated certain fees for ATM transactions and checking accounts. Gifford changed his perspective on profit and loss by reorganizing departments and financial statements to reflect customer affluence instead of product line and distribution. He refocused marketing to target banking products and services—such as checking and savings accounts, mortgages, insurance, mutual funds, and estate planning—to the customers most likely to use them. The emphasis on consumer products suited the requirements of a weak economy and investor distrust, as the public preferred to secure their savings in banks rather than stocks; savings deposits increased throughout the banking industry at this time. In a reflection of the era, FleetBoston closed its investment bank, Robertson Stephens, as well as other unprofitable operations.

Gifford became chief executive officer of Bank of Boston in 1995 after Stephanian had failed to find a merger partner, as the board of directors had demanded. After informally meeting William Crozier, BayBanks’s chairman, Gifford negotiated for a merger that paired Bank of Boston’s strengths in corporate and international banking with BayBanks’s strengths in technology and regional retail banking. When discussing the $2 billion deal, Gifford tended to speak of the rapport and trust he found with Crozier, rather than about financial details, while Crozier emphasized the excellent timing. Gifford succeeded where Stephanian had failed partly because

In 2003 FleetBoston and Bank of America announced a merger agreement that created the second largest bank in the United States, with 33 million customers. Gifford’s interpersonal style fostered the agreement, as he and Bank of America’s CEO Ken Lewis casually began discussions of a merger. Under the terms of the agreement, Bank of America acquired FleetBoston in a $47 billion stock transaction, with FleetBoston shareholders receiving $45 per share, a premium over the $32 per share value when the merger was announced. Gifford became chairman of Bank of America in March 2004, and the transaction was completed in April.

In 1993 Gifford and Stephanian restructured Bank of Boston’s management to eliminate bureaucracy, flatten a longstanding hierarchy, and transfer decision making to employees close to the customer. By these actions they sought to provide better service and create more efficient operations. They visited several companies, such as General Electric, and noted best practices in this trend toward decentralization. While Gifford viewed reorganization as essential to Bank of Boston’s longterm prosperity, he expressed distress at having to fire executives whom he considered friends. Given his additional title of chief operating officer, Gifford’s responsibilities shifted away from management and toward determining general strategy, institutionalizing the new corporate culture, and supporting individual and team success. Gifford responded to an employee’s inquiry about what decisions he wanted the employee to make by saying, essentially, you decide how to run your business.


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Charles K. Gifford

See also entries on Bank of America Corporation, Chase Manhattan Corporation, and FleetBoston Financial Corporation in International Directory of Company Histories.

“Gifford Banks on Merger,” Sunday Republican, July 28, 1996. Kantrow, Yvette D., “Q&A: Bank of Boston Sees ‘Reengineering’ as Tough Medicine to Gain Efficiency,” The American Banker, December 10, 1993, p. 4.


Browning, Lynnley, “Laid Back in a Tight Banking Spot,” New York Times, February 10, 2002.

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—Mary Tradii


■■■

Raymond V. Gilmartin 1941– Chief executive officer, president, and chairman, Merck and Company Nationality: American. Born: March 6, 1941, in Sayville, New York. Education: Union College, BS, 1963; Harvard Business School, MBA, 1968. Family: Married Gladys Higham, 1965; children: two. Career: Eastman Kodak, 1963–1966, development engineer; Arthur D. Little, 1968–1976, management consultant; Becton, Dickinson and Company, 1976–1980, vice president for strategic planning; 1980–1982, president of Becton Dickinson Division; 1982–1984, president of Becton Dickinson Medical Group; 1984–1986, senior vice president; 1986–1987, executive vice president; 1987–1989, president; 1989–1992, president and CEO; 1992–1994, chairman, president, and CEO; Merck and Company, 1994–, president, CEO, and chairman. Awards: Alumni Achievement Award, Harvard Business School, 2002; honorary LLD degree, Kean University, 2004. Address: Merck and Company, 1 Merck Drive, Whitehouse Station, New Jersey 08889-0100; http://www. merck.com.

■ Raymond V. Gilmartin was appointed president, CEO, and chairman of Merck and Company in 1994 with a mandate to increase sales and net income at a time when health care reform and managed care organizations were forcing pharmaceutical companies to lower prices for their products. Gilmartin was successful at first as the head of a business in which he had been a relative unknown. He was listed as one of the top 25 global business managers by Business Week in 1999. Nevertheless, he soon faced such serious challenges as patent expiration of several of Merck’s best-selling drugs. Gilmartin’s performance in the early 2000s received mixed reviews from industry analysts, although many credited him with keeping Merck’s stock earning steady dividends in the face of increased International Directory of Business Biographies

Raymond V. Gilmartin. © Reuters New Media Inc./Corbis.

competition. Gilmartin’s colleagues also noted that he retained the loyalty of subordinates throughout his career by an approach to management that allowed them significant autonomy in their respective fields of expertise.

EARLY CAREER Gilmartin was the first member of his immediate family to attend college. When he arrived at Union College in Schenectady, New York, in 1959, it was the furthest he had ever traveled from his home in Sayville, Long Island. Gilmartin played football and lacrosse for the small liberal arts school while he studied electrical engineering. After graduating from Union in 1963, he signed with Eastman Kodak Company as a development engineer. Three years later he decided to attend the Harvard Business School. “I learned that an engineer whose desk

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was close to mine at Kodak had been accepted by the school,” said Gilmartin when Harvard honored his achievement in 2002. “I said to my fiancée, ‘Gee, if he can do that, so can I’.” After receiving his MBA, Gilmartin spent the next eight years working for Arthur D. Little, a management consulting firm. In 1976 he joined Becton, Dickinson and Company (BD), a producer and distributor of medical supplies, as vice president for strategic planning. Over his 18-year tenure at BD, Gilmartin rose through the managerial ranks holding several different positions, including the presidency of the company’s medical group. He was appointed president of Becton, Dickinson in 1987 and given the post of chief executive officer in 1989. He became chairman of BD in 1992. Many industry analysts considered Gilmartin’s leadership a critical factor in smoothing Becton, Dickinson’s transition from a regional to a multinational company. For example, he was credited with restructuring the company during his tenure, a move that included eliminating several layers of middle management. The restructuring ultimately allowed BD to adapt to the growing demand for lower-priced hospital equipment that emerged during the 1980s. Around the time that Gilmartin became president of Becton, Dickinson, he saw that the company faced stiff competition even though it was growing rapidly and earning annual revenues of around $2 billion. To spur creative thinking, Gilmartin introduced a less formal approach to internal management. He encouraged individual managers to form teams to pursue innovations and allowed the heads of BD’s 15 divisions to develop their own business strategies. Edward Ludwig, who became chief executive of the company after Gilmartin left, told a reporter from the local newspaper years later, “You always knew where Ray stood on an issue, and he always invited debate to make sure we got it just right” (The Record [Bergen County, New Jersey], October 19, 2003). ON TO MERCK In 1994 Gilmartin was recruited to be the new president and chief executive officer of Merck, the large pharmaceutical firm headquartered in New Jersey. He was also in line to assume the company’s chairmanship several months later on the retirement of the present chairman, P. Roy Vagelos. Industry analysts were taken aback by Merck’s decision because Gilmartin was the first chief executive and president recruited from outside the company in its century-long history. Furthermore, he represented a departure from Merck’s previous pattern of hiring former scientists like Vagelos, who had directed Merck’s research laboratories before he took over the company, as its managers and corporate leaders. Perhaps most disturbing to industry watchers was the fact that Gilmartin had had no previous experience in the pharmaceutical industry. Some analysts, however, viewed Gilmartin’s appointment as an attempt to give Merck a fresh perspective, as the compa-

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ny had passed over several other internal candidates— including its head of research, executive vice president, and chief financial officer at the time. Other analysts pointed out that Gilmartin’s former company was also involved in the health care industry. Merck board members noted that Gilmartin was familiar with the workings of a health care system undergoing reorganization because Becton, Dickinson had a long history of selling its products to managed care organizations and other large buying groups. Vagelos commented in an article in Chain Drug Review that he thought that Merck had made the right decision in choosing Gilmartin precisely because hospital suppliers like Becton, Dickinson had been dealing with cost-containment issues long before pharmaceutical companies. Vagelos added that Gilmartin “[had] learned the lesson of staying ahead technologically, offering advantages to his customers and watching his own costs (July 18, 1994). One of Gilmartin’s first moves after assuming the leadership of Merck was to meet with a number of employees to discuss the company’s future. According to an article that appeared in the Harvard Business School newsletter in 2002, Gilmartin said, “I met with a lot of people and asked two questions: ‘What do you think are the major issues we face? And if you had my job, where would you put your priorities?’” This approach won him the approval of Merck’s employees. Gilmartin also decided to institute a cost-cutting program in order to increase the company’s stock earnings. This effort included divesting peripheral businesses, including a specialty chemicals group. His most important immediate mission, however, was to stimulate the development of a new generation of important drugs to replace key Merck products whose patents were on the verge of expiring. As a result, Gilmartin continued the company’s commitment to research and development via increased research manpower and spending. Over the next three years, Merck’s annual sales and net income rose steadily. He also oversaw the launching of eight new drugs within 18 months. Overall, Merck brought an unprecedented total of 17 new drugs to market between 1994 and 2001 and increased its revenues from $15 billion to nearly $50 billion a year. Part of this success was also due to Gilmartin’s expansion of Merck’s overseas presence. The company eventually became one of the top American-based pharmaceutical companies in Europe.

RECURRENT CHALLENGES Gilmartin’s string of successes in the 1990s did not continue into the new millennium. Merck faltered during 2001 as its shares went down 38 percent. When the company disclosed that its profits would not increase in 2002, its stock price fell 12 percent in two days. The one-time largest drug producer in the world had fallen behind its two largest competitors, Pfizer and GlaxoSmithKline.



In addition to slumping stock prices, Merck confronted several additional challenges in 2002. Although the company had recently developed some well-regarded new drugs, industry analysts pointed out that several of its most profitable products would soon be subject to general marketing by other firms. In particular, Merck stood to lose $4 billion in annual sales when five of its best-selling drugs lost the last of their patent protection from less expensive generic competitors. For example, Merck’s patent for the heartburn drug Pepcid, which had brought in $775 million in annual sales, expired in 2001. In addition, the analysts noted that in four years the company would face another serious financial loss when it lost its exclusive rights to Zocor, a cholesterol drug that accounted for $7 billion of sales a year. Gilmartin, however, kept a positive outlook in spite of these setbacks and predicted that Merck would do well once again. He designated nearly $400 million of the company’s $1 billion basic research budget to develop new drugs for such brain disorders as Alzheimer’s disease, stroke, Parkinson’s disease, and schizophrenia. Nevertheless, analysts noted that Merck had little experience in the area of drugs for central nervous system disorders, especially when compared with its biggest rivals. Gilmartin had made several other moves to protect his company’s future. The most important of these was the formation of a joint venture with Schering-Plough to produce a new cholesterol drug that blended Zocor with another agent. If the joint venture proved to be successful, Zocor’s patent would be protected until 2013. In spite of this initiative, however, many analysts believed that the only way Merck could prosper or Gilmartin survive as chief executive would be to merge the company with another major pharmaceutical firm. Many analysts maintained that although Merck’s difficulties stemmed from several different sources, Gilmartin had not provided the proper leadership to overcome them. Part of the problem, according to Fran Hawthorne, author of The Merck Druggernaut: The Inside Story of a Pharmaceutical Giant, was that Gilmartin had added new layers of middle management to the company bureaucracy, which in turn led to turf wars and culture clashes. Moreover, original ideas had to go through the expanded bureaucracy and new projects tended to die in committee. Hawthorne also wrote in the journal Chief Executive that Merck had so far failed to come up with a “blockbuster to replace its five big-selling drugs, which recently lost their patent protection. Turnover has reportedly doubled, while morale has sagged” (June 2003). By the end of 2003, Gilmartin faced more setbacks as latestage testing on four new drugs was stopped, thus derailing the company’s marketing timetable. Merck had also dropped what many analysts considered a bombshell when it made its earnings release in October of 2003. The release outlined the company’s plans to eliminate thousands of jobs. Gilmartin then


followed up these negative reports by announcing economy measures within Merck’s wholesale distribution program that would result in a one-time revenue loss of approximately $650 to $750 million and a loss of earnings per share from continuing operations of 18–21 cents in the fourth quarter of 2003. Analysts noted that Gilmartin had acted quickly but still resisted buying into a rival company to solve Merck’s problems. Gilmartin had previously explained his wariness of mergers to a reporter from WorldLink: “I also think it is questionable whether or not there really are any advantages to scale [in merging], once you get beyond a certain size” (July–August 2001). Two years after that interview, many industry insiders predicted that Gilmartin and Merck would find themselves in the end on the losing side of a wave of mergers in the pharmaceutical industry.

GILMARTIN FIGHTS BACK Gilmartin defended his leadership of the company during Merck’s annual business briefing in 2004. He maintained that the decision to stick to what many considered an old-fashioned strategy of emphasizing original research rather than late-stage in-licensing of drugs (purchasing marketing rights to a drug developed by another company) or their outright acquisition from other companies would prove to be more profitable in the long run as Merck developed new medicines. Gilmartin also outlined some of the company’s ongoing efforts to recover its position of leadership. He said that Merck would reduce its cost structure, partly through eliminating some 4,400 jobs. He also stated that the company was working on speeding up the process of drug development from initial discovery and clinical trials to regulatory approval and marketing. Gilmartin stressed that the company currently had several drugs at the clinical trial stage that might soon be available to the general public. For example, the company was developing new medications that would address such major public health issues as cervical cancer and AIDS. With regard to the merger question, Gilmartin noted that, although no major mergers had yet been formed, Merck had made several strong alliances with such companies as ScheringPlough, GenPath, Neuogen, Amrad, and Actelion. In fact, the company had been very active with smaller licensing transactions over the previous two years, moving from ten agreements in 1999 to 72 through 2002 and most of 2003. As reported in Medical Marketing & Media, Gilmartin told those attending the annual business meeting, “Despite recent setbacks, we are pursuing the strategy that is right for Merck and in the best interests of our shareholders” (February 2004).

MANAGEMENT STYLE Gilmartin’s management style was summarized in the commencement address that he gave the graduating class of Union

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College in 1999. In that address he defined his philosophy of life, which he also had applied to his business career. Gilmartin believed that taking risks is a necessary step toward creating great opportunities and that these opportunities can emerge from failure as well as success. He advised the graduates to follow their instincts in terms of pursuing lines of work that they enjoy while at the same time acting with ethical integrity. “Genuine success depends on your values and your ethics.” Gilmartin added that he had emphasized the importance of ethical values to his colleagues at Merck when he joined the company as a relatively unknown outsider. He was quoted as saying, “I made it clear I was willing to take the risks necessary to lead a company in an industry that was facing difficult times. I made it clear that I was not just in it for immediate results or personal glorification, but for the long haul” (Union College Magazine, Summer 1999). Colleagues, analysts, and Gilmartin himself described his management style as a preference for delegating day-to-day activities to subordinates while setting the company’s overall strategic direction. For example, Gilmartin quickly selected Merck employees to form his management team during his early days as chief executive because he recognized that they had the insider expertise that he lacked. In an interview with Lewis Krauskopf for The Record of Bergen County, New Jersey, Gilmartin noted, “The style of management that I have, basically, is to recognize the fact that I’ll never be as expert in any of the areas of the company as some of my direct reports are” (October 19, 2003). Critics of Gilmartin’s approach pointed out, however, that the extra layers of bureaucracy that he had added to Merck’s structure held up the company’s development of new research projects and marketable products. Hawthorne concluded in Chief Executive that Gilmartin’s personality and management style also retarded Merck’s progress because he was much less accessible than his predecessor. She quoted former international and vaccines executive Simon Benito as saying, “Employees seldom see him and therefore feel that they do not know him. Consequently, they are afraid of taking risks in case they make a mistake” (June 2003). Although Gilmartin generally kept a low profile at Merck, he declared his conviction that business leaders and companies should take leadership roles on important social issues that were once the strict purview of government and social service organizations. As an example of such leadership, Gilmartin pointed to Merck’s decision not to profit from the sale of its HIV/AIDS medicines in the world’s poorest countries as well as its work with foundations and other groups to attack the HIV epidemic at local levels. Despite the larger role that Gilmartin saw for business within the wider society, he also maintained that he was not interested in being a celebrity CEO. He criticized the media for their tendency to glamorize certain business leaders. Gil-

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martin said, “Chief executives are too often seen as high-profile dealmakers rather than problem solvers who move their companies forward in competitive and innovative ways” (2002). He had once told Brian Dumaine in an interview for Fortune while he was still the CEO of Becton, Dickinson, “We’re creating a hierarchy of ideas. You say, ‘This is the right thing to do here,’ not ‘We’re going to do this because I’m boss’” (June 17, 1991).

TAKING THE RIGHT STEPS While some analysts saw Merck’s slide from dominance in the pharmaceutical industry as indications that Gilmartin would lose his job, others noted that he had taken a correct first step in cutting costs. They also observed that he wisely refused to cut back on spending for research and development, which is the lifeline of any pharmaceutical company. As a result, many believed that Gilmartin was putting Merck on the path to recovery from its current problems. An article in Business Week Online quoted Gilmartin as saying, “In an environment driven by increasing competition, cost-containment pressures, and greater customer demand for value, we have examined every aspect of our business, at every level, to identify ways to more effectively address these challenges.” In addition to his duties at Merck, Gilmartin served as a director of General Mills and Microsoft as well as a director of the United Negro College Fund. He was also chairman of the International Federation of Pharmaceutical Manufacturers Associations, the Healthcare Institute of New Jersey, and the Valley Health System. He was a member of the Business Council and Business Roundtable, the board of associates of the Harvard Business School, and the executive committees of the Council on Competitiveness and the Pharmaceutical Research and Manufacturers of America.

See also entries on Becton, Dickinson & Company, Eastman Kodak Company, and Merck & Co., Inc. in International Directory of Company Histories.


“The Awards for Alumni Achievement 2002,” Harvard Business School, 2002, http://www.hbs.edu/about/news/ AAA/gilmartin.html. “Commencement ‘99: Rules to Live By,” Union College Magazine, Summer 1999, http://www.union.edu/N/DS/ s.php?s=1665. Dumaine, Brian, “The Bureaucracy Busters,” Fortune, June 17, 1991, p. 36.


Raymond V. Gilmartin Gajewski, Joanna, “A Healthy Diagnosis,” WorldLink, July–August 2001, p. 20. “Gilmartin Takes Helm at Merck,” Chain Drug Review, July 18, 1994. Hawthorne, Fran, “Merck at Risk,” Chief Executive, June 2003, p. 54. ———, The Merck Druggernaut: The Inside Story of a Pharmaceutical Giant, Hoboken, N.J.: J. Wiley & Sons, 2003.


Krauskopf, Lewis, “Merck CEO Steers Firm Through Rough,” The Record (Bergen County, New Jersey), October 19, 2003. “Public Address,” Medical Marketing & Media, February 2004, p. 12. “Why Merck Missed the Mark,” BusinessWeek, October 23, 2003.

—David Petechuk

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■■■

Larry C. Glasscock 1948– Chairman, chief executive officer, and president, Anthem Nationality: American. Born: April 4, 1948, in Cullman, Alabama. Education: Cleveland State University, BA, 1970; attended Columbia University. Family: Son of Oscar Claborn and Betty Lou Norman; married Lee Ann Roden; children: two. Career: AmeriTrust Company, 1974–1975, vice president of personnel and organization; 1976–1978, vice president of the national division; 1978–1979, manager of the credit card center; 1980–1981, senior vice president of consumer finance; 1981–1983, senior vice president of the national division; 1983–1987, executive vice president of corporate banking administration; 1987–1992, group executive vice president; Essex Holdings, president and chief executive officer; First American Bankshares, N.A., president and chief operating officer; Group Hospitalization & Medical Services (Blue Cross and Blue Shield of the National Capital Area), 1993–1998, president and chief executive officer; CareFirst, 1998, chief operating officer; Anthem, 1998–1999, senior executive vice president of Anthem Insurance; 1998–1999, chief operating officer of Anthem Insurance; 1999–2001, president and chief executive officer of Anthem Insurance; 2001–, corporate president and chief executive officer; 2003–, chairman of the board. Awards: Indiana Entrepreneur of the Year Award, Ernst & Young, 2003. Address: Anthem, 120 Monument Circle, Indianapolis, Indiana 46204; http://www.anthem-inc.com.

■ Larry C. Glasscock directed the Anthem insurance company to record growth. Known for streamlining operations at numerous institutions, Glasscock went to work for Anthem in 1998. There he held the successively responsible positions of chief operating officer, president, chief executive officer, and chairman. He more than doubled the company’s annual pre-

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Larry C. Glasscock. AP/Wide World Photos.

miums and oversaw its highly successful initial public offering in 2001, up to that time the largest for a health-care company. He was one of the architects of a merger with WellPoint Health, a deal that was expected to close in mid-2004, which would make the resulting company the largest managed care provider in the United States.

HONES HIS OPERATING EFFICIENCY Larry Glasscock was born in Cullman, Alabama, in 1948; in 1969 he married Lee Ann Roden. He served with the U.S. Marine Corps from 1970 to 1976 and then went to work for AmeriTrust Corporation in Cleveland, Ohio, where he had an 18-year career. In 1974 he began work as vice president of personnel and organization. In 1976 he became the vice president of the company’s national division and, then, in 1978 was ap-


Larry C. Glasscock

pointed the vice president and manager of the credit card center. In 1980 he moved on to become AmeriTrust’s senior vice president of consumer finance. Another move, in 1981, saw him assume the duties of the senior vice president of the national division. In 1983 Glasscock was promoted to executive vice president of corporate banking administration and, in 1987, to group executive vice president. He held this last position until 1992. Following his stint at AmeriTrust, Glasscock held the position of president and chief executive officer at Essex Holdings, another Cleveland-based company. He was also hired by the federal government as the president and chief operating officer of First American Bankshares, N.A., of Washington, DC. The bank had been owned by Bank of Credit and Commerce International, now defunct, and was reputed to have laundered drug money. International authorities closed down the operation, resulting in a loss to depositors of $2 billion. Glasscock was brought aboard to clean it up in preparation for sale. Upon completing that assignment, he went on to hold the position (1993–1998) of president and chief executive officer of Group Hospitalization & Medical Services, which operated as Blue Cross and Blue Shield of the National Capital Area. The company was losing money, and he oversaw a turnaround and guided it to an affiliation with Blue Cross and Blue Shield of Maryland. From January through April 1998, he was chief operating officer of CareFirst, the resulting company. SHEPHERDS ANTHEM THROUGH RECORD GROWTH In April 1998 Glasscock joined Anthem, an Indiana-based insurance company that, through subsidiary operations, supplied healthcare benefits to more than 11.5 million people. Anthem, the publicly traded parent company of Anthem Insurance Companies, was an independent licensee of the Blue Cross and Blue Shield Association. Glasscock joined the corporation as senior executive vice president and chief operating officer. Chief executive officer L. Ben Lytle had brought Glasscock into the company to help analyze and integrate the operations of several new companies that had been obtained through a series of mergers and buyouts directed by Lytle. In his first four months at Anthem, Glasscock, through a combination of early retirement and attrition, had lightened the corporation of hundreds of its middle managers, bringing the manager-to-employee ratio to roughly 1 to 15, from 1 to 8. He was promoted to president and chief operating officer in April 1999 and to president and chief executive officer in October 1999. In July 2001 Glasscock became president and chief executive officer of Anthem Inc. In July 2002 he was appointed chairman of the Council for Affordable Quality Healthcare. With Glasscock at the helm, Anthem experienced record growth, and in the first part of 2003 Lytle picked Glasscock to be chairman of the board, in addition to his other responsibilities, when Lytle vacated that spot and became Anthem’s presiding director.


In June 2003 Glasscock and Lytle were honored with the 2003 Ernst & Young Entrepreneur of the Year Award for financial services. From the time Glasscock joined Anthem in 1998, the corporation’s annual premiums had more than doubled, and its 2001 initial public offering was the largest up to then for an Indiana company, Wall Street’s 23rd largest ever, and by far the largest public offering of a health-care company at the time. Anthem was ranked on Barron’s 500 list, the Standard & Poors 500 index, and the Fortune 500 list.

ARCHITECT OF MERGER In October 2003 Anthem announced that it would purchase California-based WellPoint Health networks for about $16.4 billion. Approved by the Federal Trade Commission in February 2004 but still subject to shareholder and regulatory approval, the merger was expected to result in the creation of the country’s largest managed care provider, with a membership of 26 million people from California to Maine. According to Glasscock, it was expected that under the merger the two companies would save $50 million in 2005 and $250 million by the year after that. The deal was projected to close by mid2004, with the combined company to be called WellPoint. News of the deal was met with mixed reactions. Benefit consultants speculated that savings from the consolidation of back-office functions and the elimination of some jobs might slow premium increases, which at the time were rising at their fastest pace in a decade. It was thought that big insurers who were eager to attract large, multistate employers as clients might become more competitive in the wake of the merger. Other analysts believed that competition might be hampered should smaller insurers be driven from the market, which could fuel price increases. Doctors were also concerned that the merger marked a nationwide trend toward a health-care system governed by a handful of publicly traded corporations operating primarily for the welfare of shareholders. In April 2004 it was announced that for his role in the pending merger, Glasscock would receive a merit-based performance bonus of $42.5 million, in addition to his regular salary and bonus, paid out over the ensuing three years. In 2003 Glasscock earned $3.6 million in salary, and his outstanding stock options, said to be worth no less than $22.9 million, were to fully vest at the sale’s close.


“Anthem CEO to Get $42.5M Merit Award,” April 7, 2004, http://www.wane.com/global/ story.asp?s=1768950&ClientType=Print. Appleby, Julie, “Health Insurers’ Deals Get Mixed Reactions,” USA Today, October 28, 2003, http://www.usatoday.com/ money/industries/health/2003-10-27-health-care_x.htm.

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Larry C. Glasscock “BCBS OKs WellPoint, Anthem Merger,” Los Angeles Business, March 22, 2004. “L. Ben Lytle and Larry C. Glasscock, Anthem, Inc., Honored with 2003 Ernst & Young Entrepreneur of the Year for Financial Services,” company press release, June 17, 2003, http://www.anthem.com/jsp/antiphona/corp/

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int_primary.jsp?content_id=PW_038085&site=CORP&state= &role=CORPOR. “Panel Presentation by Larry Glasscock,” Indiana Leadership Summit, 2003, http://www.ihc4u.org/glasscock.htm. —Amanda de la Garza


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Robert D. Glynn Jr. 1942– Chairman, chief executive officer, and president, PG&E Corporation Nationality: American. Born: 1942, in Orange, New Jersey. Education: Manhattan College, BS, 1964; Long Island University, MS, 1967. Family: Married; children. Career: Long Island Lighting Company, 1964–1972; Woodward-Clyde Consultants, 1972–1984, rose to executive vice president; Pacific Gas and Electric Company, 1984– (position unknown); 1988–1991, vice president of power generation; 1991–1994, senior vice president and general manager of electric supply and then general manager of customer energy services; 1994, executive vice president; 1995–1997, president and chief operating officer; PG&E Corporation, 1997–, chief operating officer; 1997–, president and chief executive officer; 1998–, chairman of the board. Address: PG&E Corporation, 1 Market Plaza, Spear Tower, San Francisco, California 94105; http:// www.pgecorp.com.

■ Robert D. Glynn Jr. took over as president and CEO of PG&E Corporation in 1997 and became chairman the following year. His reign over the energy-based holding company, which owned Pacific Gas and Electric Company, one of the largest combination natural gas and electric utilities in the United States, was stormy. Although the corporation had initially prospered under Glynn, deregulation and the bankruptcy of the core utility company soon had stockholders questioning his management and calling for his ouster. Glynn insisted, however, that the company was on its way back to financial health. Known among industry analysts for his hands-off management style, Glynn stated that his job as chairman and CEO was to look at the larger picture. EARLY CAREER A native of Orange, New Jersey, Glynn received a degree in mechanical engineering from Manhattan College and a


master of nuclear engineering degree from Long Island University. He also graduated from a program for public utility executives at the University of Michigan and an advanced management program at the Harvard Business School. Glynn’s career included eight years at a public utility, Long Island Lighting Company, followed by 12 years with the firm of Woodward-Clyde Consultants, an engineering firm that specialized in environmental management, waste management, pollution control, and occupational health. Glynn eventually rose to the position of executive vice president at Woodward-Clyde. In 1984 Glynn joined the California-based Pacific Gas and Electric Company, where he went on to hold several managerial positions, including president of power generation, senior vice president and general manager of electric supply, and general manager of customer energy services. He was elected vice president of the company in 1994 and president in 1995.

THE DEREGULATION CRISIS Glynn became president and chief operating officer of the utility’s parent holding company in January 1997, chief executive officer in June 1997, and chairman of the board in January 1998. Glenn took over the helm of the PG&E Corporation as the energy deregulation boom of the late 1990s got under way. The holding company had four open-market subsidiaries in addition to Pacific Gas & Electric: PG&E Energy Services; PG&E Gas Transmission; PG&E Energy Trading Company, an electric commodity trader; and U.S. Generating Company, an independent power producer. Many analysts saw Glynn as a leader who could take PG&E from a slow-paced monopoly to one of the largest and most efficient energy companies in the nation. Glynn’s objective was to make PG&E a premier company capable of providing optimum benefits for its shareholders, customers, and employees. Glynn also recognized, however, that he was competing in a frenetic market. In an interview with Kristin Bole of the San Francisco Business Times, Glynn noted, “The speed with which [the market] is moving both for our customers and our employees is something that definitely keeps us on our toes” (March 27, 1998).

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Robert D. Glynn Jr.

FULL SPEED AHEAD Pacific Gas and Electric had been a stable investment when it was a regulated utility. Glynn was now intent, however, on transforming the company and its parent corporation into major players in a much less regulated and much more competitive marketplace. Over the year and a half since Glynn had first assumed the presidency of PG&E, the corporation’s institutional investor base had risen from 30 percent to 45 percent, an increase of 50 percent. One of Glynn’s primary moves was to reinvest in operations to be more competitive. To do so, he kept a lid on the growth of dividend payouts. He told Mark Calvey of the San Francisco Business Times, “Energy utilities as a whole—and our company as an example—provide a lower dividend yield than we used to and provide a greater opportunity for stock price appreciation” (March 27, 1998). Initially, Glynn sent out salespeople to call on other utilities’ customers in the San Francisco area and bought other power plants far from home, even paying $1.6 billion for plants in New England. In addition, he negotiated what many industry analysts considered sweetheart deals, including selling three PG&E plants to Duke Energy for $501 million and negotiating a ten-year bond issue to cover the costs of old power plants (not only operating costs but government-mandated renovations). These deals, analysts said, would help ease the company’s transition into a deregulated market. Glynn did not hide the fact that he saw PG&E as a national powerhouse in the energy business. He was optimistic about the future, as the company’s stock had risen 44 percent during 1997. Glynn was confident that the company’s exclusive focus on the large domestic market would enable it to garner much of the business. In an interview given to Kristin Bole, Glynn stated, “Five years from now, we’ll have a huge number of customers buying commodities and services from us. We’ll have without a doubt the best local distributing company and utility in the country” (San Francisco Business Times, March 27, 1998).

A WRONG TURN Despite Glynn’s optimism, Standard & Poor’s downgraded the ratings of Pacific Gas and Electric and its parent corporation to “low junk” in January 2001. The company had run up billions of dollars in debt largely because it could not pass on soaring wholesale power costs to its customers. This problem had arisen because the state of California had frozen retail prices. Although Glynn had hoped that the state government would step in and allow rate increases, Pacific Gas and Electric filed for Chapter 11 bankruptcy in April 2001. Glynn called the decision an “affirmative” one and chided the California state government, noting, “We heard a lot of the words... but have not seen actions” (Sacramento Business Journal, April 13, 2001).

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Many analysts, however, blamed Glynn for PG&E’s slide, since the company had reported a net loss of $3.4 billion, or $9.29 per share, in 2000. Analysts noted that Glynn had paid exorbitant prices for old power plants, intending to create a company to rival Enron, even though none of these investments were paying off. Instead of reporting record profits, Glynn found himself trying to guide the utility through a crucial phase of its bankruptcy proceedings. Glynn planned to separate Pacific Gas & Electric from its parent corporation and move its power generation, gas transmission, and electric transmission assets to the parent company as separate entities under PG&E. The reorganization moved those assets from state regulation to federal control and helped raise the financing for the utility to pay off its $13.1 billion in debts without raising rates to customers. Glynn then faced an irate and outspoken group of investors in the May 2001 shareholders meeting. Several shareholders were ejected from the meeting. One shareholder later noted that dissent was quashed by the corporation when she sought to introduce a resolution calling for Glynn’s dismissal. Glynn soon confronted further turmoil when an attorney for the city of San Francisco filed suit against the corporation, charging it with unfair and illegal business practices that had driven its subsidiary utility into bankruptcy. The attorney asked for a $5 billion return to ratepayers, including $4.6 billion in illegally paid dividends and stock purchases as well as $633 million in inflated tax payments made by the utility to its parent corporation.

SEEKING FINANCIAL HEALTH Glynn’s plans to diversify the business ultimately failed, and he put Pacific Gas & Electric in bankruptcy. Nevertheless, PG&E Corporation reported a fourth-quarter profit of $37 million in 2003, contrasting dramatically with a $2.19 billion quarterly loss a year earlier. Glynn then declared that the corporation was back on its feet. Despite the fact that Pacific Gas & Electric had emerged from three years in bankruptcy, Glynn faced angry shareholders once again in April 2004. The shareholders complained during the meeting about Glynn’s 2003 compensation package of more than $17 million. They were particularly indignant that such a sum was paid to someone who had been named by Business Week as one of the worst executives of 2003. As reported on Forbes.com, one shareholder told Glynn, “You folks are the people who put the company into bankruptcy and yet you didn’t suffer. You, Mr. Glynn, made $17 million.... How can you justify that?” (April 21, 2004) Glynn’s response to criticism was that he and the management had restored $7 billion to PG&E’s overall value and that the company’s stock had risen to $28.28 per share from its low of $6.50 per share after its utility company had filed for bank-


Robert D. Glynn Jr.

ruptcy in April 2001. Glynn also painted a rosy picture of the corporation’s future and said that its subsidiary utility would be able to pay dividends again by the second half of 2005. According to a Forbes.com article, Glynn also said that the compensation packages were “designed to [give an incentive to] this team to deliver the restoration of this company’s health” (April 21, 2004).

ty, and a healthy utility as our core business, PG&E Corporation is strongly positioned to provide value to customers and shareholders” (“PG&E Corporation Announces First Quarter Earnings,” May 4, 2004). In addition to his duties at PG&E, Glynn was also active in other organizations, including the Business Council, the California Business Roundtable, and the Board of Governors of the San Francisco Symphony.

MANAGEMENT STYLE Industry analysts noted that Glynn’s training in mechanical engineering was reflected in his emphasis on order and building a team environment. When he took over at PG&E, he immediately set out to recruit seasoned staff from a wide variety of backgrounds, from energy generation and marketing to sales and customer service. Glynn also used a hands-off management style that staffers initially found unsettling. As one employee told Kristin Bole of the San Francisco Business Times, “Some of them expected to be able to go to the CEO with problems and have him fix them. He would listen to them and say, ‘How are you going to solve that?’” (March 27, 1998). Despite the company’s setbacks, Glynn maintained a positive outlook. He once noted that his job was to have the vision to make the company the best and to inspire top staff under him to pass on that vision throughout the company. In defense of Glynn’s management of PG&E, company spokespeople pointed out that PG&E stocks outperformed the average utility during Glynn’s tenure. Some analysts thought Glynn had learned a lesson from his two trips to bankruptcy court and come to realize that one should hedge one’s bets in commodity markets. Glynn himself noted in a company news release, “With a new period of regulatory and financial stabili-


See also entries on Pacific Gas and Electric Company and PG&E Corporation in International Directory of Company Histories.


Bole, Kristin, “Glynn Whipping Behemoth PG&E into Fighting Shape,” San Francisco Business Times, March 27, 1998. Calvey, Mark, “Stability Is out, Risk Is in for Investors in the New PG&E,” San Francisco Business Times, March 27, 1998. PG&E Corporation, “PG&E Corporation Announces First Quarter Earnings,” May 4, 2004, http://www.pgecorp.com/ news/releases/040504r.html. “PG&E Files Chapter 11,” Sacramento Business Journal, April 13, 2001. Tanner, Adam, “Shareholders Grill PG&E Executives on Pay Packages,” Forbes.com, April 21, 2004, http:// www.forbes.com/reuters/newswire/2004/04/21/ rtr1341462.html. —David Petechuk

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Francisco González Rodríguez 1944– Chief executive officer, Banco Bilbao Vizcaya Argentaria Nationality: Spanish. Born: October 19, 1944, in Chantada, Lugo, Spain. Education: Universidad Complutense de Madrid, BA, 1970. Family: Married; children: two. Career: FG Inversiones Bursátiles, 1987–1996, president; Argentaria, 1996–1999, chief executive officer; Banco Bilbao Vizcaya Argentaria, 2000–, chief executive officer. Address: Banco Bilbao Vizcaya Argentaria, Gran Via, 1, 48001 Bilbao, Vizcaya, Spain; http://www.bbva.es.

■ After successful careers in the computer industry and as a stockbroker, Francisco González Rodríguez became one of Spain’s most powerful banking executives. He served as chief executive officer (CEO) of the Argentaria group from 1996 to 1999. During that time he led the final phase of privatization of the formerly government-owned banking group. After Argentaria merged with the Banco Bilbao Vizcaya (BBV) in 1999, he became CEO of the newly created Banco Bilbao Vizcaya Argentaria (BBVA), one of Spain’s largest banks. Notable among González’s achievements were BBVA’s expansion into Latin America and the diffusing of a major scandal inherited from BBV. González enjoyed a reputation as a no-nonsense workaholic who also believed in delegating authority.

EARLY CAREER González was born in 1944 in Chantada, Lugo, in the remote northwestern region of Galicia, Spain. After moving to Madrid, González obtained a degree in economics from the Universidad Complutense de Madrid in 1970. Upon graduating, he began his professional career in the computer industry. His experience as a computer programmer would lead him to be at the forefront of utilizing the latest technology in the

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Francisco González Rodríguez. © Reuters NewMedia Inc./Corbis.

banking industry later in his career. After working for several computer companies, however, González found that he was more interested in the financial industry. González left the computer industry to become a stockbroker in 1983. In just four years he was successful enough in his new career to have saved sufficient capital to start his own business in 1987. In the late 1980s he began his own brokerage firm, FG Inversiones Bursátiles. He took advantage of the many market reforms taking place in Spain at the time to build his company into the largest independent brokerage in the country. In 1996 González greatly increased his personal wealth by selling his firm to Merrill Lynch for $30 million. Not only did González earn great profits, he also made important connections in the world of politics. In particular, he established contacts with the center-right political party



known as the Partido Popular (PP). González organized a series of seminars to promote FG Inversiones, and one of the invited speakers was the PP congressman Rodrigo Rato. González and Rato became good friends, a relationship that served González well when the PP won the 1996 elections.

FROM STOCKBROKER TO BANK CHAIRMAN After selling his business, González remained as a senior advisor at Merrill Lynch while he developed his plans for the future. These plans took on a new twist when in May 1996 the new PP government in Spain appointed him as the chairman of the Argentaria banking group. González went from having 130 employees at the brokerage firm he founded to being at the helm of a company with some 16,000 workers. The government selected González to complete the privatization of Argentaria, which had been created in 1991 in a merger of government-controlled banks in Spain. By 1996, 25 percent of Argentaria was still government owned. Between 1996 and 1999 González guided Argentaria as it became a unified, fully privatized business. He spent three years putting the company in order by refinancing its expensive assets, changing its management structure, merging its three main units, and cutting jobs. While González succeeded in these endeavors, the cost was a sharp decline in profits in his first year on the job at Argentaria. One of González’s tasks as CEO at Argentaria was to make the banking group more efficient. Specifically, he had to reduce the number of employees and eliminate what he called “superfluous luxury.” While cutting jobs was a difficult process, González argued that he had no alternative and that many redundant positions should have been eliminated when the group was created. It was now up to him to streamline the company before the government sold its remaining 25-percent stake. To this end, in May 1997 he cut 2,100 jobs at the Banco Exterior, one of the key components of the Argentaria group. González also pointed to the company’s headquarters as overly ostentatious. Argentaria’s offices were located in a magnificent nineteenth-century building in Madrid and possessed an extensive art collection. The new CEO saw these luxuries as unnecessary, telling the Financial Times that “banks have to make money. They don’t need pictures and piles of pretty brick and marble” (May 9, 1997).

MERGER WITH BBV González’s career took yet another twist in 1999, when Argentaria merged with the BBV. He had been exploring various possibilities for mergers and acquisitions. When the Banco Santander and the Banco Central Hispano, two of Spain’s largest banks, merged, González felt that it was time to act so


that Argentaria would not be left behind. With the merger, González became cochairman of the newly created BBVA, sharing duties with Emilio Ybarra, who had been CEO at BBV. One of his most significant early challenges at BBVA was that he was considered an outsider. BBV had a long history in Spain’s self-governing Basque region and had traditionally been run by a group of Basque elite simply known as “the families.” After the merger, the offices of BBVA were located in Bilbao, home to BBV, rather than in Madrid, where Argentaria had been based. In 2000 González faced a serious crisis. It took four months and an internal power struggle for him to learn the details of one of the biggest scandals in European banking history. The alleged activities, which began at BBV before the merger with González’s Argentaria, included secret slush funds, money laundering, and bribery. Upon learning of these secret accounts in September 2000, he told BusinessWeek that “I felt shocked, worried, and betrayed” (May 27, 2002). González had good reason to be worried about the allegations. There were secret pension funds in the United States. Other secret offshore accounts were used to trade the company’s own shares. There were shady political contributions to the presidential campaign of Hugo Chávez in Venezuela. Funds were used to bribe other politicians in Latin America. Additional charges included tax evasion, embezzlement, and money laundering. While the purported illicit financial activities took place before González joined BBVA, it was up to him to restore the reputation of the bank. He had to deal with both public criticism and also satisfy authorities that BBVA was cleaning up its practices. The scandal led to many resignations at the bank and severely hurt morale at the company. González himself had to appear before a judge as a witness in the scandal, although he was not being investigated personally. In December 2000 he closed the secret accounts, transferred them to the bank’s balance sheet, paid taxes on the funds, and reported everything to the Bank of Spain. In 2001 many of BBVA’s top executives resigned due to alleged involvement in the scandal. Among them was cochairman Ybarra, whose resignation left González completely in charge of BBVA. Overall, 27 people were indicted in connection with the secret accounts.

AN EMPHASIS ON CORPORATE GOVERNANCE While the BBVA scandal may have represented a low point in González’s career, he used the crisis to overhaul the bank and its corporate governance, making his company more transparent in order to win back the trust that was lost among customers and investors. He studied the best codes of corporate governance used by other companies. BBVA then adopted the most rigorous systems, while adding its own elements. González broke with the tradition of packing the bank’s board of di-

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rectors with cronies by appointing more neutral outsiders. He promised to select board members based on their knowledge, responsibility, and experience rather than on personal connections. He also promised to publish the salaries of BBVA’s top executives, a rarity in continental Europe. “BBVA will have the most advanced code of governance and standard of transparency. Society is expecting it,” González told BusinessWeek (May 27, 2002).

LATIN AMERICAN EXPANSION González and BBVA participated in a wave of Spanish investment in Latin America in the 1990s. Banks expanded in Latin America due to their overcrowded domestic markets and restrictions on cross-border bank consolidation in Europe. Cheap assets and the promise of great profits lured Spanish bankers to the region, and at first they enjoyed much success. As much as half of BBVA’s profits during the 1990s derived from its Latin American holdings. Along with many other corporations that invested in Argentina, however, BBVA was hurt by that country’s severe economic crisis in 2002. Nevertheless, González promised to remain loyal to the region despite the uneven results of his company’s activities in the region. He did not want to give up on Latin America because of the success BBVA experienced in countries other than Argentina. In 2001, for example, 17 percent of the bank’s profits came from its operations in Mexico, and in 2004 BBVA purchased the remaining 40 percent of Mexico’s Bancomer that it did not already own. Part of the appeal of Mexico for González was the country’s proximity to the United States. One profitable growth area was the remittance of funds from Mexican migrants living in the United States. The Argentine crisis was a good learning experience for BBVA. Jordi Canals, a business-school dean in Barcelona, told the Financial Times, “They are learning how to manage banks through a crisis” (November 18, 2002).

freed up time, leading González to claim that BBVA was one of the most efficient banks in the world. In addition to efficiency, the use of technology to track and record customer activity allowed BBVA to better understand and serve clients. González maintained that technology aided BBVA in treating its customers like real human beings. González also sought to expand the use of telephone and Internet banking. He compared the situation of the banking industry in the 21st century to that of the Wells Fargo Company in the 19th century. Wells Fargo had to adapt to the appearance of railroads after having relied upon stagecoaches for so long. González equated the brick-and-mortar bank branches with the old stagecoaches and the new modes of remote access with the railroads.

A WORKAHOLIC AND TEAM PLAYER González had a reputation as being something of a workaholic. While he enjoyed playing golf on the weekends, he spent little time away from the office. Neither a smoker nor a drinker, he worked out vigorously at the gym for an hour everyday. González believed in delegating authority. Upon becoming CEO at Argentaria in 1996, he created the new post of managing director so that he would not be overwhelmed by an enormous workload. González told the Financial Times that “the whole thing is having a good team. I don’t believe in the style of a chairman having to do everything. I prefer people to think for themselves” (October 15, 1996).

See also entry on Banco Bilbao Vizcaya Argentaria S.A. in International Directory of Company Histories.


Burns, Tom, “Argentaria Makes Job of Redundancies,” Financial Times, May 9, 1997.

A PROPONENT OF TECHNOLOGY González was a strong proponent of expanding the use of technological developments in the banking industry, a result of his earlier career as a computer programmer. He believed that by adopting state-of-the-art technology, his company could gain an advantage over its competitors. He pointed to electronic payment systems that had made checks virtually obsolete in Spain. The use of such technology reduced costs and

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Crawford, Leslie, “Latin Lessons Have Left Little Room for Growth,” Financial Times, November, 18, 2002. “Holding the Bag at BBVA,” BusinessWeek, May, 27, 2002. White, David, “The Third Time Around,” Financial Times, October, 15, 1996. —Ronald Young


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David R. Goode 1941– Chairman, president, and chief executive officer, Norfolk Southern Corporation Nationality: American. Born: January 13, 1941, in Vinton, Virginia. Education: Duke University, AB, 1962; Harvard Law School, JD, 1965. Family: Son of Otto Goode (owner of a small department store and later a real estate broker) and Martha (a homemaker; maiden name unknown); married Susan Skiles (a schoolteacher) on June 22, 1963; children: two. Career: Norfolk & Western Railway, 1965–1967, tax attorney; 1967–1968, assistant general tax attorney; 1968–1971, general tax attorney; 1971–1981, director of taxation; Norfolk Southern Corporation, 1982–1985, assistant vice president of taxation; 1985–1991, vice president of taxation; 1991, executive vice president for administration; 1991–1992, president; 1992–, president, chairman, and CEO. Awards: John T. McCullough Logistics Executive of the Year Award, National Industrial Transportation League and Distribution magazine, 1997; Railroader of the Year, Railway Age magazine, 1998; Virginian of the Year, Virginia Press Association, 1999. Address: Norfolk Southern Corporation, 3 Commercial Place, Norfolk, Virginia 23510–2191; http:// www.nscorp.com.

■ Less than five years after he took over as chairman and chief executive officer of Norfolk Southern Corporation, which operates Norfolk Southern Railway, David Goode faced the biggest challenge of his career. He learned that CSX and Conrail, Norfolk Southern’s chief rivals in the eastern United States rail freight market, had quietly reached an agreement to merge. If allowed to proceed, the merger would have completely changed the competitive dynamics of the eastern rail market, leaving Norfolk Southern a much smaller force. The VirginiaInternational Directory of Business Biographies

born Goode, normally noted for his courtly manner and gentility, moved quickly and forcefully to block the merger with Conrail. Ultimately, Goode engineered a fairly even split of Conrail’s operations between CSX and Norfolk Southern, preserving his company’s position as a major player in the eastern rail freight market. Widely admired, according to Railway Age (January 1, 1998), as “a man who says what he means and means what he says,” Goode shaped for Norfolk Southern a four-pronged business strategy that served his company well. The four key goals of Goode’s strategy were (1) creating higher-quality, higher-value service, which could then be leveraged; (2) pushing high-value pricing and (3) increasing volume; and (4) improving efficiency of all operations and services.

TRAINS AS ACCOUNTANT AND LAWYER Born in Vinton, a suburb of Roanoke, southwest Virginia’s premier business center, Goode gained his first business experience by keeping the books for his family’s small department store. Goode was a bright student who also enjoyed sports. He played baseball and tennis enthusiastically but never really excelled at either game. Voted most likely to succeed by his high school classmates, Goode was named class valedictorian. Although he received a scholarship to nearby Washington and Lee College, a visit to the campus of Duke University in Durham, North Carolina, changed his plans. Smitten with everything about Duke, Goode turned his back on Washington and Lee and enrolled at prestigious Duke as a liberal arts student. He later settled on accounting as his major. For three summers between his studies at Duke, Goode worked as a seasonal park ranger for the U.S. Forest Service. At the beginning of his junior year, according to Norfolk’s Virginian Pilot, Goode returned early from his summer as park ranger to start selling advertising for the Duke Chronicle, the university’s daily newspaper, on which Goode served first as advertising manager and later as business manager. He also met the sophomore Susan Skiles. Goode earned his bachelor’s degree from Duke in 1962 and then attended Harvard Law School. In June 1963, shortly after Skiles graduated from Duke, the two were married and moved to Cambridge, Massachusetts, where Goode continued his law studies while his wife worked as a schoolteacher. In 1965 Goode received his law degree.

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David R. Goode

Fresh out of law school, Goode returned to southwestern Virginia and took a job as an attorney in the tax department of Norfolk & Western Railway (N&W), headquartered in Roanoke. For the next two decades he worked his way up through the ranks of the tax department. In 1967, two years after joining N&W, Goode was named assistant general tax attorney, and a year later he was promoted to general tax attorney. In 1971 Goode was named N&W’s director of taxation, a post he held until 1982, when he became assistant vice president, taxation, for the newly formed Norfolk Southern Corporation, created when N&W and Southern Railway merged. Three years later Goode was named vice president, taxation.

GOODE PUT ON FAST TRACK TO EXECUTIVE SUITE Although all of Goode’s experience with N&W and Norfolk Southern had been within its tax department, by the end of the 1980s he had come to the attention of Norfolk Southern’s top management as a strong candidate for a leadership position. He was groomed as a successor to the company’s retiring CEO, Arnold McKinnon, who in 1990 sent Goode to Harvard Business School’s advanced management program. Shortly after completing his studies in Cambridge, Goode in 1991 was named executive vice president, administration. Later that same year he was promoted to president. In 1992, soon after Norfolk Southern began its second decade in business, Goode’s duties increased significantly when he was given the added responsibilities of chairman and CEO. In the early 1990s Norfolk Southern was one of the three major players in the eastern U.S. railroad freight market, the other two being CSX Corporation and Conrail. Formed in 1976 under the Railroad Revitalization and Regulatory Reform Act to take over the operations of six bankrupt railroads in the Northeast, Conrail for the first decade of its existence was heavily subsidized by the federal government. In 1987 the federal government sold its controlling interest in Conrail in a $1.9 billion initial public stock offering (IPO), the largest such IPO up to that time. Both Norfolk Southern and CSX negotiated joint operating agreements with Conrail that gave them access to some of the major ports and transportation hubs within Conrail’s network in the Northeast. Under Goode’s leadership, Norfolk Southern in 1993 signed on Conrail as a partner in Norfolk Southern’s Triple Crown Services, which used trailers that could be operated over both rail and road. In 1995 the two railroads launched north–south double-stack service. Neither CSX nor Norfolk Southern made any secret of its interest in Conrail’s strategically valuable trackage throughout the Northeast. However, Goode was taken by surprise in mid-October 1996 when he learned in a telephone call from John Snow, then CEO of CSX, that Conrail and CSX had reached an agreement to merge.

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GOODE SEES NORFOLK SOUTHERN’S FUTURE AT STAKE Goode was seriously concerned about the effect that such a merger would have on Norfolk Southern’s competitiveness in the eastern rail freight market, especially by its exclusion from key markets in the Northeast. Interviewed by Justin Martin for Fortune magazine, Goode said that his immediate concern upon learning of the CSX-Conrail merger plan “was what to say to the world. We decided to make a strongly worded response indicating Norfolk Southern planned to take action and wouldn’t rule out any options.” That was just what Goode did. Norfolk Southern countered CSX’s bid for Conrail with an even larger purchase offer. When Conrail’s board of directors turned it down, Goode began a campaign to persuade Conrail shareholders to reject the planned merger with CSX, which they did on January 17, 1997, thus clearing the way for Goode’s next move. About a month after Conrail’s shareholders decided to oppose the proposed merger with CSX, Goode sent off a letter to Snow and David LeVan—the CEOs of CSX and Conrail, respectively— suggesting a compromise solution to their standoff. He proposed that Conrail’s existing operations be split roughly 50–50 between CSX and Norfolk Southern. However reluctantly, Snow and LeVan agreed, and by early April 1997 a new plan for the division of Conrail between the two railroads had been hammered out. It was then submitted to the Surface Transportation Board (STB), which eventually approved the breakup of Conrail despite vigorous opposition from some smaller eastern railroads that argued that the plan would hurt them competitively. Also speaking out against the breakup plan were railroad customers who believed that the realigned rail structure would reduce competition in the East and rail labor unions fearful of layoffs. The resulting division of Conrail created what Goode described to Fortune in 1997 as “two overlapping and pretty much competitive systems. Both Norfolk Southern and CSX will be able to offer single-line long-haul routes.” Previously both rail lines had been reliant on Conrail to provide the connection for many of their long hauls. Under the final agreement approved by the STB, Norfolk Southern acquired 58 percent of Conrail’s assets, including roughly six thousand Conrail route miles, and CSX got 42 percent of Conrail’s assets, including about 3,600 route miles. Approximately one thousand Conrail route miles located in northern New Jersey adjacent to the Port of New York and New Jersey, southern New Jersey and the nearby Philadelphia port area, and Detroit were reserved in the Shared Assets Area, jointly owned by the two railroads. Operation over that trackage was accessible to both Norfolk Southern and CSX and continued, in the early 2000s, to operate under the Conrail name.


David R. Goode

KEY COMMODITY MARKETS EVENLY SPLIT Although the division of Conrail route miles appeared at first glance to be somewhat tilted in Norfolk Southern’s favor, their submissions to STB showed that the agreed-upon division gave both railroads roughly equal shares of key commodity freight markets. After the breakup, the railroads estimated that CSX would hold 53.7 percent of the agricultural products market, compared with 46.3 percent for Norfolk Southern. The breakdown in other key commodities between CSX and Norfolk Southern, respectively, were as follows: chemicals, 58.8 and 41.2 percent; coal, coke, and iron, 49.7 and 50.3 percent; metals and construction, 52.4 and 47.6 percent; motor vehicles and parts, 48.6 and 51.4 percent; paper, clay, and forest products, 50.5 and 49.5 percent; and intermodal (moving via two or more transport modes), 44.9 and 51.1 percent. As of early 2004 Norfolk Southern operated over a network of 21,500 route miles connecting 22 states and the District of Columbia in the eastern United States and the Canadian province of Ontario. CSX, on the other hand, had a route system of 23,000 miles, linking 23 states, the District of Columbia, and the Canadian provinces of Ontario and Quebec. Under Goode’s leadership, however, Norfolk Southern steadily increased its annual revenue, climbing from roughly $5.2 billion in 1999 to about $6.5 billion in 2003. Over the same period CSX revenues plummeted from nearly $10.2 billion in 1999 to just under $7.8 billion in 2003. More impressively, Goode led Norfolk Southern to solid gains in profit every year except one between 1999 and 2003. After net income of $239 million in 1999, Norfolk Southern’s profit dipped to $172 million in 2000, a decline attributed to a slowing economy, depressed coal market, and higher diesel fuel prices. Stung by the decline, Goode moved quickly to slash costs at Norfolk Southern, laying off between one thousand and two thousand workers in 2001, adding to layoffs of nearly 3,700 workers in 2000. Norfolk Southern’s net income climbed sharply in 2001, hitting $375 million. The upward climb continued in 2002 and 2003, with net incomes of $460 million and $535 million, respectively. To keep Norfolk Southern growing and better able to meet the needs of its customers, Goode in December 2003 announced plans to spend $810 million on capital improvements in 2004, including $517 million earmarked for roadway projects and $258 million for new equipment. According to Fortune, Goode’s long-term goal for Norfolk Southern was to provide a full range of transportation services for its major customers, covering all phases—from distribution to billing— involved in the movement of goods.

OTHER ACTIVITIES Goode, who in 2004 lived with his family in the Norfolk area, was active in both industry and civic affairs. He was a


member of the Business Advisory Committee of the Transportation Center at Northwestern University, Business Council, Business Roundtable, Coal Industry Advisory Board, National Freight Transportation Association, National Grain Car Council, and Virginia Business Council. He also sat on the boards of the Association of American Railroads, AeroquipVickers, Caterpillar, Georgia-Pacific Corporation, Texas Instruments, Business Committee for the Arts, General Douglas MacArthur Memorial Foundation, Hollins College, and Virginia Foundation for Independent Colleges.

See also entry on Norfolk Southern Corporation in International Directory of Company Histories.


Dinsmore, Christopher, “How Norfolk Southern Derailed the Merger of CSX and Conrail,” Virginian Pilot, March 5, 1997. ———, “Norfolk Southern Earmarks $810 Million for Capital Budget,” Virginian Pilot, December 11, 2003. ———, “Norfolk Southern Pours It On; Coal Tonnage Is up for the First Time in a Decade with Renewed European Interest,” Virginian Pilot, November 9, 2003. ———, “On Track toward Railroad History,” Virginian Pilot, June 29, 1997. Holcomb, Henry J., “Rail Executive Profile: Norfolk Southern’s David Goode,” Philadelphia Inquirer, November 25, 1996. Martin, Justin, “Surviving a Head-on Collision,” Fortune, April 14, 1997. Miller, Luther S., “The War Is Over: The Real Fight Begins,” Railway Age, April 1, 1997. “Railroad Executive Is Honored: Press Group Names Goode Virginian of the Year,” Virginian Pilot, June 29, 1999. “Railroader of the Year Goode: In Troubled Times, an Optimist,” Railway Age, April 1, 1998. Thomas, Jim, “Logistics Executive of the Year David R. Goode: Restoring Rail Competition to the East,” Distribution 96, no. 12 (November 1997), p. 38. Welty, Gus, “The World’s Best Freight Railroad and the Man at the Top: David R. Goode: Railway Age’s Railroader of the Year,” Railway Age, January 1, 1998. Wilner, Frank N., “Good-bye Conrail. Hello, Competition,” Railway Age, July 1, 1998.

—Don Amerman

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Jim Goodnight 1943– President and chief executive officer, SAS Institute Nationality: American. Born: January 1943, in Salisbury, North Carolina. Education: North Carolina State University, BS, 1965; MS, 1968; PhD, 1972. Family: Son of Albert Goodnight and Dorothy Patterson Goodnight (hardware store owners); married Ann Baggett, 1966; children: three. Career: NASA Apollo space program, 1966, computer programmer; North Carolina State University, 1966–1971, graduate student; North Carolina State University, 1971–1976, faculty member; SAS Institute 1976–, president, CEO, computer programmer. Awards: Influential Leaders Award, CRM, 2003; Business Leader of the Decade, Business Leader, 1999. Address: 100 SAS Campus Drive, Cary, North Carolina 27513; http://www.sas.com. Jim Goodnight. AP/Wide World Photos.

■ After founding SAS Institute with a university colleague in 1976, Jim Goodnight built the organization into the largest private software company in the world. By 2004, 98 percent of Fortune 500 companies were using SAS programs to perform a variety of tasks in data mining, warehousing, and analysis. In 2004 Goodnight, with a fortune estimated at $2.9 billion, was ranked number 170 on the Forbes list of the richest people in the world. Goodnight achieved success mainly by ignoring mainstream business ideology and following his own distinctive philosophy about how to run a company. Goodnight’s unconventional methods inspired fierce loyalty in his employees and customers.

was a keen basketball player and cited his high school basketball coach as an important early influence. Software and computer programming, however, became Goodnight’s passions. In his sophomore year at North Carolina State University, as part of a major in applied mathematics, Goodnight took the only class available in computing at the time. This first encounter with a computer was a moment of revelation for Goodnight, and he found programming work over the summer break. In an article in the New York Times, Goodnight wrote that his destiny seemed assured: “After that summer, I was absolutely sold that I wanted to be in software” (October 20, 2002).

EARLY EXPERIENCE

Midway through his graduate studies in statistics, Goodnight went to Florida to work on the Apollo space program, developing engineering programs for the GE Company. Goodnight’s experience at his first full-time job had a pro-

From the age of 12, Goodnight worked after school and on weekends in his parents’ hardware store in Wilmington, North Carolina. At a height of six feet, four inches, Goodnight

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Jim Goodnight

found effect on how he later ran his company. While the work was exciting, the working conditions were demoralizing. Discipline was extremely tight, and the employees were treated with little respect. As Goodnight wrote in the New York Times, “You could be questioned about being five minutes late arriving in the morning. I resented that, since I often came back at night to work. They didn’t treat programming like a creative activity” (October 20, 2002).

SAS IS BORN After a year in Florida, Goodnight and his wife, Ann, moved back to North Carolina because of a family illness, and Goodnight returned to his graduate studies at North Carolina State. On completion of his doctorate, Goodnight became employed as a member of faculty. During his doctoral research, Goodnight joined forces with Anthony Barr, a fellow North Carolina State graduate who had recently returned from working at IBM. By this time, the department of statistics had become a focal point for incoming agricultural data from universities all over the Southeast. Rather than writing a new program each time analysis was required, Goodnight and Barr thought it would make sense to write one program that could be applied again and again. From this, Statistical Analysis Software (SAS) was developed. By 1972, with federal funding for the project running out, Barr and Goodnight persuaded the schools using SAS to fund their salaries so that they could continue to develop the software. The partners then were approached by pharmaceutical and insurance companies who recognized the applications of the software for their industries. By 1976 Goodnight and Barr had 120 clients and a growing group of SAS fans. It became apparent that SAS had outgrown its initial status as a research project and needed to move out of the confines of the university. With their business partners John Sall and Jane Helwig, Goodnight and Barr established the SAS Institute. Because it had an existing customer base, the company made a profit from the beginning. In 1979 Barr sold his share of the business to Goodnight. A few years later Helwig also sold out, leaving Goodnight with twothirds of SAS. While he retained his one-third share, Sall left the running of SAS largely to Goodnight. Goodnight recruited more programmers to work on creating and perfecting a range of SAS products. In 1980 the company headquarters was moved to Cary, North Carolina, where Goodnight bought large amounts of real estate, forming the basis of what would become a 200-acre campus. From 1976 to 2001 the SAS growth figures were in double digits every year, and in 1999 the company broke the $1 billion revenue mark.

SERVING CUSTOMERS AND EMPLOYEES SAS attracted attention not only because of its phenomenal growth but also for some of Goodnight’s unorthodox business


methods. From the beginning SAS software was sold on a subscription-billing basis with yearly renewals as opposed to the perpetual-license billing that was the norm in the industry. The SAS billing system had major consequences for the way the company was run. To maintain its income, the business had to establish strong relationships with its customers to keep them renewing their subscriptions. Goodnight created an environment in which customer needs were rated highly, to the extent Goodnight claimed he let customer needs determine the direction of the company. As a result, the company boasted a 98 percent customer retention rate in 2004. One of the benefits of the policy was that the company spent less on sales and marketing. Instead, 25–30 percent of revenue was spent on research and development when the industry average was 10–18 percent. Goodnight’s commitment to developing and perfecting the software products he offered to customers was the reason SAS Institute rose to the top of the data-analysis industry. The attention paid to the needs of the customers was more than matched by the benefits that Goodnight provided to his employees. Keeping in mind his experiences on his first job, Goodnight was determined to build a company in which the demands of work and family were carefully balanced in a stimulating and enjoyable working environment. With a wide range of employee benefits and flexible working hours, SAS gained a reputation as one of the best places to work in the United States. Goodnight steadfastly maintained that looking after his employees made good business sense and pointed to the money saved by the company’s staff turnover rate of less than 5 percent as opposed to the 20 percent that was the industry norm. Charles Fishman, in an article in Fast Company, quoted one SAS employee as saying, “You’re given the freedom, the flexibility, and the resources to do your job. Because you’re treated well, you treat the company well.” In a 60 Minutes interview with Morley Safer in 2002, Goodnight said that “95 percent of my assets drive out the front gate every evening. It’s my job to bring them back.” A key aspect of Goodnight’s management style was his involvement with his employees. As the company expanded, Goodnight continued writing computer code for several important SAS products. Even by the late 1990s he estimated that programming took up approximately 50 percent of his time at work. Goodnight continued to consider himself a software programmer even as his fortune climbed and the company grew. Goodnight remained in touch with his employees, who believed their CEO had a real understanding of what they needed to do their jobs well. Goodnight’s management values resulted in a company with a flat organizational structure, only four layers between the bottom and the top. The lack of hierarchy was expressed in a number of ways. The CEO and senior executives did not have their own parking spaces or a separate eating space, and Goodnight could often be seen lining up for lunch in the cafeteria with everyone else. Goodnight’s low-key style meant that while he was almost unknown outside the

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company, his employees regarded him as approachable and down-to-earth. Although some observers derided the SAS campus as a theme park and criticized Goodnight’s style as overly paternalistic, others regarded Goodnight as a model for an alternative approach to business leadership.

PUBLIC OR PRIVATE? With the changing business environment of the late 1990s, some observers predicted that Goodnight would be forced into overhauling some of his business philosophies. Despite its success, SAS remained invisible in terms of its public profile. In large part, this lack of visibility stemmed from Goodnight’s restrained personality and his distaste for the limelight. In a highly competitive market, however, and with giants such as Microsoft eyeing the industry, SAS needed to increase its visibility if it was to continue to grow. Goodnight himself admitted the need for the company to sell itself to executives rather than relying on its reputation among technical staff. This effort required a change in role for the publicity-shy CEO. Goodnight’s public profile became more prominent from the late 1990s onward. Media interviews, public-speaking engagements, and conferences increasingly took him away from SAS headquarters. The desire to increase the profile of SAS was part of the reason behind the proposed move to take the company public. The company was considered to have more chance of recruiting and retaining the best people if it could match the lucrative share options with which other companies lured staff. In 2000 the former Oracle executive Andre Boisert was hired to help take the company public. However, Goodnight, who often pointed out the advantages of being a private company, appeared to withdraw from the idea. The abrupt departure of Boisert in 2001 meant the flotation plans were put off indefinitely. As of early 2004 SAS Institute remained a private company. Some observers accused Goodnight of not wanting to relinquish control and questioned the future direction and sta-

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bility of the company. SAS Institute continued to perform strongly, however. Revenue from software sales in 2003 increased more than 14 percent over the previous year. Goodnight’s decision not to go public seemed to be generally well received by staff and customers, especially given the poor performance of the U.S. stock market. As of early 2004 Goodnight showed no signs of tiring in his role as head of SAS. He aimed to extend the reach of the company into the area of anti–money laundering software and development of products that would help companies to meet the requirements of new financial compliance legislation.

See also entry on SAS Institute Inc. in International Directory of Company Histories.


“Business Leader of the Decade: Jim Goodnight,” Business Leader 11, no. 5 (November 1999). Fishman, Charles, “Sanity Inc,” Fast Company no. 21 (January 1999), p. 84. Goodnight, Jim, “A Selectric Made Me Do It,” New York Times, October 20, 2002. Kirk, Phil, “Practical Visionary,” North Carolina Magazine, December 2000, p. 27. Morphis, Rebecca, “Forecasting the Future,” NC State 75, no. 4 (Fall 2003), p. 9. Safer, Morley, “Working the Good Life,” CBSnews.com, April 20, 2003, http://www.cbsnews.com/stories/2003/04/18/ 60minutes/main550102.shtml. Turchin, Brian, “SAS Profile: Going Its Own Way,” Software Business, January/February 2004, http:// www.softwarebusinessonline.com/images/SAS.pdf. —Katrina Ford


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Fred A. Goodwin 1959– Chief executive officer, Royal Bank of Scotland Nationality: British. Born: 1959, in Paisley, United Kingdom. Family: Married; children: two. Career: Rosyth Royal Dockyard, 1985–1987, contract manager; Touche Ross, dates unknown, partner; Bank of Credit and Commerce International, dates unknown, chief operating officer; National Australia Bank, dates unknown, chief executive officer and director; Royal Bank of Scotland, 1998–2000, group chief executive; 2000–, CEO. Awards: Named Global Businessman of the Year, Forbes, 2002; named one of the Top Ten UK Computer Sciences Corporation Business Leaders of the Year, 2003; knighthood, bestowed by Queen Elizabeth II of England, 2004. Address: Royal Bank of Scotland, 36 Saint Andrew, Edinburgh EH2 2AD, Scotland; http://www.rbs.co.uk. Fred A. Goodwin. © Elder Neville/Corbis SYGMA.

■ Frederick (“Fred”) A. Goodwin joined the Royal Bank of Scotland in 1998. The young, aggressive businessman operated like a European Pac-Man, gobbling up smaller banks and entities along the path to the top, feeding on their assets and spitting out their excess. By 2004 the Royal Bank of Scotland (RBS) commanded a global market value of $70 billion, outpacing J. P. Morgan Chase, Deutsche Bank, Barclays, and UBS.

OUT OF OBLIVION AND INTO THE SPOTLIGHT The tall, lanky, boyish-looking Goodwin was born in Paisley, Scotland, on the Clyde River west of Glasgow. An accountant by profession, Goodwin had early business experiences that extended across a wide range of industry sectors. His first professional challenge was the reorganization of contract management for the Rosyth Royal Dockyard from 1985 to 1987, and he was subsequently retained to advise the incoming con-


tractor. In 1990 Goodwin was appointed by the British government to prepare Short Brothers, Northern Ireland’s largest industrial employer, for privatization. He later became an accounting partner with Touche Ross and chief operating officer of the worldwide liquidation of the Bank of Credit and Commerce International. Goodwin was savvy in restructuring financial mergers and their attendant overlapping costs. He combined this talent with forward momentum to achieve tighter, fitter organizations, better prepared to take on growth and progress. Still in an accounting role, Goodwin helped the Clydesdale Bank (the British arm of the National Australia Bank) acquire the Yorkshire Bank. This became the stepping stone for him to enter the world of financial services. National Australia Bank noticed him and the work he did with Clydesdale and invited him to head British banking operations, which, in addition to

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the Clydesdale and Yorkshire Banks, included the National Irish and the Northern Banks. Goodwin later recounted, in an article for Forbes magazine, that he had accepted the job based on his “five-second rule,” which dictates that one’s first instinct is the right one (April 15, 2002). In fact, Goodwin, who was honored by Forbes as Global Businessman of the Year in December 2002, revealed that he often relied on such fast-paced visceral reactions to help him make his final decisions.

FRED THE SHRED True to form, Goodwin developed a reputation with National Australia Bank for cutting costs and trimming excess. Before long, he became known as “Fred the Shred” for his austere and often sweeping measures at the bank. In 1998 the Royal Bank of Scotland invited him to join their ranks as CEO. Moving from Glasgow to Edinburgh was as symbolic as it was factual: he had crossed the great divide from west to east, from simple to stuffy. Because he had been serving as chairman of the Prince’s Trust in Scotland, the transition was easier for those who had not yet attached a face or bona fide name to “Fred the Shred.” When Goodwin became CEO, RBS was a modest, midsized, provincial bank. He immediately set about to build up the bank by investing heavily in smaller acquisitions. A signature trend of RBS was that it did not replace its logo on its new acquisitions, often permitting them to operate independently. But behind the lines, Fred the Shred shrewdly strategized for integration. In March 2002 National Westminster Bank (NatWest) became the crown jewel in RBS’s holdings, and it was a hostile takeover. Twice the size of RBS, NatWest was acquired for $32 billion and catapulted the names of the Royal Bank of Scotland and Goodwin into banking history. According to Forbes Global (April 15, 2002), the acquisition was “brilliantly strategized” by Goodwin, who trumped his competition (Bank of Scotland) with a carefully constructed integration plan that impressed investors and produced great results, including a 27 percent increase in RBS’s profits. Unfortunately, Goodwin had to cut 18,000 jobs and $1.4 billion in costs in the merger, but his dedication to his investors won the day. Other Goodwin acquisitions included Mellon Financial (from RBS’s Citizens Financial Group in the United States) in 2001; the Swiss private Bank von Ernst in 2003; and First Active, an Irish mortgage lender, which merged with RBS-owned Ulster Bank in 2003.

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MONARCH OF THE BANKING GLEN OR MACHIAVELLI? Goodwin was staunchly loyal to his bank customers, making money for them at any cost. Known as blunt to the point of brutality, he was opinionated and viscerally judgmental, and he did not suffer fools gladly. While his acquisitions made a lot of money for his clients, he often alienated merger employees and labor unions for his cost-slashing tactics. The duality of his reputation—hero to many, Machiavelli to others—did not bother him. His commitment to his investors remained his primary focus.

THE BRITISH INVASION Having gained what he saw as the most desirable European acquisitions, Goodwin looked westward toward the future. Royal already owned the Citizens Financial Group in the United States, but in May 2004 Goodwin approved Citizen’s $10.5 billion acquisition of Ohio-based Charter One Financial. This move resulted in a $128 billion increase in RBS’s U.S. assets, making it the largest European-based bank in the United States. In a conference call with journalists, Goodwin conceded that he planned more U.S. takeovers in the future.

See also entry on Royal Bank of Scotland Group plc in International Directory of Company Histories.


Christy, John H., “The A List: Pro-Choice,” Forbes Global, April 15, 2002, http://www.forbes.com/global/2002/0415/ 043.html. O’Neill, Tina-Marie, “It’s All Right for Fred,” Sunday Business Post, October 19, 2003, http://archives.tcm.ie/businesspost/ 2003/10/19/story294620684.asp. Robinson, Karina, “Right, Said Fred, Both of Us Together,” Banker, April 2, 2001. “Royal Bank Eyes Growth,” Daily Herald (UK), May 6, 2004. Syre, Steven, “Royal Ambition,” Boston Globe, May 6, 2004. Wapples, John, and Rob Ballantyne, “RBS Steps Up Its Invasion of US Banking,” May 9, 2004, http:// business.timesonline.co.uk/article/0,,9063-1105149,00.html. —Lauri R. Harding


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Chip W. Goodyear 1958– Chief executive officer, BHP Billiton Nationality: American. Born: January 18, 1958, in Hartford, Connecticut. Education: Yale University, BS, 1980; Wharton School of Finance, University of Pennsylvania, MBA, 1983. Family: Son of Charles Goodyear (marketing director); married Elizabeth Dabezies; children: two. Career: Kidder, Peabody, 1983–1985, associate; 1985–1986, assistant vice president; 1986–1989, vice president; Freeport-McMoRan, 1989–1993, vice president, corporate finance; 1993–1995, senior vice president and chief investment officer; 1995–1997, executive vice president and chief financial officer; Goodyear Capital Corporation, 1997–1999, president; BHP, 1999–2001, chief financial officer; BHP Billiton, 2001–2003, chief development officer; 2003–, chief executive officer. Address: BHP Billiton, 180 Lonsdale Street, Melbourne 3000, Victoria, Australia; http://www.bhpbilliton.com.

■ When Charles (Chip) Waterhouse Goodyear was unexpectedly tossed into the CEO position at Australia’s gigantic mining and oil conglomerate BHP, people wondered whether his “blue-chip” management style could make up for the loss of his more aggressive and entrepreneurial predecessor. However, behind the scenes first as BHP’s chief financial officer, then as the merged BHP Billiton’s executive director and chief development officer, Goodyear had already contributed significantly to the successful turnaround of the previously ailing corporation. By 2004, after a year at the helm, things were looking good for both Goodyear and BHP Billiton: At the end of fiscal year 2003 the company ranked among the world’s top producers of coal and iron ore, was a major producer of crude oil and natural gas, and was a prolific producer of silver, lead, gold, zinc, nickel, aluminum, and copper, with operations on six continents. It employed 34,800 people, posted revenues of $10.26 billion, and showed a net income of $1.39 billion. International Directory of Business Biographies

THERE’S ORE IN BROKEN HILL! BHP began in 1883 when a sheep-station boundary rider in New South Wales, Australia, gathered some young speculators to search for ore that he felt sure existed in Broken Hill. The consortium, named the Broken Hill Proprietary Company (BHP), immediately found rich deposits of silver, lead, and zinc. In 1915 BHP entered the steel industry to become Australia’s largest producer, and it entered the oil business in the 1960s when it partnered with Esso Standard in offshore oil exploration. The 1960s and 1970s saw a major expansion of its iron ore, manganese, and coal interests, and BHP made further acquisitions in the 1980s in oil and steel. In 1996 it acquired Magma Copper, but a steep decline in copper prices created a $420 million write-down (reduction) in the book value of this asset. The turmoil in Asia’s economic market in the late 1990s caused further economic difficulties, and in 1997 BHP posted record losses. John Prescott, the CEO for the previous 40 years, was heavily criticized, and he was forced to resign in 1998 as BHP’s blue-chip stocks plunged and shareholders’ funds were depleted by $12 billion. Prescott was succeeded by an American, Paul Anderson of Duke Energy, who was hired to stop the bleeding; in 1999 Don R. Argus took over as chairman. Goodyear joined BHP in 1999 as chief financial officer. He was named for his paternal ancestor, Charles Waterhouse Goodyear, a highly successful U.S. lumber baron, and his father was a Texas oil man who worked for Exxon. After working for the Wall Street investment bank Kidder-Peabody, Goodyear went to Freeport-McMoRan, a natural-resources group. In 2001 BHP acquired Billiton, the London-based but predominantly South African-focused mineral-mining company, to become BHP Billiton. Anderson became CEO of the new venture, Brian Gilbertson was slated to become his successor, and Goodyear became the chief development officer to be stationed in London. The new corporation soon posted sales of almost $20 billion and had close to $30 billion in market capitalization. Also in 2001 BHP acquired Dia Met Minerals, with its 29 percent stake in Canada’s only producing diamond mine; combined with Alcoa’s North American metalsdistribution business in a joint venture called Integris Metals; and spun off its remaining steel business as BHP Steel to focus on minerals, oil, and gas operations.

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GOODYEAR INSTRUMENTAL IN TURNAROUND Goodyear was responsible for the group’s worldwide portfolio and entire strategy development and corporate activities, and he contributed significantly to transactions that further refined BHP Billiton’s asset portfolio. Due to his extensive financial, corporate restructuring, and merger and acquisition experience, he—along with Anderson—was widely credited with reversing the downward spiral of BHP’s fortunes. He was made executive director in November 2001. On January 6, 2003, Gilbertson—having been CEO of BHP Billiton for just six months—stormed out of a board meeting and subsequently announced his retirement, citing irreconcilable differences with the board. Many analysts speculated that those differences were actually with the more conservative and dogmatic board chairman, Argus, “regarded as one of the toughest nuts in the industry” and whose initials and personality earned him the nickname “Don’t Argue” (Sunday Times, January 19, 2003). The Sunday Times reporter noted that Gilbertson had aggressively built up the Billiton business and handed it over to BHP; he had a loyal following. Goodyear was immediately named CEO—the fourth in the five years since Prescott’s departure—and some analysts felt that his biggest challenge would be “keeping the loyalty of Gilbertson lieutenants so that BHP Billiton doesn’t lose its entrepreneurial edge” (Fortune, February 3, 2003). In announcing Goodyear’s appointment, however, Argus immediately confirmed that he had the board’s full support in continuing the strategic approach announced the previous year. “Chip is an outstanding executive with solid resources industry experience. During his time at BHP Billiton he has shown real leadership skills, financial acumen and a great ability to get things done. He is widely respected throughout the company and is highly regarded by the investment community” (press release, January 6, 2003). Goodyear, already highly instrumental in turning the company around, expressed assurance that he would continue to work with the initiatives in place and build on the company’s progress: “The Customer Sector Group business model and the company’s strategy have been in place and effective for over 18 months. The financial success and the significant progress we have made demonstrate our business model and strategy are working well” (Sunday Times, January 19, 2003). During an interview with Malcolm Maiden of the Age, Goodyear indicated that the company’s structure was designed to outlast even those who implemented it. He said the business model “wasn’t one person’s idea, I can assure you of that,” and that while everybody was surprised at Gilbertson’s sudden departure, once they got past it, the general attitude was to get back to business: “The platform we’ve created is a great one, the performance to date is all we would have hoped for. There are always people who wander off the reservation. Change happens—it’s good. If it didn’t, we would get run over” (April 12, 2003).

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SAFEGUARDS AGAINST VOLATILITY As part of his ongoing efforts, Goodyear worked on evening out the company’s volatility in the marketplace. Over the previous two or three years he had implemented a strategy to better control risks, direct marketing, and capital management to create an organization that no longer had what he called a “traditional resource cycle.” BHP Billiton’s financial strength came not just from its cash flow and balance sheet, but through an extremely diverse range of products and customers, access to global capital markets, and excellent growth opportunities. Goodyear said that diversification helped keep earnings level, even during a crisis: If one business, perhaps copper, was on a downswing, another business, perhaps oil and gas, may be on an upswing. As an example of the company’s stability, he pointed out that before tax, interest, and depreciation and amortization, BHP Billiton was “$US1.2 billion flat for the last six quarters—despite 9/11, Enron, Arthur Andersen, war, oil prices as low as $US18 a barrel and as high as $US38. Even people in the company are going, ‘wow, maybe there’s something to this stuff’” (Age, April 12, 2003). He said he still found himself having to educate analysts as to how BHP Billiton’s business model was a very different structure financially from other, less-diverse companies. When Maiden noted that analysts expected fewer mergers under Goodyear’s leadership, Goodyear responded that he expected to create value through management and expansion of existing assets, acquisitions to enhance those assets, and new projects. He indicated that because three huge corporations— BHP Billiton, Anglo American, and Rio Tinto—dominated the industry and could buy virtually anything they wanted, bargain takeovers were becoming more difficult. “We all look at everything, let’s be honest about that,” he told Maiden. “If the competition doesn’t show up, that’s because they aren’t the best buyer for the asset. And when you buy, you will pay the highest price that anybody else would be willing to pay” (Age, April 12, 2003). Part of Goodyear’s strategic plan was expansion in China. In February 2004 his company closed its largest-ever deal in a joint venture with four Chinese steel mills. In the venture, named Wheelarra, the mills agreed to purchase more than $9 billion worth of ore over a 25-year period. Ore shipments would come from BHP Billiton’s Jimblebar mine in Western Australia, and the mills would take a 40 percent stake in a sublease of the mines. “The Wheelarra Joint Venture will underpin a major export agreement between Australia and China and will cement an ongoing economic partnership between BHP Billiton as a leading supplier of raw materials and China as a major industrial nation,” said Goodyear (CNN.com, February 29, 2004). He expected the relationship would open other opportunities in China, especially in manganese and metallurgical coal. As a result of surging sales in China, rising metal prices, and increased sales of base metals and stainless


Chip W. Goodyear

steel, BHP Billiton’s 2003–2004 first-half profit jumped 30 percent to $1.2 billion.

DOWN-THE-LINE, DOWN-TO-EARTH, UP TO THE JOB In a May 24, 2004, Times Online article following an interview with Goodyear, Jon Ashworth described him as an “impeccably groomed American former investment banker who works out at the gym and prefers Hildon mineral water to Foster’s Lager.” He said Goodyear brought a “down-the-line approach to the job,” believing communication was of primary importance, followed by honesty. “You project an image of being straightforward . . . and you expect that in return. Thirdly, don’t play politics. That will disrupt an organization faster than anything,” he told Ashworth. Also high on his list was getting employees to focus on the real reason they went to work every day rather than worrying about who had the biggest or best office, who got the best deal, who got the better parking spot. “Who cares about all that stuff? Ultimately we’re here to create value for shareholders, and everybody in the organization ought to have that objective in mind.” Brett Olsher, global head of metals and mining at Deutsche Bank, worked closely with Goodyear for years. “He’s a very down-to-earth guy whose heart is in the right place,” he told Ashworth. “Chip, from day one, resonated very well with the market. . . . Australia is a very tough place. The Australian institutions are lethal, and it’s good combat duty for the UK and the US.” Ashworth noted that Goodyear spent a great deal of time on the road, or in the air. Of the company’s seven annual board meetings, four were in Melbourne and three in London. There were also executive committee meetings in Australia, the United Kingdom, and South Africa, and many visits to mines and smelters. Goodyear said he liked to “wander around and talk to people,” but indicated that was becoming ever more difficult because people were so spread around. “But if you do,” he added, “they appreciate that you understand who is doing the work.” John Buchanan, a board member and former finance director, said that although employees were located all over the world, Goodyear seemed to be doing an excellent job of postmerger integration. “It’s been very good for the company to find a team player pulling the old BP and the former Billiton together in a very constructive way. He took over in diffi-


cult circumstances and I think he’s hit the right mark” (Times Online, May 24, 2004). When Ashworth addressed Goodyear with the executivecompensation issue—Goodyear stood to earn up to £2 million a year if targets were met—he said being paid for doing the job was perfectly reasonable. He pointed out that if targets were met, the executive’s compensation would be miniscule in comparison to the “multiplier effect on the company’s share price. Clearly there are excesses and nobody has a perfect system. But if they set the metrics and that’s achieved, it ought to be, ‘hey, job well done’” (Times Online, May 24, 2004).

See also entry on Freeport-McMoRan Copper & Gold, Inc. in International Directory of Company Histories.


Ashworth, Jon, “Top Miner Keeps a Level Head over Key Merger: Chip Goodyear Is Quietly Making His Mark in Global Mining,” Times Online, May 24, 2004, http:// www.timesonline.co.uk/article/0,,630-1120899,00.html. “Billiton’s New Chip Faces the Aussie Bloc: Southerner Charles ‘Chip’ Goodyear Fobs Off the Threat of Australian Domination,” Sunday Times (Zambia), January 19, 2003. “Chip Goodyear Appointed BHP Billiton Chief Executive, Brian Gilbertson Resigns,” press release, January 6, 2003, http://www.bhpbilliton.com/bb/newsCentre/ newsReleaseDetail.jsp?id=News/2003/ NR_BHPBilliton060103.html. Hiscock, Geoff, “BHP Clinches $9bn China Deal, “ CNN.com, February 29, 2004, http://www.cnn.com/2004/BUSINESS/ 02/29/china.bhpdeal. Maiden, Malcolm, ”Now Is a Goodyear for BHP,” Age, April 12, 2003, http://www.theage.com.au/articles/2003/04/11/ 1049567876612.html?oneclick=true. “People to Watch, Chip Goodyear,” Fortune, February 3, 2003, http://www.fortune.com/fortune/peopletowatch/snapshot/ 0,16431,19,00.html.


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Andrew Gould 1946– Chairman, chief executive officer, Schlumberger Nationality: British. Born: December 17, 1946, in United Kingdom. Education: University of Wales. Family: Married (wife’s name unknown); children: three. Career: Ernst & Young, ?–1975; Schlumberger, 1975–1977, Internal Audit Paris; 1977–1979, controller, Schlumberger Instrument Velizy; 1979–1981, controller, FEA Wireline; 1981–1982, coltroller, Forex Neptune; 1982–1984, controller, Drilling & Production Services; 1984, vice president, Finance Dowell Schlumberger Houston; 1984–1985, treasurer, Atlantic Asia; 1985–1986, controller, Wireline & Testing; 1986–1990, treasurer, SL NY; 1990–1991, vice president operations, Sedco Forex; 1991–1993, president of Sedco Forex, 1993–1998, president of Wireline & Testing; 1998–1999, president of Oilfield Services Products; 1999–2002, executive vice president of Oilfield Services; 2002, president and COO; 2003–, chairman and CEO. Address: Schlumberger, 153 East 53rd Street, 57th Floor, New York, New York 10022-4624; http://www.slb.com.

■ As of 2004 Andrew Gould was the chairman and chief executive officer of Schlumberger. Gould received a degree in economic history from the University of Wales then worked for Ernst & Young before beginning his career at Schlumberger in 1975 in the company’s Internal Audit Department in Paris. In early assignments he was treasurer of Schlumberger and president of Sedco Forex, Wireline & Testing, and Oilfield Services Products. He later held the positions of executive vice president of Schlumberger Oilfield Services and then corporate president and chief operating officer. In February 2003, after heading up the firm’s oilfield services operations from 1999 to 2002, Gould succeeded Euan Baird as CEO. By the mid-2000s he had also become a nonexecutive director on the board of Rio Tinto.

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NEW LEADERSHIP FOR SCHLUMBERGER When Gould assumed the lead role at Schlumberger at the beginning of 2003, he quickly outlined specific goals for the renaissance of the company, which included increasing return on capital to double digits; substantially reducing net debt; refocusing on oilfield operations through divestitures; bringing the after-tax margins of Oilfield Services and Western-Geco to 15 percent and 12 percent, respectively; and increasing earnings per share (EPS) faster than revenue. In less than two years Gould oversaw the completion of a large portion of his goals: return on capital was 13 percent in 2003, as compared to the 7 percent of 2002; net debt was $2 billion in 2004, as compared to the $4.1 billion of 2003; business divestitures of Sema, Smart Cards, and Electricity Metering, among others, raised in excess of $2 billion; and oilfield revenue and EPS in 2003 increased by 9 percent and 28 percent, respectively. Industry analysts expected that by the end of the second quarter of 2004 Schlumberger would have returned to its oilfield service roots. Gould was credited with spurring this resurgence; investors rediscovered the company’s stock, which was well on its way to reattaining a premium valuation. Additionally, during Gould’s two years at the helm the company’s pricing strategy was overhauled, with a more disciplined approach being instituted. Cultural change was driven by management incentives tied to margin expansion and an absence of addition of new capacity during 2003. After Gould’s appointment to the position of chairman and CEO, Schlumberger deployed the Singapore remoteconnectivity teleport and the Aberdeen satellite-manufacturing facility with a second teleport. The company also introduced the ProVISION real-time reservoir-steering tool for LWD; the OrientXact perforating system; the SlimXtreme slimhole, high-pressure, high-temperature wireline logging platform; and the FlexSTONE advanced flexible cementing system. Under Gould’s direction Schlumberger acquired A. Comeau and Associates, enhancing capabilities in artificially lifted wells; VoxelVision, adding high-end PC-based visualization and seismic technology; and a stake in the premier Russian oilfield services firm PetroAlliance Services Company. In 2003 Schlumberger began conducting Q-Land surveys and launched the following systems: the PowerDrive Xceed fully rotational steerable system; the MaxTRAC production-services tractor; the SeismicVISION LWD (logging while drilling) system; the


Andrew Gould

LiteCRETE lightweight, high-performance cementing system; the PVT Express mobile pressure-volume-temperature laboratory; and the DecisionXpress petrophysical evaluation system. Founded in 1924, Schlumberger was a global oilfield and information services company with major activity in the energy industry. With oil being searched out and developed across the globe, Schlumberger provided a range of oilfield services and products spanning the entire reservoir life cycle. Among its activities were seismic surveying, wireline logging (a company invention dating from 1927), directional drilling, middrilling measurement, well services from construction through completion, and integrated project management. The company employed people of more than 140 nationalities in one hundred countries through 28 service regions and consisted of three business segments: SchlumbergerSema was a leading supplier of IT consulting, systems integration, and network and infrastructure services to the energy industry as well as to the public sector and telecommunications and finance markets; the world’s premier oilfield services company Schlumberger Oilfield Services supplied a wide range of technology services and solutions to the international oil and gas industry; and WesternGeco, jointly owned with Baker Hughes, was the world’s largest and most advanced surface-seismic company.

MANAGEMENT STYLE Industry watchers indicated that Gould’s 2003 appointment produced a very notable change in management style at Schlumberger that was beginning to have large effects on the company, due primarily to his quick plans to realign the firm’s strategic direction. Under the previous management structure Schlumberger was becoming a global technology services company leveraged to many different industries; Gould strove to refocus the company on energy services, selling some of the noncore technology components that had been built up over several years under the prior leadership. Gould’s traditional and conservative style was credited with reasserting cohesion within the Schlumberger corporate culture. The company returned to being a leading force in almost every product or service it provided and produced outstanding returns in the process. Both critics and supporters noted that Gould planned not only to divest noncore businesses but also to differentiate Schlumberger on the basis of technology and maximize profits from core activities. Observers expected that under his aggressive leadership, in keeping with the corporate objectives he laid


out at the onset of his reign, and in response to changing times in the energy business, Gould would consistently find the necessary solutions. In a speech at the Lehman Brothers CEO Energy/Power Conference, Gould said, “What is sure is that if the world is going to have a reasonably priced energy supply to continue to fuel economic growth, we need to rapidly adapt to more volatile times; risk and reward opportunities will therefore abound. In these circumstances, I am confident that in the coming decade, Schlumberger will be a major benefit in the renewed investment that will be required to guarantee our energy future” (September 2, 2003).

See also entry on Schlumberger Limited in International Directory of Company Histories.


“Andrew Gould,” Executive Management, http://www.slb.com/ press/company/executives/gould.cfm. “Andrew Gould,” Offshore Technology Conference, http:// www.otcnet.org/2004/pressroom/bios_photos.html#gould. Gould, Andrew C., “Lehman Brothers CEO Energy/Power Conference,” September 2, 2003, http://www.corporateir.net/media_files/NYS/SLB/pdf/slb_090303.pdf., from the Thomson CCBN Web site: http://www.ccbn.com/. Hallead, Kurt, “RBC Capital Markets Web Page,” (June 1, 2004), report March 29, 2004, https:// www.rbccmresearch.com/drw1.0.4/pdf/0,,44953,00.pdf. MacKenzie, Robert, “Analyst Expects the Stock Price of Schlumberger to Rise Faster Than Its Peers,” Wall Street Transcript, July 15, 2003, http://www.twst.com/notes/ articles/sax800.html. “Schlumberger Limited,” Ernstrade, http://www.ernstrade.com/ NYprofil/Schlumberger.html. “Schlumberger Ltd. (Services/Suppliers),” Oil and Gas Journal, November 18, 2002, p. 62. “Shareholder Winter 2004 Web Site,” http://www.slb.com/ Hub/Docs/slb/secu/Winter-2004.pdf, May 5, 2004, from Schlumberger limited Web site: http://www.slb.com. “Speaker Bios,” Global Energy Symposium, http:// www.simmonsco-intl.com/conferencebios.htm. —Patricia McKenna

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William E. Greehey 1936– Chairman and chief executive officer, Valero Energy Corporation Nationality: American. Born: 1936, in Fort Dodge, Iowa. Education: St. Mary’s University of San Antonio, Texas, BBA, 1960. Family: Married Louree Bruce; children: five. Career: Price Waterhouse, 1960–?, accountant; Exxon, ?–1963, auditor; Coastal State Gas Corporation, 1963–1968, indenture administrator; 1968–1973, senior vice president of finance; LoVaca Gathering Company, 1973–1980, CEO and vice president; Valero Energy Corporation, 1980–, chairman and CEO. Awards: Distinguished Alumni Award, St. Mary’s University, 1986; Golden Plate Award, American Academy of Achievement, 2000; Horatio Algier Award, Horatio Alger Association, 2001; Business Hall of Fame, Texas, 2002. Address: Valero Energy Corporation, 1 Valero Place, San Antonio, Texas 78212; http://www.valero.com.

■ William E. Greehey rose from humble origins to become the chairman and CEO of Valero Energy Corporation, one of the largest independent oil-refining companies in the United States. Greehey saw Valero through a price plunge in unleaded gas in the 1980s that threatened its existence; he eventually turned the debt-ridden corporation into a flourishing Fortune 500 company with approximately 20,000 employees and revenues of $38 billion. Industry analysts and colleagues described Greehey as a tenacious man whose ambitious vision ultimately made Valero into one of the most successful oil refiners in the nation.

years old, Greehey had found employment in order to help support his family. Equipped with a strong work ethic and a dream of attaining more in life, he joined the air force in order to benefit from the GI bill and become the first person from his family—as well as his neighborhood—to go to college. After completing his tour of service, Greehey attended St. Mary’s University in San Antonio, Texas. At the Catholic college Marianist brothers helped arrange for further financial aid, and Greehey also worked nights and weekends parking cars at a hospital. He went on to complete his four-year course of studies in business administration in two and a half years, earning numerous academic honors in the process. After graduating in 1960, Greehey first became a certified public accountant and worked for Price Waterhouse. He then joined Exxon as an auditor. In 1963 he was hired by Coastal State Gas Corporation, where he rose quickly through the ranks to become senior vice president in 1968 at the age of 32. In the early 1970s Greehey’s career reached a turning point. A subsidiary of Coastal, LoVaca Gathering Company, found itself being sued by natural-gas utilities throughout Texas when it could not fulfill its contracts due to a short supply of natural gas. In 1973 the courts appointed Greehey as LoVaca’s CEO and president and charged him with negotiating a settlement, which many industry analysts believed would be an impossible task. But Greehey proved them wrong and turned the company around by striking a $1.6 billion deal. In an article in Philanthropy World Magazine, the former Texas governor Dolph Briscoe noted that taking over LoVaca would have been “too daunting a task for some people, but it never occurred to Greehey that he would not succeed in turning the company around and reaching a successful settlement” (August/ September 2003).

FACES NEW CHALLENGE

FROM SMALL TOWN TO BIG TIME

Greehey’s turnaround of LoVaca reached a conclusion in 1980, but his relations with the company had not yet ended. The agreement to meet LoVaca’s debts had necessitated the creation of a new company called Valero Energy Corporation. When the spin-off occurred in 1980, it was the largest in U.S. history. Greehey was appointed as the head of Valero and soon found a whole new set of challenges awaiting him.

Greehey grew up in the small town of Fort Dodge, Iowa, in a loving but relatively poor family. By the time he was 12

One of Greehey’s early decisions was to diversify the natural-gas supplier into the refinement of unleaded gasoline; he

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William E. Greehey

had a hunch that the company could prosper from increasing fuel shortages and the industry’s general lack of specialized refining capacity. Greehey focused on the use of residual fuel oil, a byproduct of the process of crude-oil refinement, to produce the desired unleaded gas. He made arrangements to obtain supplies from Saudi Arabian refiners, bought an old refinery in Corpus Christi, and spent $600 million to build a new refinery on the old site. In an interview with Claire Poole of Forbes, Greehey recalled, “The headlines in San Antonio said buying the refinery was the biggest mistake we’d ever make” (April 13, 1992). For a while it looked as though the analysts would be right. A yearlong strike by Great Britain Coal miners beginning in 1984 caused much of Greehey’s Saudi supply of residual fuel oil to skyrocket in price because of the greater demand for fuel with which to fire British boilers. Greehey and Valero were hit again when European refiners decided to boost production of unleaded gasoline from residual oil and then dump stores on the U.S. market. As 1984 came to a close, Greehey’s refinery in Corpus Christi was losing $250,000 a day, according to some industry analysts. The company’s stock dropped from around $20 per share in 1983 to just $5.88 per share in 1984. Greehey avoided panicking and was determined to see Valero through the tough times. He sold off the company’s west Texas pipeline and some of its preferred stock to raise around $80.5 million. Still, by 1986 Valero had lost approximately $50 million and incurred around $900 million in debt. The following year Greehey decided to spin off a substantial portion of Valero’s gas-pipeline operation into Valero Natural Gas Partners, a move that reduced Valero’s debt load by $700 million and saved the company $45 million a year in interest expenses. In 1988 the bailout started to pay off as refining margins began to improve. Valero earned $30.6 million on sales of $770 million that year. Greehey’s decision to build the new refinery in Corpus Christi also paid dividends in other ways. Because they had constructed one of the most modern and efficient refineries in the country, Greehey and Valero did not need to spend any money to comply with the refinery standards of the 1990 Clean Air Act; partly as a result of the act several of Valero’s competitors were ultimately forced to close down.

FORGES AHEAD Valero’s earnings reached $98.7 million on revenues of more than $1 billion in 1991. Greehey retired as the company’s CEO in 1996, but his retirement lasted only four months, as his replacement, who had become CEO on June 30, 1996, resigned following a board meeting. Greehey came back on board just as the company was making numerous transactions that focused on the selling off of natural-gas assets in order to


reduce the company’s operations to oil refining and marketing exclusively. By the time Valero Energy Corporation completed its divestitures of the natural-gas divisions, Greehey had already set in place the foundation for the company’s future success. According to many industry analysts, one of his most significant moves was the acquisition of Basis Petroleum’s three refineries the previous April, when refining margins between costs and prices had been narrow and owners had been willing to sell. Analysts pointed out that Greehey had been right in predicting that refining margins would widen and that purchasing the refineries to add to Valero’s only existing refinery in Corpus Christi would be a boon to the company. Greehey told David Hendricks of the Knight Ridder/Tribune Business News that the second and third quarters were good and “the fourth quarter will be very good. We’re going to have a record year” (August 24, 1997). Greehey continued to successfully guide Valero; in 2001 he was the highest-paid executive of a publicly traded U.S. upstream or downstream oil company. Although already the largest U.S. independent oil refiner by 2002, Valero continued to expand through the purchase of other refineries such as Ultramar Diamond Shamrock. In January 2004 Valero posted record profits and reduced its debt by $725 million. The company reported net incomes of $131.6 million for the fourth quarter of 2003 and $621.5 million for the year, which were record highs. Bolstered by the company’s success, Greehey once more looked for acquisitions. He told Paul Merolli of the Oil Daily, “We feel there is room to grow in the East Coast, Gulf Coast, Mid-Continent and—excluding California—the West Coast” (January 28, 2004).

MANAGEMENT STYLE: EMPLOYEES FIRST Industry analysts noted that Greehey had grown up in the face of adversity and that his experience certainly played a role in his never-say-die management attitude. They credited his shrewd business deals with bringing Valero back from the brink of collapse in the mid-1980s. Colleagues and industry watchers said that his dedication and determination were the primary reasons for Valero’s overwhelming success over the years. Both analysts and colleagues noted that in spite of his business wheelings and dealings Greehey always considered Valero’s most important asset to be its employees. Fiercely loyal to the company’s management and workers, he referred to them as the “Valero family.” This loyalty was best demonstrated by the facts that the company never laid anyone off and that employees received the best pay and benefits in the industry. Because of Greehey’s leadership Fortune magazine recognized Valero in 2003 as one of the “100 Best Companies to Work For in America.”

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William E. Greehey

Greehey’s personal philosophy was to share Valero’s success with the community through various initiatives. The company received numerous honors, including the Points of Light Foundation’s national award for Excellence in Corporate Community Service and the United Way’s Spirit of America Award, its highest corporate honor. Greehey also donated his personal time and money to worthy causes; he raised funds to build an athletic arena for his alma mater, St. Mary’s, which named the complex Bill Greehey Arena.

LOOKING GOOD Although Greehey had initially planned on retiring in 1999, he continued to lead Valero into the 21st century. In 2004 Valero had an extensive refining system with a throughput capacity of over 2.4 million barrels per day; its refining network stretched from Canada to the U.S. Gulf Coast and from the West Coast to the Caribbean. Greehey remained optimistic about the future, telling Merolli of the Oil Daily, “As far as the fundamentals are concerned, they’ve never looked better to us” (January 28, 2004). In addition to his duties at Valero, Greehey served in numerous capacities for other organizations, serving on the board of trustees of St. Mary’s University and on the Boy Scouts of

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America’s National Advisory Council. He also served on the board of trustees of the United Way of San Antonio and Bexar County and on the boards of the Southwest Foundation for Biomedical Research, the Cancer Therapy & Research Center, and the Alamo Board.

See also entries on The Coastal Corporation and Valero Energy Corporation in International Directory of Company Histories.


Hendricks, David, “Margins Helping the Texas-Based New Valero Energy Corp.,” Knight Ridder/Tribune Business News, August 24, 1997. Merolli, Paul, “Bullish Valero Looks to Grow after Record Year,” Oil Daily, January 28, 2004. Poole, Claire, “Stubbornness Rewarded,” Fortune, April 13, 1992, p. 54. “Refining the Meaning of Success,” Philanthropy World, August/September 2003, http://www.philanthropyin texas.com/03augsep/bill-greehey.htm. —David Petechuk


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Stephen K. Green 1948– Chief executive officer, HSBC Holdings Nationality: British. Born: November 7, 1948, in England. Education: Exeter College, Oxford, BA, 1966; MIT, MSc. Family: Son of Dudley Keith Green and Dorothy Rosamund Mary Wickham; married Janian Joy, 1971; children: two. Career: British Government, 1971–1977, Ministry of Overseas Development; McKinsey and Company, 1977–1982, management consultant; Hongkong and Shanghai Banking Corporation (became HSBC Holdings in 1993), 1982–1992, various positions; 1992–1998, group treasurer; 1995–1998, director of HSBC Bank (formerly Midland Bank); 1998–2003, executive director of Investment Banking and Markets; 1998–, executive director; 2003–, chairman of HSBC Investment Bank Holdings, department chairman of HSBC Bank, chief executive officer. Publications: Serving God? Serving Mammon? Christians and the Financial Market, 1996. Address: HSBC Holdings, 8 Canada Square, London, E14 5HQ, United Kingdom; http://www.hsbc.com.

■ In 2003 Stephen K. Green was appointed CEO of HSBC Holdings, Great Britain’s second-largest bank and the secondlargest international banking concern in terms of market capital. Founded as Hongkong and Shanghai Bank in 1865 by a Scotsman and other businessmen to focus on imperial trade in East Asia, the business grew and became HSBC Holdings in 1993, with subsidiaries throughout the world, including Asia and North and South America. After taking over the reins at HSBC, Green set out to organize and instill a sense of teamwork and continuity in the global banking concern. He also oversaw the acquisition and integration of the U.S. consumerfinance group Household International, which represented HSBC’s largest acquisition in a series of acquisitions made in the five years prior to Green’s appointment as CEO. Noted as studious and competitive, Green was also a part-time preacher in the Anglican Church. International Directory of Business Biographies

FROM BRIGHTON TO BANKING Green grew up in Brighton, England, the son of churchgoing parents who influenced his later decision to become more involved with his Christian faith. He graduated with a degree in philosophy, politics, and economics from Exeter College, Oxford, and then earned a master of science degree from the Massachusetts Institute of Technology (MIT). He joined the British government’s Ministry of Overseas Development in 1971 and worked there for six years before joining the international management-consulting firm of McKinsey and Company in 1977. In 1982 he joined HSBC’s predecessor, the Hongkong and Shanghai Banking Corporation, on a two-year contract that he hoped would turn into a four-year contract. Green would later recall to Jill Treanor in an article in the Guardian, “It was not in my wildest imaginings that I would be in the company 21 years later or that the company would become what it has” (October 18, 2003). Green joined HSBC to take on responsibility for corporateplanning activities. In 1985 he was put in charge of developing the bank’s global treasury operations. In 1992 he became group treasurer of HSBC Holdings, with responsibility for the HSBC group’s treasury and capital-markets businesses globally. He was made a director of HSBC Bank (formerly Midland Bank) in 1995. In 1998 Green was appointed executive director of Investment Banking and Markets, responsible for HSBC’s investment banking, private banking, and asset-management activities. He also assumed responsibility for HSBC’s corporatebanking business in May 2002. While serving as executive director, Green showed how tough he could be when he cut out all executive bonuses in 2001 and 2002 after the stock markets had fallen for the second and third years in a row. Green explained his rationale to James R. Hagerty and Michael R. Sesit of the Wall Street Journal: “We took the view that a business that had not performed for the shareholder couldn’t expect to receive bonuses” (March 3, 2003). As a result of the bonus cuts, some of the company’s bankers and research analysts left in protest. Nevertheless, in addition to holding down costs, Green’s decision to cut bonuses was good public relations for the company. HSBC’s chairman, Sir John Bond, told Institutional Investor, “We had corporate clients come up to us and say, ‘Thank God you’ve taken a stand’” (April 2003).

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Stephen K. Green

BECOMES CEO Some colleagues and industry analysts noted that it was Green’s foresight and courage in halting bonuses that influenced the HSBC board’s decision to appoint the 21-year company veteran to succeed the retiring HSBC chief executive in May 2003. Another factor in the decision was that the corporate, investment-banking, and markets divisions that Green had been heading accounted for $194 billion, or 36 percent, of the company’s pretax profits in the first half of 2002. Analysts also noted that HSBC had never made anyone from outside the company its CEO and that Green had spent 20 years being groomed in the HSBC corporate culture. As head of corporate and investment banking, Green showed that he adhered to the corporate philosophy by carefully watching costs and emphasizing teamwork. Industry analyst James Leal told Sean Farrell of the National Post, “This is a transition from one HSBC-lifer to another. Strategically, it will be more of the same—HSBC will continue to expand its global reach” (March 1, 2003). Many banking insiders in England felt that Green was taking over one of the best banking jobs in Great Britain, noting that the position had sometimes led to knighthood. Analysts noted, however, that Green’s appointment came at a crucial time, as HSBC embarked on an expansion in the United States following its takeover of Household International. One of Green’s first priorities as CEO was to oversee the smooth transition of the U.S. consumer-finance group, which had been purchased for $15.5 billion to help HSBC make inroads into the U.S. consumer market. Green’s initial success in integrating the company into HSBC was tied to HSBC’s profits jumping 25 percent to $6.1 billion in the first half of 2003. Roughly 10 percent of the profit came from Household. Green also looked to apply the expertise the company gained from acquiring Household to other markets where HSBC was exploring consumer-finance opportunities, including Mexico, Brazil, Southeast Asia, and France. Green said these markets were ripe for consumer lending despite the fact that in many of them lending traditionally was associated with corporate and commercial clients rather than the individual consumer. Green told Maisara Ismail of the Business Times, “There are opportunities to build up the consumer finance business, particularly in the younger market as people are beginning to get fully integrated in the mainstream modern economy” (November 13, 2003). Green also encountered controversy during his early tenure as CEO. The Household transaction was surrounded by controversy concerning payouts to executives and a $484-million settlement due to accusations of predatory lending by U.S. regulators. Green also made enemies when he decided to move approximately four thousand call-center and processing jobs from the United Kingdom to India, China, and Malaysia. This

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represented the largest job migration of any British financialservices company and fostered a groundswell of controversy. The British finance union Unifi spoke out loudly against the decision, but Green maintained that it was an important move in his effort to manage the company’s resources internationally in the most cost-effective manner. He told Treanor of the Guardian, “It’s wrong to pretend you can protect the existing jobs and wrong to pretend there isn’t going to be change. It can’t be the right response to say that emerging markets have no right to jobs” (October 18, 2003). Although Green felt that the bank did not need acquisitions to continue to grow, he also noted that emerging markets in Asia, Mexico, and elsewhere were important to HSBC’s continued success, especially in terms of its consumer business. But Green did not forget Europe. For example, he oversaw the launching of a credit-card business in Poland because it was a growing economy that had joined the European Union. Nevertheless, Green kept looking for new sources of development outside of Europe. He received kudos for his support in fostering HSBC’s growth in its Islamic financial services in Asia. He fostered the development of a comprehensive range of products and services at HSBC’s Islamic division, Amanah Finance. He also stressed that the services needed to be aggressively marketed through HSBC’s global banking network. Ultimately, Green geared up the finance group both in terms of investment and management capability to pioneer products and structures that gave HSBC a leading position in the Islamic finance industry. In 2003 HSBC became the first international bank in the United Arab Emirates to provide Islamic personal-finance products when it launched Amanah Personal Finance, a cash-financing facility that complied with sharia, or Islamic law. In the same month, HSBC was the first “high street” (finance district) bank in the United Kingdom to launch Islamic personal finance services with its Amanah Home Finance and Amanah Current Account, both of which meet the requirements of sharia. Green also launched a Britishbased Islamic finance program and expanded the program to over 70 branches in the United Kingdom. Green’s push for expansion in Asia focused heavily on China. He believed that the bank had to take a long-term perspective in China, and he was quoted by Brian Kelleher in a Reuters news-service report as saying, “China is going to become more and more important on a global scale. I think you will see us constantly growing our business there” (August 11, 2004).

FROM BOARDROOM TO PULPIT Green said that his number-one priority in management was meeting what he called the “people challenge,” that is, preserving a strong sense of teamwork through a management and working group that was spread across the globe. Analysts noted


Stephen K. Green

that he emphasized instilling integrity and professionalism in all HSBC staff. He stressed a moral business code of always giving the customer a fair deal. “I can’t think of another management challenge more important than that,” he said. “If you get that right everything else will fall into place. If you don’t, you will lose something very precious” (Business Times, November 13, 2003). Green told Jill Treanor that he looked for certain characteristics in employees. He said the most important characteristic, regardless of the employee’s faith, was a view of the importance of morality and integrity in business life. “I happen to believe it is the only basis of sustainable success over the long term,” he said (Guardian, October 18, 2003). As CEO, Green was committed to recruiting globally, and not just for employees to work in their own countries. He once noted that the bank’s expansion over two decades from a regional Southeast Asian bank with 30,000 employees to a global powerhouse with 215,000 workers required that he recruit from nearly 50 different countries. Green also had strong opinions about how his current employees and those hired in the future could succeed. As reported by David Ignatius, Green told a graduating class at St. Gallen’s University in Switzerland that they would have to work hard and stay on their toes, reminding them of the old Chinese proverb: “Today’s rooster is tomorrow’s feather duster” (Washington Post, May 27, 2003). Green not only practiced what he preached, he also wrote about it in his book Serving God? Serving Mammon? Christians and the Financial Market, which was published in 1996. Green was an ordained, unpaid Anglican Church minister and often preached in the church near his London home. Colleagues noted that he sometimes composed his sermons while flying to HSBC’s outposts around the world. In his book and his sermons he stressed that businesses like HSBC could demonstrate their moral standing by always acting responsibly toward employees, customers, and the local communities. Referring to how his Christian beliefs affected his management style, he told Institutional Investor, “There’s a very clear focus on doing the right kind of business, on long-term relationships with clients, on honesty and transparency” (April 2003). Although he had strong moral beliefs, colleagues also viewed Green as being extremely competitive. Nevertheless, he prided himself on being a team player. He had a reputation for flexibility in managing and understanding that management must adjust over the years. For example, he told Ismail of the Business Times that HSBC’s management organized its resources by geography and by activity. However, any organization according to these criteria would not necessarily be valid for the long term. As for his personal outlook toward his own career, Green often noted that money was not the most important aspect of the job to him. He said that many others in the HSBC organi-


zation had more lucrative salaries and bonuses than he did. Green also believed that a company’s size was not the most important element to ensure future success. Catching up with competitors through acquisitions was never his main priority. Instead, he focused on earning the best returns for shareholders and contributing to the economies in areas where HSBC operated. He told Ismail, “Yes, we are among the top banks in the world, and we all want to maintain that position, but I think it will be quite a fundamental mistake for us to say our primary goal in life is to become the largest bank by market capital in the world” (Business Times, November 13, 2003). As the head of a bank that employed people around the world, Green also emphasized cultural sensitivity in the expanding global marketplace. He told Philippe Rosinski that he believed HSBC would be less profitable and life would be a lot duller if his French colleagues “lost their French-ness” or Brazilian colleagues did not maintain their “Brazilian-ness.” He also noted, “We prize our diversity. That’s all part of the richness and fun of working together, and it’s what makes us so creative and responsive to our clients’ needs” (Management Centre Europe, May 2004).

FURTHERING GLOBAL PRESENCE In early 2004 Green announced that HSBC’s performance had exceeded the company’s expectations for 2003. Operating in 79 countries, HSBC benefited from a global economic recovery and rising employment in its key U.S. and Hong Kong markets. Nevertheless, an uncertain economic outlook connected with high oil prices and rising interest rates led to falling share prices overall for the company. By May 2004 the company’s stock price had fallen 10 percent for the year, making it the second-worst performer of the 11 top banks in the United Kingdom. Although Green professed to have a somewhat cautious outlook, he was generally pleased with the company’s progress under his guidance to that point. He initiated a new management plan to further the company’s globalization. In addition to his duties as CEO, Green held directorships at the Hongkong and Shanghai Banking Corporation, CCF, HSBC Guyerzeller Bank, HSBC Bank USA, HSBC Private Banking Holdings, and HSBC Trinkaus and Burkhardt. He was a member of the board of directors of Credit Commercial de France, director of the Poplar Housing and Regeneration Community Association, and chairman of International Needs UK.

See also entry on HSBC Holdings plc in International Directory of Company Histories.

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Stephen K. Green SOURCES FOR FURTHER INFORMATION

“Britain’s Biggest Bank Name Poetry-Loving Minister as Chief Executive,” Knight Ridder/Tribune Business News, February 28, 2003. Farrell, Sean, “HSBC Appoints New CEO To Shepherd US$15.5 B Acquisition: Stephen Green to Replace Sir Keith Whitson,” National Post, March 1, 2003.

Ismail, Maisara, “Preserving Teamwork a Vital Challenge for HSBC,” Business Times, November 13, 2003. Kelleher, Brian, “HSBC’s Size Seen Less Important in China Expansion,” Reuters news-service report, August 11, 2004, http://uktop100.reuters.com/latest/HSBC/top10/20030811FINANCIAL-HONGKONG-HSBC-CORRECTED.asp.

“The Greening of HSBC,” Institutional Investor, international edition, April 2003, p. 9.

Rosinski, Philippe, “Developing Global Leaders with Coaching Across Cultures,” Management Centre Europe, May 2004, http://www.mce.be/knowledge/400/27.

Hagerty, James R., and Michael R. Sesit, “Deals & Deal Makers: New HSBC Chief Will Minister U.S.-Loan Foray,” Wall Street Journal, March 3, 2003.

Treanor, Jill, “Preaching Profit: Interview Stephen Green, Chief Executive, HSBC,” Guardian (England), October 18, 2003.

Ignatius, David, “Innovation in the Face of Uncertainty,” Washington Post, May 27, 2003.

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Hank Greenberg 1925– Chairman and chief executive officer, American International Group Nationality: American. Born: May 4, 1925, in New York, New York. Education: University of Miami, BA, 1948; New York Law School, LLB, 1950. Family: Son of Jacob Greenberg and Ada Rheingold; married Corinne Phyllis Zuckerman; children: four. Career: Continental Casualty Company, 1952–1960, employee, then vice president; American International Group, 1960–1962, founder of overseas health and accident business; 1962–1967, president of American Home Assurance Company; 1967–1989, CEO and president; 1989–, chairman and CEO. Awards: Insurance Leader of the Year, College of Insurance, 1998, 1999; six honorary degrees. Address: American International Group, 70 Pine Street, New York, New York 10270; http://www.aig.com. Hank Greenberg. AP/Wide World Photos.

■ Maurice R. Greenberg, well known as “Hank,” reached leg-

FROM FARM BOY TO CEO

endary status in the business world as the long-time chairman and CEO of American International Group (AIG), a holding company engaged in a broad range of insurance and insurancerelated activities and the largest underwriter of commercial and industrial insurance in the United States. Under Greenberg’s innovative leadership AIG underwent exceptional growth and was transformed into a leading global insurance organization. Employing a risk-taking strategy combined with product innovation and expansion into such areas as financial services, Greenberg became a legend whose business moves were watched closely not only by others in the insurance business but by business leaders throughout the country and around the world. Industry analysts and colleagues noted that Greenberg was a dynamic, hard-driving, intimidating leader who was committed to improving the bottom line and instilling an entrepreneurial spirit throughout AIG.

Greenberg was born in New York City but grew up on a New York dairy farm in the hamlet of Swan Lake. He lied about his age to join the U.S. Army during World War II, became an Army Ranger, and stormed the beach at Normandy. After the war he attended the University of Miami, where he majored in prelaw, and then New York Law School, where he earned his LLB in 1950. He was just embarking on a career in law when the Korean War broke out; he soon found himself back in the service stationed in South Korea, eventually rising to the rank of captain and receiving a Bronze Star, an award given for heroic or meritorious service.


Greenberg entered the insurance business three days after returning from Korea in 1952, when he knocked on the door of the Continental Casualty Company. Greenberg was initially rebuffed in his search for a job there but was hired after he re-

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portedly criticized the boss of the man who had initially refused to employ him. He quickly rose through the ranks to become the youngest person to be appointed vice president at the company. In 1960 Greenberg joined AIG; he was appointed president of its major subsidiary American Home Assurance Company in 1962. In that position Greenberg was credited with developing substantial reinsurance facilities, which allowed insurers who were forced to take unwanted assignments, or “bad risks,” the opportunity to reinsure those risks. Losses incurred by the bad risks were thus absorbed by the facility. Greenberg’s strategy enabled American Home to write large quantities of majorrisks policies and thus control the pricing of those policies. Greenberg was lauded for his notable contribution to the advancement of the risk-management movement in the 1960s, when other insurers and brokers opposed its advancement. He also introduced personal-accident insurance through American Home. He established a bottom-line philosophy of insisting on underwriting only those companies that made profits, installing a management team that could accomplish that goal. Greenberg’s strategies for building American Home were successful, and the company’s reputation for being aggressive and profitable grew. Greenberg soon moved to acquire other domestic companies, including New Hampshire Insurance Company and the National Union Fire Insurance Company. Greenberg established a strategy of identifying companies that were troubled or fighting off takeovers, buying controlling interests in the companies, and ultimately integrating them into the AIG corporate structure. When AIG’s founder and CEO Cornelius van der Starr died, Green was named to head the company. Two years later AIG went public with Greenberg as the CEO.

PERIOD OF EXCEPTIONAL GROWTH In response to the changing needs of corporate America, Greenberg led AIG to be among the first companies to establish risk-management services for large companies. In 1979 and 1980 AIG became the first Western insurance organization to establish joint ventures with foreign countries, including Hungary, Poland, Romania, and China. Throughout the 1970s and 1980s Greenberg also organized or acquired various specialized entities focusing on such areas as aviation insurance, vocational and rehabilitation services, mortgage-guaranty insurance, and managed health care. By the mid-1980s Greenberg had made AIG one of the most respected companies in the insurance business, largely by selling insurance for risks other insurers would not address. When devastating floods occurred in portions of Pennsylvania in the early 1980s, other insurers started canceling their flood insurance. Greenberg, however, directed AIG to write new policies at a profitable rate. Greenberg also continued his

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knack for innovation. When soaring premiums led corporations to create their own offshore captive insurance companies—which insured the risks of the parent corporations— Greenberg stepped in to establish AIG as a premier provider of services to those offshore captives; other insurers merely tried to block the trend. In 1984 Lynn Brenner, writing in American Banker, noted, “In the past 10 years, the company has consistently grown faster and more profitably than its industry” (August 24, 1984). Greenberg’s success continued, as AIG had 1985 revenues of $5.8 billion. He had led AIG to consistently outperform competitors through what many were viewing as the industry’s dark years. Analysts noted that Greenberg’s successes stemmed from his start as an insurance underwriter who conscientiously priced policies to be both profitable and salable. Greenberg’s philosophy was that the entire insurance industry needed to “return to basics.” As quoted by James Ring Adams in Forbes, Greenberg noted that succeeding in insurance “means proper pricing and recognizing that you’re in a risk business, not selling potatoes” (December 29, 1986).

A NEW BUSINESS In 1987 Greenberg decided to diversify AIG by expanding the company from commercial insurance into financial services, creating AIG Financial Products. Despite Greenberg’s successful track record, proving that the business would work took time, and many shareholders booed Greenberg in a 1990 meeting at which the diversification gamble was discussed. Analysts as well questioned Greenberg’s move, noting that most investors owned AIG stock purely for its renown in the insurance business and that the financial market typically went through violent earnings swings. In response to the many questions about AIG management’s decisions, Greenberg, as quoted by Caren Chesler-Marsh in Euromoney, explained the strategy this way: “We’ve been very focused in what we want to do. We’re not going into every area of financial services. We’ve chosen the areas where we think we can have the best leverage and the best results” (February 1991). Although AIG’s stock fell 7 percent in 1990, it began to rebound in 1991; Greenberg had once again proven himself to be on target. AIG Financial Products had an operating income of $127 million and became a major force in swaps and derivatives. The move turned out to be extremely profitable for the company and its shareholders. Financial industry analysts once again placed the kudos squarely on Greenberg’s shoulders, noting that he had been the first to appreciate the value of a triple-A balance sheet in the swap market and that he had successfully forged joint ventures with some of the elite swap technicians. By 1993 Greenberg’s management approach had propelled AIG to the top of the business world; the company made a


Hank Greenberg

13.1 percent return on equity, with profit growth from $17 million to $1.7 billion after he took over the company. Others in the insurance and financial markets tried to imitate Greenberg’s approach, but none could match his performance. Although he was nearing 70, Greenberg had no plans to retire and was guiding AIG’s advances into foreign markets. Once again he was having success in countries like Russia where other American companies were having difficulty competing. As reported in Chief Executive, Greenberg noted that the company’s success was due to extensive forethought, stating, “It’s taken us years to plan an entry into some countries. But many American companies don’t take that approach. There’s no quick fix in international business” (June 1993).

INTO THE 21ST CENTURY Greenberg and AIG strode into the new millennium on an upbeat note, with the company’s net income rising 11.5 percent to a record $5.64 billion in 2000. By the end of the year revenues had gained 13.1 percent, assets had risen 14.3 percent, and shareholders’ equity had reached $39.62 billion, compared to the $33.3 billion of 1999. When the economy took a downturn, Greenberg acted quickly, waiving a year-end bonus of $5 million for himself and freezing pay for all employees in 2001. The terrorist attacks of September 11, 2001, created additional levels of uncertainty for the insurance group; furthermore, investors became cautious because of the collapse of giant corporations such as Enron and concerns about conflicts of interest, unsavory accounting practices, offshore registration of corporate vehicles, and high share valuations. By early 2002 AIG’s share price had fallen 30 percent. Nevertheless, analysts did not recommend AIG as a “sell.” Industry watchers believed that part of the analysts’ decisions was based on the extreme clout held by Greenberg, who had been known in the past to exert his power to the detriment of those who opposed him or his company. According to some, analysts feared that even the mildest criticism of AIG would prompt Greenberg to disparage the firm responsible and remove it from AIG’s vast information network. When Shearson Lehman published a critical report on one of AIG’s subsidiaries in 1990, Greenberg spoke out loudly against the report; Shearson Lehman eventually issued a subsequent report essentially summarizing Greenberg’s views. Greenberg and AIG were questioned about their practice of registering more than 50 AIG entities in Bermuda, which many saw as an attempt to avoid the ramifications of American securities-law disclosures and create an ownership structure that was, in many ways, immune to U.S. business laws and taxation. AIG’s routine public filings were considered virtually impenetrable even to expert outsiders. As a result, few could determine with absolute certainty what businesses AIG re-


tained and what it ceded. Some analysts saw AIG’s fall in share price as stemming from these creatively inscrutable accounting and financial-engineering practices. In spite of these concerns, many maintained a strong belief in the virtuousness of Greenberg’s leadership of AIG, noting that he swiftly responded to rumors of his own demise when he fell ill for a brief period. Greenberg also promised to discuss profits and details about insurance operations via quarterly conference calls between himself, analysts, and investors; in fact, changes in the securities industry forced Greenberg to open his conference calls and presentations to all stockholders and industry analysts who wanted to listen. Some analysts felt that such openness eliminated much of the mystique that had surrounded Greenberg and AIG. Greenberg told Aaron Elstein of Crain’s New York Business, “First I get criticized for not being accessible enough, and now I get criticized for being too available. It’s like getting sued for infidelity and impotence at the same time” (September 8, 2003). The outlook for AIG remained strong as Greenberg continued to apply his formidable knowledge and implement wellconstrued strategies with positive effects. He helped AIG overcome the massive losses that had resulted from the 2001 World Trade Center attacks. For the first nine months of 2002 AIG reported a 61 percent gain in net income, to $5.6 billion. Greenberg kept AIG on track the following year as well, with the company’s profits rising a record 68 percent to $9.3 billion in 2003. Although Greenberg was nearing 80, he maintained a strong interest in AIG and the insurance business in general. In 2003 he set out on a crusade to establish tort reforms. He wasn’t getting any mellower either; according to Michael Ha in National Underwriter Property & Casualty/Risk & Benefits Management, Greenberg went as far as to call lawyers who opposed the reforms “terrorists” (March 8, 2004).

MANAGEMENT STYLE: BOLD AND BRILLIANT Business analysts and colleagues alike noted that throughout his career Greenberg combined a disarming charm with a hard-driving and intimidating demeanor that often terrified colleagues, competitors, and even market analysts. Passionate in his approach to building AIG, he was known for a hands-on style that reached out to every area of the company. When AIG’s new commodities unit was formed, Greenberg attended every meeting in which the deal to launch the operation was negotiated. When employees were recruited for the unit, Greenberg, in his usual thoroughness, personally ensured that each candidate was completely checked out. Robert Rubin, who became executive vice president and director of the unit in 1991, told Chesler-Marsh of Euromoney, “At AIG, we were cleaned and screened and pressed and pulled and tugged. They lifted up our teeth, called everyone I knew of any consequence,

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and asked for lists of references, and they called everyone on the list” (February 1991). Although Greenberg garnered little praise for being a “good guy,” early on he won respect for being one of the most accomplished business thinkers in the world. Many noted that he had a “heavy-hitter” approach to fighting off threats to his business empire. In the early 1990s the consumer-advocacy group Public Citizen issued a negative report saying that AIG was vulnerable to a downturn in the economy; Greenberg threatened to take legal action unless the group retracted its statement. Yet Greenberg conducted business within AIG on a relatively informal basis—an anomalous approach in the highly bureaucratic insurance business. Brenner of American Banker quoted him as saying that the trick was to maintain “a nonchaotic environment without becoming too bureaucratic as you get bigger” (August 24, 1984). Greenberg was known to support spontaneity in his management team, the members of which always felt that they could get the boss’s attention with a good idea. As reported on BusinessWeek Online, Greenberg once commented, “When new ideas come in, they don’t find a deaf ear” (January 14, 2002). Nevertheless, Greenberg’s dominant personality was at times overbearing and for some employees made AIG a nervewracking place in which to work. Greenberg often publicly criticized the company’s senior management team; his abrasive personality was legendary within insurance circles and beyond. Observers noted that AIG’s entire corporate style reflected Greenberg’s approach to business. He was nicknamed “Hammerin’ Hank,” after the one-time Detroit Tigers baseball star Hank Greenberg. His aggressive spirit so pervaded the company that workers once pasted his and other senior staff members’ pictures over the faces in a cartoon ad for AIG featuring the comic-book tough guy Sergeant Fury and other hardened Marines storming a beach with machine guns firing.

stockholders dreaded the day that Greenberg would step down. One contributor to National Underwriter Property & Casualty/Risk & Benefits Management noted that for more than three decades Greenberg had delivered solid returns for shareholders, “who see him as their security blanket” (March 4, 2002). Greenberg had a wide-ranging influence that also reached into the world of government and politics. As noted by William F. Jasper in New American, few corporate leaders could “match Greenberg’s political clout and connections” (October 8, 2001). Greenberg was a longtime influence on the Business Roundtable and the President’s Advisory Committee for Trade Policy and Negotiations. He was a member of the board of directors of the New York Stock Exchange and the Trilateral Commission and a director of the United Nations Association. He served as the chairman, deputy chairman, and director of the Federal Reserve Bank of New York; on President Bill Clinton’s Advisory Committee for the President’s Commission on Critical Infrastructure Protection; and as vice chairman of the Council on Foreign Relations. Greenberg was chairman of the U.S.-China Business Council, the U.S.ASEAN Council on Business and Technology, and the Starr Foundation. He was the founding chairman of the U.S.Philippine Business Committee, trustee and chairman emeritus of the Asia Society, and a member of the Board of Governors of the Society of the New York Hospital. He was also involved in several other charitable and civic organizations.

See also entry on American International Group, Inc. in International Directory of Company Histories.


Adams, James Ring, “Insurance Follies,” Forbes, December 29, 1986, p. 107.

In terms of his overall management philosophy, Greenberg aimed to wring out the company’s cost inefficiencies while gauging risks with pinpoint precision. On the insurance side, he unswervingly refused to underwrite any business that he didn’t think would turn a profit. To some observers Greenberg’s personality and business approach were summed up perfectly by Greenberg himself when he told Chesler-Marsh in Euromoney, “The strategy of AIG is not developed on a consensus basis” (February 1991).

Brenner, Lynn, “Stirring Staff to Grab a Risk,” American Banker, August 24, 1984, p. 16.

IMPACT BEYOND INDUSTRY

Ha, Michael, “Trial Lawyers Deplore Greenberg’s ‘Terrorist’ Label,” National Underwriter Property & Casualty/Risk & Benefits Management, March 8, 2004, p. 10.

As Greenberg reached his late 70s, rumors grew about his potential health problems and efforts to ultimately choose a successor. Greenberg, who would grow annoyed when asked about retirement plans, often joked that the company was developing a clone to succeed him. Most analysts and company

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Chesler-Marsh, Caren, “The Greenberg Enigma,” Euromoney, February 1991, p. 26. “Does AIG Need to Reveal a CEO Succession Plan?” National Underwriter Property & Casualty/Risk & Benefits Management, March 4, 2002, p. 32. Elstein, Aaron, “World’s Largest Insurer a Low-Risk Investment,” Crain’s New York Business, September 8, 2003, p. 47.

Jasper, William F., “China’s Man in America,” New American, October 8, 2001, p. 29. “Risky Business,” Chief Executive, June 1993, p. 34.


Hank Greenberg “The Top 25 Managers of the Year: Maurice R. Greenberg,” BusinessWeek Online, January 14, 2002, http:// www.businessweek.com/magazine/content/02_02/ b3765033.htm. —David Petechuk


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■■■

Jeffrey W. Greenberg 1951– Chairman and chief executive officer, Marsh & McLennan Companies Nationality: American. Born: 1951. Education: Brown University, AB, 1973; Georgetown University Law School, JD, 1976. Family: Son of Maurice “Hank” Greenberg (business executive); married second wife Kimberly (maiden name unknown). Career: Marsh & McLennan Companies, 1976–1978, broker, manager of the commercial aviation and aerospace insurance group; American International Group, 1978–1995, several management positions, including executive vice president of domestic brokerage insurance group; Marsh & McLennan Companies, 1996–2002, chairman of MMC Capital; 1999–, CEO; 2000–, chairman. Awards: Named by Forbes as one of America’s Most Powerful People, 2000 and 2001.

Jeffrey W. Greenberg. © Jim Bourg/Reuters NewMedia Inc./Corbis.

Address: Marsh & McLennan Companies, 1166 Avenue of the Americas, New York, New York 10036-2774; http:/ /www.mmc.com.

FOLLOWING IN HIS FATHER’S FOOTSTEPS

■ Jeffrey Greenberg spent most of his early career under the wing of his father, Maurice “Hank” Greenberg, head of American International Group (AIG). After nearly two decades he surprisingly left AIG and joined Marsh & McLennan Companies (MMC), a global insurance, investment, and consulting company. Within a few years he was named the company’s chairman and chief executive officer (CEO). Greenberg led AIG through several tumultuous events, including the loss of hundreds of employees in the September 11, 2001, attacks on the World Trade Center. He also steered AIG through an investment scandal at Putnam Investments, one of MMC’s subsidiary companies. Greenberg was described as a smart and competent executive who tended to avoid the spotlight.

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Jeffrey Greenberg grew up in a privileged environment, but he did not want to be a stereotypical rich kid. As a teenager he took jobs pumping gas and bagging groceries at a local supermarket (although he reportedly used the proceeds to buy an Alfa Romeo sports car). His former wife, Nikki Finke, described Greenberg as a “dutiful son.” After graduating from Brown University and Georgetown University Law School, he took a job as a broker at MMC, where he quickly became known for his intelligence and hard work. “I think he could have succeeded in any business,” Michael P. Esposito, a longtime business associate, told BusinessWeek. Greenberg left MMC after two years to join his father’s company. In 1988 he was made head of AIG’s propertycasualty division, the National Union Fire Insurance Compa-



ny. Three years later he was named executive vice president of domestic brokerage operations. The insurance products he helped develop enabled AIG’s customers to protect themselves against a wide variety of potential problems, from severe weather to currency fluctuations. While at AIG, Greenberg adopted his father’s tough business style. When Hurricane Andrew hit Florida in 1992, Jeffrey Greenberg is said to have sent out a memo (supported by his father) telling AIG senior managers, “This is an opportunity to get price increases now” (Washington Post).

person who makes snap decisions,” Michael A. Lewis, an analyst at UBS Investment Research, told the New York Times. As CEO, Greenberg always kept a low profile, making few public appearances, and rarely hosting conference calls to announce quarterly earnings, as was the practice of many of his rivals’ CEOs.

Greenberg spent 17 years at AIG and was expected to succeed his father as head of the company. But in 1995 he abruptly left his position as executive vice president, just weeks after his brother, Evan, was awarded the same title. Although Jeffrey said he made the move because “it would be fun to do something independent of AIG” (Wall Street Journal), there was some speculation that Evan’s rapid rise within the family business threatened Jeffrey’s position as heir apparent. Other analysts suggested that Jeffrey was tired of waiting for his father’s job; though Maurice was well past the age of retirement, he showed no signs that he was ready to relinquish the top spot at AIG.

The rosy period that Greenberg enjoyed during his first few years at MMC did not last for long. The economic downturn at the beginning of the 21st century hit MMC’s stock price hard. The company was also devastated by the events of September 11, 2001. MMC had 1,700 employees working in the upper floors of the World Trade Center, and nearly 300 of them were killed. When he heard news of the terrorist attack, Greenberg quickly established a command center at the company’s headquarters in midtown Manhattan. He later arranged for grief counselors and other support for the families of those employees who had perished. September 11 changed the business world significantly, but for the insurance industry the repercussions were not all negative. MMC took advantage of higher insurance rates and the increased demand for insurance that resulted from the attacks.

Still other people in the industry suggested that Jeffrey felt strangled by his father’s tight rope. At one point his father reportedly responded to a personnel problem in one of Jeffrey’s divisions by saying, “You either fix your management problem or I’ll fix mine” (Washington Post). But Jeffrey denied that there was any strain in his relationship with his father. Some AIG executives were saddened when Jeffrey Greenberg left the company and were concerned that his brother would not be able to fill his shoes. “He was a real creative force,” one highlevel manager said of Jeffrey (BusinessWeek).

RETURN TO MARSH & MCLENNAN Soon, Greenberg returned to MMC. The move raised eyebrows, because AIG was one of MMC’s primary sources of insurance coverage for its clients. Skeptics were concerned that Greenberg would give preferential treatment to his father’s company, choosing its policies over those of rival insurers.

DIFFICULT TIMES FOR MMC

In 2003 Putnam Investments, one of MMC’s divisions, found itself embroiled in scandal. Civil charges were filed against the company for alleged trading abuses. According to the Securities and Exchange Commission, Putnam’s executives used insider information to profit from the international funds they managed, at the expense of their clients. Within a few months after the story became public, angry investors withdrew more than $71 billion from the company. Greenberg replaced Putnam CEO Lawrence Lasser soon after the scandal broke, in a move many thought reminiscent of his father. “”I see this as an aggressive move that hopefully will address whatever problems they have and get them firmly back on track,” Chris Winans, an insurance analyst at Lehman Brothers, told the New York Times. ”This is very much like his father’s approach to problems, to address them quickly and forcefully.”

Greenberg was chairman of MMC Capital from 1996 until 2002. In 1999, at the age of 47, he became the youngest CEO in the company’s 129-year history. At the helm he was charged with overseeing the three divisions of the multibillion-dollar financial-services conglomerate: Marsh, one of the world’s largest corporate risk and insurance brokers; Putnam Investments; and Mercer Consulting Group. Within two years MMC’s stock prices were up 60 percent, and Greenberg had lured top talent from companies such as PepsiCo and the Union Bank of Switzerland to fill his management team.

Although Greenberg vowed to stick with Putnam, he was firm that the company would not stand for any sort of shady business practices. “We are taking measures to see that this does not happen again. The kind of conduct that has occurred has no place at Putnam,” he said in a statement (CFO.com). He directed Putnam Investments’ mutual-fund unit to pay millions of dollars in restitution to jilted investors. Greenberg also added independent directors and limited employee trading, all in an effort to restore investor confidence.

Associates described Greenberg as an intellectual and analytical leader with a deliberate management style. “He’s not a

While his company was struggling to regain its foothold in the investment industry, Greenberg’s own finances were solid.


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In 2003 he pocketed approximately $14 million, a hefty increase from the previous year. By the end of the year MMC was on better footing as well. The company had a double-digit revenue increase over the previous year, fueled primarily by a strong performance by its risk and insurance businesses. In 2004, following the controversy over former chairman Richard Grasso’s $188 million compensation package, Greenberg was appointed to the New York Stock Exchange oversight board to help reform the organization’s business practices.

OTHER ROLES Greenberg was a trustee of the Brookings Institution, Brown University, the Spence School in New York City, and New York Presbyterian Hospital. He was a member of the board of overseers of the Joan and Sanford I. Weill Graduate School of Medical Sciences of Cornell University, the board of directors of ACE Limited, the Council on Foreign Relations, and the Trilateral Commission.

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See also entries on American International Group, Inc. and Marsh & McLennan Companies, Inc. in International Directory of Company Histories.


Brady, Diane, “People: Dynasties: Like Father, Like Sons,” BusinessWeek, March 1, 1999, p. 112. Crenshaw, Albert B., “Another Son of CEO Leaves AIG; Evan Greenberg Quits 9 Months After Being Called Next Chief,” Washington Post,, September 20, 2000. Lohse, Deborah, “At AIG, Son is (Nearly) Spitting Image of CEO Father,” Wall Street Journal, June 15, 2000. Taub, Stephen, “That’s No Virus, That’s Our Restatement,” CFO.com, http://www.cfo.com/article/ 1,5309,11079–0–A–93–100,00.html. Treaster, Joseph B., “Attention-Getting Decision from a LowProfile Chief,” New York Times, November 4, 2003. —Stephanie Watson


■■■

Robert Greenberg 1940– Chief executive officer, Skechers USA Nationality: American. Born: 1940, in Boston, Massachusetts. Education: Attended hairdressing school. Family: Son of Harry Greenberg (grocer) and Belle (maiden name unknown); married (wife’s name unknown; divorced); children: six. Career: Talk of the Town, 1962–1969, owner; Wig Bazaar, 1965–1968, owner; Wigs ‘n Things, 1968–1970, owner; Europa Group, 1970, owner; Europa Hair, 1971–1974, owner; Wild Oats, 1974, importer; Removatron, 1977, investor; Roller Skates of America, 1979–1983, owner; L.A. Gear, 1983–1992, CEO; Skechers USA, 1992–, CEO. Address: Skechers USA, 228 Manhattan Beach Boulevard, Manhattan Beach, California 90266; http:// www.skechers.com.

■ Robert Greenberg built two shoe companies from the ground up, each of which became a major player in the competitive footwear industry. His first creation was L.A. Gear, which capitalized on the aerobics craze of the 1980s. When L.A. Gear started going under, Robert and his son Michael were forced out. The Greenbergs quickly rebounded and started Skechers—a word which, appropriately, was street slang for someone who could not sit still. The company marketed a wide range of affordable, trendy footwear to 12- to 24-yearolds.

ENTREPRENEURIAL SKILLS The entrepreneurial spirit ran in the Greenberg family. In the 1930s Greenberg’s father opened Belle’s Market, which he named after his wife. He worked Robert hard, not allowing him to wear gloves in the winter in order to toughen him up. After finishing high school, the younger Greenberg chose a different business route, attending hairdressing school. In 1962 he opened Talk of the Town, which grew into a chain of salons


and would be the first of many business endeavors. Next came wigs: Greenberg found he could sell a $50 hair piece for $300, opening Wig Bazaar and then later Wigs ‘n Things. By 1970, at only 30 years of age, Greenberg had purchased Europa Group as a holding company for his many business ventures. He also bought Medata Computer Systems, renaming it Europa Hair. Greenberg was already learning the common sense behind the whimsical field of fashion; he was quoted in Fortune as saying, “Things that change have opportunities in them all the time. Stodgy things don’t change—no glamour, no dance shows, no hoopla” (March 31, 2003). By the mid-1970s Greenberg was in full swing and rapidly moving from one idea to the next. At one point he was importing South Korean clocks; at another he was buying jeans. He ventured into Removatron and the selling of electronic hairremoval devices. He eventually moved to the West Coast for both business and personal reasons; having divorced, Greenberg moved his children to Los Angeles, where he was intrigued by the number of people who seemed to be wealthy but did not work very hard. He opened up Roller Skates of America, later ditching the rental business when the fad ended. However, roller skates were what brought him to his first shoeindustry trade show. After earning $3 million off of a $10,000 license to sell shoelaces promoting the movie E.T., Greenberg had the capital with which to start L.A. Gear. What later became the third-largest shoe manufacturer in the Untied States started from humble beginnings as a women’s clothing store and shoe importer; Greenberg soon followed Reebok’s lead in selling aerobics shoes when the exercise fad took off in the early 1980s. He copied the hottest aerobic styles, affixing them to the L.A. Gear brand. To keep the business booming, Greenberg relied on his charisma and attention-grabbing stunts, such as showing up to a tradeshow in a Thunderbird convertible covered with different-colored shoes. He hired men to wear black satin L.A. Gear jackets to sell one style of shoe in 12 colors. When asked about variety, Greenberg simply said, “The shoe comes in many sizes!” (Sloan, March 31, 2003). Drawing back on his jeans-selling days, he added sequins, rhinestones, and tassels to shoes in gold, silver, and neon. As the brand took off, Greenberg’s oldest son, Michael, quit college to help his father keep up. In 1986 they took their company public.

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L.A. GEAR’S BOOM AND BUST Shoes became Greenberg’s lasting obsession. Even as revenues soared, he continued to work Saturdays at Sneakerland to see what people were buying. Sales went from a mere $11 million to top out at $800 million in 1990. Greenberg became a lurker at trade shows, eavesdropping on sales talk and spying on competitors’ shoes so that he could recreate his own versions for L.A. Gear. He avoided having his picture taken. While Greenberg shunned the spotlight, L.A. Gear pulled in a line of celebrities to promote the brand, including Paula Abdul, Belinda Carlisle, and Joe Montana. Licensing deals were struck, extending the brand name to watches, T-shirts, and jeans. Then two hard blows fell at the same time: market oversaturation and a fashion flip from glitz to grunge. Aerobics was out, and even Kareem Abdul-Jabbar and Michael Jackson were unable to help push L.A. Gear products. A surplus of 11 million pairs of shoes built up. To make matters worse, an L.A. Gear shoe fell apart during a nationally televised college basketball game. The shoes and the company’s reputation were relegated to the discount bin. In December 1990 the company posted a fourth-quarter loss that caused a $360 million line of credit from Bank America to be pulled. In a desperate move Greenberg sold a 34 percent stake in L.A. Gear to Trefoil Capital Investors in order to maintain an influx of money. As an unexpected result he was pushed out of his own business; his son as well was given the boot soon afterward. By the Greenbergs’ own account, they sat on a couch at home in shock for less than a week. They then thought up the Skechers idea and decided to put it into action with the $55 million they had left—far more than what Greenberg had used to start his first shoe company. By the time L.A. Gear declared bankruptcy in 1998, Greenberg’s new shoe company was going public with a $115.1 million public stock offering.

SKECHERS’ SUCCESS STORY WITH A L.A. GEAR GHOST Greenberg began Skechers USA out of his Manhattan Beach, California, home, from which he distributed Doc Marten shoes. That relationship did not last long, however; thus, Greenberg turned back to his trademark skill of fashioning reproductions. He imported Asian Doc Marten look-alikes, eventually sparking a legal battle, and marketed them under the Skechers brand. The new product lines were less flashy than those of the L.A. Gear era but still relied on trends and the very fickle target market that made up over 20 percent of the U.S. population: young consumers, who had approximately $136 billion burning holes in their pockets. Skechers was one of the first to capitalize on the work/utility trend with loggers and biker boots in the $50 to $75 range. With Greenberg as the lead fashion spotter, the success of Skechers’ product

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lines was heavily dependent on the company’s beating other U.S. shoe manufacturers to the punch—and doing it for less money. Greenberg embraced intensive marketing, saying in Footwear News, “unseen, untold, unsold” (October 4, 1993). To get teens’ attention, Skechers set television commercials to a techno groove and filled magazine ads with stylish men and women lounging in Skechers active footwear and looking hip. This marketing ploy, enhanced by the presence of celebrities, worked especially well with teenage girls. Britney Spears hawked Skechers, but only overseas, so that the company could avoid establishing too much of a bubble-gum image. In the States, Christina Aguilera was used instead, giving the brand an edgier feel; Rob Lowe and Matt Dillon were the faces of the men’s line. These endorsements came with hefty price tags; in 2002 and 2003 Skechers topped the list of big corporate spenders, paying out more than $11 million for advertisements, even during a weak economy. The parallels between Greenberg’s two companies were numerous. Both companies were founded and headed by Robert, with Michael at his side. Both had explosive growth and strong celebrity presences that thrust the companies up to the number-three spots in the shoe industry. And both companies had similar trouble with lawsuits from their celebrity endorsers.

MANAGEMENT OF THE FAMILY BUSINESS With Greenberg’s five sons, his daughter, and a niece all working for the company, Skechers could be described as a family business that also happened to be an international company. The patriarch was described in Forbes as a “gregarious, diminutive man with a deep California tan, a thick Beantown accent, and an overdeveloped sense of showmanship” (August 6, 2001). Greenberg referred to himself as Captain Marvel but said of Skechers, “I’m not driven to do anything other than build a nice family business” (October 4, 1993). Greenberg’s son Michael was groomed to take over the company and was seen as the counterbalance to his father’s flamboyancy. Michael was the one who encouraged the company to go public when Greenberg was still spooked by the L.A. Gear fallout. Another son, Jeffery, was in charge of Skechers’ successful TV campaign, and the whole family shared their father’s obsession with feet. At the movies and in restaurants they watched feet as people came and went. Skechers became so good at mimicking styles—or interpreting categories, as Greenberg preferred to define the process—that other companies were forced to knock off their own best shoes. The Greenberg family also knew when a fad was finished. When clunky shoes faded, Skechers was ready with a new Michelle K line of sexy, frivolous shoes for 18- to 34year-old women, priced at $60 to $250 a pair; a junior Michel-


Robert Greenberg

le K line was produced as well. The company paid special attention to the shopping habits of women who bought shoes for the whole family while shopping for themselves. Salespeople in Skechers’ 60 stores were trained to bring out several colors and styles for every one pair a customer wanted to try on. The plethora of selection and low prices led to 30 percent of Skechers’ customers walking out with more than one pair of shoes. Prices were kept low through the use of less expensive leather and the avoidance of the high-tech features of Nike and Reebok performance wear. Although some analysts continued to see risks attached to investing in Greenberg’s company, in 2002 Smartmoney.com named Skechers an attractively valued small-cap company with good prospects for growth. The company also made BusinessWeek‘s list of top 10 hot-growth companies in 2000, 2001, and 2002. And even though Greenberg said in Sporting Goods Business, “Skechers isn’t planning on getting into apparel and will continue to focus exclusively on footwear” (September 23, 1999), he must have been referring only to the present; in 2003 and 2004 Skechers signed 20 new contracts licensing its brand to everything from hosiery and handbags to jeans and outerwear for men, women, and children. No one doubted Greenberg’s ability to create a successful company; still, some continued to question whether he could maintain one.

See also entries on L.A. Gear, Inc. and Skechers U.S.A. Inc. in International Directory of Company Histories.



Earnest, Leslie, “There’s Something Afoot at Skechers: Analysts Say the Footwear Company, Led by a Father-Son Team, Has Hit Its Stride,” Los Angeles Times, June 16, 2002. Heiderstadt, Donna, “Robert Greenberg Still Shifting Gears,” Footwear News, October 4, 1993, p. 41. “Image Makers: Top 10 Nonathletic Ad Spenders,” Footwear News, September 29, 2003, p. 26. Sloan, Julie, “Waiting for the Other Shoe to Drop,” Fortune (Europe), March 31, 2003, p. 56. Taub, Daniel, “Former L.A. Gear Chief Puts on New Shoe— Robert Greenberg’s Skechers USA Inc.,” Los Angeles Business Journal, August 10, 1998. Tedeschi, Mark, “Greenberg Plots Skechers’ Next Step in Growth Plan,” Sporting Goods Business, September 23, 1999, p. 22. Wells, Melanie, “Sole Survivors,” Forbes, August 6, 2001, p. 62. Zmuda, Natalie, “Driving Licenses: As Cautious Consumers Stick Close to Well-Known Brands, Footwear Vendors Reach Out with More New Products,” Footwear News, February 9, 2004, p. 24.

—Margaret E. Gillio

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J. Barry Griswell ca. 1949– CEO and chairman of the board, Principal Financial Group Nationality: American. Born: ca. 1949, in Atlanta, Georgia. Education: Berry College, BA, 1971; Stetson University, MBA, 1972. Family: Married; children. Career: MetLife Marketing Corporation, dates unknown, president and chief executive officer; Principal Financial Group, 1988–1991, agency vice president; 1991–1996, senior vice president of individual insurance; 1996–1998, executive vice president; 1998–2000, president; 2000–, president and CEO, 2002–, chairman. Awards: Honored by the National Academy of Design, 2002; CEO of the Year, Des Moines Business Record, 2002; named a member of the Horatio Alger Association of Distinguished Americans, 2003; Alexis de Tocqueville Society award; Iowa Business Leadership Award, University of Iowa Henry B. Tippie College of Business, 2004; Ellis Island Medal of Honor, National Ethnic Coalition of Organizations, 2004. Address: Principal Financial Group, 711 High Street, Des Moines, Iowa 50392-0002; http://www.principal.com.

■ As chairman of the board and chief executive officer of the

J. Barry Griswell. AP/Wide World Photos.

grasp situations and act decisively with impeccable timing. Principal’s shares advanced that first day. The company rapidly gained Fortune 500 status, trading on the New York Stock Exchange under the ticker symbol PFG.

Principal Financial Group, J. Barry Griswell was a wellrespected and popular leader. Known as much for his personable nature and generosity as for his business acumen, he inspired employees, colleagues, competitors, and strangers alike. Two things distinguished him from most other top successful insurance executives: his background in sales and marketing and the fact that he did not play much golf.

The Principal Financial Group had more than $119 billion in assets and 14 million customers under its management in 2004. It provided (among other products and services) retirement and investment services, life and health insurance, and mortgage banking. According to CFO magazine, more employers chose the Principal Group for their 401(k) plans than any other bank, mutual fund, or insurance company in the United States.

Griswell was greatly admired by colleagues for preparing and leading his company through a $1.8 billion initial public offering, becoming one of the first, and certainly the largest, company to do so following the terrorist attacks of September 11, 2001. It was a great example of Griswell’s keen ability to

TALL MAN, BIG HEART

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Raised in Atlanta, Georgia, J. Barry Griswell was the product of a troubled home. With an alcoholic father and a stressful


J. Barry Griswell

family life, he sold newspapers and bagged groceries to help the family make ends meet. By the age of 15, he was loading trucks. The adversity seemed to strengthen him. On a full scholarship, he attended Berry College in Rome, Georgia, where he earned a bachelor’s degree in 1971. He went on to earn a master’s degree from Stetson University in 1972. A tall man (6 feet, 9 inches) with a warm and affable disposition, he decided on a career in which he could capitalize on his “people skills,” particularly in one-on-one communications. Choosing the insurance industry, Griswell received his Chartered Life Underwriter designation in 1976 and his Chartered Financial Consultant designation in 1985. He later became a fellow of the LIMRA Leadership Institute.

INSURANCE SALES AND MARKETING Griswell’s career began with Metropolitan Life Insurance Company (MetLife), where he soon became president and chief executive officer of MetLife Marketing Corporation, a brokerage and supplementary distribution marketing subsidiary. He joined the Principal Financial Group of Des Moines, Iowa, in 1988 as an agency vice president. Principal served both individuals and institutional clients with a wide array of financial products and services, including life and health insurance and retirement and investment services. The fast-paced environment was a good match for Griswell, despite his atypical background in sales and marketing. His hard work, winning personality, and positive thinking propelled him through the ranks. He was named senior vice president in 1991 and executive vice president in 1996. In 1998 Griswell became president. In 2000, when then-CEO David Drury vacated his position to concentrate on his duties as chairman, Griswell was promoted to the CEO position and then became chairman in 2002.

A SMOOTH TRANSITION AT THE TOP Griswell had worked so closely with his mentor, Drury, that he needed only to continue the strategy they had outlined and introduced a few years earlier. The plan involved developing global markets for retirement plans and financial planning. Principal hoped to capitalize on emerging markets that utilized some form of tax incentive or mandatory retirement system, such as Chile, Brazil, Mexico, and Hong Kong. Providently, these were geographic markets where Principal could also leverage its U.S.-based products and supporting technologies. The executive leadership incorporated this strategy into the reorganization plan before going public, envisioning a more integrated and collaborative structure for Principal, which would be capable of responding rapidly to change. To further their international objectives, the company spun off Principal Capital Management and acquired BT Australia, in addition to starting a Brazilian joint venture with Banco de Brasil.


In an interview with the Des Moines Business Record (December 13, 1999) just before he was installed as the new CEO, Griswell conceded that Principal had become larger and more complex an organization than it had ever been in its history. He explained that he would be in charge of overall company management, while Drury, as chairman, would focus on capital markets development. When asked how the company would change with him as CEO, he replied, “There’s not much to report there. I had been an integral part of the management team building the current strategy. What I need to do is help the company execute that strategy.”

LEADING BY EXAMPLE In fact, Griswell did add something of his own to the CEO position. He brought with him the winning personality and his approachable persona. Not just an implementer, he was also an influencer. That component of his personality played out in both internal and external communications but, in both cases, positively enhanced the image of the company and of its leader. A visible and hands-on boss, Griswell invested heavily in his employees. He strongly believed that employee health and productivity were the most important issues faced by corporations. In a 2004 interview for the Wellness Council of America, Griswell articulated his own philosophy that “if you want to lead a successful company and satisfy shareholders, you must start by making sure your employees are treated well. Give them the tools and resources they need to stay happy, healthy, and productive” (http://www.welcoa.org/free resources/pdf/griswell_interview_example.pdf). The trickledown effect dictated that when employees were satisfied, they treated customers well, which created shareholder value. At Principal, Griswell promoted a holistic approach to employee well-being, which integrated personal health and fulfillment with organizational resources. Success could be measured by such tools as tracking the number of transactions per employee, absenteeism rates, surveys, and so on. In 2004 Principal’s employees participated in a national survey that measured several areas of employee performance and satisfaction, including productivity, absenteeism, and levels of stress. The Principal employees fared very well against national norms for the industry. Griswell himself made it a point to participate in wellness initiatives and, after losing 50 pounds, became an example and hero to his employees. Principal had its own employee fitness center and a full-time wellness manager on its staff.

COMMUNITY CITIZENSHIP Finally, Griswell’s leadership was characterized by charitable involvement with the community and its citizens. He

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J. Barry Griswell

served as a trustee of Central College in Iowa and Berry College in Georgia. He was director of the local Business Committee for the Arts, a member of the Business Roundtable, and an honorary trustee of the Boys and Girls Club of Central Iowa. He also held participatory roles in fund-raising events for the American Red Cross, the American Heart Association, PACE, and the United Way. In 2004 Griswell took over as chair of Central Iowa’s regional economic development organization, the Greater Des Moines Partnership.

See also entries on Metropolitan Life Insurance Company and Principal Financial Group in International Directory of Company Histories.


Burger, Kathy, “Position of Influence,” FinanceTech.com, May 18, 2004, http://www.financetech.com/ showArticle.jhtml?articleID=20600018.

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“Griswell Will Oversee Both Ongoing and New Projects,” Des Moines Business Record, January 26, 2004, p. 16. “J. Barry Griswell to Be Inducted as Member of the Horatio Alger Association as Role Model for Overcoming Humble Beginnings,” December 2, 2002, http:// www.horatioalger.com/geninf/PressRel/Pdf/griswell.pdf. “Leading by Example: Interview with J. Barry Griswell,” The Wellness Councils of America, WELCOA, 2004, http:// www.welcoa.org/freeresources/pdf/griswell_interview_ example.pdf (accessed June 15, 2004). Lovell, Michael, “Leaders Cite Griswell’s Heart, Drive,” Des Moines Business Record, January 13, 2003, p. 7. “A Smooth Transition at Principal,” Des Moines Business Record, December 13, 1999, p. 4.

—Lauri R. Harding


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Rijkman W. J. Groenink 1949– Chairman of the managing board, ABN AMRO Nationality: Dutch. Born: August 25, 1949. Education: University of Utrecht, law degree; Manchester University Business School, DipBA, 1973. Family: Children: four. Career: Amro Bank, 1974; 1976–1977, head, product management retail accounts; 1978–1979, head, syndicated loans; 1980–1981, head, international corporate accounts, international division; 1982–1985, director, Dutch special credit department; 1985–1987, senior executive vice president, corporate business; 1988–1990, appointed to managing board; ABN AMRO, 1990–2000, appointed to managing board, responsible for the Netherlands division; 2000–, chairman, managing board. Awards: Officer in the Order of Oranje-Nassau, presented by Her Majesty Queen Beatrix of the Netherlands, 2004. Address: ABN AMRO Holding, PO Box 600, 1000 AP, Amsterdam, Netherlands; http://www.abnamro.com.

■ After a life-long career with Amsterdam-Rotterdam Bank (AMRO), Rijkman W. J. Groenink was appointed to the managing board and placed in charge of the entire Netherlands division of the newly established ABN AMRO following the 1990 merger of AMRO and Algemene Bank Nederland (ABN). Over the ensuing decade, the huge bank listed in a sea of stodgy management traditions and mindsets. Groenink broke with long-held Dutch business traditions to bring an aggressive and clearly defined management philosophy to all levels of the company, with a major emphasis on trimming unnecessary levels of management, implementing restructuring programs, and, especially, creating shareholder value. International Directory of Business Biographies

IMPLEMENTS NEW MANAGEMENT PHILOSOPHY ABN AMRO had its beginnings in the 1990 merger of the two largest banks in the Netherlands, Algemene Bank Nederland (ABN) and Amsterdam-Rotterdam Bank (AMRO). ABN purchased the Chicago-based LaSalle National Bank in 1979, and in 1991 LaSalle was quickly acquiring competitors in the U.S. Midwest. The newly formed ABN AMRO continued this overseas expansion, but poor oversight and management of its offshore institutions led to huge losses through fraud and embezzlement. The bank continued expanding, however, purchasing two banks in Brazil in 1998 and in 1999, real-estate interests in Italy, and Bouwfonds Nederlandse Gemeenten, a major real-estate company on its home turf. That acquisition led to the purchase of the Pitney Bowes mortgage servicing portfolio, Atlantic Mortgage and Investment, the same year. In November 1999 Groenink was slated to take over as chair of the company’s managing board as of May 2000, by which time, according to an analyst for Euroweek, ABN AMRO had become “just a cuddly Dutch bank going nowhere in particular” (November 28, 2003). One American Banker reporter commented that Groenink’s appointment was a sure indication that the bank—the largest in the Netherlands—had no intention of being left behind in the bank-consolidation initiatives that were sweeping the continent (November 15, 1999). Another analyst commented that, with Groenink’s appointment, even the most cynical Dutch critics were beginning to take the bank seriously. According to Euroweek, the bank’s particular weakness was “layers of senior management who were intellectually feeble” and who did little but go home early and collect their paychecks. The bank was wandering around in the dark for lack of leadership and communication, and there were layers upon layers of deadwood in middlemanagement positions—enough deadwood, the analyst commented “to start a Dutch rain forest. Worse still, however, was the fact that the rain forest had spread almost all the way to the very top of the ABN Amro ladder” (November 28, 2003). The bank’s shares were no longer viewed as a growth vehicle and were valued only for their dividend yield. The company had earned a reputation of being “stingy,” it had difficulty attracting the best and the brightest into its fold, and employee morale was low. Enter Groenink, who, according to a BusinessWeek online reporter, was an “aggressive and cunning tactician” (February

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Rijkman W. J. Groenink

28, 2000) and whom John Carreyrou of the Wall Street Journal described as having an “aggressive and no-nonsense style” (August 18, 2000). Groenink had been with AMRO since 1974, and in 1988 he was appointed to its management board. Following the merger with ABN, he was appointed to the new company’s management board and placed in charge of its entire Netherlands division. Relatively unknown as a manager, he won the chairman’s slot over another board member thought by many analysts to have been the more likely candidate. Groenink had already designed an ambitious restructuring plan, named Focus 2005, under which the bank’s entire Netherlands branch network was to be restructured. He accelerated the implementation of a multichannel distribution strategy and took responsibility for a strategic reorientation program that focused on maximizing shareholder value and making the bank leaner and more profitable. Groenink commented: “ABN Amro must change and it will change. We will be single minded in focusing our efforts and resources on businesses which add value and divert resources from those that do not” (Manchester Business School, February 22, 2001). Groenink took out his ax and chopped off the deadwood, shedding layers of bureaucracy. The appointment of appropriate managers in the investment-banking division eliminated the bickering between Amsterdam and London that had previously hampered those operations, turning the division into a cohesive and profitable enterprise. On its home turf, 150 branch banks were shut in order to focus resources on the retail business, and as a result 10 percent of ABN AMRO’s Dutch workforce was cut. ATMs with expanded functions and small retail centers replaced some full-service branches that had been staffed to provide advice and sales but no cash services. In other areas, however, Groenink intended to increase the bank’s physical presence through mergers and acquisitions. He committed to investing heavily in an Internet banking strategy and the creation of a Web portal that would provide a wide range of retail banking services and, once successfully implemented, would be expanded throughout Europe and used to enter new markets. Between the launch of the Internet service in March 2001 and June 2003, the bank had more than 1.5 million Internetbanking customers. When it launched its English-language Internet service on June 8, 2003, to meet the needs of more than 50,000 English-speaking customers, it became the first bank in the Netherlands to do so. The growing range of services included foreign-money transfers, product purchasing, investment-portfolio analysis, and access to 18-month account histories. So popular was the service that a customer survey showed that more than 75 percent of users ranked the service eight or higher on a scale of one to 10. In relation to the bank’s overseas markets, Groenink indicated that some smaller operations would be sold but that, in the Far East, he believed one or two markets might become strategic points of value. At the

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time, the bank’s largest presence outside Europe was in Thailand. Even though the restructuring cost the bank EUR 100 million in the first half of 2000 and a further EUR 800 million in the second half, net profit increased by the end of 2000 by 20.5 percent to EUR 3,097 million (excluding the restructuring charges), net earnings per ordinary share rose 18.6 percent, and consolidated total assets increased from EUR 457.9 billion in 1999 to EUR 543.2 billion. In another break with tradition for his company, Groenink refused to keep silent about what he saw as perhaps unpalatable predictions for 2001. In his statement in the company’s 2000 annual report, he warned stakeholders that the second half of 2000 heralded two trends that would negatively affect the bank’s performance in 2001: a slowdown in the U.S. economy and a flattening yield curve in the Eurozone (the 12 European Union member states that replaced their domestic currency with the euro). “Given the economic uncertainties,” he said, “it is difficult to predict how the remainder of the year will transpire. Should these conditions prevail in the rest of this year, it will be a challenge to equal the record profits of 2000” (press release, May 9, 2001). Regardless, he noted that the bank had achieved considerable success in a short time, even while passing through a major transition, and expressed confidence that it would do even better in the upcoming four years.

MANAGING FOR VALUE Three months after taking over as chairman, Groenink outlined several goals for the company under what he called the “managing for value” program. One of these goals was to see ABN AMRO’s share price double by 2004, with a target increase of at least 17 percent every year and a return on equity of 25 percent. He wanted the bank to be among the top five of 20 European and U.S. financial institutions in its peer group, which included Citigroup, HSBC Holdings, and Morgan Stanley Dean Witter. Another was that managers would no longer collect paychecks to do little and go home early: Groenink placed emphasis squarely on accountability— compensation for managers would now be tied solely to shareholder value. “Coupled, the two initiatives show how intent he is on promoting an Anglo-American, shareholder-driven brand of corporate governance,” wrote Carreyrou, who also noted that with his aggressive program, Groenink seemed to be breaking with the traditional Dutch style of making changes gradually and only after considerable consensus building. He quoted the chairman as commenting: “We’re leaving the [Dutch] culture of ‘don’t stand out; don’t be better than anybody else’” (August 18, 2000). Groenink hired the U.S. management consultants Marakon Associates to focus on maximizing share values. He placed 25 Marakon consultants in what he considered strategic



locations throughout the world to implement the new management philosophy. No longer would managers be compensated based upon what their budgets showed; now their pay would be assessed on their contributions to profits in excess of expected returns. “[Groenink] is trying to implement the shareholder value thinking deep down into the bank,” commented Pieter Elshout, who noted that ABN AMRO was Marakon’s first client in Europe (Marakon Associates, February 24, 2001). In 2001 ABN AMRO bought the U.S. brokerage and corporate-finance operations of its Dutch rival ING Group, with its 1,300 employees, for $275 million. The company shed European American Bank (EAB)—of which it took control in 1991 after it sustained heavy losses on bad real estate and Third World loans—and purchased Michigan National Corporation from National Australia Bank, merging it with Standard Federal Bancorporation, another of its Michigan holdings. The merger created Standard Federal Bank and one of Michigan’s largest banks. While second-quarter profits declined from EUR 851 million the previous quarter to EUR 671 million, profits from its U.S.-based businesses surged 63 percent. Then Groenink announced in August 2001 a shift of focus in which the bank would decrease activity in corporate and investment banking and emphasize traditional retail banking. Analysts began predicting that a merger might be in the forecast and speculated specifically on the Belgian-Dutch giant Fortis. Groenink remained noncommittal on the matter. “We have not drawn up a list of merger partners,” he said. “If we were to draw up a short list, then Fortis would fit the criteria” (New York Times, August 17, 2001). By the end of 2002, ABN AMRO was one of the world’s largest banks with a presence in more than 60 countries and total assets of EUR 607.5 billion.

PREPARES FOR MERGER AND ACQUISITION OPPORTUNITIES In addition to rewarding the bank’s stakeholders, Groenink was also intent on making ABN AMRO an attractive merger candidate, which seemed important given the trend toward consolidation that was sweeping through Europe’s financial sector. By late 2003 the bank had a market capitalization of more than $32 billion. Apart from turning things around on the home front, a Euroweek analyst noted that Groenink had been successful in the United States: “He proved to the many non-believers that ABN Amro’s growing businesses in North America were not a gamble, but a solid money spinner . . . and began to pay their best revenue producers the true market price. For ABN Amro, Groenink’s new approach has paid off in spades” (November 28, 2003). Another analyst for Euroweek commented that the bank’s extremely large and profitable Midwest business “has prospered beyond all expectations and makes a mockery of the belief that foreign banks in the


US get skinned alive by the natives. Talk to any well-informed US domestic banker and they will confirm that ABN Amro has carved out a niche which is the envy of local competitors” (February 13, 2004). Groenink had disposed of the bank’s less-profitable endeavors and, according to Euroweek, by the end of the first quarter 2004 it was “sitting on a modest cash mountain” (May 7, 2004). Yet $32 billion in market capitalization was not sufficient, according to Groenink, to acquire or merge with banks he felt were worthy candidates, such as Credit Suisse, Deutsche Bank, ING, Societé Generale, and UBS. The driving force behind his plan for accelerated growth would come from restructuring the bank into three major segments: wholesale clients, asset management and private clients, and consumer and commercial customers. Groenink estimated that merging the international and corporate and investment-banking divisions into the new wholesale segment alone could save almost EUR 2 billion over four years. He projected that by 2004 the entire restructuring program would save the bank EUR 600 million annually.

INTERNATIONAL STRATEGIES In 2000 Groenink initiated a program to rationalize all ABN AMRO’s businesses. The huge retail business in the Netherlands would remain the core operation. Following a rebuilding of businesses in the 76 countries in which they operated, which included closing several operations in Asia, the bank decided to leave some areas intact, including markets in South America and the Middle East. By 2003 many private and retail banks, including ABN AMRO, were showing a great deal of interest in developing their businesses in Dubai while retreating from Bahrain, Morocco, and Egypt. ABN AMRO sold operations in Bahrain, Morocco, Lebanon, and Egypt. In an interview with C. L. Jose of Gulf News, Groenink explained that he deliberately retained the bank’s operations in Abu Dhabi and Dubai. “We know that there exists enough potential [there] because of the growing business in these emirates and we will try out best to grow more here. . . . Moreover, we would be keen to increase our physical presence also in these areas, especially in Dubai,” he said, indicating both on- and offshore prospects would be explored with the intent of expanding their branch networks (April 10, 2003). His strategic plan for the area emanated from a general consensus in the region that the next major recovery in the world economy would come through India and China and that the Gulf states—and the Dubai emirate in particular—were in pivotal positions between Europe and these markets to the east. Groenink visited the emirate in October 2003 and announced plans to centralize its entire regional back-office business in Dubai. When asked by Jose why ABN AMRO was not as aggressive as other foreign banks in the retail segment there,

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Groenink replied: “If you see the statistics, you’ll be convinced how aggressive we are and how fast we are growing in this segment.” He indicated that there seemed to be an erroneous perception of the bank’s retail position in the area and vowed to “be more communicative in the future.” “And for your information,” he added, “we are the fastest growing bank in the UAE [United Arab Emirates] in the credit card segment.” As for operations in Saudi Arabia, he indicated that ABN AMRO had a 40 percent holding in Saudi Hollandi Bank and a management contract. The bank’s local operations were strong, and it had grown into a very profitable retail franchise. “We believe this bank can very well grow into a strong regional player in its own right,” he said. He also said that he was open to looking into a possible combination between Saudi Hollandi Bank and Saudi British Bank, but only with specific caveats. “The move has to be seen in the perspective of the shareholder’s ambitions on this, and whatever be the outcome, it should serve the national interests and fit the framework of the national policies,” he said (April 10, 2003).

prospects could be found, however, he would consider buying back shares in his company. Under Groenink’s daring restructuring plan, the bank experienced a net income growth in 2003 of 71.4 percent, with an increase in net profit of 30 percent to EUR 3.16 million. “Groenink said excess capital was a new phenomenon for ABN AMRO as the bank had started out with a relatively low capital base. He said any M&A [merger and acquisition] deal would have to create value and not exceed the bank’s limited capital surplus,” wrote Alison Tudor (India News, June 10, 2004).

In 2003 ABN AMRO floated a mutual fund in India through its 13-branch presence in that country, adding to its other services in India such as investment banking, government securities, and brokering and lease finance. Groenink considered India a fast-growing market for the Asian arm of his company, particularly in light of a hike in Foreign Direct Investment (FDI) limits to 74 percent, which would allow foreign banks to grow their minority holdings. While Groenink said he did not favor entering into a joint venture in India, he would “explore this opportunity as it will be the fast road to future expansion” (Chennai, March 8, 2003).

“ABN AMRO Reports First Quarter 2001 Results,” press release, May 9, 2001, http://www.abnamro.com/pressroom/ releases/2001/2001-05-09-en.asp.

In China, ABN AMRO received approval in September 2003 to acquire a 33 percent holding in the asset-management arm of Xiangcai Securities. The joint venture was named ABN AMRO Xiangcai Fund Management Company and by early 2004 had issued four mutual funds. Its president and CEO, Walter Lin, said the company was also interested in managing China’s pension fund. Groenink announced that he would further expand ABN AMRO’s presence in China based on the optimistic economic outlook for that country and good performance of its fund-management joint venture. Groenink was quoted in People’s Daily online as saying: “With the growth rate shown over the last few years, China will soon become the third-largest economy in the world,” and because of that, ABN AMRO was reconsidering its entire strategy in the country (March 31, 2004). Groenink applied for a qualified foreign institutional investor (QFII) investment quota to allow his bank to enter China’s A-share and bond market, and Xiangcai Securities would become the local brokerage arm for the venture. As of mid-2004 Groenink was considering expanding the bank’s presence in India and the United States, where it was one of the largest foreign banks. He told members at a conference organized by Goldman Sachs that if no real value-creating

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See also entry on ABN AMRO Holding, N.V. in International Directory of Company Histories.


“ABN Amro Promotes a Top Exec,” American Banker, November 15, 1999, p. 30.

“ABN-Amro to Float MF Businessline,” Chennai, March 8, 2003, p. 1. “ABN Puts Dowdy Past Behind,” Euroweek, May 7, 2004, p. 20. “ABN: Return of the Black Tulip,” Euroweek, February 13, 2004, p. 1. Carreyrou, John, “ABN Amro to Cut 10 Percent of Dutch Workers In Preview of Coming Chief’s Bold Style,” Wall Street Journal, January 19, 2000. Cowell, Alan, “ABN Amro Shifts Focus Back to Traditional Banking,” New York Times, August 17, 2001. Elshout, Pieter, “Rijkman Groenink Finds His Prophet,” Marakon Associates, http://www.marakon.com/ pre_me_010224_hfd.html. “Financial Group Plans Further Biz Expansion,” People’s Daily online, March 31, 2004, http://english.peopledaily.com.cn/ 200403/31/eng20040331_139038.shtml. “German Banks Get Religion,” BusinessWeek online, February 28, 2000, http://www.businessweek.com/2000/00_09/ b3670218.htm. Jose, C. L., “Interview: ABN Amro to Make Dubai Its Hub for Middle East,” Gulf News online, April 10, 2003, http:// www.gulf-news.com/Articles/news.asp?ArticleID=99339. “Polder Power,” Euroweek, (London), November 28, 2003, p. 1. “Profile of Rijkman Groenink, Chairman (ABN AMRO Bank), DipBA 73,” Manchester Business School, February 22, 2001, http://www.mbs.ac.uk/alumni/prominent_alumni/ Rijkman_Groenink.htm.


Rijkman W. J. Groenink Tudor, Alison, “ABN Mulls Acquisitions, May Consider Buyback—CEO,” India News, June 10, 2004, http:// in.news.yahoo.com/040610/137/2dkjj.html. —Marie L. Thompson


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Andy Grove 1936– Chairman, Intel Corporation Nationality: American. Born: September 2, 1936, in Budapest, Hungary. Education: City College of New York, BS, 1960; University of California, Berkeley, PhD, 1963. Family: Son of George (dairyman) and Maria (bookkeeper); married Eva Kastan (homemaker), 1958; children: two. Career: Fairchild Semiconductor Research Laboratory, 1963–1966, research engineer, transistors; 1966–1967, section leader, surface and device physics; 1967–1968, assistant director, research and development; Intel Corporation, 1968–1979, vice president and director of operations; 1979–1987, president; 1987–1998, chief executive officer; 1998–, chairman of the board. Awards: Honored by American Institute of Chemists, 1960; Achievement Award, Institute of Electrical and Electronics Engineers (IEEE), 1969; J. J. Ebers Award, IEEE, 1974; Merit certificate, Franklin Institute, 1975; Townsend Harris Medal, City College of New York (CCNY), 1980; Engineering Leadership Recognition Award, IEEE, 1987; Enterprise Award, Professional Advertising Association, 1987; George Washington Award, American Hungarian Fund, 1990; Achievement medal, American Electronics Association, 1993; Citizen of the Year, World Forum of Silicon Valley, 1993; Executive of the Year, University of Arizona, 1993; Person of the Year, PC magazine, 1993; Heinz Foundation Award for Technology and the Economy, 1995; John von Neumann medal, American Hungarian Association, 1995; Steinman medal, CCNY, 1995; Statesman of the Year, Harvard Business School, 1996; CEO of the Year, CEO magazine, 1997; International Achievement Award, World Trade Club, 1997; Cinema Digital Technologies Award, Cannes Film Festival, 1997; Computer Entrepreneur Award, IEEE, 1997; Man of the Year, Time, 1997; Technology Leader of the Year, Industry Week, 1997; Distinguished Executive of the Year, Academy of Management, 1998; Medal of Honor, IEEE, 2000; Lifetime Achievement Award, Strategic Management Society, 2001. Publications: Physics and Technology of Semiconductor Devices, 1967; High Output Management, 1983; One-

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Andy Grove. AP/Wide World Photos.

on-One with Andy Grove, 1988; Only the Paranoid Survive, 1996; Swimming Across, 2001. Address: Intel Corporation, 2200 Mission College Boulevard, Santa Clara, California 95052-8119; http:// www.intel.com.

■ Andrew Steven Grove, universally known as Andy Grove, began making his mark while he was at Fairchild Semiconductor Research Laboratory, by helping solve the problem of inconsistency in the responses of silicon chips to electricity. When he went to work at Intel Corporation, he was expected to direct the young company’s engineers, but he quickly became the de facto chief operating officer. Grove organized the factories, called “fabs” (for fabrication plants), that made semiconductor chips, and it was Grove who set the corporate tone for Intel for three decades. He had a hand in every major devel-


Andy Grove

opment at Intel, which meant that he was part of almost every major event in the history of the manufacture and sale of computers from 1970 well into the 21st century. Partly because of his foresight, leadership, and relentless hard work, computers found their way into the lives of almost every human being on earth, affecting the lives of billions in large and small ways and making Grove one of the most influential businesspeople in history.

A DETERMINATION TO SUCCEED

“ONLY THE PARANOID SURVIVE”

Grove attended City College of New York from 1957 to 1960, spending his evenings poring over his class notes with a dictionary to understand difficult English words. When he was not in class or studying, he worked as a busboy. While at work he met Eva Kastan, who was then a waitress (and also a Hungarian refugee). After Grove graduated from City College, the couple moved to California, where Grove attended Stanford University, focusing on fluid mechanics and earning his PhD in only three years. Grove’s hard work and his keen, creative mind earned him a reputation for brilliance and gave him his pick of jobs with elite American technology companies. He chose to go to work for Fairchild Semiconductor Research Laboratory, a subsidiary of Fairchild Camera and Instrument Corporation, in California.

The title of Grove’s 1996 book Only the Paranoid Survive sums up much of Grove’s management philosophy. He came by his paranoia naturally: it was essential to his survival. He was born András Gróf into a not religious Jewish family in Budapest, Hungary, which was ruled by a military dictator whose government persecuted Jews. That Gróf was not a Jewish surname may have helped his family avoid some of the worst of the persecution. As a small child, Grove had scarlet fever, which not only nearly killed him but also rendered him partly deaf. With the advent of World War II and Germany’s invasion of the Soviet Union, Hungary abandoned its official neutrality and joined the Germans. In 1944, when the war went badly for Germany, the Nazis overthrew the Hungarian government, fearing that the Hungarians were about to make peace with the Soviets. The rounding up of Jews for death camps and slave labor soon began. Grove’s father was forced to serve in the German army at the Eastern Front, where he endured appalling tortures for the amusement of German soldiers. Grove and his mother hid under false names with a Christian family; almost every day was a close call, as soldiers snatched Jews off the streets and out of their homes. Then the Soviets fought their way into Budapest, bringing with them more persecution (and the rape of Grove’s mother). Grove wanted to be a journalist, but he discovered that journalistic success depended on the whims of political correctness, and he decided to enter a field where subjectivity would not affect judgments about his work; he chose to study chemistry. In 1956 Hungarians tried to replace their Communist government with a democracy, and the Soviet Union invaded their nation. There was fighting in Budapest’s streets as young people tried to repel soldiers and tanks with small weapons and bottles filled with gasoline. Soviet troops began snatching young men and imprisoning, torturing, or killing them. Grove and his best friend, Janos Lanyi, fled to Austria, dodging Soviet troops, crawling in mud, afraid all the way. He had lived 20 years under murderous oppression, surviving by always remaining alert to the possibility that even a simple attempt to purchase a loaf of bread could cause him to disappear along with many other young Hungarians.


The International Rescue Committee helped Grove immigrate from Austria to the United States, where he lived in the Bronx with an aunt and uncle who had immigrated in the 1930s. He quickly Americanized his name to Andrew Grove. A worker for the International Rescue Committee gave him a blank check to purchase a good hearing aid. Years later, in 2001, Grove would donate the proceeds from the memoir of his childhood, Swimming Across, to the International Rescue Committee.

Two of Grove’s bosses at Fairchild were Robert Noyce coinventor of the integrated circuit, and George Moore, the coiner of Moore’s Law, stated that computer chips would double in power and be halved in price every eighteen months. In 1968 Noyce and Moore established Intel, raising $2.3 million in start-up capital from the venture capitalist Arthur Rock— who would earn over $500 million for his investment. The first scientist Noyce and Moore hired was Grove.

MORE OF A MANAGEMENT PHILOSOPHY THAN A STYLE When Grove joined Intel in 1968, he was put to work managing the engineers who researched and developed semiconductors for Intel. Grove brought with him the personal traits that had helped him survive dictators and mass murderers and had enabled him to earn a BS in three years and a doctorate in three more. He was interested in every detail of the operations of Intel, regardless of whether it was directly related to his management of engineers. He spent long hours studying the math and experimental science behind Intel’s products. Almost immediately evident was his passion for orderliness. He expected every part of Intel’s laboratories and “fabs” to be clean, earning the nickname “Mr. Clean.” He wanted statistics on everything his employees did, forcing them to work until midnight to record every detail Grove wanted—there were no personal computers to help them, so they had to do every calculation by hand and slide rule. Grove used the statistics to

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monitor trends in productivity. This practice proved invaluable when Intel faced competition in the 1970s, 1980s, and 1990s, because it allowed Intel to maintain a high standard of quality in most of its operations; it also revealed where Intel was likely to lose money rather than make money. Not everything Grove did was productive. For instance, in 1971, he ordered all Intel employees to sign in with the time of their arrival at work. He stationed security guards at entrances to Intel’s buildings to enforce the policy. Grove did this out of frustration with employees’ showing up at odd hours. What happened, however, was that employees who arrived bright and early for meetings in one building would be recorded as late when they later went to their offices in another building. Then, too, employees who had been working 14hour days and 100-hour weeks switched to eight-hour days and 40-hour weeks and stopped working weekends. Despite the decrease in productivity caused by the policy, Grove did not withdraw it until June 1988, and in 1994 he reinstated the “late list.”

TEMPER AND SHOUTS Another problem some employees faced was Grove’s explosive temper; he harangued and yelled at them, often in front of other employees, a tactic he called “constructive confrontation.” He had a quick mind and could think faster than most people, and he sometimes rejected employees’ proposals by shouting them down with reasons the proposals would not work. Sometimes he was mistaken, and if the proposals were good ones, he might apologize and even admit that he was wrong—but Intel lost employees who felt humiliated by Grove. Some of the shouting may have been a result of Grove’s deafness; he had trouble hearing until a series of operations repaired his eardrums in the 1970s and 1980s. There was method to Grove’s style, even though his approach to management superficially seemed to be leadership by intimidation. In fact, Grove studied management as intensely as he studied science. In the 1970s he faced a volatile market for computer chips; Intel was just one of many firms trying to build markets for their technology. To make Intel one of the successes required building a demand for its particular products and staying ahead of other manufacturers in the development of ever more powerful chips. Grove approached these demands with a ruthlessness that characterized his entire management career. For instance, he instituted an unending series of productivity reviews for every Intel employee. He studied every aspect of production and found ways to quantify it: how many dollars were earned for Intel by an employee’s performance or how many problems were solved by a given employee. Part of his strategy for management by paranoia was to make it clear to all employees that the bottom 10 percent in his ratings could expect to be fired every year.

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This evaluation process provided data that Grove could use to build models of success and failure for Intel as a whole. The data also gave him clues to which aspects of Intel’s operations needed to be improved and which operations should be emulated by the rest of the company. He created a corporate culture in which employees strove to stay out of the bottom 10 percent, because they believed that there would always be someone behind them ready to take their jobs if they failed to perform well. Meanwhile, Grove compensated for the 10 percent turnover rate (which soared to 25 percent in the fabs, as employees quit because of the stress of the evaluations and productivity demands) with vigorous recruitment of new college graduates. He, Noyce, and Moore were brilliant recruiters, and Intel’s position at the cutting edge of technology was a powerful lure for new graduates. Further, Grove made sure that management employees stayed in touch with their old professors to learn of the brightest students in their colleges. Grove also refined the evaluation process with what was called Intel’s Management by Objectives (IMBO). In this process, the company drew up a statement of what each individual employee was expected to achieve in a quarter; the objectives achieved were recorded so that an employee could see the percentage of objectives, “IMBOs,” he or she was achieving. The IMBOs could be unreasonably high, reflecting Grove’s view than nothing is too good to be improved, but part of the beauty of the system was that the number of IMBOs required could be adjusted when statistics showed the target to be too high.

MORE THAN JUST MEETINGS Another important aspect of Grove’s management philosophy was the meeting. To Grove, meetings were essential to Intel’s productivity, and during the 1970s he honed his techniques for running meetings. Every meeting had a specific starting time and duration, and people who arrived late were sometimes shut out. The meeting’s leader, usually Grove himself, would make sure that discussion focused on a clear, written statement of what the meeting was meant to accomplish. The meeting could be about a low yield of viable chips in a fab, about marketing a new product, or about getting departments to cooperate with one another more efficiently. At the end of each meeting the results were quantified and measured against the meeting’s objectives. Grove’s ideas on efficient and productive meetings were explained in his first book on management philosophy, High Output Management, and through that book they became part of the corporate culture of uncounted American businesses. Yet Grove had more to offer than theoretical and applied management techniques. In spite of his notorious temper, he was usually an affable man known for his bright smile and personal warmth. He applied these traits to a newspaper column he began in 1984 for the San Jose Mercury; it was a “Dear Abby”-


Andy Grove

style advice column in which he explained how people could survive the day-to-day grind of work, and it touched on subjects from personal efficiency to how to get along with coworkers. These columns became the basis for another book, One-on-One with Andy Grove, a guide to surviving the corporate jungle.

SAVING INTEL FROM DEATH In the early 1980s Intel’s fortunes dropped. The main source of Intel’s income was the DRAM (dynamic random access memory) chip that Intel had pioneered and turned into an essential component of computers. The Japanese corporations Fujitsu, Hitachi, NEC, and Toshiba invested heavily in research into DRAMs, and by 1979 Fujitsu had a 64K (64,000 bits of memory) DRAM chip ready for the mass market, beating Intel to the 64K level by two years. The Japanese also invested in industrial espionage, trying to steal the secrets of American chip manufacturers, and Fujitsu copied Intel’s 8086 microprocessor, the heart of the emerging personal computers for the mass market. Grove did not back down from fights, and he sought ever better ways to improve Intel’s products and to cut production costs. But he refused to believe that the Japanese companies were more efficient manufacturers than Intel, and that refusal set Intel back, because the Japanese fabs were, in fact, superior to most American plants in getting the most out of their resources. Whereas Intel would have a success rate of 50 percent to 80 percent—in terms of functional chips at the end of the manufacturing process—Japanese corporations were achieving 80 percent to 98 percent success rates. By 1985 Intel was in desperate straits, losing money because the Japanese corporations were dumping their chips on the American market—selling below cost in order to drive competitors out of business. For instance, a Hitachi directive ordered its salespeople to undersell everyone in America by at least 10 percent, no matter how low the price went. Eventually this placed Grove, then Intel’s president, and Moore, Intel’s chief executive officer, in the painful situation of having to make cuts in Intel’s manufacturing process. Grove directed the end of Intel’s manufacturing of DRAM chips, laid off more than three thousand employees, and focused the company on making microprocessors. To this task Grove brought all of his considerable intelligence and experience, using the courts to stop the copying of Intel’s microprocessors and developing efficient processes for creating more powerful microprocessors, following Moore’s Law of doubling power and halving cost every eighteen months. The result was the 80386SX chip that in 1989 became the fundamental processor in most of the world’s computers. When he became CEO in 1987, Grove brought the manufacturing expert Craig Barrett up from Intel’s ranks to become president. As a team, Grove and Barrett streamlined Intel’s


manufacturing process, and they made every Intel fab a duplicate of every other Intel fab, allowing improvements to be applied universally to the manufacture of chips. This suited the business climate that was evolving partly as a result of the improving inventory control that Intel’s microprocessors allowed. Corporations were cutting overhead by reducing or eliminating their inventories and taking delivery of the products they needed only days before they were to be used. Intel could tell customers exactly when new, more powerful chips would be available, and thus it was able to adapt to customers’ schedules even a year and a half in advance. In 1992 Intel profits topped $1 billion, and it was the dominant manufacturer of microprocessors. In 1994 Intel hit a bump in its road of success. A college professor discovered that Intel’s new “pentium” chip had a flaw in making long division, and he published exactly what the flaw was. Grove knew that the flaw would affect a computer’s calculations only once in tens of thousands of years of constant use, so he had Intel promise to replace only those chips used in computers making exceptionally complex calculations, mostly in scientific research. But that made it appear that Intel was not committed to making its microprocessors of the highest quality. Eventually, at the cost of $475 million, Intel promised to replace all the flawed chips with new ones in which the flaw had been eliminated. It turned into a public relations victory for Intel, restoring confidence in its products. During the 1990s Intel’s gross revenues averaged increases of 25 percent per year, with profits soaring by 40 percent per year. When Grove retired as CEO to become chairman of the board, his share of Intel was worth several hundred million dollars, but he lived modestly, eschewing many of the trappings of great wealth and power. He even had to jockey for a parking space in Intel’s Santa Clara lot, just like every other employee. He had become one of the world’s most admired businessmen, and his business course at Stanford was always crammed with students. At Intel he focused on helping shape Intel’s future, working with the new CEO, Barrett, to diversify Intel’s holdings and product line to meet a changing global economy. By 2004 Intel’s microprocessors ran 80 percent to 90 percent of the world’s computers, and the “itanium” chip, a special project for Grove, was expected to be a big winner as the processor of choice for large computers. The new chip ran at 4.5 gigahertz (4.5 billion calculations per second) and put Intel’s technology far ahead of its competitors at that time.

See also entry on Intel Corporation in International Directory of Company Histories.


Buderi, Robert, Engines of Tomorrow: How the World’s Best Companies Are Using Their Research Labs to Win the Future, New York: Simon & Schuster, 2000.

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Andy Grove Jackson, Tim, Inside INTEL: Andy Grove and the Rise of the World’s Most Powerful Chip Company, New York: Dutton, 1997. Ramo, Joshua Cooper, “Man of the Year: Andrew S. Grove—a Survivor’s Tale,” Time, December 29, 1997, pp. 54–67. —Kirk H. Beetz

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Oswald J. Grübel 1943– Co–chief executive officer, Crédit Suisse Group; chief executive officer, Crédit Suisse Financial Services Nationality: German. Born: November 13, 1943, in Germany. Career: White Weld Securities, 1970–1978, Eurobond trader; 1978–1985, CEO; Crédit Suisse First Boston, 1985–1986, corporate chairman and chairman of Futures Trading in Zurich and of Asia division; 1986–1987, member of the Nederlands Supervisory Board; 1987–1988, CEO of Hong Kong division; 1988–1991, deputy chairman and member of group executive committee; Crédit Suisse Group, 1991–2002, member of executive board; Credit Suisse First Boston, 1997–1998, member of the executive board and head of Global Trading; Crédit Suisse Financial Services, 1998–, CEO; Crédit Suisse Group, 2003–, co-CEO. Address: Crédit Suisse Group, Paradeplatz 8, P.O. Box 1, 8070 Zurich, Switzerland; http://www.credit-suisse.com/ en/home.html. Oswald J. Grübel. AP/Wide World Photos.

■ Oswald J. Grübel appeared to have concluded a successful career when he took early retirement in 2002 from Crédit Suisse Group (CSG), the Swiss international banking, investment, and insurance conglomerate for which he had held a series of increasingly important positions over the course of more than three decades. Less than a year after his retirement, however, the venerable 150-year-old financial institution found itself in an existence-threatening crisis, caused principally by the excessive expansion of insurance interests. While still with CSG, Grübel, an investment-banking specialist, had counseled the CEO Lukas Mühlemann against that expansion strategy, and Mühlemann’s failure to take the advice had likely led to Grübel’s departure. When Mühlemann exited at the end of 2002, CSG called upon Grübel to return as the company’s coCEO, in tandem with John Mack, the head of the company’s American investment-banking unit Credit Suisse First Boston. Born in Germany during the middle of World War II, Grübel steadfastly refused to discuss his childhood or family


life with the media—such a public posture was not unusual among German businessmen of Grübel’s generation. He did not attend university, instead gaining his education through an apprenticeship in banking and securities trading at Deutsches Bank, first in Mannheim and then in Frankfurt. During the late 1960s he attended the International Institute for Management Development in Geneva, a “finishing school” for promising European executives who lacked traditional university credentials. Grübel joined White Weld Securities in 1970 and rose from his initial position as a floor trader to become the chief executive officer of the London- and Zurich-based Eurobond house in less than eight years’ time. Crédit Suisse gained a majority share in White Weld during Grübel’s tenure and in 1974 absorbed the firm as Financière Crédit Suisse White Weld. Having successfully led the White Weld unit for seven

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years, Grübel was groomed for Crédit Suisse’s inner management circle through a series of assignments at company units in Europe and Asia. By the late 1980s Grübel had moved into the company’s elite management team, handling responsibilities in such important areas as global foreign exchange and money markets. He performed well and was considered popular among employees for his down-to-earth style. In an interview on the Crédit Suisse Web site, he stated, “I’m a person who isn’t afraid of choosing the fast track. For example, if I need a piece of information, I’ll call the person I believe has that piece of information directly, not via his line manager or that line manager’s boss. It’s important that communication be fast and uncomplicated. The same thing applies to making decisions.” CSG, the second-largest Swiss banking concern, had long been involved in insurance interests; in 1997, under the leadership of the CEO Lukas Mühlemann, the company took a decisive step toward greater participation in the industry by purchasing Winterthur Insurance for EUR 5 billion. The Winterthur deal, coupled with some EUR 15 billion in other corporate purchases, soon proved disastrous for CSG. Company shares fell to half their 1997 value in 2000, and during 2002 Winterthur incurred losses of over EUR 1 billion. Grübel, who was in charge of the company’s private-banking business during the late 1990s, had opposed Mühlemann’s policies but found himself isolated and chose to opt for early retirement in 2002, as the company seemed to have reached a low point. Later that year Mühlemann stepped down, and Grübel was quickly called back to Crédit Suisse to become co-CEO with John Mack, effective January 1, 2003. Contrary to the predictions of some analysts, Grübel determined not to sell off Winterthur, describing it as “an important constituent” of Crédit Suisse Financial Services: “Our priority now is to restore Winterthur to its position as the best

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and most profitable insurance company” (Grübel interview). The dual CEO structure decided upon by CSG had Grübel focusing on financial-services operations from Zurich, with Mack in charge of banking out of Boston. The arrangement was an industry oddity, leading to speculation about an inevitable battle for supremacy between the two. But any such battle would have to be predicated on the company’s rebound. Thomas Kalbermatten, an analyst for the Swiss rival Bank Sarasin, stated, “For now, I think it works better to have two people. But the leadership structure may change” (James, November 17, 2002).

See also entry on Crédit Suisse Group in International Directory of Company Histories.


Grübel, Oswald, interview by Bettina Bucher and Bettina Junker, Crédit Suisse Financial Group, http://www.creditsuisse.com/en/who_we_are/manage.html. James, Jennie, “How to Stop Sinking,” Time Europe, November 17, 2002, http://www.time.com/time/europe/ magazine/article/0,13005,901021125-391495,00.html. Langely, Alison, “Crédit Suisse Sets a Record with Its Loss of $1.4 Billion,” New York Times, November 15, 2002. “Life’s No Gas at CS: Crédit Suisse Group Seeks to Recover from Losses,” Private Banker International, December 2, 2002, p. 7. Olsen, Elizabeth, “Crédit Suisse Announces Management Shake-Up,” New York Times, July 4, 2002. —David Marc


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Jerry A. Grundhofer 1945– Chairman, chief executive officer, and president, U.S. Bancorp Nationality: American. Born: 1945, in Glendale, California. Education: Loyola Marymount University, BA, 1967. Family: Son of a bartender and a house cleaner; married (wife’s name unknown). Career: Union Bank, 1967–1981, various positions; Alliance Bank, 1981–1983, president; Wells Fargo Bank, 1983–1985, senior vice president; 1985–1987, executive vice president; Security Pacific National Bank, 1987–1990, vice chairman; 1990–1993, president and COO; Star Banc Corporation, 1993–1998, chairman, CEO, and president; Firstar, 1998–2001, CEO and president; U.S. Bancorp, 2001–2003, CEO and president; 2003–, chairman, CEO, and president. Awards: Honoree, 15th Annual Tribute Dinner of the Jewish Institute of Religion, Hebrew Union College, 1997; Banker of the Year, Forbes, 1998; Banker of the Year, American Banker, 2000. Address: U.S. Bancorp, U.S. Bank Plaza, 601 2nd Avenue South, Minneapolis, Minnesota 55402; http:// www.usbancorp.com.

■ Jerry A. Grundhofer worked his way up through the banking world to become the president, CEO, and chairman of U.S. Bancorp (USB), the nation’s eighth-largest bank-holding company. Over his career Grundhofer turned around several faltering banks by adhering to his basic business principles: maintaining a sales-oriented culture, offering high-quality customer service, and instituting major cost-cutting measures. Through acquisitions and mergers he turned Star Banc Corporation of Cincinnati first into Firstar Corporation of Milwaukee and then into U.S. Bancorp of Minneapolis. Firstar made big news when in February 2001 the company bought USB— run by Grundhofer’s brother John, well known as “Jack”—for $21 billion and took its name. Although family control of large American banks had become very rare, the relationship International Directory of Business Biographies

Jerry A. Grundhofer. AP/Wide World Photos.

between and complementary skills of the Grundhofer brothers smoothed the complex integration of these two large corporations.

FOLLOWED HIS BROTHER INTO BANKING Jerry Grundhofer, his older brother Jack, and a sister were raised in a modest home in the Los Angeles suburb of Glendale. Grundhofer’s father, a bartender, and mother, who worked as a caterer and maid, struggled to put their sons through Jesuit schools. Jerry’s first job was parking cars at church. Jack coached Jerry in baseball. Jerry eventually followed his brother through Loyola High School and Loyola Marymount University and into the world of banking. As a

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management trainee at Union Bank in Los Angeles, Jack found Jerry a summer job in the mailroom. Following his graduation from college Jerry Grundhofer continued to work at Union Bank; in 1981 he became president of the struggling Alliance Bank. Two years later Jack Grundhofer convinced his employer, Wells Fargo Bank, to hire his brother. As the Grundhofer brothers rose through the ranks at Wells Fargo, they adopted the “Wells way”—the costmanagement principles of the company’s CEO Carl Reichardt. However, whereas Jack Grundhofer cut costs through layoffs and other draconian measures—earning him the nickname “Jack the Ripper”—Jerry emphasized the cutting of costs through aggressive salesmanship and employee incentives. In 1987 Robert Smith, the chairman and CEO of Security Pacific Corporation in Los Angeles, recruited Jerry Grundhofer to head the company’s retail-banking business. Over the next three years Grundhofer increased the business’s net income from $125 million to $425 million, and in 1990 he was promoted to president and chief operating officer. As Security Pacific ran into serious problems, Smith credited Grundhofer with keeping earnings up and saving the company from complete disaster. In an article in Institutional Investor Jack Milligan quoted Smith as saying, “It’s hard not to follow Jerry because he believes so much in what he’s doing” (November 2000). In April 1992 BankAmerica Corporation announced that it would acquire Security Pacific. Grundhofer stayed on until May of 1993, when he was named president, CEO, and board chairman of Star Banc Corporation of Cincinnati. TURNED STAR BANC INTO FIRSTAR Grundhofer’s reputation grew as he turned Star Banc around with his charismatic optimism. Richard Davis told John Engen of USBanker that when Grundhofer called to recruit him to Star Banc, “He said, ‘You know how we always talked about building something from scratch and doing things right? This is it—a once-in-a-lifetime chance to put all those best practices in place.’... There’s no better salesperson than Jerry” (February 2004). His first address to the senior managers was both a pep talk and a sharing of his vision for the troubled company. Grundhofer walked through the building in his shirtsleeves, quizzing employees about their latest sales coups and their sales “pipelines.” He became famous for his unorthodox selling strategies, telling employees to hand out their business cards in grocery-store lines and sponsoring sales contests between groups of workers—the winners earned Las Vegas vacations. Grundhofer transformed Star Banc into one of the nation’s most profitable and efficient banks; he topped the record per-share operating earnings for 28 successive quarters, and Star Banc’s stock valuation soared. Grundhofer’s success enabled him to acquire the struggling Firstar Corporation of Milwaukee in late 1998. With assets of

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$15 billion Star Banc paid $7.5 billion in stock for Firstar and its $23 billion in assets. Grundhofer took the Firstar name and moved his company’s headquarters to Milwaukee. Known for his effective communication with Wall Street, Grundhofer convinced analysts that the move was an inspired one.

TURNED FIRSTAR AROUND Under Grundhofer the “Wells way” became the “Firstar way.” He continued to follow his philosophy of efficiency and cost cutting while making strategic investments and providing employee incentives. He told Milligan, “Being a low-cost provider gives one a tremendous strategic advantage. It allows you to deal with challenges, be competitive on the asset and liability sides of the balance sheet, and take care of customers” (November 2000). Whereas many banks were notorious for their high workerturnover rates and low-quality service, at Firstar Grundhofer created an employee-motivating meritocracy. Bonuses and stock options were based on revenues and customer service. Grundhofer gave branch managers more authority; they became responsible for their own profit-and-loss statements and were instructed to reward performance by augmenting base salaries by up to 40 to 50 percent. Underperforming managers were fired. Analysts were stunned when in early 1999, just months after the Star Banc–Firstar merger, Firstar paid $10 billion for Mercantile Bancorp of St. Louis, a regional holding company with $33 billion in assets. Grundhofer admitted that he would have liked to have moved more slowly but, as with his later acquisitions, believed that he couldn’t afford to wait. Firstar’s earnings continued to rise. Over Grundhofer’s three years of leadership Firstar increased in size eightfold. He emphasized low-cost retail products and taught his employees how to sell. At his monthly meetings with the heads of the 23 major business lines Grundhofer stressed the principle of “operating leverage”—the constant pushing of costs below 50 percent of revenue. Each Firstar business unit was committed to a “Five-Star Service Guarantee.” Retail customers would receive $5 each for an inaccurate statement, a teller-line wait of more than five minutes, failure to receive a same-day answer to a query, lack of access to a telephone representative, or a closed or malfunctioning ATM. Grundhofer summed up his approach to management for the Business Journal–Milwaukee: “Our philosophy is to give customers what they want, when they want it, and on their own terms. Also, we put the highest priority on increasing the value of our shareholders’ investment in Firstar Corporation. It is the reason that we come to work each day” (May 5, 2000).


Jerry A. Grundhofer

ACQUIRED U.S. BANCORP In 2001 Grundhofer made his boldest move yet in acquiring U.S. Bancorp—run by Jack Grundhofer—for $86 billion. Investors worried that Grundhofer was moving too fast, particularly in light of other recent—and sometimes disastrous— large bank mergers, but USB was attractive and affordable. Jack believed that USB had not been growing fast enough and needed a larger base; Jerry believed that Firstar had to move immediately so as not to lose USB to a competitor. After the acquisition Firstar took the USB name and moved its headquarters to Minneapolis. Jerry Grundhofer became president and CEO of the country’s eighth-largest commercial bank, while Jack was chairman of the combined board of directors. The brothers saw the two companies as a perfect match, with Firstar providing high-quality, low-cost retail banking and customer loyalty and USB providing investmentbanking services, primarily through its Piper Jaffray subsidiary. In addition USB had access to western consumer markets that were growing at an average of 7.5 percent a year—twice the rate of midwestern metropolitan markets. USB also had transaction-processing and commercial-payments businesses, offering ATM services and corporate credit cards, that were growing by 20 percent annually. Milligan quoted Grundhofer as commenting, “We know how to compete if we have a distribution system, and U.S. Bancorp gives us that. We’ll combine the values of the heartland with the growth markets of the West. This is a story made for fairy tales and history books” (November 2000). The reunion of the Grundhofer brothers made headlines. Milligan quoted Jerry Grundhofer as having once said, “Jack and I are pretty similar. We think about things the same way. We run our companies pretty much the same way” (November 2000). However, although both brothers believed in drastic cost cutting, Jack acknowledged that Jerry not only had more experience with large retail-branch operations but worked within a different model; Jack decided that Jerry’s model would be the ideal one for USB. The brothers had offices down the hall from each other and made decisions together on a daily basis.

EXPANDED USB Milligan quoted Jerry Grundhofer as saying, “We have the mental toughness to win. There’s no acceptance around here for not making it” (November 2000). Analysts and employees seemed to agree that not only was Grundhofer tough but his infectious enthusiasm enabled him to sell his vision effectively while maintaining a long-term perspective. Grundhofer chose to integrate the two companies over a relatively long period of time, so as to minimize disruptions


to employees and customers. In an address to an American Banker conference Grundhofer stressed the importance of retail-branch banking: “Brick and mortar is not dead, and it’s not going away. The branch office remains the center of the customer relationship” (February 26, 2002). While cutting costs and eliminating USB’s many-layered bureaucracy, Grundhofer expanded retail services, especially in California, where, just as analysts had predicted, USB began buying up retail banks. The company opened student-loan, auto-leasing and home-mortgage units; it introduced investment and insurance products. By the summer of 2003 USB had 220 branches in California alone and had become the nation’s largest real-estate lender. That summer U.S. Bank, a USB subsidiary, undertook a major push into corporate banking in downtown Los Angeles. Grundhofer made other acquisitions, including Leading Mortgage Company of Defiance, Ohio, and Nova Corporation of Atlanta, the country’s thirdlargest payment processor. Grundhofer also spun off Piper Jaffray.

MANAGEMENT STYLE Following Jack’s retirement at the end of 2002 Jerry Grundhofer became USB’s chairman as well as its president and CEO. As of 2004 U.S. Bancorp had assets of more than $189 billion, operating nearly 2,300 bank offices and 4,500 ATMs in 24 states. The company continued to offer Firstar’s “Five-Star Service Guarantee.” In May 2004 Grundhofer announced that he had no plans to make further major acquisitions. In addition to bringing Firstar’s branch strategies to USB, Grundhofer brought its meritocracy. Annual bonuses for senior managers were tied to performance; analysts credited Grundhofer with developing one of the best bankmanagement teams in the country. In February 2002 Grundhofer announced that all employees would be eligible for stock options, including part-timers. USB’s former chief financial officer Andy Cecere told Engen of USBanker, “Jerry runs this very large company like a small company, with a lot of focus and engagement, and he works hard to keep things simple”; the acting CFO David Moffett noted, “There are a lot of CEOs who love being CEO more than they love the business. That’s not the case with Jerry. He loves to sell, and he cares” (February 2004).

See also entries on Firstar Corporation, Security Pacific Corporation, Star Banc Corporation, and U.S. Bancorp in International Directory of Company Histories.

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Jerry A. Grundhofer SOURCES FOR FURTHER INFORMATION

Bach, Deborah, “Grundhofer Asserts Faith in Bricks,” American Banker, February 26, 2002, p. 13. Engen, John, “U.S. Bancorp’s Smooth Operator,” USBanker, February 2004, pp. 34–37. “Jerry Grundhofer, 55,” Business Journal–Milwaukee, May 5, 2000, p. 27.

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Milligan, Jack, “A Deal Too Far?” Institutional Investor, November 2000, pp. 53–64. Reilly, Patrick, “U.S. Bancorp Chief Puts Motivation Plan to Test,” American Banker, April 26, 2001, p. 1.

—Margaret Alic


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FROM INDIA TO PENNSYLVANIA

Rajiv L. Gupta

Gupta’s trip from Muzzafarnager, India, to the home of Rohm & Haas half a world away in Philadelphia, Pennsylvania, was a most direct one. He was born in December 1945, graduated from the Indian Institute of Technology in 1967, and received a master’s degree from Cornell University in 1969 and a master’s in business administration from Philadelphia’s Drexel University in 1971. Gupta joined Rohm & Haas that same year as a financial analyst and, except for a three-year stint with another company in the United Kingdom, moved steadily upward, and outward, through its ranks over the next 30 years.

1945– Chairman, director, and chief executive officer, Rohm & Haas Company Nationality: Indian. Born: December 23, 1945, in Muzzafarnager, India. Education: Indian Institute of Technology, BS, 1967; Cornell University, MS, 1969; Drexel University, MBA, 1971. Family: Son of Phool Prakash and Rukmini Sahai; married Kamal Varshney, 1968; children: two. Career: Scott Paper Company, 1969–1971, scientific analysis manager; Rohm & Haas, 1971–1974, manager and treasurer; 1974–1976, assistant to the CEO; 1976–1979, financial planning manager; 1981–1983, planning director in London; 1983–1984, director general in Paris; Ducolite International, 1984–1987, director general; Rohm & Haas, 1987–1989, plastics business director; 1989–1993, global business director; 1989–1993, vice president of Pacific Region; 1996–1998, chairman of Electronics Materials Business Group; 1998–1999, vice chairman; 1999–, chairman and CEO. Awards: Award for Executive Excellence, Commercial Development and Marketing Association, 2002. Address: Rohm & Haas Company, 100 Independence Mall West, Philadelphia, Pennsylvania 19105; http:// www.rohmhaas.com.

■ As chairman and CEO of Rohm & Haas Company, Rajiv L. Gupta was in every sense a global leader. Born and educated in India, beginning in 1999 he was head of the Philadelphiabased $6 billion specialty-materials company running operations in more than 25 countries. Gupta served Rohm & Haas in 13 different positions in three different regions of the world, including Europe and Asia Pacific. In 2002 he was recognized for his outstanding leadership by the Commercial Development and Marketing Association, and in 2003 Rohm & Haas ranked second on Fortune magazine’s list of America’s mostadmired companies; among the eight key attributes of reputation, its quality of management was ranked with a near perfect score.


Gupta developed a global breadth of management experience throughout his career with Rohm & Haas, a company generally classified as a specialty-chemical company, but which describes itself as a specialty-materials company making products for the personal-care, grocery, home, and construction markets as well as the electronics industry. In 1999 the company acquired Morton International, a producer of salt and also a diversified specialty-chemical company. The acquisition expanded Rohm & Haas’s plastic-additives assets and added a global electronics-materials business, a specialty-adhesives division, and more. Gupta was vice chairman of Rohm & Haas at the time of the Morton deal but was already lined up to succeed the chairman and CEO J. Lawrence Wilson upon his retirement at the end of 1999.

NAVIGATING A DIFFICULT ECONOMIC ENVIRONMENT At the start of 2000, when Gupta took over the top position at Rohm & Haas, the economic environment was taking a major downturn that lasted for several years. In 2001 he told Alex Tullo of Chemical & Engineering News, “The external economic environment of the past 12 months has sharpened our resolve to make Rohm & Haas a less complex company” (May 7, 2001). The manufacturing assets were streamlined through cutbacks in facilities and the elimination of the liquidpolysulfide sealants business, which cut approximately 1,200 jobs of a total of 18,000. Gupta maintained a long-term goal for Rohm & Haas of 4 to 6 percent sales growth, to be achieved through new product development, expanded presence in Asia, and the imple-

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Rajiv L. Gupta

mentation of improved information technology and an Enterprise Resource Planning (ERP) system throughout the company. ERP is a set of business-planning and scheduling tools designed to sharpen decision-making and enhance coordination and teamwork in the supply chain for more effective preparation for the future. Implemented properly, ERP, combined with well-designed system-wide information technology, can give a company a competitive edge through improved customer service and productivity while at the same time lowering costs and inventories.

THE ASIA-PACIFIC CONNECTION

DEVELOPING THE TECHNOLOGY ADVANTAGE

Beginning in 1979 the company set up and maintained operations in China, where more than $300 million were invested after that date. Gupta was quick to point out that in spite of discrepancies among regulations across international boundaries, the company had set up its own policy for environmentally responsible manufacturing in China. He told a press conference in Shanghai in 2003, “We will support and implement the ‘Green China’ policy with the help of China’s rich resources, market growth, and labor as the way to success” (March 5, 2003).

Gupta saw technology differentiation as a way to gain a greater market share at any time—but particularly in difficult times. Innovation typically increases with investment in research and development; where Rohm & Haas spent only 11 percent of its R&D funds on growth projects in 1997, under Gupta’s leadership growth-project spending was increased to approximately 35 percent of R&D funds in 2003. One of the reasons Gupta received the Commercial Development and Marketing Association award in 2002 and was recognized by Forbes for outstanding management leadership was his attention to societal responsibility. Rohm & Haas committed R&D funds to reducing energy consumption by one percent each year, the ultimate goal being to reach total reductions of 15 percent from 1999 totals. The company’s largest energy consumer, a plant in Houston, reached a 15 percent reduction from 1999 figures in a span of only three years. Gupta recognized that maximizing operating efficiency benefited both the environment and the company’s profitability. Gupta led Rohm & Haas through hard times with a strong product portfolio that was continuously refined through aggressive R&D and through incorporation of the ERP system in order to drive productivity and efficiency. At the same time, Gupta stressed the importance of good corporate governance practices at all levels. Rohm & Haas required all salaried employees to attend compliance training and be certified annually with the company’s Code of Business Conduct.

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One more essential action that Gupta took to ensure Rohm & Haas’s corporate survival was to geographically reposition its manufacturing to meet the changing global environment. As of 2004 Rohm & Haas had over 100 manufacturing and technical locations in over 25 countries. Between 1999 and 2003 the company opened six sites in the Asia-Pacific region, meanwhile closing manufacturing facilities in North America and Europe. In 2002 Rohm & Haas started construction of a $20 million plant in India designed to annually produce up to 23,000 metric tons of water-based latex polymers used in coatings.

See also entry on Rohm & Haas Company in International Directory of Company Histories.


Rohm & Haas, “Rohm & Haas Chairman and CEO Raj L. Gupta Visits Shanghai and Discusses Company’s Plans for Ongoing Investment in China,” news release, March 5, 2003, http://onlinepressroom.net/rohmhaas/. Tullo, Alex, “Rohm & Haas Also Streamlines Operations,” Chemical & Engineering News, May 7, 2001, http:// pubs.acs.org/cen/topstory/7919/7919notw2.html. “2003 America’s Most-Admired Companies,” Fortune, http:// www.fortune.com/fortune/mostadmired. Wallace, Thomas F., et al., ERP: Making It Happen, New York: John Wiley & Sons, 2001. —M. C. Nagel


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Carlos M. Gutierrez 1953– Chairman and chief executive officer, Kellogg Company Nationality: American. Born: November 4, 1953, in Havana, Cuba. Education: Attended Monterrey Institute of Technology. Family: Son of Pedro (pineapple plantation owner) and Olga (Fernandez) Gutierrez; married Edilia Cabrera, c. 1975; children: three. Career: Kellogg Company, 1975–1982, sales and marketing representative; 1982–1983, supervisor of Latin American marketing services; 1983–1984, manager of international marketing services; Kellogg de Mexico, 1984–1989, general manager; Kellogg Canada, 1989–1990, president and chief executive officer; Kellogg USA, 1990, vice president, product development; 1990–1993, vice president, sales and marketing; 1993–1994, general manager, cereal division; Kellogg Company, 1993–1996, executive vice president; Kellogg Asia-Pacific, 1994–1996, president; Kellogg Company, 1996–1998, executive vice president, business development; 1998–1999, chief operating officer; 1999–, president and chief executive officer; 2000–, chairman of the board. Address: Kellogg Company, 1 Kellogg Square, Battle Creek, Michigan 49016; http://www.kelloggcompany. com/kelloggco.

■ Coming up through the ranks of Kellogg Company, Carlos Gutierrez repeatedly proved his ability to increase sales and output through innovative ideas. Wherever Kellogg assigned him, which was all over the world, Gutierrez corrected problems that prevented company growth, be they in manufacturing or marketing. General Mills was on the verge of becoming the leading cereal maker when the Kellogg board of directors appointed Gutierrez chief executive officer and president. True to his ethic Gutierrez quickly mapped out and set in motion a strategic plan to put the company on a new course. The successful implementation of the plan by this “charismatic and approachable executive,” stated an article in the St. Louis PostDispatch, “has won the admiration in business circles for a flagging company” (April 7, 2004). International Directory of Business Biographies

Carlos M. Gutierrez. AP/Wide World Photos.

LEARNED WORK ETHIC FROM FATHER Gutierrez was born into a Cuban family that enjoyed a comfortable lifestyle. His father, Pedro, owned and managed a pineapple plantation, and his mother, Olga, cared for Carlos and his older brother. Life changed suddenly in 1959 when Fidel Castro overthrew the regime of Fulgencio Batista, created a communist state, and confiscated businesses, including the Gutierrez plantation. The following year the Gutierrez family fled to Key Biscayne, Florida, believing they would soon be able to return home. For a time they lived as if they were on vacation; young Carlos learned English from the hotel bellhop. When it became apparent they would not be going home, Pedro uprooted his family numerous times as he pursued job opportunities. He eventually accepted a position with the Heinz Company in Mexico and later started his own business. Gutierrez worked in his father’s business before a recession

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Carlos M. Gutierrez

made him decide to leave. Gutierrez credited Pedro, whose work ethic was never to give up and always to deliver results, as being his mentor.

DELIVERED RESULTS Gutierrez was studying business administration at the Monterrey Institute of Technology in Queretaro, Mexico, when a friend told him Kellogg was recruiting employees for sales and marketing positions. Gutierrez knew something about sales, having sold magazine subscriptions in high school. After he was hired as a sales representative for Kellogg de Mexico in 1975, Gutierrez dropped out of college without earning a degree and dedicated himself to delivering results for Kellogg. His outstanding performance in sales and marketing assignments drew the attention of corporate headquarters in Battle Creek, Michigan. Gutierrez was transferred there in 1982 and made supervisor of Latin American marketing services. The next year he was promoted to international services manager. In 1984 the 29-year-old Gutierrez was given the opportunity to test his entrepreneurial abilities on a larger scale as general manager of Kellogg de Mexico. The plant in Mexico routinely finished last according to company standards. Gutierrez consulted with employees about work conditions and then shut down the plant. When the revamped plant reopened three months later, new production and cleanliness standards were in place. Within two years the plant was performing at peak standards and serving as a model for Kellogg’s largest operations. Recognized for the turnaround at the plant in Mexico and for other achievements, Gutierrez was appointed to a series of high-level positions. In 1989 he was named president and chief executive officer of Kellogg Canada. Back in Battle Creek in 1990 he served as corporate vice president of product development and then as vice president of the Kellogg Company and executive vice president of sales and marketing for Kellogg USA. He was promoted to executive vice president of Kellogg USA and general manager of the cereal division in 1993 and to executive vice president of the Kellogg Company and president of Kellogg Asia-Pacific in 1994. Two years later he became executive vice president of business development. Gutierrez attained the position of president and chief operating officer (the first COO in six years) in 1998. He became a member of the board of directors and president and chief executive officer in 1999.

REINVENTED THE COMPANY Gutierrez, the youngest CEO in Kellogg history at age 43, faced the challenge of reversing the downward spiral in which the respected company found itself. Kellogg had been under-

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performing for more than five years and was losing out to its major competitor, General Mills, in volume of products—a position that previously had seemed impossible. Kellogg, the world’s major cereal company, had not tried to counteract the two major factors contributing to its decline: the increase in sales of lower-cost generic and store brands of cereals that were knockoffs of Kellogg brands and the fact that because of busy lifestyles fewer people were eating a traditional breakfast of milk and cereal. The decline had a dramatic effect on stock prices, decreasing them 45 percent in 1999 alone. Pledging to boost profits, Gutierrez developed a strategy that would effectively reinvent how Kellogg did business. First he sought to improve the balance sheet by scaling back operations and instituting a plan to reduce debt. Gutierrez remarked to Elizabeth Llorente in an interview in HispanicMagazine.com about closing Kellogg’s oldest cornflake facility, a move that saved the company millions of dollars while laying off five hundred workers: “I was given the job to make difficult decisions. I felt it was my duty to do it. The worst thing I could have done for all the company’s employees and the community was not to act” (January/February 2004). To reduce debt, the company began “managing for cash” so that “the amount of money tied up in inventory, accounts receivable and accounts payable” was reduced. When it could, Kellogg used its own assets for capital expenditures. The South Bend Tribune reported this approach “has freed up enough cash to pay down $1.6 billion in debt” (April 1, 2004). Gutierrez increased Kellogg’s presence in noncereal categories. In the wholesome snacks category, the company developed products such as Special K bars and made judicious acquisitions. The acquisition of Keebler in 2001 expanded Kellogg’s lineup of snack foods and provided the company with a direct distribution system that helped implement Gutierrez’s vision of selling products in places besides supermarkets so that anyone could have a breakfast bar anywhere. Gutierrez also steered Kellogg into offering healthful foods. The company acquired Worthington Foods, a maker of soy and vegetarian products, and Kashi, a brand of natural foods. Gutierrez told Supermarket News: “Most of all, we want to stay focused. Unlike other food companies, we are focused on key categories and capabilities instead of being a broad food conglomerate” (July 21, 2003). Gutierrez directed the Kellogg toward brand building and launching new products to increase sales. Cross-functional teams of market researchers, food technologists, and engineers were charged with developing products that could not be easily converted into store brand products. They also were to consider health trends. In 2004 Kellogg planned selling lowcarbohydrate and reduced-sugar cereals. Brand building also played an important part in product development. Many of the new products developed were spinoffs from current brands, such as Rice Krispies Treats snack bars and new varie-


Carlos M. Gutierrez

ties of Special K. To ensure Kellogg maintained its well-known and trusted name in its key categories, Gutierrez increased marketing efforts and entered into licensing agreements with leaders in children’s entertainment, including Disney and Nickelodeon. The measure of company success ceased to be the volume (tonnage) of products sold and became the value of Kellogg products.

TURNAROUND The new strategic plan executed by Gutierrez produced results. Between 1999 and 2003 sales increased 43 percent and earnings 131 percent. In 2004 analysts once again recommended investors buy the climbing Kellogg stock. Because of his success there was speculation Gutierrez might be lured by a larger company to bring about another turnaround. See also entry on Kellogg Company in International Directory of Company Histories.


Fagnani, Stephanie, “SN’s Power 50: Carlos M. Gutierrez,” Supermarket News, July 21, 2003, p. 64.


Llorente, Elizabeth, “The Breakfast Champ,” HispanicMagazine.com, http://www.hispaniconline.com/ magazine/2004/jan_feb/CoverStory. Martinez, Miriam, “Carlos Gutierrez: From Exile to Corporate Leadership,” Latino Leaders, December 2003, http:// articles.findarticles.com/p/articles/mi_m0PCH/is_6_4/ ai_113053399. Pande, Shamni, “It’s Crunch Time for Kellogg,” Brand Equity, March 24, 2004, http://economictimes.indiatimes.com/ articleshow/577977.cms. Prichard, James, “CEO Restored Kellogg’s Snap: Gutierrez Seen as Catalyst to Company’s Comeback,” South Bend Tribune, April 1, 2004. ———, “He’s Gr-r-reat!” St. Louis Post-Dispatch, April 7, 2003. Taylor, Alex, III, “Kellogg Cranks Up Its Idea Machine: To Grow, the Company Needs New Products, but Will FiberEnriched Potato Chips Be a Hit?” Fortune, July 5, 1999, p. 181.

—Doris Morris Maxfield

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Robert Haas 1942– Chairman of the board, Levi Strauss & Company Nationality: American. Born: 1942, in San Francisco, California. Education: University of California, Berkeley, BS, 1964; Harvard Graduate School of Business, MBA, 1968. Family: Son of Walter Haas Jr. (chief executive officer, Levi Strauss & Company); married Colleen (maiden name unknown; lawyer), 1974; children: one. Career: Peace Corps, 1964–1966, volunteer in Ivory Coast; White House, 1968–1969, fellow; McKinsey & Company, 1969–1972, associate; Levi Strauss & Company, 1973–1984, manager; 1984–1999, chief executive officer and chairman of the board; 1999–, chairman of the board. Awards: Berkeley Citation, University of California, Berkeley, 1970; International Quality of Life Award, Auburn University, 1997; Ron Brown Award for Corporate Leadership, President of the United States, 1998. Address: Levi Strauss & Company, 1155 Battery Street, San Francisco, California 94111; http://www. levistrauss.com.

■ In 1984 Robert Douglas Haas began a great experiment in corporate governance by expanding on the ethical traditions of Levi Strauss & Company. During the Great Depression of the 1930s, Walter Haas Sr., risking bankruptcy, refused to lay off idled employees. Instead he created work projects such as laying wooden floors in the company’s factory in San Francisco. Walter Haas Jr. insisted on running integrated factories in the American South, giving equal treatment to all races during the era of segregation. During his tenure as leader at Levi Strauss, Robert Haas mandated ethical principles. He tried to create a corporate culture in which tens of thousands of employees around the world were treated fairly and well.

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Robert Haas. AP/Wide World Photos.

DEVELOPING BUSINESS ETHICS Robert Haas was an intellectual given to Chaucerian scholarship, and he was shy and ill at ease when working in large groups. He majored in English at the University of California, Berkeley, and was class valedictorian. In his graduation speech, Haas warned of alienation among students, faculty, and administrators, anticipating the free speech movement that would break out the following year. Haas volunteered for the Peace Corps and worked in a remote Ivory Coast village from 1964 to 1966. He was officially a teacher of English as a second language but while in Africa began a healthcare program still in existence in 2004. After earning the degree of master of business administration from Harvard Graduate School of Business in 1968, Haas won a position as a White House fellow, working in the Department of Housing and Urban Development under presidents Lyndon B. Johnson and Richard M. Nixon. In 1969 Haas accepted a job at the San Francisco Bay Area management consulting firm McKinsey & Company, a place he found exciting because of the variety of projects he worked on. In early 1973 Haas joined the family business, working in various management positions. In those years coworkers gave him the nickname Z.D., for “zero defects,” because of his de-


Robert Haas

manding leadership. Haas was disturbed by what he saw happening among Levi Strauss employees, who seemed to be progressively alienated from the company that had once earned loyalty through corporate benevolence. Haas tempered his management style to be more willing to listen to others. In the early 1980s Levi Strauss foundered; it had alienated retailers with arrogant behavior and its workers with uncommunicative management. When he was made CEO in April 1984, Haas was determined to set the company on its own unique ethical course.

IMPLEMENTING ETHICS POLICY Over the course of a year and a half Levis Strauss had closed 14 American factories and nine foreign ones. From 1980 to 1984 net income had dropped 80 percent, and 15,000 workers had been laid off. Haas’s first move was to engineer a leveraged buyout whereby he and his relatives purchased enough stock to privatize the company in 1985. During the 1970s Levi Strauss had bought many smaller companies that marketed suits, shoes, purses, and other clothing and accessories. Haas chose to focus on the Jeans Company division that manufactured the famous Levi’s jeans label, and he sold most of the companies that did not focus on the manufacturing of pants. In 1986 the company introduced the Dockers line of cotton pants, which proved very popular. By 1990, 80 percent of American men owned at least one pair of Dockers. Haas chose 1987 to introduce what became known as the “Levi Strauss Aspirations Statement,” a long document that outlined how company employees were to behave. It boiled down to three areas: diversity, ethics, and leadership. All areas entailed the pursuit of “aspirational goals,” and Haas required that all employees, including Haas himself, attend classes that promoted cooperative work toward aspirational goals. At first little happened. Then, in 1989, Haas introduced an appraisal system in which all pay raises, promotions, and bonuses were determined by how well an employee was rated by others in areas that included aspirational goals. The vagueness of the terms “diversity” and “aspirational” would eventually create chaos, but in the early 1990s Haas appeared to be a corporate genius. Haas reorganized all Levi Strauss workplaces around what was called the Japanese model, in which workers formed cooperative groups for setting goals. In 1992 the company had $5.6 billion in revenue, up from $2.6 billion in 1979. Furthermore, Haas’s efforts to create a workplace where justice prevailed was winning the company worldwide brand-name recognition. In 1993 Haas’s managers wrestled with the ethics of doing business in China, trying to find ways to prevent workers from being oppressed by the Communist Party in the workplace. Levi Strauss eventually decided not to do business in China


and to begin a three-year phasing out of operations in the country because of China’s poor civil rights record. This action won Levi Strauss praise but also threatened to cut off its Chinese market of one billion people. In 1996 Haas engineered his second leveraged buyout of stock, giving his uncle Peter Haas Sr.; cousin Peter Haas Jr.; a distant relative, Warren Hellmann; and Robert himself sole control of the company. Securities and Exchange Commission filings during the buyout process revealed that during Robert Haas’s tenure as leader since 1984, the company’s stock value had increased 105-fold, to $265 a share. By then Levi Strauss & Company was the wealthiest apparel manufacturer in the world, foreign sales outstripping American sales.

CRASH By 1997 it was evident that something was seriously wrong. On November 3, 1997, Levi Strauss laid off 18,000 employees while closing 11 American factories. This action followed the layoffs of one thousand white-collar workers. Retailers were angry over long delays in fulfillment of orders and turned to other manufacturers. The J. C. Penney Company began to manufacture jeans itself. Decision making at Levi Strauss was slow or stopped altogether because middle managers believed everyone had to agree on every decision. Competitors were manufacturing jeans in foreign countries without adhering to Levi Strauss’s ethical concerns and were underpricing the company’s American-made jeans. In 1999 Haas removed himself as CEO and hired Philip Marineau, president and CEO of Pepsi-Cola North America, to be president and CEO of Levi Strauss. By early 2004 Levi Strauss had closed its last American factory, in Oakland, California, and had moved all of its jeans manufacturing abroad.

See also entries on Levi Strauss & Company and McKinsey & Company, Inc. in International Directory of Company Histories.


Impoco, Jim, “Working for Mr. Clean Jeans,” U.S. News & World Report, August 2, 1993, pp. 49–50. Schoenberger, Karl, Levi’s Children: Coming to Terms with Human Rights in the Global Marketplace, New York: Atlantic Monthly Press, 2000. Sherman, Stratford, “Levi’s as Ye Sew, So Shall Ye Reap,” Fortune.com, May 12, 1997, http://www.fortune.com/ fortune/articles/0,15114,378487,00.html. —Kirk H. Beetz

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David D. Halbert 1956– Former chairman, president, and chief executive officer of AdvancePCS Nationality: American. Born: 1956, in Abilene, Texas. Education: Abilene Christian University, BS, 1978. Family: Son of a physician; married (wife’s name unknown). Career: AdvancePCS, 1987–2004, chairman and chief executive officer; president, 2003–2004. Awards: Named one of the 40 best Dallas-area executives under 40, Dallas Business Journal, 1991.

■ David Dean Halbert was cofounder, chairman, president, and chief executive officer of AdvancePCS, a pharmacy benefit management service company. Halbert led the company from its modest beginnings in 1987 to a multibillion-dollar industry leader in the early 2000s. Halbert’s success has been likened by some to that of the business greats Ross Perot and Bill Gates, “founding executives who created something from nothing” (Fort Worth Star-Telegram, September 10, 2003). AdvancePCS was acquired by Caremark Rx in 2004, and Halbert left the company.

A FAMILY AFFAIR Raised in the western Texas town of Abilene, Halbert had early aspirations to make it big in the business world. His grandfather had become rich on Texas oil, and his father was a prominent Abilene physician who led the building of one of the city’s hospitals. His father said that young Halbert’s ambitions started in high school: “David Dean tells me, ‘Dad, if you’re going to do something, you may as well do something big because it doesn’t take any more time than something smaller. . . . If you’re going to spend your time on something, spend it on something worth your time” (Abilene Christian University Alumni Profiles, June 11, 2004). Halbert attended Abilene Christian University, graduating with a BS in 1978. His Christian upbringing and education

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became a guiding force in his personal and professional life: “I feel a stewardship responsibility to use my resources to the best of my ability. . . . Nothing any of us have is the result of what we’ve earned. It’s all a gift from God. Christ taught that to those whom much has been given, much is expected. I’ve learned to appreciate that teaching through the success I’ve experienced” (Abilene Christian University Alumni Profiles, June 11, 2004). After completing his education, Halbert began working in the oil-and-gas industry, as did his younger brother, Jon. In the mid-1980s, however, the brothers took an interest in the rising trend of home healthcare and began looking for investors to start a mail-order pharmacy. (One of the original investors was George W. Bush, who would later become president of the United States.) Advance Paradigm was formed in 1987, and David Halbert became chairman and chief executive officer.

RAPID GROWTH IN THE 1990S The home prescription business was wildly successful. In 1983 the industry as a whole saw $50 million in business, growing to over $2.3 billion by 1992. By providing clients with a 25–30 percent discount on medications for chronic illnesses over that provided by retail pharmacies, Halbert’s company saw business triple each year from 1989 to 1991. In 1991 the brothers were named to Dallas’s “40 under 40” list, featuring the city’s top 40 executives under the age of 40. Halbert led the company through rapid growth in the 1990s. From 1987 to 1999 Advance grew at a compounded rate of 103 percent. By 1993 the company had more than 1.5 million members. Halbert began to look outside the company to fuel Advance’s ongoing growth and diversify its services. Acquisitions of Paradigm Pharmacy Management in 1993 and Foundation Health Pharmaceutical Services in 1999 gave the company solid footing in the pharmacy benefit management industry and increased the member count to 27 million. Other innovations in the 1990s included initiating diseasemanagement services, launching an online health portal called BuildingBetterHealth.com, and starting an online drugstore. In 1995 Halbert said of his goals for the company: “We’d like to be the largest in the country, and fully intend to stick to that track. We might go public. We’ve certainly considered


David D. Halbert

that in the past” (Dallas Business Journal, July 21, 1995). The company hit Wall Street in October 1996 with its initial public offering; opening at $9 per share, the stock value rose quickly, hitting a high of $43.50 and settling at around $27 two years after the IPO. Said one analyst, Ken Miller of Hambrecht & Quist: “The company is well-managed and headed by people with a track record of making money. Advance Paradigm is a consistent financial performer” (Dallas Business Journal, October 23, 1998). By 2000 the company was managing 165 million pharmacy claims and $6 billion in drug expenditures per year.

scription Drug Discount Card Program was enacted into law on December 8, 2003. The management at AdvancePCS announced in the fall of 2003 that the company had been acquired by Caremark Rx, a pharmaceutical services company, in a $5.6 billion deal, under which Halbert would leave his post and most likely be retained by the company as a consultant. The deal closed in March 2004, but not before AdvancePCS experienced its 37th consecutive quarter of record earnings, up 22 percent from the prior quarter.


LEADING THE COMPANY INTO THE NEXT MILLENNIUM Halbert set his sights higher in 2000 with the purchase of PCS Health Systems from Rite Aid Corporation, to establish AdvancePCS, the nation’s largest pharmacy benefit management company. Analysts called it “a home run for Advance Paradigm” (Dallas Morning News, July 12, 2000). In 2001 Halbert collaborated with two of the company’s competitors, Express Scripts and Merck-Medco, to establish RxHub, a prescription computer network that would link doctors, pharmacies, and insurers. In 2001 President George W. Bush came under fire for his business connections with Halbert in the mid-1990s. Halbert and his family had contributed funds to several of Bush’s campaigns. Bush had sold off his stocks in Advance Paradigm in 1998, to avoid a conflict of interest. The two had remained friends, however, and Bush had approached Halbert in 2001 to help write a controversial proposal to offer drug discount cards to seniors. Many felt the move was inappropriate, however, because AdvancePCS stood to benefit from the program if Medicare endorsed the company to issue the cards. David Sirota, author of The Progress Report, was quoted as saying, “The White House is supposed to be the people’s house, not the drug industry’s corporate headquarters. The president needs to explain why he allowed his longtime Texas crony and benefactor to help write key pieces of Medicare legislation that guarantees nothing for seniors but billions for his friend’s business” (Boston Globe, December 12, 2003). The Medicare Pre-


“David Dean Halbert (’78),” Abilene Christian University Alumni Profiles, June 11, 2004, http://www.acu.edu/ campusoffices/development/programs/coba/alumni/ halbert.html. Fairbank, Katie, “Texas Firm Buying Rite Aid Unit,” Dallas Morning News, July 12, 2000. “40 under 40,” Dallas Business Journal, September 27, 1991, pp. 21–32. Fuquay, Jim, “AdvancePCS, Caremark Rx to Merge Pharmacy Benefit Management Operations,” Fort Worth StarTelegram, September 4, 2003. Mabray, D’Ann, “Drug Benefit Managers Try for Part of Health Care Market,” Dallas Business Journal, July 21, 1995, pp. 5–6. Mason, Todd, “Bush Connection Raises Questions on AdvancePCS’ ties with Harken Energy,” Fort Worth StarTelegram, August 18, 2002. Schnurman, Mitchell, “A Parachute Is Worth Its Weight,” Fort Worth Star-Telegram, September 10, 2003. Tanner, Lisa, “Advance Paradigm Moving into Richardson Offices,” Dallas Business Journal, October 23, 1998, p. 11. Washington, Wayne, and Susan Milligan, “Bush Ally’s Firm Vies for Medicare Cards,” Boston Globe, December 12, 2003. —Stephanie Dionne Sherk

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Hiroshi Hamada 1933– Chairman, Ricoh Company Nationality: Japanese. Born: April 28, 1933, in Kagoshima Prefecture, Japan. Education: Tokyo University, 1957. Family: Married; children: three. Career: Ricoh Company, 1957–1975, various positions; 1975–1983, director; 1983–1996, president; 1996–2003, chairman and chief executive officer; 2003–, chairman. Awards: Ranju-hosho (the Blue Ribbon Medal), 1991; named an officer of the Légion d’honneur, 1998. Address: Ricoh Company, 1-15-5, Minami-Aoyama, Minato-ku, Tokyo 107-8544; http://www.ricoh.co.jp.

■ Hiroshi Hamada took the post of director of Ricoh Company, which manufactures and markets electronic equipment, in the mid-1970s. His many innovative ideas contributed to the growth and successful positioning of the company in the worldwide market. He instituted a more global strategy and expanded the company’s operations into the United States, Europe, Canada, China, and South Korea, and he developed and refined Ricoh’s product line. Coworkers described Hamada as brilliant, kind, and empathetic and credited him with the concept of “Oyakudachi,” or “walking in the other person’s shoes.” He also served as a high-level government adviser and founded a school where urban children can practice farming.

EXPANDS OPERATIONS AND PRODUCT LINE Hamada was born in April 1933 in Kagoshima Prefecture, Japan. He graduated from the prestigious Tokyo University with a degree in economics, married, and had three children. In 1957 Hamada went to work for Ricoh Company, which manufactures and markets electronic equipment, such as copiers, fax machines, data-processing systems, cameras, and measuring instruments. He became the company’s director in

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1975, and in 1983 was promoted to president. Under Hamada’s direction, Ricoh pursued a more global strategy. Hamada felt that the company should change its practice of conducting new-product research overseas, with a heavy emphasis on the United States, and then transferring operations to Japan for manufacture of the products. He devised a plan for Ricoh to develop more products at home and boost its production capability by manufacturing its goods both domestically and abroad. Ricoh merged its U.S. research-and-development operations (Ricoh Systems) with its production facility (Ricoh Electronics), both of which had reported independently to the parent company in Japan, thus making its operation more responsive to the American economy. The company also established an entity in the United Kingdom in 1983 (Ricoh UK Products), offices in Italy and France (Ricoh Nederlands) in 1984, and an office in Belgium in 1985. In the mid-1980s Ricoh introduced a local area network called the RINNET System, an electronic whiteboard, an electronic filing system, a color copier, and two minicomputers that were cooperatively developed with AT&T. This led to a 20 percent growth in annual sales from 1982 to 1985. The alliance between Ricoh and AT&T had begun when Ricoh agreed to use AT&T telephones on its fax machines. The partnership was expanded in 1984 when Ricoh was permitted to market AT&T minicomputers in Japan. The two companies established a joint venture in 1985, AT&T Ricoh Company, to manufacture and market modified forms of AT&T’s compact phone systems. AT&T gained use of Ricoh’s marketing-andservice network in Japan and, in turn, helped Ricoh enter the telecommunications market. In 1984 Ricoh’s plant in Atsugi, Japan, created a production-technology research center and was honored for its factory automation with the Nihon Keizai Shimbun Award. Ricoh Finance and Ricoh Research Institute of General Electronics Company were also established. The firm expanded its Fukui factory to include a toner and thermal-paper production facility. Sindo Ricoh Company began production of zoom plainpaper copiers and toner. In the United States construction began on Ricoh Research and Development Center, and a fully automated plant that manufactured thermal paper was opened. Ricoh Corporation in Canada (formerly Rapifax of Canada) opened a new facility in Ontario in 1985. In 1986 Ricoh


Hiroshi Hamada

founded two marketing companies, a wholly owned subsidiary named Ricoh France and a joint venture with a Spanish company that distributed Ricoh products, Ricoh España. In May 1986 Ricoh UK Products began production, making Ricoh the first Japanese company to produce copiers in the United Kingdom. By 1988 production of fax equipment and supplies had been added. Under Hamada’s guidance, Ricoh launched its second manufacturing subsidiary in Europe, Ricoh Industrie France, a producer of office-automation equipment and supplies and plain-paper copiers In 1987 the company, seeking a foothold in the semiconductor market, purchased the semiconductor division of Panatech Research & Development. In May of that year Ricoh established a semiconductor-design firm in San Jose, California, which broadened its research-and-development endeavors for its semiconductor products. At that time these included a large-scale integrated mechanism called CMOS, which was part of Ricoh’s copiers, cameras, and fax machines. Ricoh maintained its position as the leading manufacturer of plain-paper copiers when, in 1987, it introduced a number of new copiers, including a multifunctional, high-speed desktop model. In addition, a new product line, called Imagio, was introduced in Japan. It consisted of office-automation equipment that utilized a digital system to produce 20 copies per minute, process images, and function as an electronic filing station input/output center.

CONTINUES GLOBALIZATION EFFORTS Hamada, keen to continue Ricoh’s globalization efforts, oversaw the consolidation and reorganization of the company’s U.S. subsidiaries. The move was designed to create a North American Ricoh that would gradually take on greater independence across its operations. In 1987 Hamada also unveiled plans to establish another independent European Ricoh, the first step of which was to increase production capacity. In 1988 Ricoh offered a compact, lightweight 8-mm camcorder to its Japanese and U.S. markets. It also established Ricoh Software Research in California, which would design custom software for database and three-dimensional computer-aided design markets. Also in 1988 Ricoh’s domestic sales were exceeded by sales abroad for the first time. Richoh was one of a few companies that made four different types of copiers: the plain-paper copier, the electrofax, the diazo, and the duplicator. While the high value of the yen in the mid- to late 1980s resulted in decreases in export business for many Japanese companies, Ricoh’s overseas sales expanded. This success was attributed to significant gains in fax machine and laser printer


sales, as well as the major U.S. market share earned by its two primary office products, fax machines and copiers. Despite an aggressive sales approach, Ricoh’s profits declined in 1986 and 1987, in part due to decreased profit margins brought about by the yen’s appreciation in value. To counteract this loss, the company planned to maintain increased overseas production. It began manufacturing copiers at a third U.S. factory in the late 1980s. In the 1990s Ricoh expanded its manufacturing operations to plants in China and South Korea. In 1996 Hamada became the company’s chairman and chief executive officer.

ADVISES THE GOVERNMENT AND FOUNDS A SCHOOL In 2003 Hamada became the chairman of Ricoh. The firm’s operating profit was at record high levels and poised to expand. Its line of optical disks was struggling, but the company was expanding its sales channels from personal computers to other consumer electronics. Its mainline office equipment, led by color copiers and printers, was showing brisk overseas growth. Ricoh was also introducing high-speed color ink-jet printers for office use. As chairman, Hamada was considered a man whose brilliance was tempered by kindness and a deep empathy for others. One of his greatest legacies is the concept of “Oyakudachi,” or “walking in the other person’s shoes,” a guiding principle in Ricoh’s approach to customer service and sales since the early 1980s. After assuming the responsibilities of chairman, Hamada took on a more diplomatic bent. He was active as a high-level government adviser, serving on a number of prestigious committees, including the National Commission on Educational Reform beginning in 2000 and the Council of Labor Policy beginning in 2001, and as adviser to the Japan Business Federation starting in 2003. He had a thorough understanding of economic forces and asserted a need for reform in that area. His deep commitment to education was reflected in the launch of the Ichimura Nature School in 2001. In a rural Tokyo suburb, young urban girls and boys practiced farming through a nine-month cycle from sowing to harvest. Each year requests exceeded available slots.


“Hiroshi Hamada,” Forbes.com, http://www.forbes.com/finance/ mktguideapps/personinfo/FromPersonIdPersonTearsheet. jhtml?passedPersonId=186062. —Amanda de la Garza

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Toru Hambayashi Former chairman and co–chief executive officer, Nissho Iwai–Nichimen Holdings Corporation Nationality: Japanese. Born: In Japan. Career: Nichimen Corporation, 1997–1998, COO of Chemicals, Plastics, and Energy Group; 1998–1999, COO of Consumer and General Products Group; 1999, executive vice president and chief information officer; 2000–2001, head of Net Commerce Business Team; 2001–2003, president; Nissho Iwai–Nichimen Holdings Corporation, 2003–2004, chairman and co-CEO.

■ Toru Hambayashi spent almost his entire career at Nichimen Corporation, a general trading company specializing in energy, chemicals and plastics, household goods, and consumer and general products. After Japan’s economic bubble burst, Hambayashi spent the late 1990s and early 2000s steering Nichimen out of its accumulated debt, building capital, and encouraging employees to think creatively. He divested Nichimen of its underperforming subsidiaries and reduced excessive management. In 2003 Nichimen merged with the trading house Nissho Iwai Corporation to form the giant Nissho Iwai–Nichimen Holdings Corporation, where Hambayashi served as co-CEO with Nissho Iwai’s Hidetoshi Nishimura.

ENCOURAGED OPTIMISM AMID LOSSES After becoming one of Nichimen’s senior managing directors, Hambayashi received a steady stream of promotions at Nichimen. He was named chief operating officer of the Chemicals, Plastics, and Energy Group in 1997, followed by chief operating officer of the Consumer and General Products Group in 1998, and then executive vice president in 1999. In November 1999, he was appointed to the newly created position of chief information officer. As CIO in January 2000 he oversaw the Net Commerce Business Team, which was created to develop and implement strategies exploiting advanced information technology. In 2001 Hambayashi was named president of Nichimen Corporation.

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In the early 2000s Nichimen struggled to remain solvent, as did many other Japanese companies, amid the pervasive Japanese climate of falling stocks, creeping economic recovery, and bankrupt banks. Hambayashi issued an apologetic yet upbeat letter after the fiscal year ending March 31, 2001, wherein he noted that drops in the market value of shares of financial institutions held by Nichimen contributed to an annual net loss of ¥21.1 billion. Although the company was successful at writing off most of its unrealized losses on securities, Nichimen temporarily suspended dividends. The year 2001 was the second and final year of the New Create 2000 medium-term management plan, which had been designed to increase profits. Hambayashi was able to report that gross trading profits and operating income had both advanced over that period. Adhering to Nichimen’s slogan, “Make a difference, make it unique,” Hambayashi instituted the New Plan (NP) 2002 management approach, which would liquidate unprofitable and uncompetitive subsidiaries, reduce interest-bearing debt and generate net profit, and boost Nichimen’s stock price. He also arranged to expand Nichimen’s strategic businesses of energy, chemicals, plastics, and household and general products through mergers and acquisitions. Interested in streamlining management and increasing efficiency, Hambayashi introduced the Enterprise Resource Planning system in order to unify management information resources and facilitate faster decision making. He implemented plans to clarify the work responsibilities of executive officers and increase their decision-making authority, promote information sharing among officers, reduce the number of directors, and add an outside director to the board in order to gain a broader range of opinions on group strategy. In his end-of-the-year letter to shareholders Hambayashi heralded his employees, encouraging them to revolutionize their ways of thinking so as to boost operational productivity: “Nichimen’s core competencies that will enable it to expand and develop the company’s operations on a global scale during the new century are found in the minds of our staff” (June 27, 2001).

INITIATED MERGERS AND CONSOLIDATIONS Concerned with maintaining liquidity and faith in the eyes of shareholders, the new president Hambayashi carefully di-


Toru Hambayashi

rected Nichimen’s mergers and consolidations over the next several years. In 2001 Nichimen and Tomen Group merged their life-science businesses into an independent company with 130 employees. Blending Tomen’s expertise in chemical production with Nichimen’s formulation capabilities, the new venture would perform in agrochemicals, pharmaceuticals, veterinary medicine, and biotechnology. That same year, in the spirit of the NP 2002’s mandate for selection and concentration of Nichimen’s core business, Nichimen Group and its wholly owned subsidiary Nichimen Energy Company transferred their liquefied petroleum gas business to Shinanen Company. Hambayashi remarked that the move would allow Nichimen to redistribute its financial resources to more strategic business areas. Hambayashi’s plans were to dispose of unprofitable gas stations, help existing gas stations add capacity, and improve operating efficiency by reducing interest-bearing debt. In another area of NP 2002 Hambayashi aimed to expand Nichimen’s textile business. Nichimen formed a business alliance with the Hong Kong-based Li & Fung, a supply-chain management company with a network of textile factories. Nichimen also transferred a 51 percent interest in Wuxian Hamasaki Plastics Compounds Company, a Chinese Nichimen subsidiary, to Asahi Kasei Corporation. Due in part to his own country’s economic problems Hambayashi looked outside Japan for investment opportunities. One country upon which he focused his attention was Poland, the biggest market in eastern Europe; he had a positive perception of the country’s economic future. Hambayashi attended an investment forum with the Polish Agency for Foreign Investment in Tokyo and conducted a productive meeting with the Industrial Development Agency president Arkadiusz Krçzel. Hambayashi also instituted alliances with the Finlandbased Wihuri Oy conglomerate and the Azerbaijan-based Azerchimia. Those alliances were experimental new business models designed to minimize Nichimen’s assets while maximizing profits.

PUSHED FOR CORPORATE VALUE In a continuing effort to reform management and administration, Hambayashi established the Consumer Business Department in April 2002 in order to consolidate the retail operations of Nichimen’s internal companies and integrate them horizontally. For Nichimen’s fiscal year ending March 2002 Hambayashi reported a 15 percent decline in net sales, to ¥2.055 trillion. While net income had deteriorated due to falling stock prices, operating income increased 43 percent to ¥33.1 billion as a result of the company’s efforts to concentrate resources, increase asset utilization, and reduce interest-bearing debt. In


his year-end report, which sported the title “Brand New Ideas,” Hambayashi apologized for the company’s performance: “I greatly regret that the company was not able to realize the sharp improvement in performance that it laid plans for last year” (June 26, 2002). Hambayashi assured investors that Nichimen would proceed with its NP 2002 management plan, concentrate resources in key business fields, encourage corporate growth through investment in information technology and life sciences, and minimize its risk assets by selling real estate and stock assets. He noted, “I believe that Nichimen’s corporate value stems from its relationships with diverse organizations and individuals, including shareholders, major customers, and consumers. I do not think that simply pursuing profits is the way to increase corporate value” (June 26, 2002).

FORMED NISSHO IWAI–NICHIMEN HOLDINGS CORPORATION On April 1, 2003, in the atmosphere of the stagnating Japanese economy, domestic inflation, and tight credit, the two trading company giants Nissho Iwai Corporation and Nichimen Corporation, the sixth- and eighth-largest trading houses in Japan respectively in terms of sales, established the joint holding company Nissho Iwai–Nichimen Holdings Corporation through a stock-transfer agreement. The two companies hoped to improve their financial strength, develop new business areas, and increase management efficiency. Toru Hambayashi, the president of Nichimen, was named chairman and co-CEO of the new company, while the Nissho Iwai Corporation president Hidetoshi Nishimura was named co-CEO and president. With several businesses in different sectors—Nichimen in textiles and raw materials and Nissho Iwai in airplane and energy interests—the two companies had been unlikely to compete, which would minimize restructuring and speed up cooperation in efforts to reduce debt, cut jobs, and increase profits. But the two companies owed incredible amounts of money; with a combined interest-bearing debt of more than ¥2.75 trillion, the Nissho Iwai–Nichimen planned to raise ¥200 billion worth of equity capital through UFJ Bank in Japan and Lehman Brothers in the United States. Industry critics questioned the motivation behind two debt-swamped trading houses agreeing to join forces. Hambayashi responded in Japan Inc. by saying, “Judging from the recent economic situation, we thought that the timing of the integration must be now” (February 2003). At a joint press conference in Tokyo, Hambayashi and Nishimura noted that they expected their companies’ integration to produce synergetic effects. Analysts, however, observed that the two co-CEOs would need to concentrate on compromise, since Nichimen’s strategy had been to select and concen-

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Toru Hambayashi

trate its business focus while Nissho Iwai’s had been to broaden into a sogo shosha—an all-around trading company.

was also a member of the Japan and Tokyo Chambers of Commerce & Industry.

Hambayashi and Nishimura hoped that their decision to merge would encourage other troubled Japanese companies to follow suit. Encountering difficulty in adjusting to deflation, the slumping stock market, and global economic slowdowns, Nichimen and Nissho Iwai tended to dispose of healthy assets rather than high-risk assets out of the fear that discarding highrisk assets would damage their equity capital.

Hambayashi traveled and spoke at conferences around the world. In 2000, as executive vice president of Nichimen, he presented a speech at the 33rd International General Meeting of the Pacific Basin Economic Council held in Honolulu. Pertinent to the council’s format that year of “New Horizons: Economic and Political Implications of the Changing Global Landscape,” Hambayashi spoke of the financial-sector reform that would be necessary to overcome economic crisis and sustain growth. Hambayashi retired in June 2004.

Under the merger the two companies and their subsidiaries consolidated management. They agreed that by April 2004 they would reduce the combined workforce from 21,000 to 17,000, trim the number of subsidiaries from 430 to 300, and cut operating expenses by ¥80 billion. They pledged to reduce interest-bearing debt to less than ¥2 trillion within three years. In keeping with their integration plan following the formation of Nissho Iwai–Nichimen Holdings, Hambayashi and Nishimura merged the two companies’ core operating segments to form the separate company Sojitz Corporation. Through selection and focus Sojitz would fulfill the mandate of improving profitability.

See also entries on Nichimen Corporation and Nissho IwaI K.K. in International Directory of Company Histories.


Hambayashi, Toru, “Brand New Ideas,” June 26, 2002, http:// www.nichimen.co.jp/ir/annual/2002/president.pdf. Kawakami, Sumie, “Goodbye to the Glory Days,” Japan Inc., February 2003, p. 8–10. “Nissho Iwai, Nichimen to Form Holding Company,” Mainichi Daily News, December 11, 2002.

BEYOND NICHIMEN In addition to his duties at Nichimen and then Nissho Iwai–Nichimen, Hambayashi served on several boards of directors of other organizations. In 2001 he was a nongoverning board member of the World Forestry Center, the educational institution promoting sustainable forests around the world. He

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“Nissho Iwai, Nichimen Trading Units Set to Merge,” Japan Times, February 11, 2004. “Tokyo Holding Company Makes Good Start, President Says,” Kyodo News International, September 6, 2003. —Lorraine Savage


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Jürgen Hambrecht 1946– Chairman, BASF Nationality: German. Born: 1946, in Reutlingen, Germany. Education: University of Tübingen, PhD, 1975. Career: BASF, 1976–1985, chemist; Lacke und Farben, 1985–1990, head of research and purchasing; 1990–1995, president of Engineering Plastics Division; BASF, 1995–2002, president of East Asia Division; 2002–, chairman. Address: BASF, ZOI-D 100, D-67056 Ludwigshafen, Germany; http://www.corporate.basf.com.

■ When Jürgen Hambrecht became chairman of BASF, the world’s largest manufacturer of chemicals, on May 6, 2003, he took over the helm of a company with interests that stretched beyond Germany to almost all areas of the globe. BASF was one of the world’s most important companies; the products it manufactured were used in a huge variety of goods ranging from the indigo dye coloring blue jeans to the brake fluid in automobiles. In the words of the Wall Street Journal contributor Vanessa Fuhrmans the company’s wide diversity of interests and global reach made it “a de facto bellwether for the business world” (April 17, 2003), anticipating swings in the global industrial economy by as much as six months. Hambrecht’s position as head of BASF made him a major player in the global economy; at the beginning of the 21st century he was positioning his company to maintain its leadership position in the production and distribution of chemical products in Asia and worldwide through increased efficiency and justin-time delivery practices. For decades BASF dominated chemical production and supply throughout the world. Hambrecht, whose career with the company stretched back 27 years, earned his reputation while serving as the head of BASF’s East Asia operations from 1995 to 1999. When the region’s economies began faltering in 1997, many companies began restructuring their joint ventures. In particular two South Korean firms dropped out of


Jürgen Hambrecht. AP/Wide World Photos.

partnerships with BASF because of financial problems. Hambrecht argued that BASF needed to remain economically active in East Asia and urged his superiors to continue their longterm plans by buying out the South Korean partnerships. His decision positioned the company to profit immensely from the economic rebound that began several years later.

STEADY RISE Hambrecht began his career not as a businessman but as a chemist. He received his doctorate in organic chemistry from the University of Tübingen in 1975 and began his career with BASF the following year, working in the company’s polymers laboratory on polystyrene, styrenic copolymers, and polyphenylene ethers. Nine years later he earned the position of head of purchasing and research at Lacke und Farben—which later

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Jürgen Hambrecht

became BASF Coatings—in Münster. In 1990 Hambrecht advanced to the position of president of BASF’s engineeringplastics division, and in 1995 he assumed the rank of president of the corporation’s East Asia division, which operated out of Hong Kong. He joined the executive board of directors in 1997 and in 2002 became chairman of the corporation. Hambrecht’s management style reflected his origins as a scientist rather than as a businessman. In an interview published in Chemical Market Reporter (May 26, 2003), the BASF head explained that the key to his decision-making process was communication—which was ideally personal and up front. He noted that a business leader “has to be a role model and lead by example.” He put this principle into practice, he explained, by making regular visits to local production plants and to customers around the world. He kept in touch with employee issues by regularly dining in the company cafeterias with the backbone of the company workforce.

A SHAMEFUL CORPORATE PAST When Hambrecht came to the helm of the world’s largest chemical corporation, he inherited not only the company’s huge international infrastructure but also its mixed legacy of nearly 150 years of developing industrial chemicals. Badische Anilin & Soda Fabrik (BASF) was founded by the German chemist Friedrich Engelhorn in Ludwigshaften in 1865 to exploit the new dyes being developed from the industrial residue known as coal tar. Within a few years of its inception the company dominated the Victorian-era market with a variety of brilliant aniline-based hues, including methylene blue, alizarin, and indigo. In the early 20th century BASF expanded into the production of artificial nitrogen-based fertilizers, using the Haber-Bosch process of ammonia synthesis. During World War I BASF became one of the largest suppliers of ammonia to the German army, which used the chemical for making war munitions. During the 1920s BASF entered into the most controversial phase of its history. At that time the chairman Carl Bosch oversaw the incorporation of BASF into I. G. Farbenindustrie, a huge conglomeration of major German chemical businesses. I. G. Farben was closely associated with the Nazi regime; one of its subsidiaries produced Zyklon B, the infamous lethal gas used in concentration camps. Although the Nazis initially regarded BASF as a suspect, unpatriotic organization with links to the Jewish community, the company prospered under Hitler. According to Daniel Bogler of the Financial Times, BASF’s revenues increased 500 percent between 1933 and 1943, when the Nazis were in power. BASF became involved in the production of synthetic rubber during World War II, locating its major plant very near to Auschwitz, the most notorious Nazi concentration camp. Bogler noted that I. G. Farben “financed the SS-run work camp at Monowitz, near Auschwitz, the in-

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mates of which helped to build as well as staff the rubber factory and of whom 20,000–25,000 died in the course of the war” (December 20, 2002). BASF did not emerge from the destruction wrought by Germany’s defeat in World War II until 1952, when it was reformed as an independent company. In the decade following its reincorporation BASF moved into the production of plastics and other polymers. In 1958 the company entered the North American market, forging a relationship with Dow Chemical’s Freeport, Texas, facility in order to produce basic chemicals and materials used to create synthetic fibers. In 1969 BASF bought the old Michigan Alkali Company, which was then known as Wyandotte Chemicals Corporation, with sites in Wyandotte, Michigan, and Geismar, Louisiana. In 1984 the Geismar plant became the site of a less conspicuous milestone in BASF’s history, when a five-year dispute began between the company and the Oil, Chemical, and Atomic Workers’ International Union (OCAW). Union workers finally won the dispute after enlisting the help of environmental associations such as Greenpeace, which helped the OCAW pressure BASF into negotiations. In return for the environmental groups’ support, the OCAW provided records of BASF’s plant emissions. The groups then tried to raise public awareness about the threats such emissions posed to public health—as evidenced by the high rate of cancer that plagued Louisiana residents during those years. At one point OCAW members joined environmental activists in a “Toxic March” to increase public awareness of the role plant emissions played in public health risks. The cooperation between the union and the environmentalists brought the dispute to a close in 1989.

A NEW CENTURY: PLANNING FOR THE FUTURE In an interview conducted at the beginning of his tenure as chairman of BASF in 2002, Hambrecht emphasized the importance of BASF’s traditions of reliability and trustworthiness; he also explained that he had developed a long-term business plan based on innovation and devotion to customer service and satisfaction. Hambrecht identified three major areas of concentration for the fulfillment of his vision of BASF’s future: providing customers with top-notch service; creatively exploring new technologies and cultivating employees who could competently approach problems using innovative thinking; and managing the cost of capital by offering the best return on investment dollars available in the chemicalsmanufacturing industry. Furthermore Hambrecht identified five factors that influenced his vision for BASF’s long-term success at the beginning of his tenure. The first of these factors was political: namely, the fallout resulting from the American war with Iraq. Because of Iraq’s petrochemical resources and the American dollars devoted to the conflict, the war had a large impact on both the


Jürgen Hambrecht

raw materials upon which BASF relied in making its products and the ability of firms to buy the company’s finished products. The war, which accelerated demand for some of BASF’s products while reducing demand for others and increasing raw material expenses, created a more volatile market. The second factor considered by Hambrecht was governmental policies, especially those regulating the production and emission of chemicals and the byproducts of chemical production. The European Union had issued a white paper establishing a new chemicals policy, setting limitations on emissions trading, tax laws, and subsidies that, as Hambrecht explained in the Chemical Market Reporter interview (May 26, 2003), cut into BASF’s profitability by “dampening the competitiveness of the chemical industry and our customer industries.” He pledged to work with EU officials and other policy makers to find equitable solutions to such regulatory problems. The chairman’s third area of concern lay in the corporate restructuring that had characterized the chemical industry in the early 2000s. BASF’s future, he stated, would be shaped by a combination of four different business approaches: internal consolidation of operations, increasing efficiency; the acquisition and divestiture of product portfolios; the attainment of increases in investment by private equity firms; and the strengthening of BASF’s petrochemicals product line. Those approaches, he felt, would result in a stronger, more diversified corporation ready to face the challenges of the 21st century. Fourth, Hambrecht’s experience in East Asian markets gave him valuable insight into the importance of expanding BASF’s customer base throughout that region; he identified Asia as the most rapidly growing market for the corporation’s chemical products. Andreas Kreimeyer, one of Hambrecht’s fellow board members, predicted that by 2010 Asia and the Pacific basin would provide 20 percent of BASF’s total worldwide sales and earnings. In 2003 BASF began work on the world’s largest plant for the production of polytetrahydrofuran—a chemical used in the manufacture of spandex and some polyurethanes—in China. Located at the Shanghai Chemical Industrial Park, the plant opened in 2004. The final challenge Hambrecht foresaw for BASF was the need to attract new chemical-engineering talent to the company. The addition of highly motivated, well-educated chemical engineers to BASF’s workforce would be of crucial importance, he said, not only to the company’s future but to the future of the entire global economy. He explained in the Chemical Market Reporter interview, “It is estimated that almost 90 percent of all industrial innovations are based on investments that originate from the chemical industry” (May 26, 2003).

TESTS AND CHALLENGES The global downturn that began in the early 2000s caused problems for BASF and its management. In the period be-


tween 2001 and 2004 profitability in the North American sector fell abruptly. When he was appointed to the chairmanship in 2003, Hambrecht addressed the situation by ordering 1,200 job cuts across the United States. Although the company’s half-year earnings were up 1.2 percent over the same period from the previous year—to about EUR 832 million—BASF suffered from the fact that oil prices did not drop at the end of the Iraq war as many had anticipated. Also purchases of chemical products were not as high as had been anticipated because many customers chose to reduce their inventories before reordering. From the beginning of his tenure at the head of BASF Hambrecht focused his attention on increasing profits and using cutting-edge technology to improve both production and profitability. BASF responded to the loss of revenue in 2003 by improving efficiency in its 50 North American plants, reducing costs by about $100 million. In a second phase Hambrecht planned to consolidate operations and eliminate some plants; the board member Klaus-Peter Lobbe noted that determining which plants would be closed or consolidated would depend on both the profitability of individual sites and their potential for growth. One area of possible development, Lobbe explained, lay in inorganic chemicals, such as the chemicals used in manufacturing pharmaceutical drugs and industrial plastics. In Process Engineering (September 24, 2003), Hambrecht promised that BASF would remain committed to production and perhaps even expansion at its North American facilities—but such expansion would take place only “on a more stable basis.” Hambrecht’s attention to profit and to the company’s bottom line paid big dividends for BASF during the first two years of his tenure as chairman. As part of his business strategy he gave instructions to limit capital expenditures to areas where profits after taxes and expenses exceeded the original capital investment—in other words, to limit business growth to areas of certain profitability. However, he also emphasized the need to explore the business potential of new, emerging technologies, including nanotechnology, where processes occur at the molecular level; materials science, for the development of more efficient, tougher materials; energy-management technologies, wherein energy consumption is made more efficient; and biotechnology. As a symbol of BASF’s new approach, in 2004 Hambrecht revealed a change to the corporation’s logo—the first such change in nearly two decades. While the company retained the block letters that had come to signify stability and reliability in the chemicals industry, it added two complimentary squares in front of its acronym. The two squares, said Hambrecht in a Process Engineering article, represented the corporation’s commitment to the success of its partnerships and collaborations. According to Hambrecht, the company’s new motto— “The Chemical Company”—reflected its commitment to

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maintaining the standards of its past while planning for the future. The chairman stated in Process Engineering (September 24, 2003, “With this claim we make it clear what we are proud of: what we are and want to remain—the world’s leading chemical company.”

See also entry on BASF Aktiengesellschaft in International Directory of Company Histories.

“Corporate Reporting: Eras in BASF’s History,” BASF, http:// berichte.basf.de/en/2004/datenundfakten/unternehmen/ geschichte. “Downstream Moves,” Oil and Gas Journal, August 19, 2002, p. 44. “Focus 2003—Chemical Leaders: CEOs and Companies: Gaining Executive Mindshare: U.S. and European Chemical CEOs,” Chemical Market Reporter, May 26, 2003, p. FR8. Fuhrmans, Vanessa, “BASF Chief Is Cautious in Outlook for His Industry,” Wall Street Journal, April 17, 2003.


“Jürgen Hambrecht Appointed as New Chairman of BASF,” Chemical Market Reporter, July 22–29, 2002, p. 6.

Abelshauser, Werner, et al., German Industry and Global Enterprise: BASF, the History of a Company, New York, N.Y.: Cambridge University Press, 2003.

Milmo, Sean, “BASF Prepares for Tough Conditions during War,” Chemical Market Reporter, March 24, 2003, p. 6.

Alperowicz, Natasha, “BASF to Build PO Plant Using Hydrogen Peroxide Route: Develops Adiponitrile Process,” Chemical Week, March 28, 2001, p. 21.

Minchin, Timothy J., Forging a Common Bond: Labor and Environmental Activism during the BASF Lockout, Gainesville, Fla.: University Press of Florida, 2002.

“BASF Names Hambrecht to Succeed Strube,” Chemical Week, July 24, 2002, p. 7. “Board of Executive Directors: Dr. Jürgen Hambrecht,” BASF, http://corporate.basf.com/en/ueberuns/fuehrung/vorstand/ hambrecht.htm. Bogler, Daniel, “Germany Comes Clean: Companies Are Putting the Past Behind Them by Revealing the Truth about Their History,” Financial Times, December 20, 2002, p. 13.

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“New BASF Chief Prepares U.S. Job Cuts,” Process Engineering, September 24, 2003, p. P3. “Old Letters, New Strategy for BASF,” Process Engineering, January 31, 2004, p. P3. Tremblay, Jean-François, “C&EN Talks with Jürgen Hambrecht,” Chemical & Engineering News, April 5, 1999, p. 17. —Kenneth R. Shepherd


■■■

John H. Hammergren 1959– Chairman, president, and chief executive officer, McKesson Corporation Nationality: American. Born: 1959, in St. Paul, Minnesota. Education: University of Minnesota, BBA, 1981; Xavier University, MBA, 1987. Career: American Hospital Supply Corporation, Baxter Healthcare Corporation, and Lyphomed, 1981–1991, series of management positions; Kendall Healthcare Products, 1991–1995, president of medical-surgical division; McKesson Corporation, 1996–1998, president of McKesson Health Systems; 1999, executive vice president as well as president and chief executive officer of supply management; 1999–2001, president and co–chief executive officer; 2001–, president and chief executive officer; 2002–, president, chairman, and chief executive officer. Awards: Cap Gemini Ernst & Young Leadership Award for Global Integration, 2004. Address: McKesson Corporation, 1 Post Street, San Francisco, California 94104; http:// www.mckesson.com.

■ John H. Hammergren was exalted as “squeaky clean with a knack for complexity” in an era following not-so-squeakyclean executives of companies such as Enron, Tyco, WorldCom, and even former executives of his own company. Hammergren was president, chairman, and CEO of McKesson Corporation, the country’s largest supplier of software solutions, technological innovations, and comprehensive services to the healthcare industry and a wholesale distributor of prescription drugs. He took over following McKesson’s January 1999 scandal-ridden acquisition of HBOC in which accounting irregularities inflated HBOC’s revenues. Although initially Hammergren doubted he could repair the damage, he did so. He also took on the larger task of restoring confidence in company leadership: “The reputation of Corporate America has been sullied and the reputation of CEOs has been tarnished and it makes the complexity of our job even greater” (Chief Executive, August-September 2003). International Directory of Business Biographies

John H. Hammergren. © James Leynse/Corbis SABA.

BUILDS STRONG FOUNDATION FOR FUTURE CHALLENGES Hammergren grew up in a tiny community in Minnesota in a family to which he attributed his strong moral and ethical values as well as his knowledge of business. His father, a traveling salesman in the healthcare business, often took his son with him on business trips, which Hammergren felt was a valuable educational experience. His father’s death at the age of 53, when Hammergren was just 16, became another valuable lesson: With his older sisters grown and married, his mother had to return to work. “There was no safety net economically or philosophically, and if I didn’t want to cement my path and my moral compass on my own, it was not going to be set for me by anyone,” he said during an interview with Daniel S. Morrow, executive director of the Computerworld Honors Foundation (April 6, 2004). He won a scholarship to the Insti-

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tute of Technology engineering program at the University of Minnesota but discovered that he preferred the mixture of human interaction and fiscal focus of business to the more technical engineering courses, and he graduated with a business degree. Hammergren was recruited to American Hospital Supply and was with the company for 10 years, during which time he was sponsored through the executive MBA program at Xavier. The company was acquired by Baxter Health Care, which changed the organization’s environment enough that Hammergren left and went to work briefly for Lyphomed. In 1991 he went to Kendall Healthcare Products, which was in the midst of a leveraged buyout and in considerable turmoil. Hammergren was aware of but undeterred by the crisis. “I was, and I am, not afraid to take on a risk and I believe that in risk, if you perform, it produces great opportunities,” he told Morrow. He explained that he was among the last set of new people to be brought into the business, and they were able to turn the company around by guiding it through a prepackaged bankruptcy and ridding it of junk bonds and high-interest debt. They then refinanced the company and returned equity to many bondholders. “We saved a 90-year-old company, “he said, “and ultimately sold it to Tyco, which became the beginning of Tyco HealthCare” (Computerworld Honors Foundation, April 6, 2004). ENTREPRENEUR WITHIN THE CORPORATION In 1996 Hammergren joined McKesson as president of McKesson Health Systems, a newly formed business unit focused on the pharmaceutical supply management needs of healthcare institutions. McKesson had just spun off its pharmaceutical-benefit-management company to Eli Lily for $4 billion, creating an attractive balance sheet. At the time, McKesson distributed drugs primarily to independent pharmacies and wanted to expand into hospitals. They felt Hammergren’s experience in health care would serve them well. “Broadening the base is what I was supposed to do,” he told Morrow. However, he soon encountered challenges. First, there had been no prior incumbent, as it was a newly created position, and the efforts made by the company to implement the hospitaldistribution scheme had been unsuccessful. Second, his training program, he told Morrow, consisted of little more than, “This is your office down the hallway. See you later.” Third, there was no strategy in place and no platform from which to launch the effort. He soon came to understand that McKesson had many intelligent people but little or no organization outside its fundamental focus—retail pharmacy distribution. Finally, many potential customers were satisfied with their suppliers. He knew he had to differentiate McKesson if the venture was to succeed, so he embarked on a two-step program: Create a team that understood the market and its customers, and then deliver value and solutions that met customers’ needs.

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“That’s how we started the process,” he told Morrow. He took up the challenging task of providing safe and effective drug distribution, from selection to administration to the patient using enhanced technology. He felt that if McKesson could provide a safe and efficient end-to-end channel for medications, they would have developed a unique and sustainable niche in the industry. “Given that I sort of had a green field opportunity in a 170-year-old company to build something from scratch, with a balance sheet and the support structure to make it happen it was like a start-up inside a huge corporation,” he commented (Computerworld Honors Foundation, April 6, 2004). His enterprise became a huge success. In just two years stock prices were high, much wealth was being created, and Wall Street was paying a great deal of attention. Then, Hammergren admits, the management team and employees alike began to lose focus. “We began to believe that we were as good as Wall Street thought we were,” he told Morrow, “as opposed to focusing on the metrics of our business” (Computerworld Honors Foundation, April 6, 2004). That loss of focus, he said, began to reflect in their decision making, and one decision in particular almost wrecked the entire corporation.

DISASTER CAUSED BY DISHONESTY Hammergren had been heavily focused on the hospitaldistribution arm of the business, and the core pharmaceutical distribution was lagging somewhat. McKesson initiated a strategic review, began implementing changes to its operating systems, and decided to further enhance the technological aspects of their business, which already included computerized distribution centers and automated order-entry systems. To that end they decided to acquire HBOC, the nation’s largest healthcare software vendor, and the $13.9 billion deal closed in January 1999. Hammergren became executive vice president of the new company and president of McKesson’s supplymanagement business. By April, however, HBOC’s inflated earnings—and the conspiracy to hide it from McKesson—had been uncovered, and restated earnings were announced. Revenue figures for the prior three fiscal years were reduced by $327.4 million, $246 million of which was for fiscal year 1999. Share prices dropped from $65 to $34 in one day and to a low of $16 over the next month. On July 15 seven top executives were replaced: president and CEO Mark Pulido and CFO Richard Hawkins both resigned, and chairman Charlie McCall and four other HBOC executives were fired. Hammergren, along with David Mahoney, former executive vice president and CEO of McKesson’s pharmaceutical-service business, were named co-CEOs, with both reporting to returning chairman Alan Seelenfreund. In announcing the decision, Seelenfreund said the changes reflected the company’s need to move forward as quickly as pos-


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sible: “Under the circumstances, strong leadership is essential to this effort: We are extremely fortunate to have two very talented and experienced senior executives . . . who have the capacity and are committed to rebuilding confidence and strength, integrity and value of our company.” He said that Hammergren was a natural leader with a proven track record for creating shareholder value (Homecare Magazine, April 1, 2001).

PICKS UP THE BALL Hammergren recalled the time as one of total turmoil with a serious void in leadership and a market-capitalization reduction of $9 billion. “There was no communication plan architected [and] No discussion about the gravity of it,” he indicated to Morrow. He said he was naive—being from the McKesson side—and did not realize how HBOC’s price-toearnings ratio was structured or how its value had been created. “I was the distribution guy, and they were the software people.” He recalled how the then CEO called him saying he was unable to keep his scheduled address with HBOC sales people in Hawaii and telling Hammergren to take his place. The remaining HBOC executives refused to speak to their own salespeople, and Hammergren had a difficult time persuading them to even be with him at the podium while he gave his address. The sales force was in complete shock: “I did the best I could to raise their spirits, at the same time while mine were plummeting. My entire net worth was wiped out . . . so it was a big deal for me” (Computerworld Honors Foundation, April 6, 2004). At his first customer meeting after becoming co-CEO, Hammergren and Graham King faced questions for three hours. King was an executive he had just promoted and whom he later credited with becoming a steadfast supporter of his new strategy and being personally accountable for the turnaround of the customer part of the business. Hammergren recalled to Morrow: “You had to dodge and weave the whole time, and clearly we were making commitments about recovery of the business to customers that we didn’t realize were this angry, and with problems that were much more severe than we even realized at the time.” Those commitments included promises that they would fully understand all the issues, continue to invest in the company’s future, make good on HBOC’s promises, and—if they could not—compensate for it financially. As it turned out, they had to take a large financial hit later in the year simply so they could look those customers in the eye and say: “‘Here’s what we promised. Here’s why we can’t deliver it, and here’s your money back.’ That discussion earned us a lot of credibility. . . . We knew that we had to hold onto that customer base so that we could rebuild our enterprise,” he explained. He said things were so critical that for two years he was not certain they could turn that part of the business around. “The gravity of the situation was such that I


wasn’t confident” (Computerworld Honors Foundation, April 6, 2004). Hammergren and Mahoney got to work, and the company showed a $427.5 million net income for the quarter ending March 31, 2000, compared with a net loss of $61.2 million for the same quarter the previous year. Then, this being the time of much dot-com excitement, they decided to reposition some underperforming assets into an Internet business, iMcKesson, with Mahoney as chairman and CEO. However, doctors did not sign up for the service as quickly as was anticipated, investor enthusiasm for dot-coms waned, and after nine months of losses that reached $29 million, the assets were folded back into the core business and expenses were shed. Mahoney resigned in April 2001 and Hammergren became sole president and CEO, with the responsibilities of chairman being added the following year.

SIMPLE STRATEGIES FOR SUCCESS Hammergren implemented two fundamental plans that set the stage for the company’s revival. First was installing a culture of shared principles under a program called ICARE, which he said he put into place primarily so he could remember it. “I’m a very simple person, so ICARE is integrity, you do what is right, taking the high road and knowing that no matter where you are in the organization that our associates will act with integrity,” he explained to Morrow. ICARE was an acronym for customer centered, accountability, respect, and excellence. He said the set of principles was something his totally demoralized employees could rally around. Second, he established a program of business scorecards that took the focus off stock prices and placed it back where it belonged. Four “metrics” were set in front of all employees: One was scoring customer satisfaction through regular surveys, and Hammergren said that when he saw customer satisfaction rising, he knew recovery was underway. Second was employee satisfaction, which first dropped but then began to rise, with employee turnover ultimately falling below industry averages. Third pertained to process success: He implemented the Six Sigma plan to reduce costs, improve efficiency, and reorganize. (Six Sigma is a rigorous and disciplined methodology that uses data and statistical analysis to measure and improve a company’s operational performance by identifying and eliminating “defects” in manufacturing and service-related processes.) Fourth was focus on financial success, measured in earnings before interest, taxes, and return on committed capital, as well as asset use and efficiency. Hammergren said that success with these two plans was central to the company’s recovery. For the nine months ending December 2003, revenues rose 22 percent to $51.57 billion and net income from continuing operations rose 14 percent to $432.3 million. And while share prices had not fully recov-

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ered, they more than doubled, hitting the mid-$30 range. Justin Martin wrote in Chief Executive: “The age of the imperial CEO is waning. In its place, a crop of new CEOs—humble, team building, highly communicative—are rising.” He named Hammergren as one of the new crop.

See also entry on McKesson Corporation in International Directory of Company Histories.

“McKesson Names Top Exec, Restructures iMcKesson,” Home Care Magazine, April 1, 2001, http://articles.findarticles. com/p/articles/mi_m0JHU/is_2001_April_1/ai_74020105. Morrow, Daniel S., “John Hammergren Oral History,” Computerworld Honors Foundation, April 6, 2004, http:// 64.233.161.104/search?q=cache:wFxBCq9btX8J: www.cwheroes.org/oral_history_archive/Hammergren/ Hammergren.pdf+%22Transcript+of+a+Video+History+ Interview+with+John+Hammergren+%22&hl=en&lr= lang_en&ie=UTF-8.


Martin, Justin, “Rise of the New Breed,” Chief Executive 191, August-September, 2003.

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■■■

H. Edward Hanway 1951– Chief executive officer, president, and chairman, CIGNA Corporation Nationality: American. Born: 1951. Education: Loyola College of Baltimore, BA, 1974; Widener University, MBA, 1984. Family: Married Ellen (maiden name unknown); children: three. Career: Insurance Company of North America, 1978–1980, assistant controller, special risk division; 1980–1982, assistant vice president; CIGNA, 1982–1985, manager; 1985–1986, senior vice president of finance and planning; 1986–1989, vice president; CIGNA International, 1989–1996, president; CIGNA Health Care, 1996–1999, president; CIGNA International, 1999–2000, president and chief operating officer; 2000–, chief executive officer, president, and chairman. Awards: Outstanding Alumnus Award, Loyola College of Baltimore, 2002. Address: CIGNA, 1 Liberty Place, 1650 Market Street, Philadelphia, Pennsylvania 19192-1550; http:// www.cigna.com.

■ In slightly more than two decades H. Edward Hanway rose through the ranks of CIGNA Corporation to become its CEO, president, and chairman in 2000. CIGNA was formed in 1982 through the combination of the Insurance Company of North America (INA), where Hanway worked at the time, and Connecticut General Corporation. The company eventually became one of the largest investor-owned U.S. employee benefits organizations and a provider of various insurance, retirement, and investment products. After taking over the company’s leadership, Hanway made numerous strategic moves to counteract the company’s disappointing results in the face of a troubled economy and rising health care costs. Industry analysts described Hanway as a good business strategist who took a highly analytical approach to management. International Directory of Business Biographies

FROM BEACH TO BOARDROOM Hanway attended Loyola College in Maryland and was graduated in 1974 with a bachelor of arts degree. In a 2003 commencement address to the graduating class of Clarke College, Dubuque, Iowa, Hanway recalled that his priorities after college were “finding a job, getting an apartment, driving to the New Jersey shore for some well-earned decompression at the beach” (May 10, 2003). Hanway eventually joined INA, a CIGNA predecessor company, in 1978. He began as an assistant controller in the company’s special risk division and rose through the ranks taking on management and finance roles of increasing responsibility. He was named assistant vice president of INA in 1980. In 1982 CIGNA Corporation was formed through the merger of INA and Connecticut General. In 1985 Hanway was made senior vice president of finance and planning for one of CIGNA’s main divisions and the following year became vice president of CIGNA Corporation. Hanway became president of CIGNA International in 1989 and oversaw the company’s expansion into other countries.

FOSTERS INTERNATIONAL BUSINESS During his seven-year tenure as president of CIGNA International, Hanway played a vital role in fostering economic cooperation across national borders. Although his primary focus was on the international insurance and financial services industries, Hanway also generally promoted U.S. business interests abroad as an advocate of free trade and through his close work with the U.S. Department of Commerce and the office of the U.S. Trade Representative. Hanway’s work with these government offices helped to formulate the financial services provisions of such landmark pacts as the North American Free Trade Agreement, for which Hanway actively lobbied in 1993, and the United States–Japan Framework Agreement on Insurance. Hanway served as chairman of the International Insurance Council from 1993 to 1995 and later as vice chairman for trade policy. While president of CIGNA’s international divisions, Hanway served as a trustee and member of the executive committee of the U.S. Council for International Business and a member of the board of directors of the U.S. National Committee for Pacific Economic Cooperation. One of the countries Hanway was most interested in was China, where he es-

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tablished CIGNA representative offices in 1994. Later Hanway urged the U.S. Congress to give China permanent normal trade relations status. In 1996 Hanway was appointed president of CIGNA HealthCare, the corporation’s largest division, which was responsible for providing health, dental, vision, pharmacy, and behavioral health coverage to the employees of various companies and their families. Three years later, Hanway was named president and chief operating officer of CIGNA Corporation and was in charge of all of the company’s divisions. In 2000 he was named CEO, president, and chairman of the corporation. Hanway’s appointment to CIGNA’s top posts was partially the result of his close work with the former CEO William H. Taylor in reorganizing CIGNA from a multiline insurer to an employee benefits specialist. The two reached their goal primarily by shedding other businesses, such as CIGNA’s property and casualty businesses in a $3.45 billion sale to ACE Limited. In a news release in CIGNA Archives, Taylor noted, “Ed is eminently qualified to lead CIGNA. He has extensive knowledge of our operations, a record of success in managing both our health care and international divisions, and a strong commitment to customer service” (December 11, 2001).

AT THE HELM In his new role as CEO, president, and chairman of CIGNA, Hanway focused CIGNA’s efforts on building each of the company’s businesses in healthcare, retirement and investment services, and group insurance. He wanted to emphasize customer service and deploy technology service capabilities to help customers and consumers better manage their benefits. Another area Hanway continued to emphasize was the need to build foreign business and to urge the United States to grant China permanent normal trade relations status. Hanway met in Beijing with Chinese premier Zhu Rongji to let the Chinese leader know that CIGNA was willing to assist China in developing a full range of healthcare, employee benefits, and financial services products. As noted in Insurance Journal, Hanway commented, “We believe that normalizing trade with China will help give U.S. companies—including CIGNA—greater access to the rapidly expanding Chinese marketplace while bringing China and its people the advantages of increased international commerce” (June 6, 2000). Hanway and other U.S. business leaders were successful in their entreaties when the U.S. Senate voted to grant permanent normal trade relations status to China, paving the way for CIGNA and others to establish full and normal fair trade with that country. Because China had also entered into the World Trade Organization, Hanway predicted that the Chinese insurance market would develop rapidly. He established offices in Beijing, Shanghai, and Guangzhou to engage in various insurance businesses.

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Through his meetings with Premier Zhu Rongji, Hanway had also helped engineer the 2002 decision by the Chinese Insurance Regulatory Commission to allow CIGNA to enter the country’s life insurance market. According to an article in Insurance Finance & Investment, Hanway said, “Now, we are looking forward to re-entering China’s insurance marketplace as a full participant” (October 1, 2002). Later that year Hanway and CIGNA developed a joint venture with China to market life insurance in Shenzhen.

FACES TOUGH TIMES Despite the advances in China, Hanway and CIGNA were encountering a tough insurance market, initially fueled by the downturn in the American economy starting in late 2000. The World Trade Center and the Pentagon attacks by terrorists on September 11, 2001, cost the company approximately $215 million in claims. Rising medical costs were also hitting the insurer hard. Hanway nevertheless remained positive and pointed out to Bill Griffeth of the CNBC program Power Lunch that CIGNA had a wide array of products that would allow the company to respond to employers’ changing needs in the insurance and finance sector. In the fourth quarter of 2001 CIGNA reported that its net income had decreased 31 percent owing to restructuring charges. On the other hand, the company, which was the number three health insurer in the United States at the time, had earned $1.92 a share, which surpassed estimates by analysts. Hanway pointed to rising medical costs and the economy as major factors in the company’s overall struggles. He also predicted, however, that the company would prosper as it continued to grow its retirement and other businesses. In an interview on the CNNfn program Money Gang, as reported in CIGNA Archives, Hanway said, “We’ve been very actively developing what we call retail strategies to deal with the individual consumer, within the large employers, and increase our name recognition and our brand recognition” (February 21, 2002). Despite Hanway’s optimism the company’s outlook continued to decline. In November 2002, CIGNA stock had reached a low of $36.27 a share, down two-thirds since May 2002, when the value had been $111. According to Hanway, much of the problem had to do with service and computer glitches and customers’ defecting from CIGNA HealthCare because they were displeased with CIGNA’s financial troubles. Furthermore, more than $1.5 billion in pretax charges from old worker compensation and annuity insurance contracts had hit the company hard. Analysts were calling CIGNA a company in trouble because of its weak sales and earnings reports. In addition, Hanway and his company were consistently being beaten out by competitors. In an interview with Joseph N. DiStefano of the


H. Edward Hanway

Philadelphia Inquirer distributed by the Knight-Ridder/ Tribune News Service, Hanway said, “I view our results as unacceptable and clearly below our potential. We fully intend to return to industry-leading [profit levels]” (November 10, 2002).

STRUGGLES TO REVERSE COURSE Hanway set out to put CIGNA back on course in several ways. He replaced some of his top management team and scrambled to reshuffle various business units. Hanway eventually assumed direct control of CIGNA HealthCare after what some analysts believed was the ouster of the division’s president as the result of sluggish sales and profits within the division. Hanway also hoped to improve profits somewhat by spending more on raising insurance prices and cutting overhead. Hanway’s plan included focusing more on billing and information systems. He had already made CIGNA a part of the Coalition for Affordable Quality Healthcare in an effort to simplify the administrative burden for physicians and their office staffs, who often had to deal with 15 or 20 insurance companies and health plans. The coalition included a collaboration of approximately 25 of America’s largest health plans. These various insurance providers were identifying initiatives to make changes in the overwhelming bureaucracy connected with health insurance. Hanway saw the collaboration as being good for business as the group worked to create a standardized grid outlining all the benefits of each member’s plans using plain language, thus making it easier for consumers to compare plans. As Hanway wrote in Health Leaders, “All of us realize that to be successful as individual businesses, we have to change the image of our industry. We think this is a way to demonstrate to people that we really do care about a number of factors that are important to both physicians and consumers” (May 1, 2002). Despite all his efforts Hanway was feeling the heat. For example, in 2002 Hanway was not granted a bonus because of CIGNA’s disappointing results. Jill Brown, the managing editor of Managed Care Week, told Tracey Walker of Managed Healthcare Executive, “As an incentive to turn things around, Hanway was granted stock options at a relatively high price point, which will not be of any value to him until such time as the company’s stock price is higher than the price of Hanway’s options” (November 1, 2003). In his 2003 commencement address at Clarke College, Hanway said that he believed CIGNA’s troubles were not caused by any wrongdoing on the company’s part but rather that he and his management team had not done enough to execute what he continued to believe were sound business strategies. He told the graduating class, “I found myself staring at the ceiling on many sleepless nights agonizing over what we


could have done or should have done to keep the ship on course” (May 10, 2003).

THE BATTLE CONTINUES Hanway’s problems continued into 2004 as he announced in an internal company memo that the company would have to lay off workers. CIGNA faced many problems, including a health insurance business hobbled as the result of pricing mistakes and computer problems dating to 2002. Furthermore, health coverage plans covering 30 to 40 percent of the company’s approximately 11 million members were up for renewal in 2004, and analysts were concerned that CIGNA would take a further hit if some subscribers did not renew. For example, if the Arizona state government decided to take a selfinsurance approach, CIGNA would lose 140,000 members. In the previous year CIGNA had lost large accounts, including Dade County, Florida, DaimlerChrysler, and Campbell Soup Company. Hanway had already made moves to save what many analysts saw as a leaking if not sinking ship. In November 2003 he continued downsizing of the company by selling CIGNA’s retirement services business to Prudential for $2.1 billion. He also began to conduct a top-to-bottom study of the company’s costs and spending. Hanway told company employees that CIGNA had no choice but to streamline its operations. As reported by Todd Mason of the Philadelphia Inquirer and distributed by Knight Ridder/Tribune Business News, Hanway wrote to employees, “Some of the changes I describe will be painful.” By the end of the first quarter of 2004 CIGNA’s net income had slipped to $78 million, or 55 cents a share, from $236 million, or $1.68 a share, during the same period the previous year. Hanway announced that the company had completed the sale of its retirement benefits business and expected to gain approximately $675 million after taxes as the result of the sale. He also said he planned to focus the company’s future efforts on healthcare and related benefits. Despite the company’s lower new-business sales and retention of existing accounts, Hanway said CIGNA was moving in the right direction by lowering medical cost trends and administrative expenses while expanding its products and service capabilities. As reported by Marie Suszynski in BestWire, Hanway stated, “We feel we’re taking appropriate action [to increase membership]” (April 30, 2004).

MANAGEMENT STYLE: FACE THE MUSIC Considered by some analysts a strong strategist and highly analytical manager, Hanway also had a reputation for instilling a high level of company values. He emphasized that his view of business was to be a tough competitor but a competitor with

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a conscience who played a vital role in the health and wellbeing of its customers and clients. As CIGNA’s business operations and earnings declined, Hanway never shied away from personal accountability for the company’s problems. In his 2003 commencement address at Clarke College, he said he found the criticism to be tough but in a way “redemptive.” He also emphasized that if more of the company executives at Enron and other failed businesses had been willing to take responsibility early on, their companies may have made it through the bad times much better and that corporate America would have gained more public trust. As for his own experience in managing a company through tough times, he told the Clarke graduates that he “learned that there’s something truly liberating about standing unprotected in the public eye and acknowledging one’s shortcomings when that’s what the situation demands” (May 10, 2003).

CONFIDENCE CONTINUES In an investor teleconference in 2004 Hanway outlined his strategic plan for the company’s future and remained optimistic that CIGNA would see brighter days. He said that the company had made solid progress in the four key areas: reducing medical cost trends, delivering quality service, reducing operating expenses, and growing membership. Hanway said he believed the company was making strong progress in the areas of medical management, service, and expense reductions. He said that the company was positioning itself to seize future opportunities and to provide superior returns to shareholders. He emphasized that the company was in the process of reconnecting with middle-market brokers and producers to ensure that they saw the company’s improvements and would become more confident in recommending CIGNA. In addition to his duties at CIGNA, Hanway served as chairman of the board of MedUnite, an Internet-based utility designed to speed the processing of health care transactions. Hanway also was active in issues associated with children’s health, education, and international trade. He served on the boards of trustees of Loyola College in Maryland and the Eisenhower Exchange Fellowships, the board of advisers of the March of Dimes Foundation, and the board of directors of the Philadelphia Orchestra and was an advocate for the Susan B. Komen Breast Cancer Foundation. Hanway was a member of the Pennsylvania and American institutes of certified public accountants and of the Business Roundtable, an association of CEOs committed to improving public policy.

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See also entry on CIGNA Corporation in International Directory of Company Histories.


“CIGNA President Calls for Senate PNTR Approval,” Insurance Journal, June 6, 2000, http:// www.insurancejournal.com/news/international/2000/06/06/ 10334.htm. “CIGNA to Start Life Insurance OPPS in China,” Insurance Finance & Investment, October 1, 2002, p. 14. DiStefano, Joseph N., “CIGNA’s Long-Term Health Is in Doubt, Analysts Say,” Knight-Ridder/Tribune Business News, ITEM02314017. “Ed Hanway Named Chairman of CIGNA Corporation,” CIGNA Archives, December 11, 2000, http:// www.prnewswire.com/cgi-bin/ stories.pl?ACCT=105&STORY=/www/story/04-03-2001/ 0001461333. “H. Edward Hanway on Administrative Simplification,” Health Leaders, May 1, 2002, http://www.healthleaders.com/ magazine/feature1.php?contentid=33952. Hanway, H. Edward, “Commencement 2003 Address,” Clarke College, Dubuque, Iowa, May 10, 2003, http:// www.clarke.edu/academics/commencement/2003/ address.htm. “Interview between CIGNA Chairman and CEO H. Edward Hanway and CNNfn’s Money Gang, Friday, February 8, 2002,” CIGNA Archives, February 21, 2002, http:// www.prnewswire.com/cgi-bin/stories.pl?ACCT= 105&STORY=/www/story/02-14-2002/0001669767. Mason, Todd, “CIGNA Warns of Upcoming Layoffs,” Knight Ridder/Tribune Business News, January 17, 2004, ITEM04017135. Suszynski, Mary, “CIGNA’s Net Income Falls on Accounting Change,” BestWire, April 30, 2004, http:// www.insurancenewsnet.com/ article.asp?a=top_lh&lnid=205426101. Walker, Tracey, “November DTR Analysis: Executive Stock Options,” Managed Healthcare Executive, November 1, 2003, http://www.managedhealthcareexecutive.com/mhe/ article/articleDetail.jsp?id=75799. —David Petechuk


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George J. Harad

fore he assumed the top leadership position with the company. Harad restructured Boise’s management and focused the company’s sales efforts on distribution rather than manufacturing.

1944– Chairman and chief executive officer, Boise

A LONG WAY FROM PHILADELPHIA

Nationality: American. Born: April 24, 1944, in Philadelphia, Pennsylvania. Education: Franklin and Marshall College, BA, 1965; Harvard Business School, MBA, 1971. Family: Married Beverly (maiden name unknown); children: two. Career: Boston Consulting Group, 1970–1971, staff consultant; Boise Cascade Corporation, 1971, assistant to senior vice president; 1971, assistant to vice president; Boise Cascade Realty Corporation, 1972–1976, finance manager; Boise Cascade Corporation, 1976–1980, manager, corporate development; 1980–1982, director, retirement funds and risk management; 1982–1984, vice president; 1984–1989, senior vice president and chief financial officer; 1989–1990, executive vice president and chief financial officer; 1990–1991, executive vice president, paper; 1991–1994, president and chief operating officer; 1994–1995, president and chief executive officer; 1995, chairman of the board of directors; 1995–, chairman and chief executive officer. Awards: George F. Baker Scholar, Harvard University, 1970–1971; Frederick Roe Fellow, Harvard University, 1971; Executive Papermaker of the Year, PaperAge Magazine, 2001, 2004. Address: Boise Corporate Headquarters, 1111 West Jefferson Street, P.O. Box 50, Boise, Idaho 83728; http://www.bc.com.

■ George J. Harad advanced through the corporate structure at Boise Cascade, a major paper and wood products manufacturer, to become the company’s chairman and chief executive officer in 1995. After earning an MBA with honors from Harvard Business School, Harad joined the company with an interest in pursuing a career in real estate and finance. His career path at Boise led him to several executive positions, including chief financial officer, chief operating officer, and president beInternational Directory of Business Biographies

Harad grew up in Philadelphia, where he played sandlot baseball as a youngster. He remained an active baseball player when he enrolled at Franklin and Marshall College in Lancaster, Pennsylvania. He earned a bachelor’s degree in government in 1965 and graduated magna cum laude. Harad was initially attracted to government as a career and enrolled at the Graduate School of Arts and Sciences at Harvard University with the intention of earning a Ph.D. in political science. Harad’s plans changed while he was at Harvard, however, and he switched from his Ph.D. program to the master’s program in business administration at Harvard Business School. While he was in business school, he was elected a George Baker Scholar, the highest honor given to a Harvard student prior to graduation. Harad received his MBA in 1971. While he was still enrolled at Harvard, he worked as a staff consultant at the Boston Consulting Group from 1970 to 1971.

A DIFFERENT BUSINESS CLIMATE Harad’s primary interest when he graduated from Harvard was real estate and finance. He took a closer look at Boise Cascade because the company had an opening in its real estate subsidiary. “The company did everything from build singlefamily homes to develop high-rise buildings and resorts,” Harad told PaperAge Magazine in 2001. “The fact that the subsidiary was based in Palo Alto, California, and I had endured six winters in Boston also may have had something to do with my decision [to join the company]” (PaperAge Magazine, March 2001). Harad first became an administrative assistant to the senior vice president for housing after he joined Boise Cascade. He worked in a variety of positions over the next 20 years. He became a finance manager for Boise’s Reality Group in 1972 and held the position until 1976. That year he moved to Boise, Idaho to become the company’s manager of corporate development. In 1980 he was appointed director of retirement funds and risk management. Two years later he became one

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of Boise’s vice presidents. He continued to advance in the corporation in 1984, when he was appointed senior vice president and chief financial officer. Harad added the title of executive vice president to his resume in 1989. In 1990 he was promoted to executive vice president in the company’s paper division, which accounted for about 60 percent of the company’s total sales.

Harad’s next move was to build Boise’s distribution business to the extent that the company was earning more from distribution than from manufacturing. Sales continued to increase. Boise became one of the first paper products companies to embrace e-business, with customers placing as many as 11,000 orders through the company’s Web site by 2001. Harad’s performance at Boise earned him an award from PaperAge Magazine as Executive Papermaker of the Year in both 2001 and 2004.

BOISE CASCADE’S NEW PRESIDENT

As the American economy weakened during the early 2000s, however, the paper industry declined along with many others. Boise, which had officially dropped the word “Cascade” from its name in 2002, also suffered attacks from environmentalists on the basis of its timber policies. Harad was himself the target of much of the criticism since he was the company’s CEO. He rebuffed the critics by pointing out repeatedly that the company adhered to environmental regulations. “Frankly they can’t win on facts, so they use smear tactics,” Harad said of these opponents (Idaho Statesman, November 22, 2002).

Boise Cascade named Harad as its president and chief operating officer in 1991. He assumed responsibility for each of the company’s operations that involved paper and paper products, office supplies, and building products. He also oversaw Boise’s timber resources branch. “George Harad is one of the most capable and talented executives I know,” said John B. Fery, at that time the chairman and chief executive officer of Boise Cascade. “He has succeeded notably in each of the many and varied assignments he’s had in 20 years with our company. He’s precisely the caliber of executive that Boise Cascade needs as its chief operating officer” (PR Newswire, December 13, 1991). Harad and his corporation endured three difficult years between 1991 and 1994. During that time, the paper industry, which had developed a reputation for instability over the years, experienced another downturn. The company reported combined losses of nearly a half billion dollars during those three years. Harad, however, stood his ground. “Both our wood products manufacturing business and our paper business are highly volatile, and that’s only one of the challenges the businesses present,” Harad said. “But I like a challenge. From a manager’s perspective, volatility can be attractive because it creates as many opportunities as problems” (PaperAge Magazine, March 2001).

CEO AND CHAIRMAN Fery retired from Boise in 1994 after 37 years with the company. Harad’s impressive performance as president and COO led to his promotion to president and chief executive officer of the company. He became the chairman and CEO of Boise in 1995. After becoming Boise’s chairman, Harad initiated a series of changes in the company’s management structure. “My business school training and my early career were focused on finance, and I brought that perspective with me when I became CEO,” Harad said in 2001. “It seemed clear that if Boise Cascade—and our industry as a whole—were going to survive, we had to do a better job at earning our cost of capital” (PaperAge Magazine, March 2001).

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In addition to Harad’s duties at Boise, he was active in numerous professional and civic associations, including the American Forest and Paper Association, the National Council for Air and Stream Improvement, the Nature Conservancy of Idaho, the Idaho Business Council, the Boise Council for Gifted/Talented Students, the Boise Public Schools Education Foundation, and the Community Youth Connection.

See also entry on Boise Cascade Corporation in International Directory of Company Histories.


“Boise Cascade Announces Election of President, Chief Operating Officer,” PR Newswire, December 13, 1991. Dey, Ken, “Harad Kicks Off Chamber Series,” Idaho Statesman, November 22, 2002. “Fery To Retire as Boise Cascade CEO in July,” PR Newswire, April 22, 1994. “George Harad: Executive Papermaker of the Year,” PaperAge Magazine, March 2001, http://www.paperage.com/ 03_2001harad.html. “George Harad: Executive Papermaker of the Year,” PaperAge Magazine, March 2004, pp. 24–27. —Matthew C. Cordon


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William B. Harrison Jr. 1943– Chairman and chief executive officer, J. P. Morgan Chase & Company Nationality: American. Born: August 12, 1943, in Rocky Mount, North Carolina. Education: University of North Carolina–Chapel Hill, BA, 1966; completed Harvard Business School International Senior Management Programme, 1967. Family: Married Anne (maiden name unknown), 2001; children: two. Career: Chemical Banking Corporation, 1967–1969, trainee; 1969–1976, corporate and correspondent loan officer; 1976–1978, head of banking operations on the West Coast; 1978–1983, senior vice president and regional coordinator, London office; 1983–1986, executive vice president and head of the U.S. corporate division; 1986, head, North America division; 1987–1989, group executive in charge of the Banking & Corporate Finance Group; 1990–, vice chairman, institutional banking; Chase Manhattan Corporation, 1999, president and chief executive officer; J. P. Morgan Chase & Company, 2000–2004, president and chief executive officer; 2001–, chairman and chief executive officer.

William B. Harrison Jr. © James Leynse/Corbis.

Address: J. P. Morgan Chase & Company, 270 Park Avenue, New York, New York 10017; http:// www.jpmorgan.com.

■ William B. Harrison Jr. was the product of three generations of family bankers. Through a series of rapid acquisitions Harrison, a low-key executive who prided himself on teamwork, transformed J. P. Morgan Chase & Company into the second-largest bank in the United States, behind Bank of America. Effective June 15, 2004, J. P. Morgan Chase acquired Bank One for approximately $58 billion in stock, forming the second-largest U.S. bank, having loans and assets of $1.1 trillion. The transaction also ended years of speculation about whether Harrison would be forced out of J. P. Morgan Chase, which had suffered greatly in an economic downturn. Harrison was expected to remain at J. P. Morgan Chase until at least 2006. International Directory of Business Biographies

With 2003 sales of $44.3 billion J. P. Morgan Chase & Company was formed by the merger of two venerable institutions—the commercial bank Chase Manhattan and the investment bank J. P. Morgan. The combined entity offered commercial, consumer, and investment banking services to clients worldwide, although its branch network was highly concentrated in the Northeast and Texas. Investment banking services included brokerage, asset management, and proprietary investment. The company was one of the largest mortgage loan originators and credit card issuers in the United States. In 2004 J. P. Morgan Chase also owned a 45 percent stake in the mutual fund company American Century Investments.

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BANKING IN HIS BLOOD In 1931 Harrison’s grandfather founded the Peoples Bank and Trust Company in Rocky Mount, North Carolina, a cotton and tobacco town where Harrison spent his childhood. His father worked for Peoples before making a career shift into real estate development. Harrison once commented that a key skill he used during mergers—adeptness at building loyalty in his employees by granting them complete trust to do their jobs—stemmed from a childhood free of rules and curfews. As Harrison told Justin Schack of Euromoney Institutional Investor, “My dad and my mom both were very trusting. They expected only the best behavior from us and trusted us to deliver. They taught us to have the confidence in ourselves to trust others.” At a private school in Virginia, Harrison won an award for mentoring younger students. He also excelled on the basketball court and earned a scholarship from Dean Smith, the revered coach of the University of North Carolina. Harrison ultimately fared better as the team cheerleader. Recalled Smith to Schack, “As it turned out, he didn’t play very much. But he practiced very hard and pushed his teammates to be better. He had the kind of attitude I wanted all the players to have.” After spending a year on the bench, Harrison gave up his scholarship so that Smith could recruit more talented players.

MENTORS Harrison’s grandfather encouraged him to train with a major Wall Street firm after college and bring back his lessons to the family business. Recalled Harrison to Schack, “I always had in the back of my mind that I would return to North Carolina. That lasted for, oh, 15 years.” After being graduated with a degree in economics in 1966, Harrison spent the first two years of his banking career as a trainee at Chemical Banking Corporation. In 1969 Walter Shipley, the legendary CEO at Chemical, recruited Harrison to work as a corporate loan officer. Harrison’s first big promotion came in 1976, when he was dispatched to San Francisco to run banking operations on the West Coast. Personally mentored by Shipley, Harrison next worked for Chemical in London as senior vice president and regional coordinator. The title came with immense responsibility. Harrison went from managing 15 employees to leading 1,200. When infighting threatened to disrupt the office, Harrison announced a three-day retreat with a corporate psychologist. Harrison told Schack, “For the first session we spent 12 hours in a room together, and the rule was you could only talk about what you didn’t like about people. We got everything out in the open, established trust in each other and were able to move forward from there as a team.” In Harrison, Shipley mentored an executive who both reminded him of himself and was different. Shipley shunned pedigrees and demanded that his staff

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prove themselves in a meritocracy. Although Harrison clearly had come from a banking family, Shipley liked his low-key, team-focused style. Both executives had fierce drives and impeccable work ethics. In 1983 Harrison returned from London to become executive vice president and head of the U.S. corporate division. In 1986 he assumed responsibility for the North America Division. A year later he became group executive in charge of the Banking & Corporate Finance Group, which developed and managed credit and investment banking services for corporate and institutional clients worldwide. Harrison was named a vice chairman of Chemical in August 1990.

MERGERS In 1996 Chemical bought Chase Manhattan for $10 billion, at the time the largest banking acquisition in history. Harrison spearheaded the combined firm’s expansion in fixedincome trading and syndicated lending, making him a contender to succeed Shipley, who was nearing retirement. In July 1999 the board named Harrison president and CEO of the combined company. Harrison brought a tech-intensive focus to the CEO job and launched Chase.com, a unit designed to pull ideas from business units and to incubate technologies. During Harrison’s tenure as CEO, Chase gave its private equity unit, Chase Capital Partners, new relevance that emphasized the unit’s stakes in a range of emerging industries, including technology, media, and telecommunications. Harrison recalled feeling relaxed in the top corporate seat. He told Liz Moyer of American Banker, “It’s a lot more fun being a CEO than I would have guessed” (February 1, 2001). Harrison spent exorbitantly on an acquisitions spree, aiming to become a one-stop destination for meeting corporations’ financial needs. In 2000 the spree culminated in the $34 billion purchase of J. P. Morgan, a deal that created a major market contender with assets that ranked third behind only Citigroup and Bank of America. Commenting on the contention that he had paid too much, Harrison told Market Week with Maria Bartiromo, “You don’t get any great property at a discount.” For Harrison the payoff was the opportunity to become a major player in investment banking, an industry dominated by J. P. Morgan. Harrison told Moyer, “This is a critical merger for this company. It does basically make us complete as a global investment bank, and that’s something that Chase was not” (February 1, 2001). Critics disagreed, pointing out that Chase had purchased a business that largely mirrored its own. The resulting firm still did not make the top three in the lucrative areas of mergers and acquisitions and equity underwriting. An anonymous competitor quoted by Heather Timmons in BusinessWeek said, “It was a bit like stacking doughnuts. The holes are all in the same place.” Three months after the merger



J. P. Morgan’s profits were crushed by a collapse of the capital markets. In 2001 return on the company’s $800 billion assets hovered at 0.24 percent, one-sixth of the industry average. That year the bank laid off 8,500 employees, triple the number it had predicted, owing to a slump in its business. Dozens of top bankers left of their own accord. In 2002 the picture continued to look bleak. The company was hampered by bad loans, venture capital losses, and a lack of profitable mergers and initial public offerings. In January of that year mergers and acquisitions activity was down 50 percent from 2000, and issuance of new shares was down 20 percent, according to the New York research firm Dealogic. The board continued to support Harrison but was forthright in its contention that a turnaround was a stipulation for further employment. Lawrence A. Bossidy, a J. P. Morgan Chase board member and the former CEO of Honeywell International, told Timmons, “We’re comfortable with him and this platform . . . and we believe the bank is doing the right things. Still, I don’t want to beat around the bush–if the economy recovers and the earnings don’t, well, that’s a negative.”

THE ENRON SCANDAL Another source of concern was the Enron scandal, which had a ripple effect on J. P. Morgan Chase. The U.S. Securities and Exchange Commission alleged that the company helped Enron set up complex financing, which allowed Enron to hide debt and make earnings and revenues look much better than the actual financial position. Harrison explained the transaction as follows on After Hours with Maria Bartiromo: “We advance money to Enron on day one, they agree to deliver gas to us sometime in the future, a year or two years in the future, and with that gas, we then get repaid. That is very typical financing in the energy business. We did it for Enron. A lot of other major financial institutions did this for Enron and a lot of other energy companies around the country, so it’s very normal financing.” He went on to explain that his company had acted within the confines of accounting conventions and rules. Although Harrison initially insisted his company’s ties to the beleaguered energy corporation were perfectly legal, J. P. Morgan Chase ultimately paid the Securities and Exchange Commission a fine of $135 million for contributing to the Enron fraud. As of 2004 the bank faced civil suits for causing unclear damages in financing the company.

MANAGEMENT STYLE As the CEO, Harrison lacked the charisma and take-charge attitude of many of his industry peers. Instead of ruling with an iron fist, he believed in the power of collaboration and consensus. Harrison gathered his top executives around a table once a week to vent. One of his favorite books was Daniel


Goleman’s Emotional Intelligence, which he gave to executives as part of performance reviews. Harrison told Timmons, “The big, complex global institutions of the future will be run by people that can build great teams. These businesses are too complex for one person to think that they can understand, run, and manage everything themselves.” Critics interpreted that explanation as a cover-up for weak leadership. Lee R. Raymond, the CEO of Exxon Mobil Corporation and a member of the board of J. P. Morgan Chase, explained to Timmons, “There’s this notion out there that these guys sit around holding hands, then take a vote and see how it turns out. I don’t think that’s how the bank runs.” Harrison used off-site retreats to encourage cohesiveness at the new company. He brought in the Duke University coach Michael Krzyzewski to address his workers and hired Jack Welch, the esteemed former CEO of General Electric, to set up a training institute for company executives. For Harrison, getting his people to work together was integral to the company’s success. Harrison told Schack, “We’ve spent a lot of time doing deals to get the platform in place. The key to taking the firm to the next level is taking care of the people factor.” Harrison’s intense focus on human relations belied a fierce competitive streak and boundless energy. Erskine Bowles, the former White House chief of staff and Harrison’s friend since prep school, recalled a summer vacation in which friends were given a “dusk to dawn” schedule that included every outdoor activity imaginable, from horseshoes to badminton. When it rained and someone expressed relief at the respite, Harrison emerged with the news that a ping-pong table had been set up in the garage. Bowles told Moyer, “You have to lead, follow, or stand aside. There’s not much follow or stand-aside in Bill Harrison. He’s constantly challenging himself. And he’s used to winning.”

FUELING GLOBAL DEVELOPMENT Harrison believed that his company, along with other large financial institutions, played a crucial role in global economic development. In a speech to the Synergos Institute in 2002 Harrison said, “We act as financial engineers that mobilize and direct the flow of capital because we have a clear stake in the communities we serve and do business in around the world.” Under Harrison’s watch J. P. Morgan Chase invested in the global outsourcing trend that had U.S.-based multinational corporations doing business in Asia to cut costs. J. P. Morgan Chase opened several facilities in China and created centers of technological expertise in India to support its global banking operations. Expanding its global reach and generating positive public relations in Africa, Harrison directed the bank to help blacks acquire the skills to obtain executive positions in its South African operations.

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MANAGEMENT SHAKEUP In 2003 J. P. Morgan Chase, scarred by a series of setbacks in the world of finance, announced a shakeup of its top ranks that included the departure of its highest-profile investment banker and the reassignment of other top managers. The stock price had decreased more than 20 percent over the previous year while earnings sank 72 percent. Harrison was under increasing pressure from investors to show his determination to revive the bank’s fortunes and revamp his senior management. Departing was Geoffrey Boisi, the co-head of J. P. Morgan’s investment banking operations. The bank said Boisi had decided to leave in the face of Harrison’s decision to reorganize. In Boisi’s place David Coulter, who a few years earlier had been ousted from Bank of America where he had been heir apparent, was named sole head of investment banking. Coulter became the bank’s most influential business manager. He joined Chase from Beacon Group at the time of the purchase and became head of J. P. Morgan’s retail banking and assetmanagement business. He retained oversight of investment management and private banking. Harrison successfully guided Morgan Chase through 2003. Profits increased 300 percent to $6.7 billion, from $1.7 billion in 2002, and the stock price rose from $15 in late 2002 to $40 in early 2004. In addition, the investment banking business was beginning to succeed owing to a trend in one-stop corporate banking and to Harrison’s appointment of Coulter as chief of investment banking. In 2004 J. P. Morgan Chase ranked fourth in global equity underwriting, up from 14th in 2001.

TAKING ON CITIGROUP With more than $100 billion in 2003 revenues, Citigroup was the world’s largest financial services firm that year. To truly compete globally Harrison knew his bank had to grow. In 2004 he negotiated a deal to merge Chicago’s Bank One with J. P. Morgan. The headquarters were in New York, and Chicago was the base for some retail operations. Although J. P. Morgan described the transaction as a merger of equals, J. P. Morgan had acquired Bank One for approximately $58 billion in stock, forming the second-largest U.S. bank, loans and assets totaling $1.1 trillion. The transaction combined Bank One’s strength in consumer financial services with J. P. Morgan’s formidable hold on the corporate banking market. The combined bank’s network of branches grew to 2,300— three times the size of the Citigroup network. As quoted by Shawn Tully in Fortune, Thomas Brown, an independent ana-

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lyst with Bankstocks.com, said, “Their strengths and weaknesses match up almost perfectly.” In an interesting twist to the consolidation of colossal corporations, Jamie Dimon, the CEO of Bank One, was designated to succeed Harrison as CEO in 2006. This move was expected to place Dimon in competition with Sanford I. Weill, his former mentor at Citigroup. By chance or fate, Harrison had secured the talent of one who understood his rival. After years of tumult William Harrison’s good fortune was something of an enigma. Raphael Soifer, the chairman of Soifer Consulting, told Aaron Elstein of Crain’s New York Business, “‘Strategic genius’ isn’t a phrase I’ve heard associated with him. But he survives—again—and lands on top” (January 19, 2004).

See also entry on J. P. Morgan Chase & Co. in International Directory of Company Histories.


Bartiromo, Maria, “William Harrison, Chairman and CEO of JP Morgan Chase, Discusses his Firm’s Involvement in the Enron Scandal,” After Hours with Maria Bartiromo, CNBC, August 5, 2002. ———. “William Harrison of JP Morgan Chase Discussed the Future of the Newly Merged Corporation,” Market Week with Maria Bartiromo, CNBC, January 5, 2001. Elstein, Aaron, “Deal Rescues Morgan Chief, May Give Him Staying Power,” Crain’s New York Business, January 19, 2004. Harrison, William B., Jr., “William B. Harrison, Jr.’s Plenary Remarks,” University for a Night 2002, Synergos at the United Nations, http://www.synergos.org/ universityforanight/02/harrison.htm. Moyer, Liz, “Banker of the Year: Harrison Has the Helm,” The American Banker, February 1, 2001. Schack, Justin, “Can a Nice Guy Finish First?” Euromoney Institutional Investor, January 1, 2002, p. 40. Timmons, Heather, “The Besieged Banker,” BusinessWeek, April 22, 2002, p. 68. Tully, Shawn, “The Deal Maker and the Dynamo,” Fortune, February 9, 2004, p. 76. —Tim Halpern


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Richard Harvey 1950– Chief executive officer, Aviva; chairman, Association of British Insurers Nationality: British. Born: 1950, in Gloucestershire, United Kingdom. Education: University of Manchester, degree in mathematics. Family: Married; children: three. Career: Phoenix Assurance, trainee; Sun Alliance, various positions until 1986; 1987–1990, general manager, New Zealand operations; Norwich Union, 1992–1993, regional chief executive officer, New Zealand; 1993–1994, general manager, finance department, UK; 1995–1997, finance director; 1998–1999, chief executive officer; CGNU (renamed Aviva in 2002), 2000, deputy chief executive officer; 2001–, chief executive officer; Association of British Insurers, 2003–, chairman. Address: Aviva, St. Helen’s, 1 Undershaft, London, EC3P 3DQ, United Kingdom; http://www.aviva.com.

■ In 2001 Richard Harvey became the CEO of CGNU, which became Aviva the following year. CGNU was created in 2000 following a merger between CGU and Norwich Union in which Harvey was highly instrumental. By 2004 Aviva was the seventh-largest insurance group in the world, offering commercial, marine cargo, health-care, and personalinsurance products and long-term savings and fundmanagement services to 25 million customers. It employed close to 60,000 and had sales of £28 billion from continuing operations and more than £200 billion in assets under management. In 2003 Harvey became chairman of the Association of British Insurers, the UK’s industry trade association for insurers.

the Great Tooley Street Fire of London in 1861, and General Accident and Employers Liability Assurance Association (GA), created in 1885 in Perth, Scotland, which sold workers’compensation insurance. Over the years, both companies expanded throughout the world through mergers, acquisitions, partnerships, and divestitures as their individual fortunes waxed and waned. In 1998, unable to compete on its own, GA merged with CU to form CGU. In 2000 CGU merged with its rival, Norwich Union, to create CGNU, which changed its name to Aviva in 2002. Harvey initially wanted to be a nuclear engineer, but at the time there was a glut of nuclear engineers and he felt he would never make it. So he decided to become an actuary. He began his career right out of university as a trainee actuary with Phoenix Assurance, rose through Sun Alliance’s ranks to general manager of their operations in New Zealand, and began his career with Norwich in that country in 1992 as CEO for the region. He returned to the UK in 1993 to take over as general manager of the company’s finance department. On June 16, 1997, he floated the company in an initial public offering. Almost 3 million qualifying members received on average of 300 shares each; nonprofit members received a fixed number of 150 shares. Harvey told an analyst for BBC News that it was undoubtedly the proudest moment of his career: “It was easily the largest and most complex project for which I have been responsible. It combined every aspect of the business, its financial construction, geographical split, and customer relationships,” he said (May 10, 2004). Harvey became CEO of Norwich in 1998 and was highly instrumental in the merger with his rival company, CGU, about which he commented: “We believe that this deal will create significant value for both sets of shareholders not only through the considerable cost savings and efficiencies achievable but also through our ability to capitalise on the significant opportunities for profitable growth, particularly in the long-term savings market [which] will be our key strategic priority” (press release, February 21, 2000). He was made deputy CEO of the new CGNU in 2000 and became CEO in 2001.

NAMES AND NUMBERS CREATE CONTROVERSIES CAREER HIGHLIGHTS Aviva’s history dates back to two insurance companies, Commercial Union Fire Insurance (CU), created following


Harvey was also highly instrumental in CGNU’s controversial name change to Aviva in 2002. The new name was chosen by members of the corporation as part of its strategy to be-

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Richard Harvey

come recognized as a world-class financial-services provider. Aviva became the umbrella for more than 50 different trading names around the world. Some companies, such as Norwich, retained their name but added “An Aviva Company.” Announcing the new name, Harvey said: “We are creating a new and powerful international financial services brand. . . . The Aviva name tested positively in consumer research around the world, bringing with it associations of life, vitality and living well. This matches the aspirations we have for our customers” (“About Our New Name”). He indicated the new name would benefit the company’s trading business by allowing them to increase the value of their corporate brand and to create more cost-effective marketing opportunities, particularly with advertising and sponsorship. Shortly after changing its name the company shocked shareholders and analysts by announcing a dividend cut of 40 percent in order to save £350 million that year. Harvey said that investors understood Aviva had evolved into a very strong growth company, with 70 percent of its profits derived from life insurance and 30 percent from general insurance, with a strong focus on personal policies rather than large-company coverage. He said the reduction in shareholder payouts was essential to enable the growth the company was aspiring to. He then pledged to increase dividends by 5 percent the following year. Not everyone welcomed the name change and the dividend cut, however, not to mention the salary increases awarded to top executives. At a February 20, 2002, shareholder meeting, 96 percent of large shareholders voted in favor of the name change. But Harvey and Aviva’s chairman, Pehr GyIlenhammar, came under heavy fire from smaller shareholders who said the change was “silly” and “unnecessary” and too similar to a bus company called Arriva. The executives were also criticized for big pay increases (Harvey’s rose 16 percent to £978,000 annually) at a time when the company was cutting policyholder dividends by almost half. Shareholder Andrew Gibson from Glasgow commented: “Policyholders are being impoverished by the directors’ culture of greed” (Knight Ridder/Tribune Business News, April 24, 2002). The dividend cut created share-price declines of more than 10 percent. In February 2003 Aviva announced that it was establishing a call center in Bangalore, India, with a staff of 1,000 to handle insurance claims while also cutting 1,600 jobs on the home front in an effort to boost savings, even though it had made robust operating profits of £1.8 billion in 2002. Later that year Harvey announced they would create an additional 2,500 jobs in India, where highly educated people could be hired for a fraction of what they would be paid in the UK. The Indian workforce would provide back-office services, information technology, and call staff. Although not ruling out the possibility of further layoffs in the UK, Harvey said that 80 percent of the jobs in India would be accommodated by expansion, current vacancies, voluntary retirements, and traditional staff turnover. “We are operating in an increasingly competitive en-

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vironment. Our customers want value for money products and high levels of service. . . . Our staff in India are an important part of this process and our experiences to date have been positive,” he said (IndiaPost.com, December 5, 2003). Harvey was criticized sharply for the moves, which Dave Fleming, a union negotiator with Amicus, called “deplorable . . . based purely on greed.” Harvey defended the moves and commented: “Making decisions that will affect our staff is always tough, but by taking action to remain competitive we will secure a longterm future for our business” (e-fusion, December 4, 2003). In March 2004 Harvey once again came under heavy criticism, this time by members of Parliament in the Treasury Select Committee, for accepting what was described by the Manchester Guardian as “bumper raises” when millions of policyholders were facing shortfalls on mortgage endowments and with-profit pension plans. The committee told Harvey that his 45 percent salary increase between 1999 and 2002 was “way out of line” in light of the fact that policyholders were suffering. In 2003 Harvey’s pension plan was increased £1.1 million to £5.6 million. He also received £1.1 million in pay and benefits, including a £312,000 bonus that the company said reflected Aviva’s exceptional performance that year. Indeed, Aviva reported operating profits for 2003 of £1.91 billion following actions that cut costs and improved margins (March 23, 2004). In early 2004 the company shut down one of its insurancebrokering businesses in the UK, which resulted in 1,600 job losses. In a June 9, 2004, Bloomberg.com report, an analyst noted that Harvey cut thousands of jobs, sold some assets, and moved a significant part of the workforce to India after the longest bear market since World War II, which seriously eroded capital. Aviva posted a net income in February 2004, its first since 1999, amid a rebounding stock market that boosted investment gains and created a rise in insurance earnings.

RELISHED A CHALLENGE In July 2003 Harvey took over as chairman of the Association of British Insurers (ABI), a position that Antonia Senior described as “one of the most dangerous jobs in the industry” (Times Online, October 18, 2003) due to the fact that of the previous ten chairmen, seven left their primary jobs—often months or years earlier than planned—shortly after finishing their stint with the ABI. “Is it the strain of holding down two jobs that taxes these insurance bosses? Or is [it] the stress of representing an industry that is seen as rapacious and amoral by consumers and government?” Senior asked, while noting that Harvey seemed totally unconcerned about holding down two such challenging positions at once. Senior commented that opinions about Harvey varied widely. Insurance-company workers saw him as something of a maverick whose outspoken manner was worrisome: “We tend to prefer people who com-


Richard Harvey

promise more,” said one senior executive at a rival company. People outside the industry, however, tended to see him as excessively institutionalized, lacking the charisma and dynamism that traditionally appealed to investors. Senior quoted one analyst as saying: “Insurance chief executives are not a great bunch. But of all of them, Harvey is the least likely to elicit an opinion.” Senior also noted that Harvey had the ability to evade difficult questions and that, regarding his controversial pay award, he “talks a lot and says little.” When asked by a BBC News analyst for the best piece of business advice he could give, Harvey indicated that leaders should always give two commendations for every criticism, adding that “It is just as important to reinforce the positive . . . as it is to correct or criticise the less acceptable. In fact, this balance makes it easy for anybody to accept constructive criticism, whilst accepting that they are valued for the majority of their work which they perform well” (BBC News, May 10, 2004).


“About Our New Name,” http://www.aviva.com/careers/ new_name.cfm. “Aviva Cuts 700 Jobs at Its Life Unit to Trim Costs (Update2),” Bloomberg.com, June 9, 2004, http://


quote.bloomberg.com/apps/news?pid=10000102&sid= a0iIhOPlPkNw&refer=uk. “Aviva Offshores 2,350 Jobs,” e-fusion, December 4, 2003, http://www.unifi.org.uk/e-fusion/e-fusion66.htm. “Aviva to Create 2,500 Jobs in India Agencies,” IndiaPost.com, December 5, 2003, http://216.122.6.220/members/ story.php?story_id=1848. “Best Insurance to Ensure a Good Future,” BBC News, May 10, 2004, http://news.bbc.co.uk/1/hi/business/3689171.stm. Jones, Rupert, “Insurance Chiefs’ Pensions Up by Pounds 1m,” Guardian (Manchester), March 23, 2003. “Norwich Union plc and CGU plc Merger,” press release, February 21, 2000, http://www.avivagroup.com.au/aviva/ news/newsitem.jsp?id=20000221. Senior, Antonia, “Insurance Man Takes Front Line in Savings Battle,” Times Online, October 18, 2003, http:// www.timesonline.co.uk/article/0,,630-858397,00.html. “Smaller Shareholders Criticize Plan by British Insurer CGNU to Change Name,” Knight Ridder/Tribune Business News, April 24, 2002, p. 1. —Marie L. Thompson

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William Haseltine 1944– Chairman and chief executive officer, Human Genome Sciences Nationality: American. Born: October 17, 1944, in St. Louis, Missouri. Education: University of California, Berkeley, BA, 1966; Harvard University, PhD, 1973. Family: Son of William R. Haseltine (retired physicist) and Jean Adele Ellsberg (French teacher); married Patricia Gercik (divorced); married Gale Hayman (creator of Giorgio perfume), 1991; children: two (first marriage). Career: Dana Farber Cancer Institute, Harvard Medical School, 1976–1978, assistant professor; 1979–1988, associate professor; 1988–1993, professor; Human Genome Sciences, 1992–, founder, chairman, and CEO. Awards: Carter Burden Award for contributions to aging, 1995; Golden Plate Award, American Academy of Achievement, 1996; Greater Washington Entrepreneur of the Year, Ernst & Young, 1996; High Technology Entrepreneur of the Year, KPMG Peat Maverick, 1996. Address: Human Genome Sciences, 14200 Shady Grove Road, Rockville, Maryland 20850; http://www.hgsi.com.

worked as a physicist, William Haseltine was one of the first infants to be saved from pneumonia by penicillin. He survived a serious heart condition as a child and witnessed his mother’s struggles with illness and manic depression; he decided to become a doctor and cure disease. An outstanding student, he planned on attending Harvard Medical School but decided to go into research instead. As a graduate student at Harvard he worked with the Nobel laureates James Watson and Walter Gilbert. As a postdoctoral fellow Haseltine worked at the Massachusetts Institute of Technology with the Nobel laureate David Baltimore studying retroviruses with RNA rather than DNA as their genetic material. Haseltine moved to the Dana Farber Cancer Institute at Harvard in 1976, where he worked with Robert Gallo on a human leukemia retrovirus. Along with Gallo and others Haseltine suggested that AIDS was caused by a retrovirus; he then created and headed a new department—the Division of Human Retrovirology—devoted to its study. Haseltine was soon engrossed in an intense scientific race to discover the manner in which the human immunodeficiency virus (HIV) destroyed the human immune system. His laboratory worked on the first protease inhibitors for treating AIDS and assembled the genomic sequence of HIV. A Harvard professor who served on Haseltine’s tenure committee told Fortune’s David Stipp, “Bill has a rough, tough, in-your-face personality, and sometimes he operates at the outer edge of acceptable behavior. But you have to take your hat off to him for his sheer volume of accomplishment” (June 25, 2001).

■ A distinguished scientist, William A. Haseltine founded Human Genome Sciences (HGSI) to sequence the DNA in human genes, boasting that his activities would lead to the immediate development of an array of new drugs for treating diseases. A controversial figure within both the scientific community and the biotechnology industry, Haseltine made enemies everywhere. Known for his grand schemes, outspoken arrogance, and huge ego, he nevertheless catalyzed a major shift within the biotech industry by demonstrating that there was money to be made in the sale of biological information.

DRAWN TO MEDICAL SCIENCE Growing up with three siblings at the China Lake Naval Weapons Center in the Mojave Desert, where his father

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FOUNDED HUMAN GENOME SCIENCES Dissatisfied with the meager financial rewards of academia, Haseltine began founding biotechnology companies in 1981. Convinced that only he saw the true potential of the new genomic sciences, Haseltine eventually started up Human Genome Sciences with J. Craig Venter in 1992. As the two men hated each other, HGSI’s structure was unusual and awkward: Venter headed the Institute for Genomic Research (TIGR), the nonprofit research branch of HGSI, while Haseltine headed the for-profit side of the company. The plan was for TIGR to begin sequencing the human genome and sell its data to HGSI, which would then resell the data to pharmaceutical companies—the operation was the first major effort to isolate thousands of human genes and determine the proteins made


William Haseltine

by each gene. Haseltine and Venter believed that their comprehensive approach would be much faster and cheaper than the conventional method of looking for individual disease-causing genes. Stipp described Haseltine and Venter’s relationship as “Godzilla vs. King Kong” (June 25, 2001). Haseltine’s goals were to discover new human genes that would lead to the prediction, detection, and treatment of human disease and to develop patentable products. Venter was most interested in publishing his data in academic journals. Just months after establishing the partnership, Haseltine set up his own DNAsequencing program at HGSI. His relationship with Venter formally ended in 1997. In 1993 HGSI sold its database of 100,000 gene fragments to SmithKline Beecham (later GlaxoSmithKline) for $125 million, enabling HGSI to go public and raise an additional $34 million. The fact that a biotech company could make money selling information rather than producing a commodity shook the industry. Other companies were soon following HGSI’s model. When Stipp asked Haseltine to describe the purpose of his William A. Haseltine Foundation for Medical Sciences and the Arts, Hazeltine quipped, “To help create more people like me” (June 25, 2001).

SEARCHED FOR NEW DRUGS Although Haseltine claimed to have isolated 95 percent of all human genes, he—and many others—greatly underestimated the difficulties of sifting through those genes in order to identify the very few that might be used as targets for new drugs. Furthermore Haseltine’s plan was risky: unlike most biotech firms that licensed their discoveries to pharmaceutical companies, Haseltine wanted HGSI to develop, manufacture, and market its own protein-based drugs—which were cloned from either “good” human proteins or antibodies that could attack “bad” disease-causing proteins. Haseltine reasoned that because such drugs were naturally occurring and presumably nontoxic, they could be developed and hustled through the approval process and into the marketplace much more quickly than conventional chemical drugs. However, protein drugs had to be injected rather than taken orally, limiting the potential market. Haseltine began patenting human genomic sequences that had the potential for medical use. He formed partnerships with major pharmaceutical companies and garnered a reputation for giving brilliant presentations to venture capitalists. Be-


tween June 1999 and December 2000 HGSI raised $1.8 billion and acquired Principia Pharmaceuticals, a company with a promising new form of drug delivery. HGSI later began working on drugs to fight anthrax and other bioterrorist threats. Such drugs did not require human trials and could be stockpiled by the government prior to approval. According to Stipp, some analysts—as well as Haseltine himself—were predicting that Haseltine could become “genomics’ first billionaire” and “the Bill Gates of biology” (June 25, 2001). Haseltine told Forbes magazine, “We are doing our best to get as many drugs for the biggest possible markets to the clinic as soon as possible. We hope to be the next Amgen” (November 24, 2003). Yet between 2000 and 2003 HGSI lost $700 million. No HGSI drug had reached the market, although the most advanced had entered clinical trials. By March 2004 HGSI stock was trading at $11, down from more than $100 in 2000.

SELF-IDENTIFICATION In a 2004 interview Haseltine told the CNBC anchor Dylan Ratigan, “I’m more of a scientist” (March 25, 2004); he had just announced that HGSI was dropping most of its early-phase drugs and planned to cut 20 percent of its workforce. He further announced that he intended to retire later in 2004. He told Ratigan, “It’s time to bring in management and leadership that has the skills and experience in taking drugs to patients through the marketplace. It’s time to get real professional management in this company” (March 25, 2004).


Cohen, Jon, “Consulting Biotech’s Oracle,” Technology Review, October 2001, pp. 70–75. Haseltine, William, “Human Genome Sciences—Chmn. & CEO Interview,” by Dylan Ratigan, CNBC/Dow Jones Business Video, March 25, 2004. Langreth, Robert, “Beyond Talk,” Forbes, November 24, 2003, pp. 72–75. Stipp, David, “He’s Brilliant, He’s Swaggering—and He May Soon Be Genomics’ First Billionaire,” Fortune, June 25, 2001, pp. 100–106. —Margaret Alic

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Andy Haste 1962– Chief executive officer, Royal & SunAlliance Born: 1962, in United Kingdom. Career: National Westminster Bank, dates unknown, president of U.S. consumer credit retail banking; GE Capital UK, dates unknown, president and chief executive officer of Global Consumer Finance Europe; AXA Sun Life, 1999–2003, chief executive officer and director of AXA UK; Royal & SunAlliance, 2003–, chief executive officer. Address: Saint Mark’s Court, Chart Way, Horsham, West Sussex, RH12 1XL United Kingdom; http://www.royals unalliance.com/rsa.

■ A virtual unknown in the general insurance industry, Andy Haste faced serious internal and external doubts over his ability to save the ailing Royal & SunAlliance company. He had no experience in the general insurance business, and Royal was suffering serious losses after a botched merger between the former Royal Insurance and SunAlliance companies. But Haste had come with a reputation for turning things around in other industries and, in less than a year, had the company’s bleak horizon facing sunrise. It appeared that the miracle worker had again changed the course of the future.

MAKE HASTE TO THE RESCUE While Haste was making a name for himself at AXA, Royal was in deep financial straits. It carried a history of miscalculated losses in its U.S. business and had, of necessity, boosted its reserves four times since 2001. In December 2002 Royal announced that Haste would take over as the company’s new chief executive officer and chief group director. Haste was to replace the ousted Bob Mendelsohn, who left in September 2002 (with Bob Gunn serving as temporary chief in the interim). Haste was brought in on a lucrative one-year contract to begin in April 2003. Along with Haste, Royal took on John Napier as its new board chairman, also effective in April 2003. As news of the two newcomers—both of whom lacked core experience in the general insurance industry—hit the press in December 2002, Royal’s stock fell 6 percent (closing down 7.75, to 116.75). Royal openly conceded that Haste did not carry the high-power or high-profile name that people were hoping for. But, Royal explained, Haste came with great references. He had been recommended by GE’s former chief executive officer, Jack Welch. Welch considered Haste to be a wellseasoned winner in financial services. Although Haste lacked directly related experience in property and casualty insurance, Welch pointed out that Haste also had not had experience in life insurance when he joined AXA and still had done well there. This positive reference carried the day. After Royal’s then-chairman Sir Patrick Gillam revealed that Welch had given Haste a “good ticket,” Royal recruited him. In a later article for Times Online (December 20, 2002) by A. Cave, Royal referred to its new chief Haste as “a proven implementer with an excellent track record.”

BACKGROUND IN FINANCE Haste had a background in corporate finance, and he used that background to manipulate and restructure ailing organizations and bring them around. He was the former president and chief executive officer of Global Consumer Finance at GE Capital for UK–Eastern and Western Europe. (GE Capital is a provider of general financial services.) Haste also had served as president of National Westminster Bank’s U.S. consumer credit business (retail banking). His next big position put him squarely within the insurance sector. In 1999 Haste became chief executive officer of AXA Sun Life and director of AXA UK. (AXA is a French provider of life and pension insurance and annuities.)

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THE “POISONED CHALICE” In April 2003 Haste became chief executive officer when Royal’s chips were down. It had suffered a 15 percent share loss in March alone, after it had revealed yet another capital bailout to compensate for losses in its U.S. operations. This resulted in a 38 percent decrease in profits to date for 2003. All in all, the cash deficit followed a £940 million loss in 2002 on the back of a £889 million loss in 2001. Moreover, Royal had operated without a permanent chief executive officer for seven months, utilizing Bob Gunn in the position. Industry speculators developed serious concerns over whether Royal


Andy Haste

would ever find a capable person to come aboard what appeared to be a sinking ship that had struggled to stay afloat in the shallows for seven years. Analysts remarked that the size of Haste’s remuneration package reflected just how difficult it was to find someone who could help. The media dubbed it “the poisoned chalice.” But Haste saw his first big role with Royal as an opportunity and seized the moment.

THE CHALLENGE Known as a hands-on, no-nonsense manager, Haste set about sorting out the longstanding problems he had inherited. In sharp contrast to his flamboyant predecessor, he moved his office quarters from a grand office to a Spartan (albeit larger) plain room and spread out his work. His immediate priority was to raise fresh capital. At AXA he had outsourced about 100 jobs to India in a “pilot” effort to cut jobs. He intended to build on that experience to fashion a strategy appropriate for Royal. With a capital deficit of £600 million, Haste planned to conduct wide-range restructuring that would necessarily result in the loss of 12,000 jobs. To that end, he first executed the disposal of noncore businesses and the float of Royal’s Australian-Asian arm, Promina. Next, Haste cut £3.5 billion in general insurance premiums. The strategy was so effective that £540 million of the £600 million deficit was raised by the float of Promina alone. Another £72 million was raised in June 2003 from the sale of RSUI, an American surplus lines operation. Also in June, Royal sold its health-care unit for £147 million. By the end of his first 90 days, Haste had closed the hole on the deficit, and Royal’s stock share price rose by more than 100 percent. Regarded as stellar performances, Haste’s moves clearly prompted investors to take faith in the unknown boardroom warrior. With the pressure of operating under heavy debt alleviated, Haste began to focus on raising another targeted £600 billion for surplus capital.


SOME LOSSES IRREVERSIBLE As Haste took the helm and faced the wind, two inherited weights dragged at the stern. One was the enormous group of asbestos exposure claims (including U.S. claims) for which Royal remained one of the primary liability insurers. The second was the ongoing court battle with World Trade Center developer Larry Silverstein over the terrorist attack of September 11, 2001. Silverstein sought judicial declaration that the terrorist attack constituted two events, not one, for insurance purposes. A federal district judge had ruled in 2002 that liability exposure on one of Royal’s policies was limited to “one event” losses, and Royal could only hope for similar rulings on remaining exposures. Notwithstanding, Haste’s performance in his first nine months earned him £1.4 million, announced in April 2004. Despite this slow, but sure forward momentum, very few persons had met the man behind the wheel, and fewer felt they knew him. Haste remained an enigmatic person continuing to be defined by the moves he made with Royal.

See also entries on National Westminster Bank PLC and Royal & Sun Alliance Insurance Group plc in International Directory of Company Histories.


Cave, A., “Investors Spooked by ‘Raw’ Recruits,” Times Online, December 20, 2002, http://www.timesonline.co.uk/money. “Haste Needs to Move Fast,” Guardian, September 5, 2003, http://www.guardian.co.uk/business/story/ 0,3604,1036079,00.html. Senior, Antonia, “First Nine Months at R&SA Earns New Boss £1.4m,” Times Online, April 29, 2004, http:// www.timesonline.co.uk/industry. ———, “Insurer Refuses to Run for Cover,” Times Online, July 28, 2003, http://www.timesonline.co.uk/business. —Lauri R. Harding

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Lewis Hay III President, chief executive officer, and chairman, FPL Energy Nationality: American. Born: In Pennsylvania. Education: Lehigh University, bachelor’s degree; Carnegie Mellon University, MBA. Family: Married Sherry (maiden name unknown); children: three. Career: U.S. Steel, management trainee; Mercer Management Consulting, consultant and head of strategic practice; U.S. Foodservice Corporation, chief financial officer; FPL Group, 1999, chief financial officer; 1999–2000, president, FPL Energy; 2001–2002, president and chief executive officer; 2002–, president, chief executive officer, and chairman. Address: FPL Group, 700 Universe Boulevard, Juno Beach, Florida 33408; http://www.fplgroup.com.

■ After just six months as the chief financial officer (CFO) of FPL, in an industry in which he had no prior experience, Lewis Hay III was chosen president of FPL Group’s subsidiary FPL Energy. Eighteen months later he was appointed president and chief executive officer (CEO) of the entire FPL Group, Florida’s largest public-utility holding company. Hay’s 10-year career as a management consultant with Mercer Management Consultants as well as his position as CFO of U.S. Foodservice, which he led through 20 successful acquisitions, placed him in good stead to take over the reins of FPL. Rather than being thought of as a consultant or food-service industry executive, he said: “Maybe a better way of characterizing me is as a strategist and possibly a change agent” (Florida Trend, June 2003).

BLUEPRINT FOR SUCCESS Although Hay studied electrical engineering at Lehigh University and was at the top of his class, he did not relish the

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thought of looking at blueprints all day and decided to take a management-trainee position with U.S. Steel. Later he took a position with a consulting firm that became known as Mercer Management Consultants, heading up strategic planning for the firm. Sara Lee was one company for which Hay consulted, and its president, John McKinnon, recalled him as being “just terribly bright and willing to work a monstrous amount of time to get things done” (Florida Trend, June 2003). Hay, in turn, credited his experiences with the likes of McKinnon and other Fortune 500 company executives for the breadth and depth of knowledge he took into his future career. Hay left Mercer and became CFO of U.S. Foodservice, into which he invested a considerable amount of his own money. The $1 billion company was spun off from Sara Lee in 1989 in a leveraged buyout, and Hay’s management abilities significantly enhanced its performance. He built it into a $6billion company headquartered in Columbia, Maryland, that supplied food services to restaurants and cafeterias. Through more than 20 acquisitions and by promoting internal growth, Hay headed up the process of taking the company public in 1994. He gained a reputation for his intelligence and abilities to successfully strategize and build revenue, and in 1999 he was recruited to FPL, whose CEO, James Broadhead, was also an engineer and energy outsider. Just six months after becoming CFO with the holding company, Hay became president of FPL’s fast-growing independent-power business, FPL Energy. The unregulated, high-growth subsidiary operated power plants across the United States and was the nation’s leader in wind-energy generation. It also constructed power plants in less-regulated states, including wind, solar, natural gas, and hydroelectric plants.

IMPRESSES THE CHIEF Broadhead was impressed with how quickly Hay improved the subsidiary’s structure and the way in which his enthusiasism captured the spirit of those who worked for him. Under Hay’s direction, EPL Energy outperformed its 20 to 30 percent annual growth target for megawatt output. At the same time Hay was functioning as interim CFO while the company searched to fill the vacant post. In 2001 Broadhead suddenly announced his retirement following his failed and extremely


Lewis Hay III

costly $16.8 billion merger attempt with Entergy Corporation and the furor surrounding $62 million in bonuses he shared with six other top executives in a package that was preapproved by shareholders. Broadhead recommended Hay as his successor, and the 13-member board unanimously approved the recommendation. Thus, less than two years into his career with the company, Hay was elected president and CEO of FPL; he became chairman as well the following year. Broadhead spoke highly of Hay. “Lew has a drive to do better,” he said. “He just wants to improve everything. He has the willingness to make difficult decisions. If it requires changing the company, if it means doing things differently . . . I just don’t have the slightest doubt he will do it” (Florida Trend, June 2003). Hay was praised for the discipline he employed during his first year with the company, which analysts said was evident in that the company suffered no scandals like those faced by Enron and other utilities in the same era. Even in light of the shattered confidence of analysts and investors alike that caused credit ratings and share prices of many other utility companies to plummet, FPL’s ratings remained relatively stable.

GROWTH STRATEGY In an article for South Florida Business Journal, John T. Fakler noted that Hay intended to improve the company’s profits through the installation of generating capacity and improved operations. “It’s very important in my mind that we continue to show earnings growth at FPL Energy in particular,” Hay commented (June 22, 2001). Perhaps that is because he was already anticipating a possible deregulation of Florida’s utility companies following an interim report by the governor’s commission calling for such deregulation. In some states deregulation had caused local utilities to sell off power plants to buyers from around the nation, but Hay indicated that he would like to see FPL’s deregulated utility, FPL Energy, take over Florida Power & Light’s plants in the state. Fakler noted that Walter L. Revell, former secretary of the Florida Department of Transportation and chair of the Energy 2020 Study Commission, said he was looking forward to working with Hay. “I’ve been advised that he’s a very strong executive, and know of several [FPL] board members who have expressed confidence in him,” said Revell. At the time, Hay was not seeking to make acquisitions, although he indicated he would consider adding nuclear power to Florida Power & Light’s capacity if a good deal came along. “We will not rule out nuclear, though no new plants are being built in this country,” he commented. “But there are a number of utilities that might make sense for our company—if we would get an acceptable return [on investment]” (South Florida Business Journal, June 22, 2001). In 2002 Hay utilized his


acquisition skills with the purchase of a controlling interest in Seabrook Station nuclear-power plant in New Hampshire, a plant that was beset with antinuclear protests. The deal led to a 20 percent increase in FPL’s total wattage generation. While Hay was cautious to avoid another costly and failed merger attempt, he was optimistic about the possibility of well-planned deals for the future. His company had a substantial balance sheet, and with the prevalence of overcapacity in the utility marketplace, he anticipated many companies would be selling their assets at a discount. He felt FPL was well positioned to capitalize on the consolidation that the industry was beginning to experience. “While waiting,” wrote Vogel, “he took a cleaver to new projects, postponing some and cancelling others, cutting FPL’s commitment to buy gas turbines to seven from thirty-two. The company is no longer pursuing projects near Sacramento, Calif.; Everett, Wash.; and Bellingham, Mass.” (Florida Trends, June 2003). Fakler noted that although Florida was not an optimum state for producing wind energy, Hay contended that wind energy would become an important power generator for them. “It always seems like there’s a nice breeze [in Florida],” commented Hay. “We have sophisticated studies as to what makes a good prospect for wind generation.” Although FPL Group owned the two biggest solar facilities in the world, both of which were bought out of bankruptcies for pennies on the dollar, Hay had no immediate intention to invest time and effort into them. “It does give us a lot of expertise about solar, and enough knowledge to tell us that we cannot get a satisfactory return.” He commented that the previous 15 years had taught his company to “stick to its knitting and build its strengths,” the major strength being operating power-generating stations. His strategy going forward was to build on those strengths while lowering costs, growing with the market, and developing FPL Energy. “It’s an area where we still see lots of opportunities,” he said (South Florida Business Journal, June 22, 2001). He indicated that, regardless of the failed Entergy merger attempt, the company was in a strong position to consider future consolidations. By 2004 FPL Group had a presence in 26 states, annual revenues upwards of $9 billion, and a national reputation as an efficient, high-quality, customer-driven organization. Florida Power & Light was the largest investor-owned electricityutility company in Florida, serving the state with belowaverage rates, and FPL Energy’s business was growing rapidly throughout the country.

See also entry on FPL Group, Inc. in International Directory of Company Histories.

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Lewis Hay III SOURCES FOR FURTHER INFORMATION

Fakler, John T., “New FPL Energizer: CEO’s Goal to Keep Going and Going,” South Florida Business Journal, June 22, 2001. Vogel, Mile, “Hay’s Way,” Florida Trend, June 2003, p. 86. —Marie L. Thompson

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BECOMES PPL LIFER

William F. Hecht

Hecht was born in New York City and attended Lehigh University, Bethlehem, Pennsylvania, where he earned bachelor’s and master’s degrees in electrical engineering. After receiving his bachelor’s degree in 1964, Hecht joined Pennsylvania Power & Light Company. He served primarily as a project engineer until he entered management in 1972, when he was appointed manager of distribution planning. Over the next two decades Hecht held several managerial posts, including vice presidencies of system power, marketing and economic development, and power production and engineering before becoming senior vice president of system power and engineering.

1943– Chairman of the board, chief executive officer, and president, PPL Corporation Nationality: American. Born: March 18, 1943, in New York, New York. Education: Lehigh University, BS, 1964; MS, 1970. Family: Married Peggy (maiden name unknown). Career: Pennsylvania Power & Light (PPL), 1964–1968, project engineer; 1968–1972, senior project engineer; 1972–1975, manager, distribution planning; 1975–1976, executive director, Corporate Energy Planning Council; 1976–1978, manager, systems planning; 1978–1984, vice president, system power; 1984–1987, vice president, marketing and economic development; 1987–1990, vice president, power production and engineering; senior vice president, system power and engineering; 1990–1991, executive vice president of operations; 1991–, president, 1993–, chairman and chief executive officer. Awards: Community Leader of the Year Award, Arthritis Foundation, 1995; Distinguished Citizen of the Year, Sales and Marketing Executives of Lehigh Valley, 1996. Address: PPL, The Plaza at PPL Center, 2 North 9th Street, Allentown, Pennsylvania 18101-1179; http:// www.pplweb.com.

■ William F. Hecht joined Pennsylvania Power and Light Company, later named the PPL Corporation, in 1964 and rose through the ranks to become the company’s president in 1991 and chairman and CEO in 1993. As head of the worldwide energy company that delivers electricity to customers in Pennsylvania, the United Kingdom, and Latin America, Hecht successfully guided the company through deregulation when many other electric companies were experiencing major upheaval. Industry analysts commended Hecht for his strong business strategy of steady growth that enabled his company to outperform many of its competitors. International Directory of Business Biographies

In 1991 Hecht was made president of Pennsylvania Power & Light. Two years later he assumed the posts of CEO and chairman of the board. Hecht came into a leadership role with the company just as the electric industry was entering an era of consolidation and deregulation. As a result Hecht helped oversee the restructuring of Pennsylvania Power & Light from a geographically organized traditional electric utility in a natural monopoly environment to a functionally organized electric power supplier in a competitive environment. In 1994, a year after he took over as chairman and CEO, Hecht guided Pennsylvania Power & Light to form a holding company, PP&L Resources, which became PPL Corporation in 2000. In 1996 Hecht made Pennsylvania Power & Light the first Pennsylvania utility to endorse generation market competition. While many others in government and business argued that deregulation of the power industry should move slowly, Hecht warned of procrastination due to fear of change on the part of people in industry and government. Although he said he believed the transmission and distribution of electricity should remain businesses best operated in a regulated atmosphere, Hecht believed there was no reason for regulation of the generation of electricity. In a speech at a conference on electric industry restructuring, Hecht said, “A competitive marketplace is good public policy because it does a better job of encouraging efficiencies than does even the best of economic regulation. Our current system of economic regulation for electric utilities can actually reward inefficient companies” (September 20, 1996). Hecht believed that a competitive electricity generation marketplace would result in the shifting of business from the high-cost supplier to the lower-cost supplier, a process that would result in lower prices for customers.

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William F. Hecht

Hecht and other representatives of Pennsylvania Power & Light helped craft legislation that allowed customers to choose their electricity generation suppliers. The legislation was signed into law in early December 1996, and Hecht saw the law as a both a challenge and an opportunity for his company. In a PPL news release Hecht noted, “With the transition legislation in place, PP&L and the other state electric utilities now face the substantial challenge of redesigning our companies to meet the ambitious timetable established by this bill” (November 26, 1996). Over the next two years Hecht placed Pennsylvania Power & Light’s plans to compete in an emerging deregulated market. In 1997 the company was the first electric utility to be granted a license by the state public utility commission to sell electricity throughout Pennsylvania as part of the state’s new Customer Choice Act. Hecht also formed the retail energy supply group, which became PPL EnergyPlus, to serve customers in unregulated markets. To further position Pennsylvania Power & Light in the new deregulated market, in 1998 Hecht developed a financial plan that included dividend reduction and a stock buyback plan.

OVERSEES WIDE-RANGING EXPANSION In addition to competing in Pennsylvania and New England power markets, Hecht continued to oversee a wideranging expansion of PPL’s business interests throughout the United States and abroad. He ordered the purchase of a 25.2 percent interest in Empresas Emel, a Chilean holding company with electric utility operations in Chile and Bolivia. He also began acquiring mechanical contracting and engineering companies in the Mid-Atlantic region of the United States. Other expansion efforts guided by Hecht included a 75 percent interest in Distributidora de Electricidad del Sur, an electricity distribution company in El Salvador; plans to develop natural gas–fired power plants in Wallingford, Connecticut, and Kingman, Arizona; an increased equity interest in South Western Electricity; an electricity distribution company in England; and entering the retail gas business. Hecht oversaw an agreement to buy 13 Montana power plants, which combined had more than 2,600 megawatts of generating capacity. The acquisition was the largest in the history of PP&L Resources.

TESTIFIES BEFORE CONGRESS In March 2001 Hecht testified before the U.S. Senate Energy and Natural Resources Committee and outlined many of his thoughts concerning the electric energy crisis that had just occurred in California as well as his view of deregulation as a whole. As for the power crisis in California, Hecht said that he believed the problem could only be solved by allowing the forces of supply and demand to set prices that both discour-

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aged consumption and encouraged production. Hecht believed high prices that reflected the actual economic value of electricity would cut consumption and reduce the mismatch between supply and demand. In the end, Hecht testified, the ultimate outcome would be to help reduce wholesale prices. In his concluding remarks about the energy crisis in California and possible crises elsewhere Hecht told the committee, as reported by the Electric Power Supply Association, “The real solution to the long-term supply issues in California and the West is inescapable: We need to build new power plants. And, those new plants will be built only if we allow the competitive market to do its job” (March 15, 2001). Hecht addressed the U.S. Congress about the issue of deregulation as part of a fundamental building block that would lead to the construction of new power-generating facilities in the United States as an answer to energy crises. He emphasized that the free market would send the right price signals to encourage the capital investment needed to build the next generation of American power plants. He pointed out to the congressional committee that PPL was developing power plants in Connecticut, Long Island, Pennsylvania, Washington, and Arizona that would add more than 4,000 megawatts of supply in these key regions. He noted, “If the wholesale markets in these regions were not sending the appropriate price signals, we could not justify building plants there” (March 15, 2001).

KEEPS COMPANY ON COURSE PPL, like many energy companies, experienced setbacks in 2001 and 2002 owing to a general economic downturn. Hecht nevertheless was able to tell stockholders at a 2002 meeting that PPL was doing better than its competition and that he intended to maintain the company’s strategy of remaining both a generator and a distributor of electricity. Under Hecht’s leadership PPL had been experiencing an impressive time of growth since 1998. From 1998 through 2002, for example, PPL’s total return outperformed the Standard & Poor’s 500 by 80 percent, and the company increased its annual dividend 45 percent over the figures for 2001 and 2002. According to Hecht, part of the company’s success was its ability to make a profit in both the regulated electricity delivery business and the deregulation electricity generation and marketing business. Once again, however, Hecht pointed to deregulation as the primary foundation of the company’s success. He noted that the company’s plan for conducting business in a deregulated environment included procuring good contracts for both the sale of PPL-produced electricity and for the purchase of fuel needed to operate PPL plants. As reported by Fournisseur Municipal, Hecht told stockholders at a meeting in 2003, “We devised and implemented a strategy that allowed us to produce strong returns while also reducing volatility” (April 25, 2003).


William F. Hecht

MANAGEMENT STYLE: STRATEGIC DECISIONS Industry analysts noted that Hecht was one not to rest on his laurels but to keep looking forward to growing his company in a disciplined, operationally focused, and cost-effective way. For example, despite the company’s success, Hecht announced in 2003 that he was realigning the company’s management and broadening the executive team in the process. His goal was to further sharpen the company’s focus. This move, noted analysts, reflected Hecht’s disciplined but opportunistic management style, which allowed him to maximize benefits for shareholders while managing risks. Hecht was a long-time proponent of long-term, steady growth of PPL. He did not hesitate to update plants and facilities as part of his style of always looking to the company’s future needs. In a 2004 shareholders meeting, as reported by PR Newswire, Hecht summed up his own management style best when he noted, “A constant at PPL—decades ago as well as today—is our focus on the essentials and an aggressive pursuit of innovation within the boundaries of our fundamental business. We have grown our business without outgrowing our ability to deliver on our commitments” (April 23, 2004).

CONTINUED SUCCESS As he led PPL into 2004, Hecht continued to focus on domestic electricity generation and marketing and electricity delivery in select domestic and international markets. His success in guiding the company was reflected in several market indicators, including the fact that at the end of 2003 the company’s total return to share owners over the previous five years was 88 percent, placing PPL among the leaders in the U.S. electricity business. Furthermore, the company’s stock had risen 57 percent over the previous five years, a rate that was better than that of all but two of the Fortune 500 companies. In addition to performing his duties at PPL, Hecht was a member of the board of directors of the Nuclear Energy Insti-


tute and the Edison Electric Institute, where he served on the executive committee. He also served as chairman of the Pennsylvania Business Round Table and on the board of directors of Dentsply International, RenaissanceRe Holdings, and the Federal Reserve Bank of Philadelphia. His community involvement included serving as vice chairman of the board of trustees of Lehigh University, president of the Lehigh Valley Partnership, and chairman of the Lehigh Valley United Way Campaign.

See also entry on PPL Corporation in International Directory of Company Histories.


“Passage of Legislation is Good News for Pennsylvania,” PPL News Release, November 26, 1996, http:// www1.pplweb.com/newsapp/ news_releases.articleview?p_artid=991. “PPL Compiling Impressive Growth Record,” Fournisseur Municipal, April 25, 2003, http:// www.fournisseurmunicipal.com/news_detail.asp?ID=5125. “PPL Corporation Focused on Long-Term Growth, Chairman Tells Shareowners,” PR Newswire, April 23, 2004. “PP&L’s Chairman: Electricity Business Competitions Is Good Public Policy,” PPL News Release, September 20, 1996, http://www1.pplweb.com/newsapp/ news_releases.articleview?p_artid=971. “Testimony of William F. Hecht before the U.S. Senate Energy and Natural Resources Committee,” Electric Power Supply Association, March 15, 2001, http://www.epsa.org/forms/ documents/DocumentFormPublic/view?id=305000000370.

—David Petechuk

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Bert Heemskerk 1943– Chairman, Rabobank Nationality: Dutch. Born: April 13, 1943, in Noordwijkerhout, The Netherlands. Education: Wolfgang Goethe Universität, bachelor’s degree, 1965; Université Catholique de Paris, master’s degree, 1966; Karls Eberhard Universität, PhD, 1969; Nederlands Economische Hogeschool, bachelor’s degree, 1972. Family: Married (wife’s name unknown); children: eight. Career: AMRO Bank, 1969–1972, merger mediation/ international acquisitions; 1972–1974, head account manager; 1974–1975, area manager for Germany, Scandinavia, and the Far East; 1975–1976, bank representative in Tokyo; 1976–1978, head area manager in Europe; 1978–1979, director of AMRO Bank Dubai; 1979–1980, regional manager in Europe; 1980–1983, regional manager and director of AMRO Bank London; 1983–1987, director and head of international commercial banking; 1988, director of general affairs, head of merger secretariat AMROGenerale; 1988–1991, director general in Netherlands; F. van Lanschot Bankiers, 1991–2002, chairman; Rabobank, 2002–, chairman. Address: Rabobank, Croeselaan #18, 3521 CB Utrecht, The Netherlands; http://www.rabobank.com.

■ Hubertus (Bert) Heemskerk was the chairman of the executive board of Rabobank, one of the three major banks in The Netherlands, having been brought in as a 30-year veteran of Dutch banking to turn the company’s fortunes around. His previous position at F. van Lanschot Bankiers had been historic, as he was the first non-family member to hold the position of chairman. Prior to his term at F. van Lanschot, Heemskerk had been a 20-year veteran of AMRO Bank, serving in various directorship roles in Tokyo, Dubai, and London. He was notorious for being a night owl, shunning the early wake-up call but working late into the night. He was urbane, deeply religious, and a follower of Pascal. Socially conscious, he was a strong proponent of sustainable development in business; he

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spoke frequently on the subject and published a report with two other executives entitled Striking the Balance.

FROM THEOLOGY TO BANKING Heemskerk took an unorthodox route to becoming an executive at three large Dutch banks. He studied philosophy and theology with the intent of becoming a Jesuit priest but eventually realized that such was not the type of life he wanted to lead; he joined the largest bank in the Netherlands, AMRO Bank, in 1969. Heemskerk would have a successful 20-plusyear career there while at first also continuing his education in business and economics. He served in various roles at AMRO, gaining considerable knowledge of the industry by acting as the bank’s representative in each of Tokyo, Dubai, and London. His experience led him to be tapped as the first nonfamily member to hold the position of chairman of F. van Lanschot. F. van Lanschot was The Netherlands’ oldest independent bank and took pride in its private, clubby atmosphere. Heemskerk took up an active role in maintaining that culture and, as noted in the Financial Times, “spoke personally to gatherings of clients and potential clients at least twice a week” (November 12, 1999). The bank was elite, requiring a minimum salary or investment of EUR 45,500. Eventually at F. van Lanschot many of the bank’s executives wanted to access new customers through the Internet. Heemskerk took a skeptical view of this tactic and while allowing a Web site to be developed, he did not allow bank products to be distributed via the site; the approach was similar to his efforts in the early 1990s to prevent the creation of call centers to sell bank products. Heemskerk preferred a one-on-one approach in dealing with customers and clients. His conservative, hands-on demeanor made him attractive to the suffering Rabobank in 2002.

BRINGING RABOBANK TO SAFETY In 2002 Rabobank was suffering under the strain of its involvement with Enron. In 2001 Rabobank had agreed to purchase a $517 million loan from the Royal Bank of Canada (RBC) for an Enron-owned business, Heracles. After Enron’s subsequent failure Rabobank sued the RBC in 2002, stating that the bank had known that Enron was failing but had failed


Bert Heemskerk

to disclose that information. After an ugly 18-month court battle, in February 2004 an examiner agreed that the RBC had not disclosed sufficient information and as such would be hit with a C$74 million after-tax charge. The experience with Enron left a bad taste in Rabobank’s mouth. Afterward the firm sought to return to its roots as a cautious and prudent lender; it saw in Heemskerk the qualities needed to bring Rabobank back to those roots. Heemskerk’s first assignment as chairman was to fully settle the Enron affair. Rabobank had been founded as a group of cooperatives that lent money mostly to farmers. With that background, while Rabobank was only the third-largest Dutch bank, after AMRO and ING, it was the leader in the Dutch retail market, with $320 billion in assets and 40 percent of domestic deposits as of 2003. While Heemskerk steered Rabobank back onto a conservative route, he nevertheless sought to make the bank a player on the world stage. In November 2003 Rabobank acquired Ag Services of America, the agribusiness financial company, serving to expand Rabobank’s capabilities in the United States. In February 2004 Rabobank diversified into the field of health insurance, signing a cooperative agreement with the Dutch health-insurance company Eureko. Heemskerk transformed Rabobank dramatically in the first 18 months of his tenure. He reclaimed Rabobank’s triple-A bond rating, which had been lost during the Enron crisis. Profits for fiscal 2003 were up 12 percent; further growth was expected for fiscal 2004. Still Rabobank announced 1,200 layoffs in June 2004 as part of Heemskerk’s Vision 2005 plan, which would institute efficiencies throughout the company. The internal document, to be unveiled in late 2004, called for local banks to be consolidated and overhead staff to be cut as necessary. By all appearances Heemskerk had succeeded in “saving” Rabobank.



“Bert Heemskerk: Personal Details,” Rabobank Web site, http:/ /www.rabobank.com/content/press/board_heemskerk.html, (2003). “Good Performance Rabobank Group in an Economically Difficult Year,” Comtex News Network, March 8, 2004. Haijetma, Dominique, and Jan-Hein Strop, “MT Interview: Bert Heemskerk,” Management Team, June 18, 2004. Harris, Clay, “Survey—Private Banking: Club Atomosphere in a Dutch Way; Profile F. van Lanschot Bankiers,” Financial Times, November 12, 1999, p. 7. “Heemskerk the New Senior Executive of the Rabobank Group,” Global News Wire, October 17, 2002. “Netherlands’ Eureko Enters Health Insurance Venture,” BestWire, February 13, 2004. “The Netherlands—New Chief to Steer Rabobank into Safety,” The Banker, November 1, 2002. “Pragmatic Guide to Reporting,” green@work, March/April 2003, http://www.greenatworkmag.com/magazine/newslines/ 03marapr.html. “Rabobank CEO Says FY Net Up at Least 10 Pct,” AFX European Focus, January 6, 2004. “Rabobank to Acquire Ag Services of America, Inc.: Rabobank Continues Its Expansion of U.S. Agribusiness Finances,” Business Wire, November 3, 2003. “Rabobank to Cut 1,200 Full-Time Positions, Sees 200 Million Euro/Year Saving,” AFX European Focus, June 21, 2004. “Royal Takes $74M Loss,” Calgary Sun, February 17, 2004. —Jill Meister

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Rainer Hertrich 1949– Co-CEO, European Aeronautic Defense and Space Company (EADS) Nationality: German. Born: December 6, 1949, in Ottengrün, Germany. Education: University of Nuremberg, Bachelor of Commerce, 1977. Family: Married; children: two. Career: Siemens, 1969–1971, apprentice; 1977, Messerschmitt-Bölkow-Blohm, information processing supervisor, military aircraft division; 1979–1983, head, service division controlling department; 1983–1984, CFO, service division; 1984–1987, head, controlling and finance department; 1987–1990, CFO, marine and special products division; Deutsche Aerospace, 1990–1991, vice president, corporate controlling; DaimlerChrysler Aerospace, 1991–1996, senior vice president, corporate controlling; 1996–2000, head, aeroengines business unit; Motoren- und TurbinenUnion München, 1996–2000, president and CEO; DASA, 1996–2000, executive committee member; DaimlerChrysler Aerospace AG, 2000, president and CEO; European Aeronautic Defense and Space Company (EADS), 2000– Co-CEO, chairman of executive committee, and member of board of management. Awards: Officer of the Légion d’Honneur, French government. Address: European Aeronautic Defense and Space Company EADS NV, 37, boulevard de Montmorency, 75016 Paris, France; http://www.eads-nv.com.

■ Rainer Hertrich was the first German co-CEO of the European Aeronautic Defense and Space Company (EADS), Europe’s largest aerospace firm as of 2004. A conglomerate formed by the 1999 merger of Germany’s DaimlerChrysler Aerospace (DASA), France’s Aérospatiale Matra, and Spain’s Construcciones Aeronauticas SA, the company had two CEOs who represented the joint ownership of Germany and France. The unique cross-cultural management structure of EADS had been dismissed initially as unworkable, but Hertrich and

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Rainer Hertrich. AP/Wide World Photos.

his French counterpart, Philippe Camus, proved that a genuinely international organization was profitable as well as feasible. Hertrich had developed a solid reputation for improving the balance sheet of each division he had led. He maintained that record with EADS, which became the global leader in civilian aircraft manufacturing along with Airbus. Hertrich’s next goal was to surpass Boeing, the leading aircraft manufacturer worldwide, by 2014. “I prefer to view the future as something that is not yet set in stone,” was Hertrich’s life motto as told to a reporter for manager-magazin (January 12, 2003). More than a year later he revised it to say, “The future is in our hands” (Financial Times Deutschland, April 28, 2004). As a man who demonstrated the leadership qualities he admired—integrity combined with vision—his career path also reflected the duality of soaring into space while paying close attention to details on the


Rainer Hertrich

ground. Although Hertrich had not yet obtained his own pilot’s license as of early 2004, his involvement in aerospace companies had expanded from managing a local Bavarian helicopter firm to breaking new ground in reorganizing the global aerospace industry.

EDUCATION AND EARLY CAREER Rainer Hertrich was born in 1949 in Ottengrün, a provincial town in Bavaria. His father was a schoolteacher who encouraged Hertrich to gain some hands-on training in a field before deciding on his life path. Hertrich began his professional career with an apprenticeship as an industrial clerk at Siemens from 1969 to 1971. His experience there encouraged him to study business administration, which he pursued at the Technical University of Berlin. He later transferred to the University of Nuremberg, from which he graduated with a degree in commerce in 1977. After completing his university studies, Hertrich became a controlling supervisor in the information processing unit of Messerschmitt-Bölkow-Blohm (MBB), a German helicopter manufacturer. He was promoted in 1979 to head of the controlling department of MBB’s service division. Four years later he became the division’s chief financial officer. Hertrich moved again in 1984, this time to MBB’s dynamics division as head of the controlling and finance department. An internal transfer to the marine and special products division in 1987 made him CFO and a member of the division management team. He was credited with greatly improving the division’s financial balance sheet (Interavia Business & Technology, December 1999). After MBB merged with Deutsche Aerospace AG (DASA), Hertrich became DASA’s vice president for corporate controlling, which allowed him to play a major role in creating the company’s corporate structure. DASA was founded in 1989, bundling space and aeronautic elements of Daimler-Benz, MBB, MTU München, and Telefunken Systemtechnik. To buffer the financial repercussions of a strong American dollar, Hertrich initiated and led DASA’s Dolores cost-reduction and productivity program. This program set the stage for DASA’s later integration into EADS. The Dolores [DOllar LOw REScue] project earned Hertrich a reputation as a “rock-hard financer” (Financial Times Deutschland, April 28, 2004). “Without Dolores, DASA would not have achieved the profitability that would have enabled the 50-50 merger to EADS with a French company,” Hertrich said (Financial Times Deutschland, April 28, 2004). To reflect corporate changes, DASA was renamed Daimler-Benz Aerospace AG in 1995 and subsequently DaimlerChrysler Aerospace AG, but its acronym remained the same.


A CROSS-CULTURAL BUSINESSMAN Hertrich founded the first pan-European aerospace firm in 1991—Eurocopter, a merger of the commercial helicopter divisions of the French Aérospatiale company and the German DASA. Eurocopter subsequently became Europe’s largest producer of helicopters. Hertrich also became the president and CEO of Motorenund Turbinen-Union (MTU) München in 1991, which was an aircraft engine company located in Munich. Hertrich completely restructured the Bavarian company and turned it around financially. Hertrich considered this job the “most appealing and wonderful job” he had ever held, due to the direct contact with daily operations and autonomy that it allowed him (Financial Times Deutschland, April 28, 2004). Over time, however, he found himself more restricted as his decisions came to have greater impact. While continuing to serve at MTU, Hertrich became the head of the aeroengines business unit of DaimlerChrysler Aerospace AG (DASA) in 1996. He also became a member of DASA’s board of management. Four years later he was appointed president and CEO of DASA.

PARTNERSHIPS WITH FRANCE AND SPAIN The European Aeronautic Defense and Space Company (EADS), an international aerospace consortium, was formed in 1999 from three companies: the German DaimlerChrysler Aerospace (DASA), the French Aérospatiale Matra, and the Spanish Construcciones Aeronauticas SA (CASA). Hertrich became one of two chief executives of the conglomerate, the other being Philippe Camus of France. EADS was Europe’s largest aerospace firm at the time of its formation; it ranked second in the world to Boeing as of 2004. The company held 80 percent of Airbus, with BAE Systems owning the other 20 percent. EADS’s other operations included helicopters through Eurocopter; jet fighter airplanes through a 40 percent stake in Eurofighter; satellites through Astrium; missiles through a 40 percent stake in MBDA; and commercial satellite launchers through Arianespace. The shared chief executive position was designed to reflect France and Germany’s joint ownership of EADS. This multinational structure was implemented at all levels of the company—each French employee reported to a German supervisor and vice versa. To ensure military trust by the host governments on the one hand and impartiality on the other, the company had headquarters in Paris as well as Munich, with legal registration in Amsterdam. EADS’s role in Spain as well as France made Hertrich wish that he had paid more attention in school. He admitted that he would have liked to retake his Spanish and French language classes (manager-magazin, January 12, 2003).

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Rainer Hertrich

Hertrich’s experience with the formation of Eurocopter provided a precedent for EADS’s worldwide impact. “EADS comprises on the prime level the major part of the aerospace industry of three countries: France, Germany and Spain,” Hertrich said in a speech to the Aerospace Industries Association of America (AIA) Board of Governors in May 2001. “Following the merger with Marconi, BAE Systems has further consolidated the defense industry in the U.K., while also acquiring a strong foothold in the U.S.” (May 24, 2001). To achieve EADS’s goal of eventually surpassing Boeing, Hertrich focused on building strong economic and political relationships with firms in Russia, Japan, China, South Korea, India, and the United States (manager-magazin, May 6, 2004). In addition to serving as EADS’s co-CEO, Hertrich also headed the company’s aeronautics division, which operated a number of civil and military aviation-related businesses that included the manufacture of helicopters (Eurocopter), regional aircraft (ATR), and general aviation aircraft (Socata) as well as aircraft maintenance and conversion, repair and overhaul, and aerostructures (Sogerma/EADS EFW). In terms of Hertrich’s management style, one reporter commented, “[Hertrich] is approachable and has a good sense of humor, qualities that will serve him well” (Interavia Business & Technology, December 1999).

on, we will continue to reap a positive impact from the contract, through the services and dividends from AirTanker” (January 26, 2004). The private financing initiative offered a risk-sharing plan for all entities involved in the contract. Hertrich compared the contract to a car lease: “The financing is done by banks. We . . . deliver an aircraft to the tanker consortium, and the tanker consortium just provides tank capacity to the U.K. Government. This means that the aircraft, the maintenance and the pilots are all included. It’s the sort of contract you would use in automotive leasing. So, it’s a new way for governments to obtain better risk-sharing from industry, and reduce the financial impact on their budgets (CEO-Direct transcript, n.d.).” In his leisure time, Hertrich liked to attend opera performances and go on mountain hiking trips. He also enjoyed skiing and good food. And while his pilot’s license remained on the back burner, he could at least soar through the sky with his hang-gliding certificate.

See also entries on G.I.E. Airbus Indrustrie, DaimlerChrysler AG, Daimler-Benz Aerospace AG, European Aeronautic Defence and Space Company EADS N.V., MesserschmittBölkow-Blohm GmbH., and Siemens AG in International Directory of Company Histories.

SERVING THE PUBLIC Hertrich was elected president of BDLI, the German aerospace industries association, at the end of 2001. During his many speeches and public appearances, he never failed to request donations for his favorite organization, Aviation Sans Frontières (Aviation Without Borders). When asked what he would do with EUR 5 million, he said he would invest some of it in EADS stock but also set aside a portion to support this nongovernment organization that provided emergency medical transport, delivered medicines, and assisted other nonprofit humanitarian groups (Financial Times Deutschland, April 28, 2004). Hertrich counted the founding of EADS and its initial public offering in July 2000 as his major successes. Additional financial rewards were expected in 2008 through the assignment of a lucrative British defense contract. In January 2004 EADS’s 40-percent partner AirTanker was set to become the industrial partner of the £13 billion UK Ministry of Defence air-to-air refueling program, covering a 27-year service period. It was the largest private financing initiative for military defense in history. EADS was to provide Airbus 330-200 multi-role tanker transport (MRTT) services for the Future Strategic Tanker Aircraft (FSTA) program in order to meet the Royal Air Force’s requirement for nextgeneration tanker aircraft. “We will start deliveries in 2008, until 2011,” said Hertrich in an EADS press release. “And later

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CEO-Direct transcript, “Co-CEO Rainer Hertrich Comments on FSTA Impact,” n.d., http://www.eurobusinessmedia.net/ transcript.php?id_article=29. “EADS Welcomes the Selection of AirTanker for Final Negotiations for the Royal Air Force’s Future Strategic Tanker Aircraft Programme,” EADS press release, January 26, 2004, http://www.eads.net/frame/lang/en/1024/xml/ content/OF00000000400004/3/07/557073.html. Hegmann, Gerhard, “Rainer Hertrich: Der Riesenflieger bei EADS,” Financial Times Deutschland, April 28, 2004. Hertrich, Rainer, “Rainer Hertrich: Ein- und Aussichten,” manager-magazin, January 12, 2003, p. 106. ———, speech to the Aerospace Industries Association of America (AIA) Board of Governors Conference, May 24, 2001, http://www.aecma.org/Whatsnew/ Hertrich_at_AIA.htm. “In zehn Jahren so groß wie Boeing,” manager-magazin, May 6, 2004, http://www.manager-magazin.de/unternehmen/artikel/ 0,2828,298554,00.html. Szandar, Alexander, “Dateline Berlin,” Interavia Business & Technology, December 1999, p. 6. —Maike van Wijk


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John B. Hess 1954– Chairman and chief executive officer, Amerada Hess Nationality: American. Born: April 5, 1954. Education: Harvard College, BA, 1975; Harvard University, MBA, 1977. Family: Son of Leon Hess (business executive) and Norma (maiden name unknown); married Susan Elizabeth Kessler. Career: Amerada Hess, 1976–1986, graduate trainee, senior vice president; 1986–1995, senior executive vice president; 1995–, chairman and chief executive officer. Address: Amerada Hess, 1185 Avenue of the Americas, New York, New York 10036; http://www.hess.com.

■ Amerada Hess, also known simply as Hess, is a family business. With 2003 sales of about $14.3 billion, Amerada (an acronym of “America” and “Canada”) Hess is an integrated oil and gas company that conducts exploration and production globally. As of 2004 the company’s proven reserves totaled 646 million barrels of oil and 2.3 billion cubic feet of natural gas. Hess owns 50 percent of a refinery it operates in the U.S. Virgin Islands and owns a smaller one in New Jersey; it sells gasoline through more than one thousand gas stations, primarily in the eastern United States. A third-generation oil and gas businessman, John Hess took over the company in 1995 from his father, Leon Hess. Following his father’s death, John Hess found himself walking in the footsteps of a giant.

A PATRIARCH’S AMERICAN DREAM Mores Hess, Leon’s father, was a Lithuanian immigrant trained to be a kosher butcher who also ran a fuel-delivery business, coal yard, and gas station. His business faltered during the Depression. Leon Hess was a delivery boy for his father when he took over the bankrupt company in 1933. He began


building the company with a product for which other oil companies had little use: no. 6 residual fuel oil, a black, tarry substance left over after refining. Hess saw that utilities and other big users were switching from coal to no. 6 when they could get it, and he built a fleet of trucks capable of keeping the fuel oil warm until delivery, gradually expanding his reach far beyond New Jersey and New York. By 1938 Leon Hess had 12 trucks and was able to build his first oil terminal at Perth Amboy, New Jersey. The oil terminal expanded during World War II while Leon Hess served in the U.S. Army under General George Patton. Ultimately Hess landed at Normandy just after D-Day and was wounded. Following the war Hess returned to work and by 1950 had bought an oil terminal in Houston. By 1958 the company started crude oil exploration and production in Mississippi, buying both a pipeline and petroleum reserves. In 1963 Hess acquired a refinery in Corpus Christi, Texas, and then built the biggest project of his life, the Virgin Islands Refinery. In 1969 the company merged with Amerada Petroleum to create Amerada Hess. By the time of his death in 1999, Leon Hess’s personal stock holdings were worth more than $700 million. Leon Hess granted only one interview over his 60-year career, during which he said: “My parents always told me to guard my reputation. I was brought up all my life to stay out of the limelight and I’m never going to change” (Newsday, January 25, 1995).

A PRIVILEGED CHILDHOOD While John Hess grew up with many of the trappings of wealth, he still pumped gas for the family Hess stations. The only son among three siblings, he joined his father on foreign oil fields at age seven and began working for the family business in 1976, as a graduate trainee. As a Harvard undergraduate he studied in Beirut, became fluent in Arabic and Farsi, and later befriended Middle Eastern oil ministers. By 1984 he was a senior vice president, managing exploration and production operations and contributing to the development of fields in Canada and the Gulf of Mexico. At a 1987 event bringing together various leaders in the oil industry, he introduced Abu Dhabi’s oil minister, Mana Said al-Otaiba, in faultless Arab dialect. By 1991 he was earning $700,000 a year and being groomed to succeed his father. William P. Tavoulareas, retired president of Mobil Corporation, said he had confidence in his

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abilities, but added: “How can any son follow an act like that?” (BusinessWeek, June 29, 1987).

A FATHER PASSES THE REINS From 1990 to 1995 Amerada Hess struggled with erratic performance that seemed attributable to Leon Hess’s advancing age. The firm had a $268.2 million loss in 1993 as sales dropped to $5.9 billion. A rebound in 1994 was modest: a $73.7 million net on $6.7 billion in sales. In 1995’s opening quarter Hess earned just $25.2 million on $1.98 billion in sales, down from the previous year. Like his father before him, Leon Hess worked well past 80. At a press conference during which he passed the torch to his son, Leon Hess wept and said, “You have a good young management team in place” (Platt’s Oilgram News, May 4, 1995). Oil analysts noted that a change of management was long overdue at the company: Lehman Brothers oil analyst Bernard Picchi stated, “it’s fair to say that the company has been a little out of step with the rest of the industry.” He noted the company’s “parochial” and “inward looking” way of operating and how this extended even to its representation in trade associations (Platt’s Oilgram News, May 4, 1995). John Hess was cut from a different cloth than his father. He had an Ivy League education, while his father never went to college. He also had a lot in common with his predecessor, including a competitive spirit and fierce work ethic. Said Nicholas Brady, a board member of Amerada Hess and a former Treasury secretary: “Like his father, John is tireless. They’re the same in their preoccupation with business. It’s a way of life for John” (New York Times, May 21, 1999). Another trait that Hess shared with his father was an aversion to the media. Both routinely turned down requests for interviews. John Hess quickly and quietly emerged as the antithesis to the modern, high-profile CEO of a leading publicly traded company. Although John Hess was thought to be very close to his father, who was the best man at his wedding, the relationship had a drawback: Hess may have had the title and control of the firm, but from 1994 to 1999 he was still symbolically under the shadow of his father, who controlled 12.9 percent of Hess stock, compared with his son’s 1.7 percent. Said Eugene L. Nowak, oil analyst with Dean Witter Reynolds: ”Leon is not going to fade away” (BusinessWeek, May 22, 1995). The shadow receded when Leon Hess died on May 7, 1999, of complications from blood disease, at the age of 85.

A CHANGE IN COURSE After taking over the day-to-day responsibilities of the company, John Hess crafted a plan to put a new face on the company, moving away from the less profitable business of refining

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and marketing and shifting more business into oil production. The company was in dire need of a new direction: In 1998 it lost $458.9 million on revenues of $6.6 billion. In 2000 Hess attempted to seize a piece of the international oil arena with a takeover bid for U.K.-based independent oil company Lasmo but failed after losing out to a competitor. It was a major setback for Hess. He seemed to recover in 2001 with the company’s agreement to buy the exploration and production company Triton Energy and its stakes in Latin America, Africa, and Southeast Asia. Hess bought Triton Energy for $2.7 billion in cash and about $500 million in assumed debt. Said Gene Nowak, analyst with ABN Amro: “Initially, investors were concerned John Hess was going to continue to tilt the company into refining and marketing which is traditionally a low-return business. But he has strongly tilted the company to exploration and production. This deal puts over 75 percent of its assets into that sector” (Lloyd’s List, July 13, 2001). In 2003, however, elements of the Triton deal came back to haunt John Hess. The company announced a $530 million after-tax impairment charge related to the Triton acquisition. UBS Warburg analyst Matthew Warburton placed part of the blame on Triton, which he said made poor decisions regarding reservoir mechanics and field management. Moreover, Warburton also cited Hess’s failure to do its homework in evaluating Triton’s value, noting that Hess had written off 25 percent of the value of the total price paid for Triton.

See also entry on Amerada Hess Corporation in International Directory of Company Histories.


“Ceiba Field, Triton Deal Haunt Hess for Moment,” International Petroleum Finance, February 4, 2003. Falk, Bill, “A Demanding Patriarch,” Newsday, January 25, 1995. “Hess Senior Proves a Hard Act to Follow,” Lloyd’s List, July 13, 2001. Johnston, David, and Robert DiNardo, “A Legend Will Step Down,” Platt’s Oilgram News, May 4, 1995, p. 1. Norman, James R., “Leon Hess: Can The Bottom-of-the-Barrel Oil Baron Get Back on Top?” BusinessWeek, June 29, 1987, p. 50. Sandomir, Richard, “Pro Football, Hess Family Likely to Hire Goldman Sachs for Jets Sale,” New York Times, May 21, 1999. Weber, Joseph, “A New Hess Helming Hess,” BusinessWeek, May 22, 1995, p. 49. —Tim Halpern


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Laurence E. Hirsch 1946– Chairman, Eagle Materials Nationality: American. Born: 1946, in New York, New York. Education: University of Pennsylvania, BS, 1967; Villanova University School of Law, JD, 1971. Family: Married Susan (maiden name unknown). Career: Bracewell & Patterson, 1973–1975, lawyer; Southdown, 1975–1985, CEO and president; Centex Corporation, 1985–1988, president and COO; 1988–1991, CEO and president; 1991–2004, chairman and CEO; Centex Construction Products, 1999–2004, chairman; Eagle Materials, 2004–, chairman. Address: Eagle Materials, 3811 Turtle Creek Boulevard, Suite 11, Dallas, Texas 75219; http://www.eagle materials.com.

■ Laurence E. Hirsch joined Centex Corporation in 1985 and eventually became CEO and chairman of the company. During his tenure there, Hirsch helped build the company into the nation’s largest home-construction business before diversifying into smaller businesses ranging from cement to pest control, which he did partly in order to offset the impact of the cyclical nature of home building on the company’s bottom line. After retiring from Centex in 2004, Hirsch continued his role as chairman of Centex Construction Products, which was renamed Eagle Materials. Analysts credited Hirsch’s strategy of extending the reach of both his company and his management power with being a vital key to Centex’s success.

FROM COURTROOM TO BUSINESS MEETINGS Hirsch was born in New York City and attended the Wharton School at the University of Pennsylvania, where he majored in industrial relations and met his wife, Susan. Although he was interested in business, he did not stay on at Wharton in order to earn his MBA, instead deciding to attend law


school at Villanova University. In an article by David A. Stevenson that appeared on the Web site of the Wharton Club of Dallas/Fort Worth, Hirsh was quoted as commenting, “I wanted to broaden my education. My wife’s father was a lawyer in Philadelphia and I saw him as a role model” (February 12, 2001). After graduating from law school in 1971, Hirsch spent a year in the U.S. Army Reserves before joining an established Philadelphia law firm, where he stayed for a year. While doing work for one of the firm’s client’s in Houston, Texas, Hirsch was recommended by the client to the smaller Dallas firm of Bracewell & Patterson, which subsequently recruited him. Seeing the job offer as an opportunity to become involved in more diverse activities, Hirsch accepted the position and practiced law with Bracewell & Patterson for about two years. As a part of one of his cases at Bracewell & Patterson, Hirsch became involved with Southdown; he was representing a family from New York that was mired in a proxy fight for control of the company. The family eventually obtained three seats on the board and later proposed its own slate of directors. Having helped the family assume control of Southdown, Hirsch approached the 80-year-old family head and asked for the opportunity to run the company; the family head complied. At the age of 29 Hirsch became CEO of a conglomerate that owned oil and gas properties, a cement operation, and a brewery and bottling operations. Hirsch stayed at Southdown until 1985, when he was recruited by Centex.

SUCCESS AT CENTEX Hirsch’s career at Centex was characterized by exceptional results. He started out as president and COO in 1985, became CEO in 1988, and added the title of chairman of the board in 1991. Over the course of his career at Centex, Hirsch helped oversee an increase in the company’s revenues from $1.2 billion in 1985 to more than $10 billion in fiscal 2004. Although Hirsch had helped Centex become the nation’s largest home builder, in 1991 the company still had less than 1 percent of the national market share. In addition, Hirsch realized that the company was dependent almost solely on the new-home market and was thus highly vulnerable to general economic fluctuations. The company’s profits had lurched from $62 in 1989 to $34 million in 1991.

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Yet, even when Centex’s bottom line seemed unstable, Hirsch remained optimistic that the company could grow, and so he oversaw its expansion into new markets. Around 1996 he started to slow down Centex’s emphasis on home building, starting fewer projects in suburban subdivisions. Centex had diversified into the manufacture of cement and wallboard when Hirsch joined the company in 1985, and he wanted to diversify further. While researching possible directions in which to lead the company, Hirsch found that mobile homes accounted for nearly one-third of all new homes sold in the mid-1990s; he decided to plunge into that market. In 1997 he bought 80 percent of Cavco Industries, which was the number-one mobile-home maker in Arizona. He also bought a small mobile-home retailer and started up one business that financed mobile homes and another that built trailer parks. By the end of fiscal 1999 Hirsch’s decisions had paid off: that year Centex’s mobile-home operations earned around $12 million, up from the $6.7 million of three years before. Hirsch’s efforts at diversification also included investment in pest control. The company installed porous plastic pipes in the walls of its new homes, then sold pest-control services in which a Centex employee used the pipes to fumigate the house every three months. In many communities up to 90 percent of home buyers signed up for the services, leading to more than 100,000 pest-control customers in 1999 and $31 million in revenues. All in all Hirsch led Centex’s non-home-building businesses to account for 44 percent of the company’s sales and 50 percent of its operating profits in 1999. Many analysts credited his expansion tactics with helping the company to remain strong through a subsequent falloff in home building. Although Hirsch’s strategy of keeping new-home sales flat at around 13,000 units a year allowed another company to gain the market-leading position in the home-building industry, Centex nevertheless became the top home builder on the 1999 Forbes list of platinum companies, with an average five-year return on capital of 13.4 percent.

KEEPS COMPANY ON COURSE By 2001 Hirsch had directed Centex’s initiation of an international home-building operation that functioned primarily in the United Kingdom and Mexico. He also started a subprime lending operation and continued to spur growth in the company’s home-services businesses, which grew to include security and lawn and garden fertilization as well as pest control. Overall the company’s stock went from $18 to $42 a share between 2000 and 2001. Meanwhile Hirsch had kept home sales increasing at a rate of 16 percent over the years, and analysts credited him with helping the company leverage costs, thus boosting net income by 51 percent. Still, many analysts were questioning Centex’s and other construction companies’ ability to continue to grow as worries about the stability of the economy heightened.

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Hirsch remained confident that he could keep all of Centex’s gears running smoothly in spite of the signs that the economy was entering a slump. While Centex had fallen to the number-four position in the U.S. home-building industry, analysts remained bullish largely because of Hirsch’s diversification strategies. They noted that the Dallas-based company was extremely strong in construction contracts in states such as Texas and Florida, and they also emphasized the company’s strength in not being entirely reliant on the cyclical construction business for profits. In 2002 one-third of Centex’s profits came from home-building services such as home finance and pest control. By cutting back on new-home construction, Hirsch had ensured that the company would retain a low inventory of unsold homes. Hirsch also established a mortgage unit called CTX Mortgage that played solidly into the firm’s strategy for increasing income. In an interview with National Mortgage News, Hirsch noted, “CTX Mortgage will add about $75 million to the company’s earnings this year,” (December 17, 2001). On April 31, 2003, Hirsch boasted of a truly spectacular quarter in terms of finances, in which Centex’s revenues increased 28 percent to over $2.3 billion.

MANAGEMENT STYLE: DIVERSIFY AND DELEGATE Analysts noted that Hirsch’s emphasis on diversification in the 1990s helped make Centex one of the most successful building companies in the nation. They observed that part of his management style was also to spread out his management power. For example, he redesigned the company’s homebuilding operations so that they were split into 40 profit centers, each run by a local president. These presidents took complete responsibility for regional aspects of the businesses— aspects that were typically overseen at headquarters at other large building companies—such as the purchasing of land and construction materials and the contracting of services. Analysts noted that this approach provided real incentive for regional presidents to turn large profits, as their salaries could be doubled or tripled as a result of their performances. With respect to his personal philosophy on business leadership, Hirsch maintained that there was no single “best” approach. He once noted that leadership-development professionals often said that their specific practices could be applied at any firm; Hirsch, however, maintained a more independent view of leadership. As quoted in the book Leading the Way: Three Truths from the Top Companies for Leaders, by Robert Gondossy and Marc Effron, Hirsch noted, “Let’s take that best practice and really think how it fits our people, and what the needs of our people are. We need to ‘Centex-ize’ it” (2003).


Laurence E. Hirsch

STEPS DOWN FROM CENTEX Although Hirsch had outlined many plans for Centex’s future, the company suddenly announced in early 2004 that he was retiring as CEO and chairman. Some analysts were surprised at his resignation, which became effective March 31, 2004. Arthur Odama of Morningstar told the Miami Herald, “This appears to be an unexpected change at the top” (January 7, 2004). Although he was no longer Centex’s chairman and CEO, Hirsch continued to serve as the chairman of the separate company Centex Construction Products, which was renamed Eagle Materials after it was spun off from Centex Corporation. Eagle’s businesses included ready-mixed, aggregate, and cement operations in Texas, Nevada, California, and Illinois. During his career, Hirsch was also a member of the boards of directors of Luminex Corporation and Belos Corporation, an advisory director of Heidelberger Cement, and a trustee of the University of Pennsylvania.

See also entries on Centex Corporation and Southdown, Inc. in International Directory of Company Histories.


“Centex CEO to Step Down,” Miami Herald, January 7, 2004. Gondossy, Robert, and Marc Effron, “Chapter 1: The Looming Leadership Crisis,” in Leading the Way: Three Truths from the Top Companies for Leaders, New York, N.Y.: John Wiley & Sons, 2003. Hirsch, Laurence, “Home-Builder Stocks Punished Too Much?” interview in National Mortgage News, December 17, 2001, p. 16. “Home Building Plus,” Forbes, March 8, 1999, p. 89. Stevenson, David A., “Laurence E. Hirsch,” Wharton Club of Dallas/Fort Worth, February 12, 2001, http:// whartondfw.org/alumninews/alumninews1.html. —David Petechuk


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Betsy Holden 1955– President, Global Marketing and Category Development, Kraft Foods Nationality: American. Born: October 19, 1955, in Lubbock, Texas. Education: Duke University, BA, 1977; Northwestern University, MA, 1978; MBA (Master’s of Management and Finance in marketing), 1982. Family: Married Arthur Holden (chairman, First Genetic Trust); children: two. Career: General Foods Corporation, 1982–1984, assistant product manager; Kraft Foods, 1984–1987, brand manager; 1987–1990, group brand manager; 1990–1993, vice president, new product development and strategy; 1991, vice president, marketing, dinners and enhancers; 1993–1995, president, Tombstone Pizza division; 1995–1997, executive vice president, Kraft Cheese division; 1997–1998, president, Kraft Cheese division; 1998–2000, executive vice president; 2000–2004, president and chief executive officer, Kraft Foods North America; 2001–2004, co–chief executive officer; 2004–, president, global marketing and category development. Betsy Holden. © Reuters NewMedia Inc./Corbis.

Awards: Laureate Award, National Cheese Institute, 2002; Alumni Association Award, Northwestern University School of Education and Social Policy, 2002. Address: Kraft Foods, Three Lakes Drive, Northfield, Illinois 60093; http://www.kraft.com.

■ In a career at Kraft Foods that lasted more than 20 years Betsy Holden worked her way through the ranks to become co-chief executive officer in 2001. Kraft Foods is the largest food company in the United States, encompassing major brands such as Kraft cheese, Jacobs and Maxwell House coffees, Oscar Mayer meats, Post cereals, Nabisco cookies and crackers, and Philadelphia cream cheese. Holden’s role as a leader of the company was short-lived, and in 2004 she was named president of global marketing and category development while her former co-chief became the sole chief executive officer.

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SCHOOL YEARS Betsy Holden grew up in the small town of Washington, Pennsylvania, south of Pittsburgh. Her father was an obstetrician, and her mother a former accountant who stayed home to raise Holden and her two siblings. Holden attended public schools with the children of blue-collar workers. After graduation from college Holden worked as a teacher while pursuing her master’s degree in education at Northwestern University. She then taught fourth grade for two years. While teaching, Holden created toys for children and had a part-time job helping the Playskool company develop toys and games. Although she found teaching fulfilling, Holden “was looking for something to combine the creative and the analytical,” she told David Barboza, of the New York Times (May 28, 2000).


Betsy Holden

Holden entered the master’s degree program at Kellogg Graduate School of Management of Northwestern University. She excelled at Kellogg, where she was honored as valedictorian and the outstanding marketing student.

KRAFT FOODS Holden started her marketing career as an assistant product manager in the desserts division of General Foods Corporation, which later became a part of Kraft Foods. Holden moved to Kraft Foods as a brand manager, first in new products and then for the sandwich spread Miracle Whip. In 1987 she was named group brand manager of confections and snacks. In 1990 Holden became a vice president, first of new product development and strategy, and later of marketing, dinners and enhancers. The Wall Street Journal noted Holden’s success in brand extension, or creating new versions of established products. In 1993 she became president of the Tombstone pizza division. While president of the pizza division, Holden made Tombstone a national brand and turned the DiGiorno pasta brand into a pizza franchise that brought in $400 million in annual sales by 2002. Holden presided over the DiGiorno rollout, accompanying direct-delivery sales representatives on visits to stores and working on displays, product placement, and promotions. In 1995 she was named executive vice president and in 1997 president of the Kraft Cheese division. As head of the cheese division, Holden led the introduction of flavored Philadelphia cream cheese and calcium-fortified cheese. In 1998 Holden was named executive vice president of Kraft Foods. Holden was named president and chief executive officer of Kraft Foods North America in May 2000. While Holden was chief executive officer, sales of Oreo cookies increased sharply with the introduction of chocolate cream filling for the cookies. The title of co-chief executive officer of Kraft Foods was added in 2001, when Kraft Foods completed an initial public offering of stock. Holden continued to lead the larger North American division, which had an annual revenue of $21.9 billion in 2003. Her co-chief executive officer ran the smaller international division, which had a total revenue of $9.1 billion in 2003. Holden also was responsible for integrating the previously acquired Nabisco into Kraft Foods. In January 2004 Holden was assigned to the newly created post of president of global marketing and category development. Her demotion was a result of various problems at Kraft Foods, including slow sales growth, difficulties with product launches, and a failure to develop new products that privatelabel manufacturers could not copy. Holden had also raised product prices in response to higher prices of ingredients, causing market share to fall. A lowering of earnings estimates in 2003 led to a decline in the stock price. Many analysts, howev-


er, found the co-chief executive officer position to have been inherently unworkable and believed Holden was given too little time to make an impact at the company. Altria Group (formerly Philip Morris), which owned 84 percent of Kraft Foods stock, was seen as pushing for change to further plans to sell off more Kraft Foods stock. Holden remained with Kraft Foods despite the demotion because of her positive feelings for the company after a 23-year career there and her family’s desire to remain near Chicago. As president of global marketing and category development, Holden was responsible for leading the company’s worldwide growth agenda, global marketing resources, health and wellness nutritional initiatives, and new product development.

PERSONAL MISSION Holden told the Chicago Sun-Times that writing a personal mission statement during a 1990 workshop at Kraft Foods was an important factor in her success. Participants in the exercise were instructed to imagine themselves at the end of their lives, looking back on what they had accomplished. Holden found the mission statement to be a guiding force in her life and used it annually to choose areas of focus. Kraft executives reflected that Holden’s “teamwork, competitive drive, and inventiveness” led to her career accomplishments. Barboza noted that “Holden also had a knack for organization, even regimentation. She charted, listed, categorized and logically plotted not just her rise to power, but her family life” (May 28, 2000). An earlier chief executive officer of Kraft Foods described Holden as follows to Cheryl L. Reed of the Chicago Sun-Times: “She has a keen understanding of consumer insights. . . . She is smart. She is willing to take risks. She’s an aggressive marketer” (April 12, 2004). Holden described her management style to Terry Stephan of Northwestern magazine as “positive, upbeat, enthusiastic . . . very collaborative, team-oriented.” As one of the first woman executives with children at Kraft, Holden created a support network for working mothers. One of her stated goals was to help advance and mentor other women. Among her many civic and charitable activities, Holden served for years as president of the Off the Street Club, Chicago’s oldest boys’ and girls’ club, leading the organization through a period of growth.

See also entry on Kraft Foods Inc. in International Directory of Company Histories.


Alexander, Delroy, “Deromedi Shuffles Kraft Execs: Holden Takes New Post as Head of Global Marketing,” Chicago Tribune, January 9, 2004.

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Betsy Holden Barboza, David, “Teacher, Cheerleader and C.E.O.,” New York Times, May 28, 2000. Copple, Brandon, “Shelf-Determination,” Forbes, April 15, 2002, p. 130–142. Ellison, Sarah, “Kraft’s Stale Strategy: Endless Extensions of Oreos, Chips Ahoy and Jell-O Brands Created a NewProduct Void,” Wall Street Journal, December 18, 2003.

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Reed, Cheryl L., “Lined by DNA, Ambition, Career Jolts,” Chicago Sun Times, April 12, 2004. Stephan, Terry, “Honing Her Kraft,” Northwestern, Winter 2000, pp. 22–25.

—Jean Kieling


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Chad Holliday 1948– Chairman and chief executive officer, DuPont Nationality: American.

strong negotiator who liked his subordinates to take new and untraditional approaches to improving business, Holliday was also recognized as a leader who emphasized providing strong customer service and meeting shareholders’ expectations.

EARLY LEARNING EXPERIENCES

Born: 1948, in Nashville, Tennessee. Education: University of Tennessee, BS, 1970. Family: Son of Charles O. Holliday Sr. and Ann Hunter; married Ann Blari, 1970; children: two. Career: DuPont, 1970–1974, engineer; 1974–1978, business analyst; 1978–1984, various manufacturing assignments in Fibers Department; 1984–1986, manager of Corporate Plans; 1986–1987, global business director for Nomex; 1987–1988, global business director for Kevlar; 1988–1990, director of marketing for Chemicals and Pigments; 1990–1992, vice president and then president of DuPont Asia Pacific; 1992–1995, senior vice president; 1995–1998, chairman of DuPont Asia Pacific and executive vice president; 1999, CEO; 1999–, chairman and CEO. Publications: Walking the Talk: The Business Case for Sustainable Development (with Stephan Schmidheiny and Philip Watts), 2002. Address: DuPont, DuPont Building, 1007 Market Street, Wilmington, Delaware 19898; http://www.dupont.com.

■ Charles O. Holliday Jr., well known as “Chad,” parlayed a summer job that he obtained while in college into a 30-plusyear career at DuPont, the largest chemical company in the United States and the developer of such products as Lycra and Teflon. In January 1999 Holliday was named DuPont’s CEO, and he added the title of chairman later in the year. Holliday’s success in overseeing DuPont’s Asia Pacific operations in the 1990s played a large role in his being appointed over several others who had been higher up in the corporate chain of command and in line for taking over the company. With extensive experience in such key areas as manufacturing, marketing, finance, planning, and business, Holliday set DuPont’s primary mission as one of achieving sustainable growth. Known as a


Holliday was born and grew up in Nashville, Tennessee, the home of country music. As a boy he performed yard work for a Grand Ole Opry singer who lived nearby in exchange for guitar lessons. When Holliday enrolled at the University of Tennessee, he planned to take over his father’s industrialsupply business, where he had helped assemble parts when he was younger. His father called him during his junior year at college, however, to say that he had sold the company. Holliday was a member of the University of Tennessee chapter of the national Pi Kappa Alpha fraternity, where he gained some of his first experiences in leadership. In 1970 he attended the fraternity’s national convention, where attendees were discussing issues such as the upsetting prevalence of discrimination and other prominent social issues of the time. He later recalled that as chapter president he was tested by many tough situations, often needing to bring his fellow fraternity members together to decide where the chapter stood on important social issues. He helped the chapter face tough financial times, an experience that prepared him well for his business career after college. No longer looking to follow in his father’s footsteps, Holliday took a summer job with DuPont. The job led him to accept an engineering position with the company, in Old Hickory, Tennessee, after graduating from college with a degree in industrial engineering. Over the next two decades Holliday would hold a wide range of marketing and business positions, primarily in the company’s fibers and chemicals businesses. As he rose through the ranks, he held a number of managerial positions, including manager of Corporate Plans; global business director for Nomex, a fire-retardant aramid fiber; and global business director for Kevlar, an aramid used for its durability in such objects as tires and bulletproof vests. Holliday also served as director of marketing for Chemicals and Pigments.

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Chad Holliday

HEADS ASIA PACIFIC OPERATIONS In 1990 DuPont sent Holliday overseas to run its Asia Pacific operations. Although some company insiders were skeptical of Holliday’s ability to handle the job due to his youth and limited foreign experience, others saw the appointment as a testing ground where his performance would indicate just how far he was capable of advancing within the company. Holliday often noted that his experience overseas taught him a great deal. During the years he spent in Japan he learned much about the Eastern approach to business, which was very different from the typically Western approach. He said that he learned an especially large amount from key Asian business leaders who had used their management and leadership skills to succeed despite tough times. As Holliday told Peters, “Many CEOs in Japan took me under their wings and tried to help me along the way” (May 21, 2001). Holliday proved himself to be a quick study. Business analysts gave Holliday much of the credit for helping to double DuPont’s Asia business during his nearly eight-year stint there. In part through his initiation of joint ventures in several countries, including Japan, annual sales increased to $4 billion. Over the course of Holliday’s stay in Asia Pacific, the number of joint ventures in the 15-country region grew from 12 to 37, dramatically expanding DuPont’s global reach. In 1995 Holliday was named chairman of the region.

WHO’S CHAD? When the DuPont president and CEO John A. Krol announced that he would retire at the end of 1998, many analysts observed that Holliday was apparently being groomed as his successor. Many within the company recognized that DuPont’s former chairman and CEO Edgar S. Woolard Jr. had taken note of Holliday early in his career, even before Holliday had reported to Woolard as head of the Asia Pacific businesses. Nevertheless, many were surprised by the announcement that Holliday would immediately take over the post of president and was slated to become CEO in the beginning of 1999; he would also assume the chairmanship before the year was out. Susan Warren wrote in the Wall Street Journal that many Wall Street analysts were calling up the chemical giant and urgently asking, “Who’s Chad?” The vice president of investor relations John Himes told Warren, “He’s probably the least known of our senior management” (November 12, 1997). Despite his relative anonymity among DuPont’s upper ranks, Holliday had been growing ever more visible over the preceding years. Many noted his potential to be the future leader of the company when he began appearing at analysts’ meetings and news conferences in 1996. The meetings in question were associated with a number of company acquisitions

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in which Holliday had been involved and which had cost approximately $6 billion. Holliday had gained further favor within the company when he helped DuPont beat out rivals in negotiations with Pioneer Hi-Bred International, a seed company that DuPont wanted for its strong market potential in the field of genetically engineered plant products. Analysts gave Holliday credit for helping to strike the unique coventure in which the companies’ marketing and research efforts were combined and DuPont purchased 20 percent of Pioneer for $1.7 billion. Through his appointments to the top posts Holliday indeed leapt over several more senior operating executives within the company, including two highly touted executive vice presidents who were leading DuPont’s Conoco unit and its European division. Many analysts held high hopes for Holliday. Jeffrey Cianci, the analyst with Bear, Stearns & Company, told the Wall Street Journal ’s Warren, “Chad plays well. He’s young, energetic, charismatic, shareholder oriented, goodlooking. And as long as he plays well, he’ll go over with investors” (November 12, 1997).

LAYS OUT HIS PLANS Holliday understood some of the concerns about his taking over the company; in addition to his relative anonymity, he was DuPont’s third-youngest top executive at the time. As the company approached its two-hundredth anniversary, Holliday became the 18th executive to take the reins and lead the venerable and successful corporation. Holliday quickly announced that he was committed to maintaining double-digit earnings growth, a standard that had been set by his predecessor. He would focus on creating a leaner, faster, and less capital-intensive company. The Merrill Lynch analyst John Roberts summed up Holliday’s challenges when speaking to Joseph Chang of the Chemical Market Reporter: “The primary task will be integrating the $7 billion of acquisitions underway, but there will also be continued focus on asset productivity, operating-cost control and more aggressive pricing in selective markets” (November 17, 1997). By the time he addressed the annual shareholders’ meeting in April 2000, Holliday was able to better outline his ambitious growth plans for the company. He acknowledged that the core of DuPont’s revenues were still tied to the company’s products, such that developing new products would remain a top priority; he noted that 20 percent of the company’s revenues came from products developed over the past five years. Nevertheless, Holliday outlined other strategies that he would pursue, such as attempting to increase DuPont’s e-business efforts and make its operations more “knowledge-intensive”; Women’s Wear Daily reported that he told shareholders, “We’re trying to get paid for what we know, not only for the products we sell” (April 27, 2000).


Chad Holliday

THINKING BIG Analysts noted that in terms of action as well as words Holliday was fast out of the box as DuPont’s new leader. He quickly spun off the company’s massive Conoco oil and gas unit and then pumped large sums of money into a biotechnology seed company. According to some industry watchers Holliday hoped to transform DuPont into an industrial-growth company, rather than allowing it to remain solely a producer of cyclical commodities. By late 2000, however, he was facing major disappointments. Holliday had set a goal of generating 30 percent of the company’s income from agriculture-biotech and pharmaceutical units by 2002. However, a public backlash against genetically modified crops, brought about by the popularization of the belief that they could be harmful to both humans and the environment, hindered the company’s progress in ag-biotech. In addition Holliday proved unable to forge an alliance with another pharmaceutical company, thus threatening to derail DuPont’s undersized pharmaceutical business. Further adding to the mound of troubles were higher oil and gas prices and a weakening economy that had harmful effects on DuPont’s older chemicals and fabric businesses. Analysts became disenchanted with Holliday and were unsure as to whether he had a coherent strategy for getting DuPont back on track. By late 2000 DuPont’s stock had fallen 28 percent since Holliday’s appointment as president in February 1998. The investmentportfolio manager John B. Fields told a BusinessWeek correspondent, “They are stumbling around looking for a growth engine and have clearly not found one” (October 20, 2000).

STICKS TO HIS GUNS Holliday admitted that he might not have been clear enough about the length of time he had expected it would take to transform DuPont; he insisted on sticking to the strategy of attempting to firmly place DuPont in the emerging biotechnology sector. Industry analysts, however, believed that the $7.7 billion Holliday had eventually paid to acquire 80 percent of Pioneer Hi-Bred International had been too much. Yet Holliday remained confident in the company, noting that DuPont was holding off on introducing certain genetically modified products until more was learned about the manner in which they would be accepted by customers. He emphasized that DuPont’s researchers were working on important new products, such as crop-protection chemicals and a new polymer dubbed Sorona that would be used in making a more resilient form of polyester. Holliday also instituted a manufacturing efficiency program in the hopes of reducing the company’s annual pretax costs by hundreds of millions of dollars. In 2000 Holiday recruited the American West Airlines CEO Richard R. Goodmanson to be his right-hand man at DuPont. Goodmanson’s appointment would be one of many


as Holliday continued to endeavor to shift DuPont’s operations. Industry observers noted that in spite of his early stumbles Holliday was slowly making changes and showing a new willingness to reach outside of headquarters for expertise— such as when DuPont formed a partnership with the longtime customer Unifi to produce polyester filament yarn. G. Allen Mebane, the chairman of Unifi, told BusinessWeek, “This alliance would never have happened years ago” (October 30, 2000). By mid-2001 Holliday had made two major decisions: to get rid of DuPont’s pharmaceutical unit and to negotiate a merger or alliance with another crop-protection company in order to build its existing product pipeline in that area. Some analysts noted that DuPont’s lack of breadth in terms of cropprotection products indicated that the company was not achieving the desired returns on its research and development spending. Nevertheless, many industry watchers were encouraged by Holliday’s aggressive focus on growth. Much of Holliday’s approach to expansion centered on the forming of new alliances with other businesses. He formed one alliance with General Mills to produce and market a new soymilk product and another with MIT to help identify major businesses/markets on which to focus as well as leading industrial partners with whom to work; conclusions drawn with MIT led to deals with Ford and Merck, strengthening DuPont’s involvement in the fields of automotives and human health, respectively. Meanwhile, Holliday was aware that, while pioneering in new areas, DuPont needed to continue to be successful with the products it had been making for decades. Holliday told Technology Review, “The key in innovation is to keep taking old products and finding new uses for them, different adaptations, while you bring in new things” (November 2001).

FACES TOUGH ECONOMIC CLIMATE The year 2001 brought further difficulties for Holliday and DuPont: Consolidated sales totaled only $24.7 billion, as compared to the $28.3 billion of the year before. Furthermore, full-year segment sales had dropped 10 percent and full-year income excluding one-time items was $1.251 billion, as compared to the $2.878 billion of 2000. Overall the company had significantly lower earnings in all segments of its business, due primarily to lower worldwide sales volume and margins. DuPont was forced to cut jobs, close plants, and shift operations to include joint ventures in the company’s textile business. While DuPont had dominated the fiber business for half a century, many began to question Holliday’s commitment to that particular traditional revenue earner, noting that DuPont had slashed nearly 7,500 staff and contract workers since 1999. In response Holliday spun off all of the company’s fiber operations into DuPont Textiles & Interiors, a $6.5 billion unit. In

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Chad Holliday

Women’s Wear Daily Scott Malone quoted Holliday as saying, “Now our long-term commitment is clear” (February 12, 2002). Holliday continued to work to align costs, introducing several new programs in his efforts to foster growth. In January 2001 Holliday had given all of DuPont’s businesses an “eightquarter challenge”: essentially, if individual businesses wanted to remain a part of the DuPont company, they would have to meet specific growth rates for revenues, earnings, cash availability, and capital intensity by the end of 2003. Despite his efforts, by 2004 DuPont had been unprofitable for several years. Holliday sold the subsidiary INVISTA, which made nylon and polyester fibers, including Lycra and Stainmaster, to Koch Industries for $4.2 billion in an April 2004 deal. He outlined plans to further cut DuPont’s workforce by 3,500 people and made a substantial shift in management in January 2004, creating the post of head of global sales and rearranging leadership in the Far East. Holliday pointed out that high natural-gas prices put DuPont and other U.S. chemical makers, who used natural gas as well as crude oil to make their products, at a disadvantage, as compared with those elsewhere who had access to more moderately priced natural gas. Holliday stated that the moves were part of an overall plan to cut $900 million and to focus DuPont’s efforts on fastergrowing markets, including South America, Eastern Europe, and Asia. Holiday pointed out that the high energy costs were prompting DuPont to shift its focus on investments and jobs overseas. Holliday told Thaddeus Herrick of the Wall Street Journal, “These are difficult but necessary decisions” (April 13, 2004).

MANAGEMENT STYLE: YOUR WORD IS YOUR BOND Holliday often referred to a conversation that he had had when he was still a young manager at DuPont in the 1980s. He was talking with the company’s CEO at the time Dick Heckert. In an interview with Carol Hymowitz of the Wall Street Journal, Holliday recalled that Heckert told him, “‘This company lives by the letter of its contracts and the intent of those contracts’”; Holliday added, “I still remember the expression on his face when he said those words, and I’ve lived by that philosophy ever since” (July 9, 2002). Analysts noted that Holliday’s management style involved looking within the company for leadership candidates who did not necessarily follow the norm. When recruiting prospective leaders, he focused on enthusiasm and desire. With respect to his own motivation to keep going everyday, he told Peters for the profile on the Pi Kappa Alpha Web site, “Well, I love interacting with people and I love a challenge. I love tough problems. If my job here was routine, it might be harder for me to get up in the morning” (May 21, 2001).

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Holliday placed a high priority on one’s ability to listen and favored those who shared this trait with him. He informed Peters, “Where I have learned the most has been from that walk through the plant with someone who is 10 or 15 years older than me who is not afraid to tell me about how things should be done” (May 21, 2001). Holliday was commended for improving DuPont’s standing on environmental issues, taking such steps as pledging to reduce the company’s greenhouse-gas emissions. He cowrote a book with Stephan Schmidheiny, the chairman of Anova Holding, and Philip Watts, the chairman of the committee of managing directors of the Royal Dutch/Shell Group, entitled Walking the Talk: The Business Case for Sustainable Development. Therein, the three corporate leaders outlined their belief that businesses should operate in a humane fashion. Malcom McIntosh wrote in the Journal of Corporate Citizenship, “The authors say they were nervous of using this title, and well they might be; but they should be applauded for recognizing the fundamental issues at the heart of sustainable development— social justice and corporate responsibility for environmental degradation” (2002).

PURSUES STRATEGY By mid-2004 Holliday remained optimistic about the future of DuPont and about his strategy of aligning DuPont’s businesses by market-growth platforms in order to increase speed and effectiveness in meeting customer needs. The platforms into which the company was broken down were Agriculture and Nutrition, Coatings & Color Technologies, Electronic and Communication Technologies, Performance Materials, and Safety and Protection. Holliday upheld his commitment to DuPont’s efforts in biotech and genetic engineering, as exemplified by the company’s purchase of Verdia, a wholly owned subsidiary of Maxygen; in 2004 he sealed a deal to purchase the plant-sciences company for $64 million in cash. By purchasing Verdia, Holliday ensured that DuPont would have worldwide, royalty-free, exclusive rights to use Maxygen’s MolecularBreeding gene-shuffling technology for applications across its Agriculture and Nutrition platform. In addition to his duties at DuPont, Holliday served on the boards of directors of HCA and Catalyst, was a senior member of the Institute of Industrial Engineers, and was also a member of the board of Winterthur Museum & Gardens. In September 2002 he was appointed by President George W. Bush to serve on the national Infrastructure Advisory Council. He was elected chairman of the Business Council in 2002. He served as chairman for the World Business Council for Sustainable Development and for the American Section of the Society of Chemical Industry.


Chad Holliday

See also entry on E. I. du Pont deNemours & Company in International Directory of Company Histories.


“CEO Describes DuPont’s Growth Plans,” Women’s Wear Daily, April 27, 2000, p. 12. Chang, Joseph, “DuPont CEO Seeks Internal Improvement,” Chemical Market Reporter, November 17, 1997, p. 1. “A Company Life Who Wants to Be a Maverick,” BusinessWeek, October 20, 2000, p. 88. “DuPont’s Big Remake May Need a Remix,” BusinessWeek, October 30, 2000, p. 84.

Hymowitz, Carol, “In the Lead: CEOs Must Work Hard to Maintain Faith in the Corner Office,” Wall Street Journal, July 9, 2002. Malone, Scott, “DuPont Plans Fiber Unit IPO,” Women’s Wear Daily, February 12, 2002, p. 2. McIntosh, Malcom, review of Walking the Talk: The Business Case for Sustainable Development, in Journal of Corporate Citizenship, Winter 2002, p. 123. “New Life for DuPont: Chad Holliday,” Technology Review, November 2001, p. 77. Warren, Susan, “DuPont’s Choice of Holliday as Chief Catalyzes Chain of Curious Phone Calls,” Wall Street Journal, November 12, 1997.

Herrick, Thaddeus, “DuPont to Eliminate 3,500 Jobs as High Gas Prices Take a Toll,” Wall Street Journal, April 13, 2004.

—David Petechuk


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■■■

Katsuhiko Honda President, Japan Tobacco Nationality: Japanese. Born: In Japan. Education: Tokyo University, 1965. Career: Japan Tobacco, 1994–1995, executive director, personnel and labor relations; 1995–1996, executive director, tobacco headquarters; 1996–1998, executive vice president; 1998–2000, senior executive vice president; 2000–, president and chief executive officer; 2001–, representative director. Address: 2-1, Toranomon 2-chome, Minato-ku, Tokyo, 105-8422, Japan; http://www.jti.com.

■ Katsuhiko Honda became president of Japan Tobacco when the once small cigarette manufacturer known only in Japan was positioning itself to become an international competitor. The company also was about to lose one of its main sources of income—rights to produce and sell the Marlboro brand of cigarettes. Honda, a quick-thinking executive, immediately began working with Japan Tobacco to keep the company afloat, to make it more widely known, and to move it in an international direction. As of 2004 he was successful in reaching these goals.

RISING THROUGH THE RANKS OF JAPAN TOBACCO Honda was graduated from Tokyo University in 1965. He joined Japan Tobacco in 1994 as the executive director of personnel and labor relations and then became the executive director of the tobacco headquarters. In 1996 Honda was promoted to executive vice president, and in 1998 he became senior executive vice president. In 2000 Honda was promoted to president and chief executive officer, and in 2001 his title expanded to president, chief executive officer, and representative director. When Honda took over the company, Japan Tobacco was the third-largest tobacco company in the world. It had bought the non-U.S. business of RJR Nabisco, which meant Japan

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Katsuhiko Honda. Getty Images.

Tobacco could sell the Camel, Winston, and Salem brands outside the United States. Japan Tobacco also made Mild Seven cigarettes, a popular brand in Japan and elsewhere. Honda, however, was interested in expanding Japan Tobacco’s outside-market base. In 2000 Honda began making alliances with small tobacco companies in Europe that were suffering the effects of being in a highly competitive market. Approximately 60 percent of Japan Tobacco was government owned, a condition Honda disapproved of because the government, having the major share, could make or veto most decisions. In 2001 Honda asked the government to sell back some of its stake in the company. He wanted Japan Tobacco to become completely private so that management would have a freer hand in running the company. The Japanese government promised to give the matter some thought.


Katsuhiko Honda

END OF THE PHILIP MORRIS AGREEMENT In 2002 Honda announced that Japan Tobacco would launch premium brands of cigarettes, including Lucia Citrus Fresh Menthol, Fuji Renaissance, and Lucia reduced-odor cigarettes. Development of these brands was possible because of the impending termination of a licensing agreement between Japan Tobacco and Philip Morris & Company by which Japan Tobacco sold Marlboro cigarettes in Japan. The agreement had been made in 1972, had been renewed in 1986, and was due to end in April 2005. When the two companies first made the deal, Japan Tobacco owned nothing else and was not viewed as competition by the tobacco giant. By 2002, however, Japan Tobacco owned several brands that competed with the Philip Morris brands, and Honda deemed it no longer suitable to renew the license. The effect of the termination of the licensing agreement was that Japan Tobacco would lose the profits from the Philip Morris cigarettes and would begin competing with the company in Japan and abroad. In preparation for the break with Philip Morris, Japan Tobacco prepared to close eight factories and reduce its workforce by March 2006. In 2003 Japan Tobacco asked four thousand employees to agree to early retirement. The company also stated the cuts were being made because of declining sales and because the government, which owned two-thirds of the company, was finally preparing to decrease its share to one-half. According to the Financial Times (July 5, 2002), Honda said the company needed to restructure “to strengthen the company’s efficiency and competitiveness through well planned restructuring measures of our own initiative.”

BOOSTING SALES ABROAD As part of his organizational planning Honda had Japan Tobacco cut existing cigarette brands from 99 to 60, eliminating unpopular brands and focusing on popular ones. As of 2004 the company was set to release 20 new brands—a major change in the company’s strategy. The former practice had been to flood the market with many brands regardless of the sales of the individual brands as long as some sales were made. The company was interested in meeting every customer need and niche no matter how much it cost. With Honda in charge Japan Tobacco was interested in branding a few types of cigarettes so that they were strong, solid competitors in the international marketplace. The company also was working on developing cigarettes with less tar and that produced less odor, features researchers believed would be popular in the new market. While organizing business at home, Honda made plans to boost overseas sales and cut costs—moves made in reaction to a three-year decline in sales in Japan. The decrease in sales was attributed to demographic changes, increases in cigarette prices due in large part to an increase in cigarette taxes, and a weak


economy. Japan Tobacco also was dealing with a net loss due to pension-related issues. Always looking for ways to expand business as the cigarette business decreased, Japan Tobacco entered the food and pharmaceuticals businesses. “We will target the development of drugs that can be accepted worldwide. We plan to make the food business a cash-flow generator. If the . . . food business needs to be augmented we will pursue alliances or acquisitions,” Honda was quoted as having said in the Financial Times (Kipphoff 2003).

See also entry on Japan Tobacco Inc. in International Directory of Company Histories.


“A Bit of a Drag,” Financial Times, August 8, 2003. “Honda Katsuhiko,” 2003, http://www.weforum.org/site/ knowledgenavigator.nsf/Content/Honda%20Katsuhiko. “In the Hot Seat,” Asia Africa Intelligence Wire, April 30, 2004. “Japan Tobacco Chief Calls for Full Privatization,” AsiaPulse News, March 1, 2001. “Japan Tobacco Inc.,” 2004, http://www.hoovers.com/japantobacco/—ID__52305—/free-co-factsheet.xhtml. “Japan Tobacco Inc. to Cut 4,000 Jobs, Close One-Third of Factories,” Knight-Ridder/Tribune Business News, August 6, 2003. “Japan Tobacco Looks for European Hookups,” The Seattle Times, June 16, 2000. “Japan Tobacco Looks to Boost Overseas Sales,” Financial Times, April 9, 2002. “Japan Tobacco Profits Surge,” Financial Times, November 7, 2002. “Japan Tobacco Slashes Profit Forecast as High Costs Bite,” Evening News, February 5, 2002. “Japan Tobacco Slips into Red on One-Off Pension Cost,” Europe Intelligence Wire, October 30, 2003. “Japan Tobacco to Close Factories,” Financial Times, July 5, 2002. “Japan Tobacco to Stop Selling Marlboros, Cut Jobs,” August 6, 2003, http://quote.bloomberg.com/apps/ news?pid=10000101&sid=aCAZ07Tdwwek&refer=japan. “JT Eyes European Market,” Financial Times, October 9, 2000. “JT Giving Up Marlboro,” World Tobacco, September 2003, p. 8. “JT Plans to Revamp Cigarette Lineup,” Asia Africa Intelligence Wire, December 3, 2003.

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Katsuhiko Honda Kageyama, Yuri, “Gov’t to Sell Japan Tobacco Stake Soon,” Seattle Times, May 10, 2004.

“Prices Rise as Takeovers Reach Clean-Up Stage,” World Tobacco, September 2003, p. 13.

Kipphoff, John, and Bayan Rahman, “Marlboro’s Licence Deal in Japan Is Stubbed Out: The Move by Japan Tobacco Will Put Philip Morris at a Disadvantage,” Financial Times, August 7, 2003.

Turner, Clive, “Snakes and Ladders: Japan Tobacco Matures,” March 2001, http://www.tobaccoreporter.com/backissues/ Mar2001/story4.asp.

“Peace Pipe,” Financial Times, August 11, 2003.

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—Catherine Victoria Donaldson


■■■

Van B. Honeycutt 1945– Chief executive officer and chairman of the board, Computer Sciences Corporation Nationality: American. Born: 1945, in Virginia. Education: Franklin University, BS, 1971. Family: Married Diana (maiden name unknown); children: one. Career: Computer Sciences Corporation, 1975–1983, regional marketing director for time-sharing and valueadded network; CSC Credit Services, 1983–1987, president; CSC Industry Services Group, 1987–1993, president; Computer Sciences Corporation, 1987–1993, corporate vice president; 1993–2003, president; 1993–1995, chief operating officer; 1995–, chief executive officer and chairman of the board. Address: Computer Sciences Corporation, 2100 East Grand Avenue, El Segundo, California 90245-5024; http://www.csc.com.

■ Although he was one of the world’s most powerful businessmen, Van Honeycutt was quiet, somewhat withdrawn, and unpretentious. He was the type of person who would pour his own coffee out of his own thermos at work. Yet presidents, prime ministers, and potentates worldwide sought Honeycutt’s advice on business, information technology, and security. When the United States created the Office of Homeland Security, Honeycutt was one of the first advisers to the new agency. During the presidency of Bill Clinton, Honeycutt had been a chief adviser on keeping America’s communications systems secure. Honeycutt built Computer Sciences Corporation into an international powerhouse with more than eight hundred offices around the world. The company aided businesses in creating and maintaining information systems, business software, and networking. Honeycutt achieved success for Computer Sciences by making the company flexible enough to be able to find any sources needed to help its clients, even when those sources were companies other than Computer Sciences. International Directory of Business Biographies

MAKING HIS PRESENCE FELT In 1971 Honeycutt received the degree of bachelor of science in business administration from Franklin University, Columbus, Ohio. He joined Computer Sciences Corporation in 1975 as a regional marketing director. At that time Computer Sciences was primarily a government contractor, emphasizing software solutions for information management. In 1983 Honeycutt was promoted to president of CSC Credit Services, a division of Computer Sciences that assisted commercial enterprises in the processing of loans. In 1983 CSC Credit Services had revenues of $22 million. By the time Honeycutt left the division in 1987, revenues had increased to $105 million, and CSC Credit Services was the largest Computer Sciences commercial operation. In 1987 Honeycutt was made president of the CSC Industry Services Group as well as a vice president of Computer Sciences Corporation. In 1993 he was named president and chief operating officer of Computer Sciences, and he was elected to the corporation’s board of directors. From 1987 to 1995 Honeycutt led Computer Sciences into information technology outsourcing, making outsourcing an $800 million business for the company. He also negotiated a 10-year $3 billion outsourcing agreement with the defense contractor General Dynamics. In October 1994 William R. Hoover announced his retirement as chief executive officer, and in April 1995 Honeycutt was named CEO while retaining his position as president. Also in 1995 Honeycutt was appointed by President Clinton to serve on the National Security Telecommunications Advisory Committee, which advised the president on policy and industry-related issues as well as on the government’s preparedness for national emergencies. In 1995 Computer Sciences had $3.4 billion in revenues. Honeycutt pressed hard for Computer Sciences to take on additional commercial outsourcing—the process whereby a business pays another company to handle some of its work. For example, Computer Sciences provides computer services for a company or perhaps manages a company’s billing process. Honeycutt wanted to expand Computer Sciences outsourcing to encompass any service a client needed so that the client could focus on its core business. In 1996 Computer Sciences revenue increased to $4.7 billion.

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Van B. Honeycutt

BATTLING TO REMAIN INDEPENDENT In 1997 Honeycutt created new divisions for healthcare and financial services consulting and outsourcing, and Computer Sciences made deals to assist Johns Hopkins Healthcare and the J. P. Morgan company. In addition, Computer Sciences developed outsourcing services for hospital supplies distribution and insurance claims processing. Computer Sciences revenue for 1997 was $5.6 billion with a net of $192 million, almost double the profits for 1996. Honeycutt developed a corporate culture that journalists, employees, and colleagues alike considered “friendly.” Hoover had been a gregarious, personable man, whereas Honeycutt seemed withdrawn, but Honeycutt was attentive to clients, and he was great at making deals. Even so, the friendly atmosphere at Computer Sciences and Honeycutt’s gentle, withdrawn personality made Computer Sciences management seem weak to some outsiders. In late 1997 Computer Associates International, a software services company, made an offer to buy Computer Sciences. When the offer was turned down, Computer Associates International launched a hostile takeover bid, creating one of the most public and nastiest battles between major corporations in the late 1990s. Computer Associates International offered $108 per share, a total of $98 billion, for Computer Sciences. It turned out that Honeycutt was not weak; he was an unpretentious person, but he was, as he described himself at the time (Lubove 1998); a “pain in the ass.” To Honeycutt, Computer Associates International and Computer Sciences were antithetical companies. Honeycutt viewed Computer Associates International as a rigid company that insisted on having all services for clients developed in-house, whereas Computer Sciences had a flexible business model that encouraged finding solutions for clients even if those solutions were to be found in an outside company. Honeycutt was proud that Computer Sciences was objective in its analyses of its clients’ needs, whereas he viewed Computer Associates International as a vendor that always tried to force clients to fit the services Computer Associates International itself had to offer. The CEO of Computer Associates International was the computer-industry pioneer Charles Wang, who along with the company’s president, Sanjay Kumar, had built the company into a corporate giant through acquisitions. Wang saw Computer Sciences as a good fit with his company because Computer Sciences had a worldwide sales force and success in financial services. Honeycutt sued Wang and Computer Associates International, asserting that Wang and Kumar had tried to bribe him into going along with the takeover by offering him $50 million in cash and stock. Wang insisted that talks with Honeycutt had focused on how much Computer Associates International would pay per share, declaring that Honeycutt had asked for $130 per share and that negotiations had eventually focused on $115 to $125 per share.

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Honeycutt insisted that he had never negotiated with Wang and that Computer Sciences was not for sale at any price. Wang and Computer Associates International sued Computer Sciences in Las Vegas, Nevada, because Nevada laws favored the takeover bid. Wang declared that Computer Sciences was violating the law by not presenting the takeover bid to Computer Sciences shareholders for a vote. Computer Sciences changed its bylaws to require that 90 percent of its board members had to vote in favor of a takeover before it could be brought to a vote of shareholders. Wang accused Honeycutt of racism, because someone at Computer Services had said that Computer Sciences was at risk of losing its defense contracts, which were 29 percent of Computer Sciences business at the time, because Wang was a native of China and Kumar was a native of Sri Lanka. Computer Sciences quickly apologized. Honeycutt took his case to Computer Sciences shareholders, arguing that a takeover by Computer Associates International would harm Computer Sciences customers because Computer Associates International lacked the flexibility and objectivity of Computer Sciences and that the takeover would harm employees because Computer Associates International had a history of firing large numbers of employees after successfully taking over a company. Wang promised that such firings would not occur. Honeycutt promised that Computer Sciences shares would soon be worth more than $108 apiece and that Computer Sciences would have an 18 percent increase in earnings for 1998. Journalists considered Honeycutt’s promises difficult to keep because the U.S. Department of Defense was cutting spending, lowering potential income for Computer Sciences. On February 10, 1998, the value of Computer Sciences shares increased to $106.94 each. On February 17 Computer Associates International officially initiated its hostile takeover bid. On February 19 Honeycutt pressed his case that the hostile takeover would damage customers and employees, two points recognized as a legal defense in Nevada, and that shareholders would lose money. Shareholders supported Honeycutt, and on March 16, 1998, Computer Associates International let its offer expire, but not without Wang’s writing a scathing public letter chastising Honeycutt for harming shareholders. By May 1998 the value of Computer Sciences stock was near $108, and the stock was split. In a display of lack of flexibility that summer Computer Sciences turned down an outsourcing deal with the telecommunications giant BellSouth because at a consultant’s urging BellSouth wanted to share the outsourcing deal with Andersen Consulting and EDS. On September 10, 1998, President Clinton appointed Honeycutt chair of the National Security Telecommunications Advisory Committee, which was then working on the year-2000 computer problem, which would have had millions of computers


Van B. Honeycutt

resetting their dates to 1900 on January 1, 2000. With help from Computer Sciences and other technology companies, the government managed to adapt its software and computers in time to avert the resetting to 1900. Later in 1998 Computer Sciences signed a $3 billion contract with the U.S. Internal Revenue Service to help manage the service’s flow of information. By the end of the year Computer Sciences had 45,000 employees in seven hundred offices around the world and had won a reputation for toughness. By then three-fourths of its revenue was coming from commercial businesses. In February 1999 Computer Sciences split stock was trading at $64 per share, the equivalent of $128 before the split and $20 dollars more than Computer Associates International’s offer the previous February. Earnings had increased 24 percent. These numbers were above Honeycutt’s promises of the previous February. For 1999 revenues were $7.60 billion. In January 1999 Honeycutt negotiated a $300 million deal with AT&T to manage AT&T’s billing processes. More remarkable was Honeycutt’s making peace with Computer Associates International through a deal whereby Wang’s company would participate with Computer Sciences in outsourcing work. On March 5, 1999, Honeycutt and Janet Reno, the U.S. attorney general, announced creation of Cybercitizen Partnership, an organization for teaching children the ethics of computer use, under the auspices of the Information Technology Association of America. The organization resulted from an encounter between Reno and Honeycutt at a technology meeting during which Reno had said that she was concerned about the lack of ethical behavior on the part of children online. The comment struck a chord with Honeycutt, whose 14-year-old daughter was learning impressive computer skills at school but seemed not to be learning how to behave online.

believed that Computer Sciences had been only partly successful and needed to do a better job of reconciling “legacy systems” of its clients with the new systems of commerce demanded by emerging e-commerce. Among the changes in which Honeycutt foresaw Computer Sciences playing a role was a shift in how business was conducted. “What’s taking place now is that leading corporations in a handful of industries such as chemicals, automotive parts and even healthcare insurance are aligning with one another as they collectively capitalize on the Internet. These efforts will drive global ecommerce,” said Honeycutt (2000). By the end of 2002 Computer Sciences had 67,000 employees in eight hundred offices worldwide. Its revenue for 2002 was $11.426 billion with net earnings of $344 million. Clients included the U.S. Department of Defense, DuPont, the Massachusetts Institute of Technology, and Rolls Royce. Outsourcing accounted for one-half of the company’s revenue. Computer Sciences was known as a good place to work because of its friendly, creative corporate culture, which included generous maternity leaves. Negative aspects of working at Computer Sciences were the grueling travel required for consulting with far-flung clients and a large corporate bureaucracy. On March 7, 2003, Computer Sciences acquired DynCorp, strengthening its government services business and adding 26,000 employees to make the total Computer Sciences workforce 93,000 persons. On March 12, 2003, Honeycutt transferred the office of president to Mike W. Laphen, who had been corporate vice president and president of the Computer Sciences European group. Honeycutt retained the offices of CEO and chairman of the board.

See also entry on Computer Sciences Corporation in International Directory of Company Histories.

EXPANDING HORIZONS In the late 1990s the dot-com crash caused hundreds of high technology and Internet businesses to lose money or go out of business. During this difficult period, which extended into a worldwide recession in the early 2000s, Computer Sciences consistently turned a profit. Part of this success was a result of Honeycutt’s communicating his vision for his company. On November 15, 2000, Honeycutt presented his view of what Computer Sciences was and what he envisioned it would become. This vision was not a by-the-numbers view but was more an exercise in classical philosophy. Honeycutt believed that success in e-business (electronic business) required interconnectivity of customers, suppliers, and suppliers’ partners and that the mission of Computer Sciences was to create that connectivity for its clients. As of November 2000 Honeycutt



Lubove, Seth, “A Pain in the Posterior?” Forbes, May 18, 1998, pp. 98–99. Martin, Mitchell, “Firms Trade Barbs over Takeover: Computer Sciences Tries to Fight $9.8 Billion Bid,” International Herald Tribune, March 4, 1998. “New Levels of Connection, Integration Key to the Business of ‘E’: Focus on Business Process, Not Technology, CSC Exec Says,” November 15, 2000, http://www.csc.com/ newsandevents/news/172.shtml. —Kirk H. Beetz

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Kazutomo Robert Hori 1965– President and chief executive officer, Cybird Company Nationality: American. Born: 1965, in Washington, D.C. Education: School of Law, Kwansei Gakuin University, graduated 1989. Career: Paradise Web Company, 1994, cofounder, president, and chief executive officer; Cybird Company, 1998–, founder, president, and chief executive officer. Address: CYBIRD Company, Roppongi Hills Mori Tower 22F, 6-10-1 Roppongi, Minato-ku, Tokyo 106-6161; http://www.cybird.co.jp.

■ Kazutomo Robert Hori’s idea to charge cell-phone users subscription fees for online content helped to revolutionize Japan’s mobile Internet industry. He launched Cybird Company in Tokyo on September 19, 1998. Cybird’s business operations include foreign and domestic mobile content, mobile marketing solutions, and research and development for nextgeneration mobile platforms. For the fiscal year ending in March 2004, Cybird boasted 3.2 million paying subscribers and a market cap of $142 million, with $54 million in projected revenues. Hori was born in Washington, DC, raised in Kobe, Japan, and studied in Japan and England. In 1994 he started Paradise Web Company, a content provider for PC users. However, the company went out of business quickly. Hori sold horse feed for three years while planning for his next venture, which came in 1998 with Cybird, which provides the content for all mobile carriers in Japan.

BUSINESS ACHIEVEMENTS Cybird achieved its goals through a combination of unique content, marketing, international focus, and technology, as well as important partnerships, affiliations, and subsidiaries. One important achievement was the acquisition of lucrative

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licensing deals, such as obtaining exclusive rights from Lucasfilm to develop mobile content in Japan for the Star Wars franchise, a venture called Star Wars Mobile. Cybird emphasized end-user satisfaction by providing mobile solutions that were beneficial and easy to use. Progress was made in the research and development of solutions that utilize two-dimensional bar codes and noncontact type IC cards for mobile phones. Cybird made inroads internationally by offering consulting services and solutions for wireless-network operators throughout Asia, Europe, and the United States, and it also provided original content for local wireless-network operators in The Netherlands, Germany, Belgium, France, Singapore, Thailand, and Korea. K Laboratory, a strategic technologyplanning company, was established by Cybird for research and development of software for mobile phones. K Laboratory created “on-campus mobile phone labs,” run by students, which actively involved both industry and academia in the research and development process. At the JavaOne Conference in Japan in 2001, Cybird was named the first Japanese company to become an authorized technology partner of Sun Microsystems. In 2002 the company received the first BREW Developer Award from the U.S. company Qualcomm. In addition, the Electronic Commerce Research Group awarded Cybird the Japan Online Shopping Grand Prize for Best Mobile Electronic Commerce Solutions.

BUSINESS STRATEGIES AND PHILOSOPHY Cybird was committed to creativity, performance, and reliability. Business plans were created with an emphasis on a thorough understanding of end-user needs and recognition of the unique nature of the Internet. As Hori explained, “In order to develop relevant content and applications, Cybird conducts its own market research. Generally, when we create a new service we look for subject material that is already widely accepted by Japanese people” (TheFeature.com). Hori’s business philosophy was influenced by the old Japanese keiretsu economic system, whereby a “group of partners develop an industry by working in long-term, structured relationships based on knowledge sharing, consensus building and mutual benefit.” Hori noted that “there must be a cycle of positive feedback between all the players, including manufacturers, operators and content providers.” He added, “In Japan


Kazutomo Robert Hori

each player in the value chain knows its own territory and doesn’t try to interfere or compete with others. All the players have an incentive to do a better job than yesterday.” Overall, Cybird’s reliability was proven by important partnerships, a large subscription base, and work with well-known clients like George Lucas. Hori expressed Cybird’s goal for the future, “We want to always position ourselves in the center of the mobile Internet. To be someone who decides. We want to be one of the mothers and fathers of this industry, not just in Japan but the whole world” (TheFeature.com).

INDUSTRY IMPACT Cybird’s mobile Internet ventures dominated content for Japanese telecommunications, but, with the exception of gaming software, Japanese companies have traditionally struggled to compete in the software and content industries on the international level. Hori’s achievements with licensing agreements


and innovative research and development created a solid base from which to reach the international community of mobile Internet users.


Cullen, Lisa Takuchi, “Birds of a Feather: When DoCoMo Flies the Coop, So Does Cybird,” Time Asia, June 23, 2004. ———, “Robert Kazutomo Hori” Time Europe, December 2, 2002, p. 46. “Kazutomo Robert Hori: Founder and President, Cybird,” BusinessWeek, July 8, 2002, p. 64. Ragano, Dmitri, “Finding the Wave,” TheFeature.com, http:// www.thefeature.com/article?articleid=13898. —Lee McQueen

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Janice Bryant Howroyd 1952– Chief executive officer, ACT*1 Personnel Services Nationality: American. Born: September 1, 1952, in Tarboro, North Carolina. Education: North Carolina A&T State University, English degree; University of Maryland, master’s degree; North Carolina State University, PhD. Family: Married Bernard Howroyd (CEO of AppleOne Employment Services); children: two. Career: Billboard, 1976–1978, personal assistant to the director; ACT*1 Personnel Services, 1978–, CEO; Document Scanning Systems, CEO, 1996–; A-Check America, CEO, 1998–. Awards: Entrepreneur of the Year, AT&T, 1994; 50 Leading Women Entrepreneurs of the World, Star Group, 1999 and 2000. Address: ACT*1 Personnel Services, 1999 West 190th Street, Torrance, California 90504; http://www.act1.com.

■ A determined professional, Janice Bryant Howroyd expanded her small, one-phone-line office into a multimillion dollar business over a period of more than 30 years. She began ACT*1 Personnel Services, a now leading employmentservices agency, with $1,500 and perseverance. Howroyd was one of a handful of African American women entrepreneurs in the employment-service industry. Janice Bryant Howroyd was born around 1953 in Tarboro, North Carolina, as one of 11 children in her family. She learned to remain determined in spite of all obstacles during high school; her parents sent her to the town’s all-white school, where in one class the teacher taught that people of African descent were only good for slave labor and that affirmative action was wrong for the country. Howroyd was upset and begged her father to allow her to switch schools. He left the decision to her; she eventually chose to return. She would perform well enough to win a full scholarship to North Carolina A&T State

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University, where she earned a bachelor’s degree in English. She later earned a doctorate in humanities from North Carolina A&T State University. After finishing her schooling, Howroyd visited her sister in Los Angeles and soon decided to stay there. She went to work as her brother-in-law’s assistant at Billboard and noticed that most of the magazine’s employees worked there in order to either break into the entertainment business or make money while waiting for their big breaks. Howroyd also noticed that she had an affinity for organization and employee placement. She stated in Black Enterprise, “I realized that I enjoyed helping people get temporary and permanent jobs. When someone told me to hang out my own shingle, I took the chance” (August 2003). She saved money and later borrowed from her family in order to start her own employment-service agency. Howroyd rented a small office in Beverly Hills, and with one phone the life of her company ACT*1 Personnel Services began. One of her first clients was her former employer, Billboard. Howroyd built her business on two principles: the “WOMB” method and the notion of “keeping the humanity in Human Resources.” The letters in “WOMB” stood for “Word of Mouth, Brother!” Howroyd guaranteed companies that she would find qualified employees or return any payment received. Indeed, ACT*1’s reputation slowly spread by word of mouth, and within a few years the company had earned $10 million. Howroyd placed workers at companies with which she could build long-term relationships; she always sent only those who were qualified and would be committed to the positions in question. She told the San Diego Business Journal, “Never compromise who you are personally to become who you wish to be professionally. That means you only do business with a company you’d send a relative to, and you look to work with companies you can get repeat business from. That’s how I measure success” (January 29, 2001). ACT*1’s motto of “pride in performance” helped employees and temporary workers feel valued. While others businesses grew merely by opening branches in other areas, Howroyd and her executive team, which by this time included several family members, decided to expand ACT*1 through the creation of new technology. Under Umbrella Managed Programs, ACT*1 created an electronic time card that Silicon Graphics, a computer maker, would use to


Janice Bryant Howroyd

track all of its temporary employees. Madelina Williams, a manager at Silicon Graphics, stated to Cassaundra Hayes of Black Enterprise, “At the end of the week, our managers can push a button and see the status of any temp employee. ACT*1 did in six weeks what their predecessors couldn’t. They are truly a business partner” (August 1998). ACT*1 branched into other areas, including engineering, technical and general office work, and entertainment. Howroyd also started two schools of continuing education— California National University for Advanced Studies and the Academy of Computer Technology—to help her workers gain new skills. She also started Agile-1, a management-solutions company; A-Check America, a background and drugscreening company; Enterpise Communications, a businesscommunication solutions company; Document Scanning Systems, a document-management solutions provider; and CTA Travel, a corporate travel agency. Through new technology and the various ACT*1 affiliates, Howroyd hoped to step beyond relationships with customers and create lasting partnerships with the companies that made use of her various services. Howroyd continued to “keep the humanity in Human Resources” and develop relationships with a number of companies, moving her business from Beverly Hills to Torrance, California. She opened more than 70 office branches across the country and served companies such as Ford Motor Company, Cingular Wireless, and the Gap. In 2003 ACT*1 reported earnings of $487 million. That year the company ranked third on Black Enterprise magazine’s Top 100 Industrial/Service Companies list.


Howroyd, who owned 51 percent of her company (her children, Katharyn and Brett, owned the other 49 percent), was also active in her community. She served on the U.S. Department of Labor’s Workforce Initiative Board, Loyola Marymount University’s board of regents, and the Women’s Leadership Board of the Women and Public Policy Program at Harvard University’s John F. Kennedy School of Government. She was married to Bernard Howroyd, the head of AppleOne Employment Services.


Forst, Eric, “Minority-Woman-Owned Company Succeeds with New Technology,” San Diego Business Journal, January 29, 2001. Hayes, Cassaundra, “Business Dynamos,” Black Enterprise, August 1998, pp. 58–64. Holmes, Tamara E., “She’s the Boss: The Women of the B.E. 100s Are Setting a New Standard of Excellence—and Changing the Face of Business,” Black Enterprise, August 2003, pp. 93–95. “Howroyd, Janice Bryant,” Contemporary Black Biography, vol. 42, Farmington Hills, Mich.: Gale Group, 2004. “Sisters in Charge: Innovative Women Entrepreneurs,” Ebony, March 2002, pp. 136–142. —Ashyia N. Henderson

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Ancle Hsu 1961– Vice chairman and chief operating officer, Apex Digital Nationality: American. Born: 1961, in Taiwan. Family: Married (wife’s name unknown); children: two. Career: Apex Digital, 1999–, vice chairman. Address: 2919 East Philadelphia Street, Ontario, California 91761; www.apexdigitalinc.com.

■ Ancle Hsu cofounded Apex Digital in 1999 and served as its vice chairman. Apex was the largest manufacturer and marketer of DVD home entertainment players in the United States and was a fast-growing supplier of analog and digital television sets. The privately held company expected to exceed $1.5 billion in sales for 2004 and to have sold its products in more than 20,000 retail outlets nationwide. Competitors and analysts described Hsu as a hard-working immigrant who occasionally cut corners in search of a profit.

RISE OF APEX DIGITAL By the late 1990s Hsu and Ji had turned to home electronics, relying on a new product—the DVD player—a device with which movies and other materials could be recorded and viewed digitally. Ji and Hsu formed an offshoot company of United Delta and called it Apex Digital. The partners devised a business model in which microchips—the “brain” of a DVD player—were made in California and shipped to China, where the player itself was manufactured inexpensively. Apex accepted slim profit margins and skimped on advertising, preferring to forge ties with major retailers such as Circuit City and WalMart, which would handle marketing, advertising, and sales. The meteoric rise of the company stunned the industry. Apex’s focus on low-cost Chinese manufacturing and leading-edge features enabled the company to sell more units of DVD players than any other manufacturer, including the industry giants Sony and Panasonic. As analyst Tom Edwards said, “They came out with the right products at the right time” (Arensman, May 1, 2002). Apex was early to market other popular features, such as a new Kodak format for showing photographs on a DVD player and a new audio format from Microsoft. A digital camera for playing MP3 files was being planned in 2004. Hsu said that Apex was doing what the established electronic companies had disdained: making new technology affordable to the masses. He argued that the industry giants had lost touch with U.S. consumers. “We don’t have the bureaucracy and overhead that Japanese companies have,” Hsu explained (Lyons, March 18, 2002).

HUMBLE BEGINNINGS Born in Taiwan, Hsu immigrated to the United States in the 1980s. He found work in Los Angeles, California, at a business that exported scrap metal to China. While toiling with the scrap metal Hsu struck up a friendship with David Ji, who had come from mainland China. In 1992 the two founded a business, United Delta, which sold scrap metal and other recycled materials to recyclers in China. Hsu’s mastery of the Chinese language and understanding of Chinese business culture helped United Delta to prosper. The company branched into stereo speakers for cars, herbal supplements, and disposable rubber gloves. Hsu had a minor misstep when California authorities charged him with a misdemeanor for failing to keep proper payroll records.

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LEGAL AND QUALITY ISSUES Hsu’s focus on price and features occasionally came at the expense of legal regulations. In 2000 Apex’s introduction of its DVD player was marred by a faulty microchip that, to the delight of many consumers, allowed users to copy DVDs to videotape and to override coding that prevented DVDs of films from being viewed in countries where they had not been officially released. Apex replaced the chips after threats of lawsuits from Macrovision Corporation and the Motion Picture Association of America. This DVD player also was the first consumer device that played MP3 files, a format used for downloading music on the Internet. The introduction of MP3


Ancle Hsu

capability had met with controversy because the technology often was used to pirate copyrighted material. Other hardware makers were afraid of legal battles with record companies, but Hsu gambled and won.

problems were related to the small size and rapid growth of the company.


A lack of technical support staff and a reliance on outsiders led to problems for Apex. Critics complained that Apex and the Chinese manufacturers on which it relied sometimes failed to pay licensing fees for technologies used in DVD players. Hsu acknowledged this fault and insisted that Apex planned to honor its obligations. Quality control became a pressing issue for the company in 2002 when its high-end DVD player had problems playing discs properly and produced unwanted popping and hissing noises. Apex halted production of the machine and arranged for customers to receive refunds. In 2001 a Chinese exporter sued Apex for payment of an $18 million debt. In 2002 a warehouse company attempted to auction off Apex gear, alleging that the firm was in arrears by $2 million. Hsu argued that partners had wronged Apex and that the


Arensman, Russ, “Watch Out Sony,” Electronic Business, May 1, 2002, http://www.reed-electronics.com/eb-mag/article/ CA211743?pubdate=5%2F1%2F2002. Berestein, Leslie, “David Ji and Ancle Hsu,” Time South Pacific, December 2, 2002, p. 68. Lyons, Daniel, “Smart and Smarter,” Forbes, March 18, 2002, p. 40–42. Mack, Rebecca, “Apex Digital Selects ESS Technology’s DVD Chip for Microsoft’s Windows Media Audio Application.” PR Newswire, November 29, 2001. —Caryn E. Neumann

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Günther Hülse 1942– Chairman of the board, Franz Haniel & Cie Nationality: German. Born: November 21, 1942, in Krefeld, Germany. Education: Degree in business finance. Career: State of North Rhine–Westphalia, fiscal administrator; Franz Haniel & Cie, 1982–2001, head, tax department; chairman of board, 2001–. Address: Franz-Haniel-Platz 1, 47119 Duisburg, Germany; http://www.haniel.de.

■ Günther Hülse was the chairman of the board of directors of Franz Haniel & Cie, one of the largest companies in Germany. Franz Haniel consisted of groups involved in many areas, including construction, pharmaceuticals, steel, and department stores. Hülse worked his way through the ranks, joining Franz Haniel in 1982 as head of the tax department and becoming chairman in 2001.

STARTING AT FRANZ HANIEL Hülse was born in Krefeld, Germany, on November 21, 1942. He earned a degree in business finance and went to work in the fiscal administration department of the state of North Rhine–Westphalia for several years. In 1982 he joined Franz Haniel as head of the tax department. Based in Duisburg, Germany, Franz Haniel had been a family-owned business since its inception in 1756. The company professed to be interested only in projects whose “rate of return is in line with the associated risk,” according to the Franz Haniel Web site, which also stated, “Speculative transactions are incompatible with our culture.” The company comprised six divisions: Belfor International, a company that provided fire- and water-damage repair service; Celesio, Germany’s leading pharmaceuticals distributor; ELG Haniel, a company that recycled and traded in raw materials for the stainless steel industry; Haniel BauIndustrie, a business that supplied building materials and raw

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materials and fixing systems; Haniel International, a group that supplied and rented work wear and washroom services and materials; and TAKKT, a mail-order company for office, plant, and warehouse equipment. Franz Haniel also owned Metro, Germany’s largest retailer, which operated several stores and restaurants in Germany and 27 other countries, including India, Russia, and Ukraine. In 1992 Hülse became a member of the Franz Haniel board, and in June 2001 he assumed the position of chairman of the board. Around the same time he also became chairman of the supervisory board of Celesio. He was also in charge of human resources, taxes, and corporate communications at Franz Haniel. Soon after Hülse became chairman, Franz Haniel purchased the German aerated concrete products business of RMC Group, a British company. Also in 2001 Franz Haniel bid for a rival conglomerate Preussag Fels-Werke, a building materials firm. In addition, Franz Haniel investigated purchasing Inrecon, an insurance and reconstruction company based in Birmingham, Michigan, which it planned to add to its water and fire damage repair company, Belfor.

INCREASING RESPONSIBILITIES In 2001 Hülse became chairman of the supervisory board of TAKKT. TAKKT had taken over the American mail-order company Hubert the year before, and Hülse was expecting further expansion after he became chairman. Hülse wanted the company to focus on setting up distribution companies in Portugal, Poland, and the United States. He also wanted TAKKT to mail its first shipment of catalogs from Kaiser + Kraft to Ireland and from Hubert to Canada. Hülse stated in the TAKKT annual report that “these investments were considered advisable from a business point of view, even under the current economic climate. The supervisory board strongly supported this strategic expansion.” In 2003 Hülse gave an annual address that stated Franz Haniel was doing well despite economic hardships. Expansion and acquisitions had helped the company succeed while the world economy was uncertain. On May 22, 2003, Hülse was nominated chairman of the supervisory board of Metro. He had become a member of the supervisory board of Allianz Lebensversicherungs in April 2003. In late 2003 Hülse announced his resignation from the Metro supervisory board as


Günther Hülse

of June 3, 2004, citing illness. He also resigned as chairman of the supervisory board of Celesio, the German pharmaceuticals trading company that had been part of Franz Haniel since April 29, 2004, and from the supervisory board of TAKKT. Hülse remained a member of both bodies but no longer took a leading role. His plan was to focus on his position as chairman of the board of Franz Haniel. In 2004 Hülse reported strong increases in sales. He was quoted as follows on the Franz Haniel Web site: “In the challenging economic environment which has prevailed in the year to date, the Group’s successful long-term trend remains unbroken—not least thanks to the strong commitment shown by all employees of the Group.”

Corporate news announcement processed and transmitted by Hugin ASA, Europe Intelligence Wire, April 29, 2004. “Franz Haniel & Cie. GmbH,” http://www.hoovers.com/franzhaniel/—ID__92227—/free-co-factsheet.xhtml. “Franz Haniel & Cie. GmbH Profile,” http:// www.business.com/directory/industrial_goods_and_services/ materials/metals/iron/franz_haniel_and_cie_gmbh/profile. “Germany: Metro Board Chairman Resigns,” May 4, 2004, http://www.kamcity.com/namnews/asp/ newsarticle.asp?newsid=18291.


Marsh, Peter, “Family Empire Reaps Rewards of Regular Disco Dancing: Private Companies,” Financial Times, May 6, 2003.

Almond, Siobhan, “Group Sells Concrete Products Unit,” The Daily Deal, July 24, 2001.

“Metro AG Company Profile,” http://biz.yahoo.com/ic/52/ 52620.html.

Braude, Jonathan, “Bidding for Fels-Werke,” The Daily Deal, May 9, 2001.



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L. Phillip Humann 1946– President and chief executive officer, SunTrust Banks Nationality: American. Born: 1946, in Independence, Kansas. Education: Auburn University, BS, 1967; MS, 1969. Family: Married Jane (maiden name unknown). Career: Trust Company of Georgia (later renamed SunTrust), 1969–?; Trust Company Bank, 1985–1989, chairman and chief executive officer; SunTrust Banks, 1989–, president and chief executive officer. Address: SunTrust Banks, 303 Peachtree Street NE, Atlanta, Georgia 30308-3201; http://www. suntrust.com.

■ Although not a native of the South, being originally from Independence, Kansas, L. Phillip Humann was associated with the laid-back style of the southern banker—until it came time for bargaining or boardroom decisions. Those who saw him in action said that his slow southern style was deceiving. After receiving bachelor’s and master’s degrees in economics from Auburn University, Humann began his career in the commercial banking training program of the Trust Company of Georgia, the first incarnation of SunTrust Banks. By 1991 he was the second-ranking officer of SunTrust. He received the nod for the top job in 1998. At that time the Atlanta-based SunTrust employed 21,000 and was America’s 19th-largest banking institution, based on its assets. As Humann ascended through the ranks at SunTrust, several significant events marked his career. In the 1970s he helped pull the bank out of bad real estate loans. In the 1990s he used strong leadership skills to bring new revenues to the conservative bank. His failed hostile takeover bid for Wachovia in 2001 drew praise, but also pessimistic speculation. Yet Humann forged ahead by acquiring firms and reorganizing to enhance his company’s hold on the South, despite rumors of SunTrust’s own readiness to sell.

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GROOMED FOR THE JOB When Humann was appointed CEO of SunTrust in 1998, his predecessor, James B. Williams, announced that Humann had been groomed for the job of heading the bank. He noted that Humann had been second in command since 1991, working right alongside Williams. Both Williams and Humann told the press that the bank’s conservative nature would not change with the new leadership. Wall Street analysts praised the decision to appoint Humann as CEO, although they expressed concern that SunTrust would not be able to compete in a market where acquisitions ruled. Even though Wall Street criticized the company for its lack of purchases, under Humann’s direction SunTrust in fact completed 37 acquisitions during the 1990s. One notable failure occurred in 1998 when Humann tried to acquire Barnett Banks of Florida, but SunTrust’s bid of $13 billion lost out to NationsBank at $14.6 billion. The phrase “quiet transformation,” coined by Humann after taking over as CEO, described his method of improving the performance and efficiency of SunTrust. However, his actions were not always quiet. Wall Street criticized SunTrust’s integration of Richmond-based Crestar Financial after their 1998 merger. The Securities and Exchange Commission required that SunTrust revise its earnings as listed in the acquisition because it had set too much aside for bad loans. The request caused Humann public embarrassment, since he was the one who had to issue the restatement of the company’s reserves, but the purchase of Crestar was nevertheless successful for SunTrust. The quiet transformation continued in 2000 as Humann cut 2,300 jobs at SunTrust and consolidated 27 banks with separate charters under one corporate umbrella. In 2001 he made his most aggressive move when he attempted to bring SunTrust into the Carolinas, the only hole in the company’s southern holdings, by making a hostile takeover bid for the Wachovia Corporation.

THE BATTLE FOR THE CAROLINAS Humann actually began negotiations for a merger with Wachovia in 2000. Hours before the boards of Wachovia and SunTrust planned to approve the agreement, the CEO of Wachovia called it off. As Humann later explained to American Banker, “Wachovia’s CEO called me to terminate discus-


L. Phillip Humann

sions based on some alleged unsolved differences in our approaches to the wealth management business. We didn’t understand back then, and don’t to this day” (May 15, 2001). When SunTrust learned, several months after the merger talks collapsed, that First Union Corporation planned to acquire Wachovia, Humann launched what insiders called a hostile takeover bid. He seemed determined to win the North Carolina–based Wachovia to solidify SunTrust’s southern stronghold, which in 2001 included Georgia, Virginia, Tennessee, and Florida. After he offered $14.7 billion for Wachovia in May 2001, institutional investors pushed him to offer more, which Humann refused to do. In the ensuing battle, both sides sued one another even before the shareholders voted on the bids. Takeover specialists said that SunTrust needed to accomplish one of two things: “Demonstrate a much greater credibility with the investment community than First Union, or put such a commanding offer on the table it left Wachovia’s board of directors no choice but to accept” (Atlanta JournalConstitution, August 4, 2001). Although it seemed at first that SunTrust had accomplished al least one of those things with the strong stock price it offered, in the end Wachovia’s shareholders voted 3-1 to take the First Union offer. Not only had Humann’s refusal to bid higher apparently hurt SunTrust’s chance to increase its southern holdings, but the company was also cautioned by the SEC to suspend repurchasing its shares to bolster stock prices. Even though Humann did not agree with the SEC’s ruling, he decided to stop the questionable practice. Humann told interviewers in 2002 that his hostile bid for Wachovia was not a new policy for SunTrust. He said that when polite negotiations failed, he had no other choice but to go the hostile route. In the end, despite the failure of the bid, SunTrust gained customers disgruntled with the changeover from Wachovia to First Union.

NEW METHODS IN A CONSERVATIVE WORLD By 2002 Humann had brought SunTrust from being the nation’s 19th-largest banking institution to being the ninthlargest, with $106.2 billion in assets. The purchase of Ohiobased Huntington Bancshares in 2002 brought Humann mixed reviews. Some analysts said that the move made sense because Huntington Bancshares had branches in Florida, allowing SunTrust to consolidate some of its own branches there. Insiders at SunTrust said that this type of merger would be the wave of the future for the company. However, other analysts argued that there were so few opportunities for mergers of this type that SunTrust could hardly grow except at the internal level. Humann liked to say that SunTrust was in a strong position because of its low percentage of bad loans. However, in


2002 he could no longer make that claim after SunTrust lost $31.2 million in loans to Enron, a large energy company that went under in a public scandal. SunTrust wrote off the loans in an attempt to break any public connection to Enron. The failed Wachovia bid made headlines, but it did not keep Humann from continuing to make changes at SunTrust. Critics said that these changes moved SunTrust from being essentially local bank under the leadership of Williams to being a large conglomerate with consolidated branches under one leadership. Humann maintained he was simply fine-tuning what had already been in place, and that this had to be done because of the company’s growth. He told American Banker in 2002 that SunTrust still retained its community-bank status while becoming more centrally efficient. Humann said the local banks provided what the customers wanted, which was contact with the top people in the bank. Betty Graseck, an analyst with Morgan Stanley, expressed concern regarding SunTrust’s ability to maintain revenue momentum despite Humann’s efforts at streamlining. Graseck said that the company needed to “focus aggressively to maintain share, especially as competition in its markets increases” (American Banker, September 16, 2002). Even though industry insiders criticized Humann’s conservative tactics, Humann saw those tactics as positives for the company in an uncertain economy. He told a reporter in 2003 that SunTrust continued to build customers and strengthen ties with its existing clients, while still considering options for acquisitions.

MANAGEMENT STYLE AND STRATEGIES Humann has been portrayed as relaxed on the surface, but those who worked with him knew that the surface was not the whole story. When Humann replaced Williams as CEO, industry insiders speculated as to what changes might occur at SunTrust. Williams assured them that if Humann had wanted to make changes, they would have been made even before he took over as the head of the company. Jon R. Burke, of Brown, Burke Capital Partners, summed up Humann for the Atlanta Journal-Constitution (February 11, 1998): “When he dies he’ll bleed Trust Company blue.” The analyst Harold Schroeder of Keefe, Bryette & Woods observed that Humann was not a flashy leader who pounded the table. Another analyst said that because Humann had spent his entire career at SunTrust, he had developed the slow-talking southern mannerisms of his predecessors, but that anyone dealing with him would be wrong to assume that his style implied slow thinking. Some insiders characterized Humann as tough and autocratic. The Atlanta Journal-Constitution reported (August 4, 2001) that when he took over as CEO, he had classified all the executives at SunTrust into A, B, or C categories. Those in the C group were not expected to last very long at SunTrust. Others have remarked on his silence during meetings—with the

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warning that it meant he was absorbing everything going on around him. Rawson Haverty Sr., who served with Humann on the board of Atlanta’s Haverty Furniture, told the JournalConstitution: “He’s always a heavyweight when he’s in a meeting. You don’t realize he’s taking everything in, but he is. If everything is going along the way he likes, he doesn’t say anything” (May 19, 2002). Some who worked with Humann at SunTrust stated that the CEO’s manner calmed other employees. John W. Spiegel, who served as SunTrust’s chief financial officer, said that Humann handled crisis situations thoughtfully, without losing his temper or control of his emotions. Interviewers have noted that Humann remained calm and relaxed even in trying times such as during the battle for Wachovia, and that he also spoke openly and honestly even about negative press given SunTrust. Thomas Finucane, manager of the John Hancock Regional Bank Fund in Boston, referred to Humann as blunt and honest. Humann avoided talking about himself, going so far with one reporter as to refuse to acknowledge information about his wife or even whether he had children. He also had a reputation for refusing to waste time, and as a result few at SunTrust under his leadership were ever late to meetings. If he told a joke, it was one that would inspire a grin rather than a guffaw because, as Spiegel pointed out, a huge joke would distract people from the business at hand. His serious and efficient manner was further reflected in his approach to controlling spending at SunTrust by freezing hiring and allowing attrition among the employees to do the rest. Even with interest rates hurting the banking industry in 2003, Humann remained op-

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timistic about his company’s future and denied continuing rumors of a takeover of SunTrust.

See also entry on SunTrust Banks Inc. in International Directory of Company Histories.


Boraks, David, “At SunTrust These Days It’s ‘Better’ not ‘Bigger’: Carolina Demographics Still a Lure, CEO Says,” American Banker, September 16, 2002, p. 1. Chambers, Rob, “A New Leader for SunTrust, but No Switch in Direction,” Atlanta Journal-Constitution, February 11, 1998. Luke, Robert, “Battle for Wachovia: The Aftermath: Too Tough a Battle for SunTrust,” Atlanta Journal-Constitution, August 4, 2001. Mandaro, Laura, and Alissa Leibowitz, “Spurned Suitor SunTrust Returns—And This Time It’s Hostile,” American Banker, May 15, 2001, p. 1. Paul, Peralte C., “The Georgia 100: Finance: SunTrust Banks: Conservative Choices Prove Prudent for Difficult Times,” Atlanta Journal-Constitution, May 18, 2003. Van Dusen, Christine, “A ‘Calming’ Banker: SunTrust’s Humann on Even Keel,” Atlanta Journal-Constitution, May 19, 2002. —Patricia C. Behnke


■■■

Franz B. Humer 1946– Chairman and chief executive officer, Roche Group Nationality: Swiss, Austrian. Born: July 1, 1946. Education: University of Innsbruck, Doctor of Law; INSEAD, MBA. Career: ICME Zurich, 1971–1973; Schering Plough Corporation, 1973–1981, assistant to the vice president (Europe, Africa, Middle East), general manager (Ecuador, UK, Portugal); Glaxo Wellcome, 1981–1995, area controller, head of group product licensing, director of marketing development and product licensing, managing director of Glaxo Pharmaceutical Limited, director of Glaxo Holding, chief operating director of Glaxo Holding; Roche Group, 1995–, member of the corporate executive committee, head of the pharmaceuticals division; 1996–1998, COO; 1998–, CEO; 2001–, chairman of the board of directors. Awards: Recipient of the 2000 Oliver R. Grace Award for distinguished service in advancing cancer research. Address: F. Hoffmann-La Roche Ltd., Grenzacherstrasse 124, CH-4070 Basel, Switzerland; http:// www.roche.com.

■ As chairman and chief executive officer (CEO) of Roche Group, Franz B. Humer led the Swiss pharmaceutical company through a number of financial ups and downs and a controversial price-fixing case. Through all of the changes, Humer never compromised the family-owned business’s solidarity, refusing even to discuss the possibility of a merger with other large pharmaceutical companies. In 2001, in the midst of a significant economic and company downturn, Humer sold all nonpharmaceutical divisions. He strengthened the company’s research-and-development arm and bolstered its new and core drug offerings. Humer always tried to balance his financial responsibilities to his shareholders with his ethical responsibilities to the millions of people who use Roche’s drugs. International Directory of Business Biographies

Franz B. Humer. © Reuters NewMedia Inc./Corbis.

EDUCATION AND EARLY CAREER Humer received his doctorate in law from the University of Innsbruch in Austria, then went on to earn an MBA from INSEAD in Fontainbleau, France. He learned survival skills and developed an innate sense of human behavior while in his 20s, working as a tour guide for large groups. “There was no salary, only tips. Pretty soon, I could hone in on particular groups. Eventually, I could predict within 10% how much I could earn from any particular group,” he told Harvard Business Review (September 1, 2000). Humer began his career in 1971 with ICME International in Zurich, Switzerland. Two years later he entered the pharmaceutical industry, joining Schering Plough Corporation as assistant to the vice president for Europe, Africa, and the Middle East. After leaving Schering Plough, Humer held various man-

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agerial positions (including director) at Glaxo Holding. He was responsible for research, business development, manufacturing, commercial strategy, and all operations outside the United States.

MOVING TO ROCHE Humer joined Roche in 1995 as a member of the board of directors of Roche Holding and as the head of its pharmaceuticals division. In 1998 he assumed the role of Roche’s CEO. In the late 1990s, a time when several other pharmaceutical companies were merging, Roche remained staunchly independent. Humer said that, although he was not completely opposed to the idea of a merger, he was confident that his company could succeed alone by simply focusing on its internal products and by marketing new drugs. One of the biggest new drugs Roche marketed was a weight-loss medication called Xenical, which gained approval from the U.S. Food and Drug Administration in 1999. Worldwide sales exceeded $350 million, and Xenical became one of the most profitable Roche products since Valium. In 2001 Humer became chairman of Roche. He kept a tight rein on the company and its employees, according to industry insiders, which led to some disagreements with other Roche executives. In May 2001 Humer fired chief financial officer Anton Affentranger after just four months of service because of a reported personality clash.

HUMER VOWS TO KEEP ROCHE INDEPENDENT In 2002 Roche lost $2.9 billion dollars, the greatest annual loss in the company’s 108-year history. Humer blamed the drop on investment losses and on a multimillion dollar fine that stemmed from a 1990s vitamin price-fixing case. In 2001 rumors had begun to circulate that rival Swiss drug manufacturer Novartis was moving toward a merger with the familyowned Roche. Novartis purchased 20 percent of Roche’s stock, and then steadily increased its stake. Humer quickly dismissed the idea, remaining firmly opposed to any such megamerger. “Large mergers, large acquisitions in this industry destroy value, destroy innovation,” he said (MIT news release). Even when Novartis increased its Roche holdings to 33.3 percent in 2004, just below the level that the Swiss law considers a formal bid, Humer was unfazed. He was so unconcerned, in fact, that even amid rumors that his company was about to be swallowed up by Novartis, Humer went skiing. He said he was secure in knowing that the two Roche owners (the Hoffmann and Oeris families) would never relinquish control over their company. But Humer had no trouble drawing other companies under Roche’s wing. In fact, he wanted to create additional value for

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Roche’s shareholders by changing the company’s focus through strategic acquisitions. In order for the company to focus on its diagnostics and pharmaceutical businesses, Humer bought a controlling stake in the Japanese pharmaceutical company Chugai in 2001, and he acquired diagnostics company Igen International for $1.4 billion in 2003. He then rid the company of its less profitable chemicals business and sold its vitamins division to the Dutch company DSM (although Roche was still responsible for all liabilities stemming from the price-fixing case). Roche also purchased a majority stake in the California-based biotech company Genentech.

PROFITS AND RESPONSIBILITIES Humer said that one of his greatest challenges in running a large pharmaceutical company was balancing the company’s fiscal and moral responsibilities. “The biggest challenge for us is how to cure the sick and run a profitable business at the same time,” he told students at the Massachusetts Institute of Technology (MIT news release). In mid-2003 the two goals seemed at odds. Controversy developed when Roche released its new AIDS drug, Fuzeon. The drug had a yearly price tag for users of $20,000, which was three times the cost of the most expensive AIDS drug then on the market. AIDS activists protested that the drug was too expensive for the average patient to afford. But Humer defended the company’s pricing, saying that it needed to recoup its research-and-development costs on the breakthrough therapy. “We need to make a decent rate of return on our innovations. . . . I can’t imagine a society that doesn’t want that innovation to continue,” he told the Associated Press (March 13, 2003). He promised that Roche would give discounts to government-run programs and even provide the drug free in some cases. Humer committed Roche resources to the fight against AIDS. In October 2001 he met with the United Nations Secretary-General, Kofi Annan, and officials from several other drug companies to help poor countries get improved access to AIDS drugs. But, he said, supplying free medicine was not enough in countries that lacked the infrastructure to disseminate and use them properly. More training and governmental commitment would be needed before the drugs could be effective.

VISION FOR THE FUTURE Humer said that he saw a “wave of innovation” in the pharmaceutical industry that one day would enable doctors to “identify the right patients for the right medication at the right dose at the right time” (American Way, March 1, 2004). Under Humer’s leadership, Roche has spent about $3 billion a year on research and development. “When you look at what drives


Franz B. Humer

the success of pharmaceutical companies, it’s clearly driven by the ability to innovate and the capacity to create new products,” he told BusinessWeek Online.

Humer was on the board of candy manufacturer Cadbury Schweppes until he was appointed chairman of Roche in 2001.

By 2004 Roche had bounced back from its financial troubles. Operating profits had increased by 28 percent, and the company went from a net loss of about $3 billion in 2002 to a net income of almost $2.5 billion the following year. The increase was due primarily to strong sales of the company’s core drugs: Rituxan (a therapy for non-Hodgkin’s lymphoma), CellCept (an immune-system suppressant used for organ transplantation), Herceptin (a drug used in the treatment of breast cancer), Tamiflu (a flu medication), and Pegasys (a therapy for Hepatitis C).

See also entry on F. Hoffmann-La Roche & Co., A.G. in International Directory of Company Histories.

OTHER ROLES In addition to his positions at Roche, Humer was vice president of the Swiss Business Federation and vice chairman of the European Federation of Pharmaceutical Industries and Associations. He was involved with a number of charitable organizations, including Project Hope and the Swiss American Chamber of Commerce, and he was active in the Paul Ehrlich Foundation, the European Round Table of Industrialists, and the World Business Council for Sustainable Development.



“Anxiety Over Cost of New AIDS Drug,” Associated Press, March 13, 2003, http://www.cbsnews.com/stories/2003/03/ 13/health/main543887.shtml. Arnst, Catherine, “Roche’s Declaration of Independence,” BusinessWeek Online, http://www.businessweek.com/bwdaily/ dnflash/jan2003/nf20030130_7429.htm. DuVergne Smith, Nancy, “Pharmaceutical Industry Balances Profits, Moral Responsibilities,” MIT news release, http:// web.mit.edu/newsoffice/tt/2002/dec18/humer.html. Goffee, Robert, and Gareth Jones, “Why Should Anyone Be Led by You?” Harvard Business Review, September 1, 2000. McGarvey, Robert, “Changing Medicine’s DNA,” American Way, March 1, 2004. —Stephanie Watson

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■■■

Nobuyuki Idei 1937– Chairman, group chief executive officer and representative corporate executive officer, Sony Corporation Nationality: Japanese. Born: November 22, 1937, in Tokyo, Japan. Education: Waseda University, BA, 1960. Family: Father was international economics professor at Waseda University; married Teruyo; children: one. Career: Sony Corporation, 1960–1962, invoice preparer; 1964–1968, manager, Sony’s Swiss operations; 1968–1972, established and led Sony France S.A.; 1972–1979, manager, Europe Section, International Division; 1979–1988, general manager in Japan, Audio Division, Audio Group; 1988–1990, senior general manager, Home Video Group; 1990–1994, senior general manager, Advertising & Marketing Communication Strategy Group, and director, Design Center; 1994–1995, senior general manager, Creative Communication Division, and managing director, Sony Corporation; 1995–1998, representative director and chief operating officer; 1995–2000, president; 1998–1999, co-chief executive officer; 1999–2003, chief executive officer; 2000–, chairman; 2003–, group chief executive officer. Awards: Officier dans l’ordre national de la Légion d’honneur from the president of the French Republic, 1998; Fortune magazine Asia’s Man of the Year (for 1997), 1998. Address: Sony Corporation, 6-7-35 Kitashinagawa, Shinagawa-ku, Tokyo 141-0001, Japan; http:// www.sony.net.

■ Nobuyuki Idei was an intellectual gifted at improvising. He was a true man of the world; fluent in English and French, he talked easily with foreigners and was comfortable with their customs. Indeed, his years in Europe left him with preferences for French cuisine and Italian suits. He was beset by curiosity and therefore forever studying, and his inquisitive nature led him to try to create technology that would allow people to study any aspect of the world quickly and simply. His was a global outlook.

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Nobuyuki Idei. AP/Wide World Photos.

MAKING CONNECTIONS While attending Waseda University, Idei first focused on photography, but at his father’s urging he shifted his major to economics. Among young Idei’s schoolmates was the daughter of Masaru Ibuka, cofounder of Sony. Upon graduation in March 1960, he got a job interview at Sony through her intervention. Idei was hired at Sony, but all he did was prepare invoices for international customers, so after 18 months he left the company to attend the London School of Economics. Because of his poor English skills, he struggled in his classes, but a professor took a liking to him and persuaded him to try l’Institut des hautes études internationales in Geneva, Switzerland. At first Idei’s French skills were poor, too, but through determined studying he mastered both French and English. In 1963 he left l’Institut without completing his PhD.


Nobuyuki Idei

Sony rehired Idei to work in Switzerland; the company was expanding its presence in Europe in the 1960s in the drive to become a global corporation. Idei was sent to Paris to establish Sony France S.A. when he was only 31 years old; during this period he developed his ability to work with people from disparate cultures, and he established his talent for solving problems and creating new businesses. Sony seized significant market share of the European television market, especially when the Trinitron model came out in the late 1960s. In 1972, as Sony’s enterprises expanded in Europe, Idei was appointed manager of the Europe Section of the International Division of Sony, responsible for Sony’s operations on that continent.

WALKMAN After 17 years in Europe, Idei was brought back to Japan in February 1979 to become the general manager of Sony’s Audio Division. Sony executives believed that his marketing expertise, developed while creating new enterprises in Europe, would be put to good use in the marketing of a new Sony gadget, the Walkman. The Walkman name emphasized its easy portability; it became a global hit and was responsible for bringing in billions of dollars over its lifetime. Even in the 2000s, with portable audio compact disc (CD) players available, the old Walkman tape cassette player remained the portable music player of choice in most nonindustrial nations. In addition to his work on the cassette player, Idei led the development of the audio CD player. In the late 1960s Sony had invested in American recording companies. The corporation’s large holdings of the rights to music by the likes of Simon and Garfunkel, a famous singing duo of the time, gave it an advantage in the marketing of devices to play their music. People who wanted to listen to one of Sony’s recordings had to purchase CDs made by Sony to play on CD players made by Sony. Rival recording companies adopted the Sony CD standards in order to sell to the same customers Sony was reaching. Ever since 1982, when Sony introduced its players, every CD manufactured brings Sony five cents in royalty payments. In 1985 Idei worked on the introduction of another highstakes gamble, the Sony eight-millimeter camcorder. This device made it easy to make home movies anywhere and was the ancestor of handheld videotape and videodisc recorders. In April 1988 Idei was made senior general manager of Sony’s Home Video Group.

CHANGES AND SURPRISES In June 1989 Idei was named to Sony’s board of directors. That year Akio Morita, cofounder of Sony, engineered the purchase from Coca-Cola of the Columbia and Tri-Star motion picture studios for $3.4 billion, while assuming $1.2 bil-


lion of the studios’ debt. He was looking to the future, when perhaps Sony’s holding rights to motion pictures would be as important to new innovations as holding rights to music had been for the Walkman. The president of the Sony Corporation of America, Mickey Schulhof, was put in charge of Sony Pictures; he hired the producers Jon Peters and Peter Gruber to run the company, buying out their production company for $700 million. Increasingly ill from heart disease, Morita retired soon after the completion of the deal. Idei was made senior general manager of Sony’s Advertising and Marketing Communication Strategy Group in July 1990. He began promoting Sony’s brand image at home and abroad, linking it with technological innovations and identifying it with high quality products. In 1992 Sony and Philips NV of the Netherlands formed an alliance to design digital videodiscs (DVDs), a format similar to CDs but much more densely packed with data. In 1992 one of Sony’s rivals, Toshiba, formed an alliance with Time Warner to cooperate on their own version of DVDs. That year Sony’s sales shrank by 6.5 percent as Japan’s strong yen made Japanese products more expensive overseas, resulting in dropping international sales. Despite the harbinger of fewer sales, Sony was complacent about its lead in developing the DVD and let the opportunity to set the standard for this format slip away. Toshiba and Time Warner developed double-sided DVDs that they called SDs for “super density.” Running DVD development for Sony was Minoru Morio, heir apparent to the president, Norio Ohga. By November 1994 Sony developed a semitransparent layer in addition to the main layer that doubled the amount of data that could fit on one side of a DVD. In April 1994 Ohga reorganized Sony’s intricate corporate structure into eight internal companies, and Idei was made senior general manager of Sony’s Creative Communication Division. By then Ohga was thinking about retiring from the presidency, and Idei kept coming to his mind as a possible successor. In June 1994 Idei advanced to managing director of Sony, ranking him fifteenth among Sony’s top executives. In November Ohga put Idei in charge of promoting Sony’s DVD format; billions of dollars in future royalties were at stake. To Sony’s misfortune, the strong Sony Pictures operation it had hoped for had not been built. Sony’s stock peaked at $63.25 in November 1994 and then plummeted into the low 40s when the company announced that it was taking a loss of $3.2 billion dollars on its motion picture division. Alan Levine was hired to replace Peters and Gruber. When Sony announced its DVD format on December 19, 1994, calling it MMCD for “multimedia compact disc,” the technology was already in trouble because potential partners were lining up behind Toshiba’s and Time Warner’s format. While Toshiba and Time Warner emphasized only the DVD’s capacity for playing motion pictures, Idei chose to emphasize how the DVD could be a full multimedia format, at home in

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motion picture players, personal computers, and video game consoles. On January 24, 1995, Toshiba and Time Warner announced their new DVD technology. Though the DVD was more limited than Sony’s version, the rival companies had taken the time to line up a formidable array of support from motion picture distributors and video equipment manufacturers. In September Idei and Sony capitulated and accepted the Toshiba and Time Warner format as their own.

PRESIDENT On January 24, 1995, Ohga privately told Idei that he was his choice to become Sony’s next president; in December the retired Morita approved of Idei’s selection. Idei had the advantage over his rivals of being truly cosmopolitan, at ease with foreign businesspeople as well as Japanese ones. He spoke fluent English, which rival Morio did not, making him an attractive leader for consolidating and making profitable Sony’s businesses in the United States. Furthermore, Idei had worked in almost every aspect of Sony’s enterprises during his career. His marketing skills seemed very desirable in a period when Sony’s sales were slipping. On March 22, 1995, Idei was introduced to the world as Sony’s next president. Observers were surprised because he had been considered too far down the management ladder to be eligible for such a position in a company that valued seniority. In April he became president and COO of Sony Corporation, while Ohga became CEO and chairman. Despite having had to accept a rival DVD format, Idei was aggressively positioning Sony to take advantage of new technology. Before he officially became president, he began negotiating with the chip company Intel’s chairman, Andrew S. Grove, to create a new computer, to be designed by Sony and manufactured by Intel. Sony and Intel announced their longterm partnership in November. Idei dubbed his engineers the Digital Dream Kids, emphasizing that they were to invent technology that would make people’s dreams come true. In Fortune he envisioned a cohesive technology that would unite “computers and consumer electronics and communications and entertainment” (June 12, 1995). The new computer was named the VAIO. A rebellious Sony engineer, Ken Kutaragi, had been developing his ideas for a video game console since 1988, when he was frustrated by the poor graphics of his Nintendo game machine. In Idei he found an ideal corporate leader who was accepting of his breaking corporate rules while he pressed forward on designing what became the PlayStation. Another bright spot was Sony’s production of professional video equipment, of which Sony had 80 percent, or about $800 million, of the world market. Even so, the year ended on a down note. In December Idei fired Mickey Schulhof and replaced him as head of American operations with Howard Stringer.

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Throughout 1996 Idei stubbornly insisted that Sony Pictures was not for sale. He fired most of the executives and hired John Calley to run the studio. In January 1996 Idei began restructuring Sony, hoping to streamline its operations to make it more cost-effective. He reorganized Sony’s eight units into 10 and appointed a president for each unit, hoping to speed up decision making and make Sony quicker to respond to changes in the marketplace. Each president was given the freedom to run his unit as he saw fit. Five of the presidents were young, the first of Idei’s attempts to break the hold of seniority on the promotion of managers. In 1996 So-net, Sony’s Internet service, was launched and grew to be Japan’s third-largest service provider. So-net was part of Idei’s plan to create homes with instant access to information and communications through the Internet. It featured the electronic Sony credit card, which could be used to shop online at 250 retail sites. Sony grossed $50 billion and netted $1.2 billion in 1997, defying an ailing Japanese economy. A Harris poll named Sony the most respected brand name in America. Idei publicly wore a Men in Black T-shirt to tout the motion picture that inaugurated a series of profitable years for Sony Pictures, which brought in over $1 billion in the first nine months of 1997. In May Idei moved to take firmer control of Sony by reorganizing the board of directors, reducing its membership from 38 to 10, with three of the 10 from outside the company. He wanted American-style corporate governance, with the board responsible to the company’s shareholders, rather than as it had been to the company’s managers. Further, he tried to replace pay based on seniority with pay based on performance, a radical departure from traditional Japanese corporate practice. Idei believed that communication and information technologies were converging, creating an opportunity for Sony to position itself strongly for the 21st century. He envisioned wireless homes, businesses, and marketplaces, where people could access the Internet without telephone lines or cables. Idei implemented this vision through a dizzying series of partnerships and new products. Sony and Qualcomm of San Diego, California, united to manufacture cell phones for this future. In April 1997 Microsoft bought WebTV Networks, which used Sony hardware. In May Sony, Rupert Murdoch’s News Corporation, Fuji Television Network, and Softbank (owner of Ziff-Davis) started JskyB, a satellite television company with 150 channels. This venture represented a step toward access to information without wires. In September Sony, Philips, Hewlett-Packard, and Ricoh created a new format for rewritable DVDs. For his role in changing how Sony did business, Idei was the first recipient of Fortune magazine’s Asia’s Man of the Year award in 1998. In May he added co-chief executive officer to his titles. That March Sony had grossed $56.3 billion and net-


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ted $4.3 billion for the fiscal year. Yet, during 1997, income from Sony’s electronics units, which represented 70 percent of the company’s business, dropped 59 percent. Meanwhile, managers were resisting Idei’s efforts to modernize the company.

CHIEF EXECUTIVE OFFICER In March 1999 Idei announced that Sony would close 20 percent of its factories and cut 17,000 jobs by 2003. Over the opposition of senior management, he planned to cut headquarters staff from 2,500 to several hundred. By 2003 the number of factories shrank from 70 to 55. The fiscal year gross was $50 billion, with a net of $2.8 billion. The positive showing was partly the result of the PlayStation. Although this product comprised only 15 percent of Sony’s total sales, it accounted for 40 percent of the profits. Idei replaced Ohga as CEO in 1999, although Ohga remained chairman. Deciding his previous reorganization had not gone far enough, Idei introduced sweeping changes to Sony’s corporate structure, trying to make the company more efficient in a period when Japan’s economy was deflating. He pulled Sony’s 12 electronics businesses into five units: Home Network, Personal IT Network, Communications System Solutions Network, Core Technology & Network, and Sony Computer Entertainment. Each unit was supposed to determine for itself where to put its resources. Following this realignment a series of strategic events catapulted Sony stock upward. The movie producer George Lucas announced that his next Star Wars motion picture would be shot using Sony digital equipment. Sony purchased controlling interest in SkyPerfecTV, the leading satellite broadcaster in Japan, and by November, Sony’s stock had doubled in value in one year. On January 24, 2000, Sony stock was $275 per share, five times what it had been when Idei became president, yet for the fiscal year ending March 31, 2000, Sony grossed $49 billion, down 5.5 percent from the previous year, and netted $1.6 billion, down 20 percent from the previous year. Even so, Sony’s value was $110 billion. Idei became chairman of the board in May and promoted Kunitake Ando of the VAIO enterprise to replace him as president. He made Terushisa Tokunaka, Sony’s chief financial officer, corporate vice president. He hoped to be able to focus on production strategy and on building more partnerships, while Ando and Tokunaka focused on day-to-day management. Idei spent much of the year evaluating factories with an eye to shutting down those that were not making money. In March 2000 Sony introduced the PlayStation 2 in Japan. It incorporated many of Idei’s ideas for creating a unified home electronics environment, including the capacity to play motion picture as well as game DVDs. Idei was already at work on even grander ideas for the PlayStation 3, planned


for release in 2005. Sony established a $100 million fund to support start-ups for promising technology companies. During 2001 Sony spent $670 million to eliminate unprofitable businesses, shutting down 13 factories. However, the company had three recalls of malfunctioning cell phones, costing $110 million. By March 2002 Sony had lost $364 million in six months. Sony’s revenues had dropped 40 percent for the fiscal year, but not all of the news was bad. Sony Pictures was one of the company’s big money makers, with such hits as Spider-Man. During 2001 and 2002, 50 million PlayStation 2s were sold, with Sony’s video games accounting for 50 percent of 2002’s profits. In further efforts to streamline Sony, Idei blended 12 factories into a single unit to save overhead on purchasing supplies and to reduce duplication of efforts. From October to December 2002, fortunes improved, and Sony netted $1.02 billion. Sony recorded a $1 billion quarterly loss in April 2003. The event was called “Sony shock” and served as an excuse for Idei to overcome resistance within the company to making painful changes. He was faulted by investment analysts for not being aggressive enough in closing down outmoded factories and for allowing Sony’s core business, electronics, to drop from a 10 percent margin in 1993 to 1 percent. Idei fired Sony Music’s leader, Tommy Motola, for not cooperating on organizational changes, and replaced him with Andrew Lack, perhaps indicating to other managers who continued to resist change what they could expect from him. In 2003 Sony released a stylishly sleek, glistening box that stood on its side. Within was an aerial and the electronics needed to bind every electronic device in the house wirelessly and give access to satellite television and information services, allow broadband access to the Internet, and provide Internet telephone services. A parent tired of listening to a child’s booming upstairs stereo could lower the volume from a downstairs living room. Idei put forth his concept of four portals for consumers: mobile telephone, personal computer, PlayStation game console, and television. Idei announced in October 2003 that Sony would cut 20,000 jobs, including 7,000 in Japan, and that he would send assembly work to countries with low wages. He devised the concept of Qualia, which he said would be the goal for Sony’s new inventions. Qualia represented comfort; he envisioned future consumers wanting more than utility from their products, but beauty as well. It was a positive view of a future in which technology would be able to meet the fundamental needs of humanity, and human beings would be able to focus on intellectual and spiritual needs. By August 11, 2003, Sony’s worth had shrunk to $61 billion, with Idei receiving most of the blame for the precipitous loss in value. Yet on the same day Fortune named Idei the second most powerful business leader outside of the United

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States. Sony was still a colossus. It partnered with IBM to create a new computer chip to power PlayStation 3 and computers, investing $4.5 billion in the project. Sony united with Samsung to create a new flat-panel liquid crystal display (LCD) television. Sony’s Digital Creatures Laboratory forged ahead in developing robots for the home. The online world of Everquest drew a huge audience to Sony’s Internet projects. Idei gave Kutaragimore responsibility, trying to harness his rebelliousness to help reform management practices. In January 2004 BusinessWeek online named Idei one of the world’s worst managers, but for the fiscal year ending March 31, 2004, Sony grossed $72 billion. Idei’s vision of the corporation of the 21st century was still a work in progress.

See also entry on Sony Corporation in International Directory of Company Histories.

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“The Complete Home Entertainer?—Sony,” The Economist, March 1, 2003, pp. 62–64. Gibney, Frank Jr., “A New World at Sony,” Time, November 17, 1997, pp. 57–61. Kunii, Irene M., Emily Thornton, and Janet Rae-Rupree, “Sony’s Shake Up,” BusinessWeek, March 22, 1999, p. 52. Levy, Steven, “Sony’s New Day,” Newsweek, January 27, 2003, pp. 50–53. Schlender, Brent, “Sony on the Brink,” Fortune, June 12, 1995, pp. 60–69.

—Kirk H. Beetz


■■■

Robert Iger 1951– President, Walt Disney Company; chairman, ABC Group Nationality: American. Born: February 10, 1951, in New York, New York. Education: Ithaca College, BA, 1973. Family: Married Susan (maiden name unknown; divorced 1994); married Willow Bay (TV news anchor), 1995; children: four (first marriage, two; second marriage, two). Career: ABC, 1974–1976, studio supervisor, daytime television; ABC Sports, 1976–1985, various production positions; 1985–1987, vice president, program planning and development; 1987–1988, vice president, program planning and acquisition, ABC Sports,; ABC-TV Network Group, 1988–1989, executive vice president; ABC Entertainment, 1989–1992, president; ABC-TV Network Group, 1992–1994, president; Capital Cities/ABC, 1993–1994, executive vice president; Capital Cities/ABC, 1994–1996, president and chief operating officer; ABC, 1996–1999, president; Disney/ABC Group, 1999, chairman; Walt Disney International, 1999, president; Walt Disney Company, 2000–, president and chief operating officer. Awards: Equal Opportunity Award, National Organization for Women, Legal Defense and Education Fund, 1994; Corporate Humanitarian Award, Urban Resource Institute, 2001. Address: Walt Disney Company, 5005 Buena Vista Street, Burbank, California 91521-0001; http://disney.go.com/ home/today/index.html.

■ Robert Iger was a career-long ABC television executive and an influential figure in American entertainment. Iger rose from a production position to become head of the ABC television network, surviving two changes in corporate ownership. Following the Walt Disney Company’s acquisition of ABC in 1996, he joined Disney management and emerged as second in command at the company, reporting only to the chief execInternational Directory of Business Biographies

Robert Iger. AP/Wide World Photos.

utive officer (CEO) of Disney, Michael Eisner. Iger was considered likely to be Eisner’s heir at Disney, one of the leading entertainment and marketing companies in the world. Having set his sights on a career as a television news reporter during grade school, Robert Iger studied television production and broadcast journalism at Ithaca College in upstate New York, graduating magna cum laude. Returning to his native New York City, he searched in vain for a TV news position. Meanwhile, he found work at the daytime division of the American Broadcasting Company (ABC) as a studio supervisor responsible for the daily production of soap-opera and game-show episodes. As he learned the nuts-and-bolts of network TV production, he refocused his career goal toward management. Switching to a job at ABC Sports in 1976, he found a mentor in Roone Arledge, who headed the network’s sports division and, after 1977, the news division as well. As more

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of Arledge’s attention went into building up ABC News, Iger gradually emerged as his most trusted aide in the sports operation. Arledge helped Iger make the difficult transition in corporate culture from a production employee to a network executive, promoting him repeatedly, often past senior executives. In 1985 Iger decisively crossed the line into higher management as vice president for program planning and development at ABC Sports. Iger developed a reputation at ABC and elsewhere in the industry for getting things done as well as developing good rapport with on-air talent. His appointment in 1988 as executive vice president of the ABC-TV Network Group marked his “graduation” from the sports division into the central corporate structure of the company. Less than a year later he was named president of ABC Entertainment, effectively putting him in charge of ABC’s prime-time television programming. Stockholders were generally pleased with Iger, who developed or championed many of the network’s successful, longrunning hit series during the 1990s, including comedies such as Home Improvement, The Drew Carey Show, and America’s Funniest Home Videos. Iger was also instrumental in bringing the immensely successful Who Wants To Be a Millionaire? to ABC. It was the first successful big-money quiz show to appear in prime time since the scandals of the 1950s. Steven Bochco, the executive producer of ABC series such as Doogie Howser, M.D., a comedy concerning a teenage genius who is a practicing physician, and CopRock, a short-lived musical police drama, praised Iger for taking chances on innovative program concepts. But Iger also kept his eye on the bottom line, winning the wrath of critics for canceling highly regarded drama series such as Twin Peaks, China Beach, and thirtysomething. In 1993 ABC was bought by Capital Cities Broadcasting, an owner of local stations and cable-television franchises. Iger, who many credited for the high price paid for the company, was one of only a handful of long-time ABC executives to survive the buyout and prosper in its aftermath. Serving during the transition period as both president of the ABC-TV Network Group and vice president of Capital Cities/ABC, he emerged as chief operating officer of the combined company in 1994. Under Iger’s leadership during the 1990s, ABC maintained its competitive position with its traditional broadcasting rivals, CBS and NBC, and moved ahead of them in expanding corporate operations into cable-television channels. The network invested in cable outlets such as ESPN (sports), Lifetime (targeted to women), and A&E (an arts channel that had been started and abandoned by CBS), all of which became profitable.

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In 1999 the network, as part of Capital Cities/ABC, was sold once again, this time to the Walt Disney Company, a diversified entertainment conglomerate known chiefly for its family-oriented feature films, cable-television channels, and theme parks. The price, some $19 billion, was believed to be the highest ever paid for an entertainment company. Iger became chairman of the Disney/ABC Group and president of Walt Disney International, the corporate division responsible for managing Disney interests outside the U.S. Asked why Iger, who had virtually no international business experience, was given the latter responsibility, Disney’s CEO Michael Eisner said that he believed it would help Iger by rounding out his experience, a vote of confidence that assured investors of Iger’s future with the company. In January 2000 the one-time studio supervisor, with only a bachelor’s degree in television production, moved past a bevy of Ivy League MBAs to become president and chief operating officer of the Walt Disney Company. Iger was married to Willow Bay, a CNN on-air personality. A previous marriage ended in divorce in 1994. Iger was active in civic affairs in New York as a member of the board of directors of Lincoln Center for the Performing Arts and as a board member of the Outward Bound Program and the National Campaign Against Youth Violence. He was a trustee of Ithaca College in Ithaca, New York, and of the Museum of Television and Radio.

See also entry on Walt Disney Company in International Directory of Company Histories.


Fabrikant, Geraldine, “Disney Gives New Jobs to 2 of Its Top Managers,” New York Times, February 26, 1999. Gunther, Marc, “Bob Iger Gets Serious about Fixing ABC,”Fortune, June 22, 1998, p. 46. ———, “A Hollywood Hotshot Without a Hit,” Fortune, September 29, 1997. “Robert A. Iger, President, Capital Cities/ABC, Inc., Announces a Consolidation of the International Operations of Capital Cities/ABC, Inc. and Walt Disney Television International,” PR Newswire Association, June 25, 1996. —David Marc


■■■

Jeffrey R. Immelt 1956– Chief executive officer, General Electric Company Nationality: American. Born: February 19, 1956, in Cincinnati, Ohio. Education: Dartmouth College, BA, 1978; Harvard University, MBA, 1982. Family: Son of Joseph Immelt (manager of General Electric Aircraft Engines Division) and Donna (schoolteacher; maiden name unknown); married Andrea Allen (General Electric customer-service representative), 1986; children: one. Career: General Electric Company, 1982–1983, internal marketing consultant; 1983–1989, district sales manager in Plastics; 1989–1992, vice president of consumer services in Appliances; 1992–1997, vice president and general manager of Plastics; 1997–2000, CEO of Medical Systems; 2001–, CEO. Awards: Man of the Year, Financial Times, 2003. Address: General Electric Company, 3135 Easton Turnpike, Fairfield, Connecticut 06431; http:// www.ge.com.

■ Jeffrey Immelt had big shoes to fill when he took over as chairman and CEO of General Electric Company (GE) in 2001. His predecessor, Jack Welch, had become a legend in American business. Under Welch’s leadership GE’s growth rate averaged 18.9 percent and over his entire career the company’s stock rose more than 3,000 percent. Immelt quickly put his own stamp on the company, earning the respect of employees, customers, and investors alike. He emphasized a long-term approach to growth and sought to differentiate General Electric from its competitors by creating a customer-focused culture and making innovation a priority. Immelt was born into a General Electric family. His father, Joseph, worked in the GE aircraft-engines division in Cincinnati for 38 years, retiring as a middle manager. Immelt exhibited leadership skills early; he was a good student who enjoyed


Jeffrey R. Immelt. AP/Wide World Photos.

sports. As a high school basketball player he advised his coach to yell at the team less often. The coach at first reacted to Immelt as if he were no more than a cocky teen, but he later took his player’s advice. At Dartmouth College, Immelt majored in applied mathematics and served as president of his fraternity, Phi Delta Alpha. At six feet four inches tall he played offensive tackle on the Dartmouth football team. Students who knew Immelt in college recalled that he was a natural leader who could help his football teammates relax in huddles. During summers Immelt worked at the Ford Motor assembly plant in Cincinnati, where, as he told the New York Times, he “learned a lot about how to communicate to people, what makes them respond” (December 1, 2000). After graduating from Dartmouth in 1978, Immelt worked briefly in the brand-

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management department at Procter & Gamble. He earned his MBA from Harvard University in 1982. After graduating from Harvard, Immelt followed in his father’s footsteps, taking a job at General Electric. He started in GE’s corporate office in Fairfield, Connnecticut, where he worked as an internal marketing consultant. After a year he was transferred to Dallas, where he was a district sales manager for GE Plastics. Immelt met his wife, Andrea Allen, a GE customer-service representative, while working in Dallas. The couple were married in 1986 and their daughter, Sarah, was born a year later.

LED GE DIVISIONS In 1989 Immelt was named vice president of GE Appliances. He arrived at the division just as it began a recall of millions of refrigerators due to failed compressors—one of the largest recalls in GE history. Immelt quickly earned the respect of workers for the manner in which he managed the replacement of the compressors. He delivered motivational speeches to workers on the factory floor in Louisville from atop a forklift and donned a uniform to accompany technicians on house calls. Immelt told Time magazine that during his tenure at GE Appliances he “went from being a boy to a man” (September 10, 2001). Immelt left GE Appliances for GE Plastics in 1992. While he successfully persuaded carmakers to use more plastic parts, he also experienced several difficulties. In 1994 he missed the division’s earnings goals by $50 million. Immelt explained to BusinessWeek Online that he had failed to move quickly enough to increase prices during a time of inflation. When he attended a management meeting that year, he avoided the CEO Jack Welch until Welch finally pulled him aside and told him, “Jeff, I want you to know you had one of the worst jobs in the company. I think you are great. I love you. You’re going to get this right. If you don’t, you’re going to have to go” (September 6, 2001). Many executives would have felt threatened by such a statement from the CEO, but Immelt viewed it as a positive experience. He told BusinessWeek Online, “I was a thousand times more valuable to the company, having gone through that. I had 10 times more self-confidence because I knew I could work through issues of my own creation. Besides, I already knew when he chewed my butt out that I was going to turn it around” (September 6, 2001). Immelt continued to attract attention when he was named president and CEO of GE Medical Systems (GEM) in 1997. When he arrived at GEM, the division was in its third year of flat revenues. Immelt initiated a series of 60 acquisitions, and GE became the world’s most successful medical-imaging company by producing innovative products like the first digital

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mammogram system and the LightSpeed CT, the world’s fastest CAT-scan machine. Under Immelt, GEM operating profits doubled and market share went from 25 to 34 percent. By the time Immelt left the division in 2000, sales had increased 75 percent. SUCCESSOR TO JACK WELCH In 1994 Immelt’s performance earned him a spot on a list of some 24 candidates to replace the CEO Jack Welch upon his retirement. Welch had served as the CEO and chairman of GE since 1981 and was one of the world’s most admired executives. During his 20 years at the helm GE’s structure dramatically changed. He sold off businesses in fields that GE could not dominate, laid off workers, and acquired an average of one hundred businesses every year. He emphasized the service end of the trade—especially financial services. During Welch’s tenure GE’s growth rate averaged 18.9 percent and its stock rose 3,098 percent. The company’s sales increased from $27 billion to $130 billion a year. GE consistently topped lists of American’s most admired companies. The list of candidates to fill the position of CEO was whittled to eight by 1997 and to three by June 2000. At 45 years of age Immelt was the youngest of the three candidates by 10 years; many analysts believed his youth was one reason for his ultimate selection to be Welch’s successor. GE traditionally kept CEOs for long periods of time, and at his age Immelt could remain in the position for some 20 years. The announcement of Immelt’s selection came on November 27, 2000. Welch had planned on retiring soon after his successor was chosen, but during 2000 and 2001 GE attempted to purchase Honeywell International. Welch decided to remain in the CEO position during the transition, giving Immelt a ninemonth apprenticeship in which he served side by side with his predecessor. The pair was disappointed when the $45 billion Honeywell takeover was nixed by the European Commission during the summer of 2001. Welch retired and Immelt took over in September 2001. When Immelt took over the company, GE produced appliances, plastic car parts, medical-imaging systems, aircraft engines, light bulbs, and television shows and also offered financial services. The corporate trend in 2001 was to concentrate on core businesses, so many people thought GE needed to divest itself of its older, less profitable divisions, such as appliances and lighting. But Immelt felt about GE’s units as a mother does about her children: he loved them all. He supported the older units, saying that they were a good venue through which to generate some cash, train employees, and build the company’s brand. He believed that managers could learn a lot running the older businesses, especially during recessions. Immelt hated to hear General Electric labeled as a conglomerate. Rather, he viewed GE as a collection of small com-


Jeffrey R. Immelt

panies that all had room to grow. He described the corporation as a whole in BusinessWeek: “We run a multibusiness company with common cultures, with common management where the whole is always greater than the sum of its parts. Culture counts. The strength of GE is its diversity” (January 28, 2002). BUSINESS STRATEGY EMERGES Immelt described the talent he believed he brought to the position of CEO in an interview appearing on BusinessWeek Online: “I’m decisive, I’m accountable. I have good discipline. I believe in people; I know the difference between a good one and a bad one. A big job is how you pick people. I love change. I love trying new things. I really bring to the job a complete growth headset. I’ve had great experiences in technology and globalization, running sales forces and doing acquisitions, and I bring all those things to the job” (September 6, 2001). Immelt’s management style was inevitably compared to Jack Welch’s. Both men were considered to be competitive and intense, but Immelt was more low-key. Time magazine described the differences between the two executives: Welch was like a general deploying his troops; Immelt was more like a coach cheering on the home team. Welch was revered; Immelt was adored. Immelt was described as self-effacing and considerate—a nice guy. Peter Foss, a colleague, said, “If you say, missed your numbers, you wouldn’t leave a meeting with him feeling beat up but more like you let your dad down” (September 10, 2001). Being compared to Jack Welch was the least of Immelt’s concerns during his first year as CEO, as he was challenged in ways he could not have anticipated. During his first week on the job the September 11, 2001, terrorist attacks shocked the world and sent the economy reeling. As the first year wore on, financial-reporting scandals made headlines, casting doubts on big businesses throughout the country. GE was criticized for Welch’s generous retirement perks. The company failed to increase earnings by at least 10 percent for the first time in 10 years; the stock price fell. But Immelt had a plan. He established four goals for the company: to better use technology; to get closer to customers; to diversify the business mix; and to increase diversity among top management. During that first year Immelt initiated $9 billion in acquisitions. He diversified the company by adding segments involved in wind power, security, cable-television channels (including a Spanish-language network and the Bravo channel), commercial and consumer finance, water filtration, and oil and gas services. The new companies failed to immediately add to the bottom line, but Immelt’s strategy was more long-term. He planned to truly expand the company through innovation, not acquisition. Immelt said in Fortune, “We have to make our own growth” (April 5, 2004). To motivate such innovation, Immelt changed the way GE appointed managers. Instead of rotating managers through


several divisions, he kept them in place longer, such that they could become specialists in their fields. By staying in their respective divisions, managers experienced the full consequences of any mistakes; additionally they were able to see the results of long-term innovations. Immelt also focused on innovation in technology. He breathed new life into GE’s once-famous Schenectady, New York, research lab, where scientists had been given free rein to pursue scientific interests, resulting in products like the X-ray tube and tungsten light. The lab languished, however, until Immelt once more made it a priority. The lab was renamed the Global Research Center, and scientists there experimented with projects involving nanotechnology, photovoltaics, hydrogen power, advanced propulsion, and other innovations. Some of these long-term projects were not expected to produce results for up to 15 years—an unusually long period of time in the American corporate environment of the early 2000s—but they were part of Immelt’s strategy to concentrate on highimpact projects. GE built affiliate research labs in China, India, and Germany.

CUSTOMER SERVICE A PRIORITY During his nine-month apprenticeship with Welch, Immelt traveled around the world meeting GE clients. He believed that GE could differentiate itself from its competitors by being more customer-focused. As reported in BusinessWeek, the Delta chairman Leo F. Mullin was impressed when during labor problems Immelt called “just to say he thought I was doing well. That meant a lot to me” (September 17, 2001). But Immelt’s customer-focus strategy went beyond shaking hands and making phone calls. He initiated a culture in which GE shared information and practices with customers in order to add to the company’s value and make it indispensible. The program was called “At the Customer, For the Customer.” GE shared productivity-boosting tips, global expertise, and data from GE units, including market information and basic research; the company also gave lessons in its much-admired management concepts. These initiatives went beyond the expectations of customers. When Southwest Airlines had problems with a component made by a GE competitor, GE helped solve the problem and also introduced efficiency-increasing Six Sigma business concepts to the airline. After the project proved successful, GE helped Southwest with others, improving financial analyses and invoice flows. Employees’ track records in increasing customer productivity became components of GE performance evaluations. GE Medical (GEM) went out of its way to offer assistance to its longtime customer University Community Health System in Tampa. When the health system built a state-of-the-art heart hospital and research center, GE created a system using proven equipment and services as well as experimental tech-

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nology that was not on the market yet. It also gave advice on leadership development and workplace design. GEM coordinated with other GE units to help build the medical facility and supplied all the hospitals’ clinical information technology and more than 80 percent of its diagnostic and imaging equipment. GE’s good service earned it a seven-year contract with the facility, instead of a more common one- to five-year contract. During his first years as CEO Immelt also made progress with respect to his goal of using technology better. In January 2002, 40 percent of the company consisted of administration, finance, and backroom functions. Immelt promised to shrink that figure by 75 percent over the following three years.

vices—something Welch had acquired—and more on highgrowth industries and fast-growing economies such as China’s. Immelt was a cheerleader for globalization, and GE invested heavily in China, where the company was building the country’s energy grid. Immelt frequently made headlines with his surprising changes at GE. In January 2004 he reorganized GE’s 11 businesses into four slow-growth “cash generators” that fed seven “growth businesses.” The new plan was expected to increase earnings. Dramatic changes like that one helped Immelt meet his goals for the company while establishing a management style distinct from that of his renowned predecessor.

Immelt also pledged to promote diversity among top management. He claimed that he was “haunted” by a newspaper article that had run pictures of GE’s senior management: 30 of the 31 executives pictured were white men. Immelt believed that GE needed to be able to relate to customers in order to serve them better. As GE was expanding globally, Immelt wanted to add Asians and Indians as well as women and African Americans to the company’s ranks of executives and salespeople. Immelt increased diversity in GE Medical Systems when he ran the division and as CEO was committed to doing the same with the rest of the company.


EARNS RECOGNITION

Deutsch, Claudia H., “GE’s New Corporate Face: Jeffrey Immelt Rides a Can-Do Confidence to the Top,” New York Times, December 1, 2000.

After Immelt spent two years as GE’s CEO, London’s Financial Times named him the Man of the Year. The publication praised him for remaking General Electric “to face the 21st century’s challenges: the rise of China and India, low growth and inflation, and geopolitical volatility” (December 27, 2003). The Financial Times explained that in remaking GE, Immelt was leading change in both American companies and their business leaders: “His careful remodeling of his own company is leading a wider reassertion of the primacy of shareholders and customers” (December 27, 2003). Financial World noted that in his first two years Immelt made significant changes in corporate governance. He appointed a lead director to balance his role as chairman. Rather than stock options, he received performance share units that were tied to the company’s results. Financial World also pointed out that Immelt wanted GE to rely less on financial ser-

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See also entry on General Electric Company in International Directory of Company Histories.

Brady, Diane, “His Own Man: Is There Room for Improvement at General Electric after Welch? Jeff Immelt Thinks So,” BusinessWeek, September 17, 2001, pp. 78–80. ———, “Will Jeff Immelt’s New Push Pay Off for GE?” BusinessWeek, October 13, 2003, pp. 94–98.

Eisenberg, Daniel, “Jack Who?” Time, September 10, 2001, pp. 42–53. Gapper, John, and Dan Roberts, “The Friendly Face of American Capitalism in a Cynical and Dangerous Era: Man of the Year Jeffrey Immelt,” Financial Times (London), December 27, 2003, p. 11. “The Man Who Would Be Welch,” BusinessWeek, December 11, 2000, pp. 94–97. Shepard, Stephen B., “A Talk with Jeff Immelt,” BusinessWeek, January 28, 2002, pp. 102–104. Unseem, Jerry, “Another Boss, Another Revolution,” Fortune, April 5, 2004, pp. 112–124. —Barbara Koch


■■■

Ray R. Irani 1935– Chairman and chief executive officer, Occidental Petroleum Corporation Nationality: American. Born: January 13, 1935, in Beirut, Lebanon. Education: American Institute of Beirut, BS, 1953; University of Southern California, PhD, 1957. Family: Son of Rida and Naz Irani; children: three. Career: Monsanto Company, 1957–1967, research scientist; Shamrock Corporation, 1967–1973, newproduct developer and director of research; Olin Corporation, 1973–1983, variety of executive positions including COO and president; Occidental Petroleum Corporation, 1983–1984, executive vice president and subsidiary chairman; 1984–1990, president and COO; Canadian Occidental Petroleum, 1984–1999, chairman; Occidental Petroleum Corporation, 1990–1996, chairman, CEO, and president; 1996–, chairman and CEO. Address: Occidental Petroleum Corporation, 10889 Wilshire Boulevard, Los Angeles, California 900244201; http://www.oxy.com.

■ Ray R. Irani became the CEO and chairman of Occidental Petroleum Corporation in 1990 following the death of the legendary company founder, chairman, and CEO Armand Hammer.Unlike Hammer, who had come to run Occidental as a type of personal fiefdom, Irani set out to stabilize and streamline the company while rerouting its direction. More than a decade passed before Irani’s corporate discipline took root, but by 2003 analysts were commending his work. The senior energy analyst Fadel Gheit was quoted by American Intelligence Wire as saying, “You have to give the management credit. They went from the ugly frog to the handsome prince” (April 7, 2003). Industry analysts called Irani a hard-driving strategist who always remained committed to his business convictions. FROM BEIRUT TO CALIFORNIA Irani was born in Beirut, Lebanon, to a mathematics professor. By the time he was 18, he had graduated summa cum


laude with a degree in chemistry from Beirut’s American University; by 22 he had earned his doctorate in physical chemistry from the University of Southern California. Irani worked as a research scientist for Monsanto Corporation for a decade in the 1950s and 1960s, during which time he earned most of his 150 patents for products as varied as pesticides, food additives, and cleaning compounds. Irani left Monsanto in 1967 and joined Shamrock Corporation, where he developed new products and directed research. In 1973 he went to Olin Corporation, a chemicals and metals conglomerate, where he served in a series of executive positions, eventually becoming COO and then president of the company. In 1983 Irani accepted an offer from Hammer to head Occidental’s chemicals division, which had lost $38 million in sales that year. Irani was restless at Olin but did not intend to let Hammer gain his services for less than he was worth. He negotiated to receive the same salary that he had been earning at Olin—a coup considering that he would be no more than a divisional head at Occidental. As quoted in Fortune, the attorney and Occidental director Louis Nizer called Irani’s terms “harsh”; with respect to Irani’s demanded salary he added, “Hammer saw in him a future top executive, and he told me, ‘Give it to him’” (November 7, 1988). Part of Irani’s bargaining power extended from the fact that Occidental was not seen as a progressive company, and its chemical division, which Irani would head, had floundered badly. Fortune quoted Irani as saying, “Oxy, for its size, was probably the worst chemical company at that time. Most of my colleagues thought I’d flipped” (November 7, 1988).

WINS BOSS’S APPROVAL Irani wasted little time in impressing the boss as he quickly masterminded a turnaround for the chemical division; by 1984 he was named company president. If some company insiders and analysts thought that he would not last long in that position, they had good reason: Hammer had fired all of the five previous company presidents over the preceding 20 years, largely due to what analysts called power struggles and disagreements. By 1988, however, Fortune was quoting a security analyst as saying, “Ray Irani and his team run the company. Hammer is very much a figurehead, a traveling spokesman” (November 7, 1988).

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Hammer himself admitted as much at the time, noting that his confidence in Irani to run the company freed him to pursue other interests, such as raising $1 billion for cancer research and improving relations with both the United States and the Soviet Union. Analysts praised Irani for placing a firm hand on a company with a history of horrendous ups and downs; they noted that for the first time in its history it was being run more like a solid Fortune 500 corporation than a one-man operation—and an erratic one at that.

and new leadership quickly became apparent when in June 1992, just six months after Hammer’s death, Irani gave up the 25-year battle Hammer had fought with the city of Los Angeles over the right to drill for oil on a plot of land owned by the company in Pacific Palisades. Irani was developing a reputation as a practical businessman, which he solidified when he told Thomas Bancroft of Forbes, “It was a pragmatic decision, it wasn’t tough for me to make. When you lose, you have to recognize it” (September 2, 1991).

Nevertheless Occidental still failed to perform up to par during Irani’s time as president through 1988. Only once between 1982 and 1988 did the company’s operating earnings cover its $2.50 dividend, giving the stock a junk-bond-like yield of 10 percent. Total annual return (including stock price and dividend yield) also lagged compared to other oil companies for many years. Yet by the late 1980s industry analysts were recommending Occidental stock based on Irani’s performance. They saw him as a stabilizing force whose mere presence had lessened the company’s volatility. In terms of strategy, he was seen as a “petrochemical man,” and he eventually set out to buy a series of chemical plants and companies; in 1988 he purchased Cain Chemical for $2.2 billion. By 1990 the analyst John H. Shaughness was able to tell John Evan Frook of the Los Angeles Business Journal, “In a sense, we’ve already seen the effect of Irani at Occidental. He is most responsible for developing a very neat, highly integrated business” (April 2, 1990).

In truth Irani had bigger things on his agenda than Hammer’s stubborn fight with the city. As chairman and CEO he quickly began making substantive changes that caught the eyes of Wall Street and competitors alike. He sold more than $2 billion worth of assets and would lay off 2,300 staff by the end of 1991. He cut the company’s stock dividend from $2.50 to $1.00, saving the company close to $450 million a year. He sold Occidental’s subsidiary in the United Kingdom, receiving a good price of $1.5 billion for the company’s oil and gas operations in the North Sea. He struck a deal to sell all of the company’s natural-gas liquid assets and businesses in the United States for $700 million. Analysts estimated that these and other deals in total netted Irani and Occidental $1.8 billion in cash after taxes. Irani soon also sold IBP, the nation’s largest beef and pork processor. Other divested assets included a phosphate business, a stake in a Chinese coal mine, and coal facilities and properties in Kentucky and West Virginia. Dale Hanson, the chief executive of CalPers and a major Oxy shareholder, told Bancroft of Forbes, “Ray Irani has to overcome the Oxy-Hammer shadow. So far, he has made good decisions” (September 2, 1991).

TAKES THE HELM With the mid-1990 announcement that Irani was heir apparent to the 91-year-old Hammer, not all stockholders were enamored with the choice. Although his appointment helped stop speculation that the still-troubled company would be targeted by a corporate raider, many analysts noted that Occidental’s strong reliance on petrochemicals, which had been developed under Irani, resulted in its struggling to keep up with other oil companies in terms of profits. Many continued to see Hammer as the controlling force behind the company, but there could be little doubt that Irani was filling upper management with his own key people in anticipation of taking over the reins entirely. Some analysts noted that Irani had been allowed to take firm control of the company because Hammer had been planning for his eventual succession for some time. On December 10, 1990, Hammer died, ending his 34-year reign as chairman and CEO of Occidental. A few days later Irani stepped in as chairman and CEO; industry analysts expected him to prove to be the competent new leader who would steer the company toward a bigger focus on chemical production. They noted that he was likely to sell off assets and businesses that had been more like “pet projects” to Hammer than genuine profit centers. The difference between the old

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Irani had started out on the right foot in the eyes of industry analysts. By 1992—nearly a year ahead of schedule—he had already hit his $3 billion debt-cutting goal. Furthermore he had completely turned around the company’s chemical business, OxyChem, which had once been up for sale piecemeal but became one of Occidental’s two core interests, along with oil and gas. Although Irani’s decision to drop the company’s dividend to $1 led to some stockholders’ disgruntlement, analysts saw the move as proof that Irani was willing to make the tough decisions needed to get Occidental moving. In 1992 Kara Glover noted in the Los Angeles Business Journal, “Industry analysts hail Irani for getting Occidental on a more focused track,” adding that he was viewed “as inspiring shareholder confidence with an effective management style and ability to get things done” (March 23, 1992).

FACES DIFFICULT TIMES Irani continued to improve the company’s bottom line and reduce debt as he kept a wary eye on the possibility of another economic recession. He had abandoned Hammer’s tangential “business” interests—such as the raising of Arabian horses, real


Ray R. Irani

estate, and hybrid-seed research. He focused on core energy assets, and before long the company’s chemical business was booming, and the oil and gas operations were growing. Irani, however, remained dissatisfied. Lower crude oil prices and other factors led to Occidental posting a net loss of $36 million, on sales and operating revenues of $4.7 billion, in the first nine months of 1994. He told Robin Sidel of the Houston Chronicle, “The bottom line, as far as earnings-per-share results, has been disappointing to me” (November 20, 1994).

ternational oil and chemical company had become a domestic exploration and production company with a few highpotential international ventures. Having suffered through the worst sales period for the chemical sector in two decades, Irani was optimistic. In an interview with Barbara Shook of Oil Daily, Irani pointed out that his purchases of the Elk Hills reserve in California and the Altura properties in West Texas had made the company first in gas and third in oil production in California and second in gas production in Texas.

Irani was discovering that turning Occidental into a successful company would be tough. Analysts noted that he was struggling to find a strategy that would provide consistent growth in sales and earnings as well as the company’s stock price. The stock languished in the mid-1990s, and Irani took heat for collecting more than $125 million in pay and other compensation over a span of several years. In 1995 the analyst Scott Black unceremoniously told Dan Dorfman of Money, “He’s unimaginative and not aggressive enough. You’ve got to speed up the sale of energy properties with low returns and upgrade exploration to increase reserves. What’s needed is a major company refocus” (June 1995).

By mid-2003 all of Irani’s work over the previous decadeplus started to pay off; he had turned the onetime profligate corporation into a disciplined company. He was reaping the benefits of correctly predicting a leap in domestic oil profits and had admirably squeezed profits from aging Texas and California gas and oil properties. Analysts noted that while other oil and gas companies were focusing on exploration efforts overseas, Irani had taken a contrarian direction in obtaining the domestic Elk Hills and Altura sites for a total of $7.1 billion. Although the wells had already reached maturity at the time of the purchase, aggressive new drilling and wellstimulation technologies enabled Irani to add to Occidental’s domestic oil reserves. At the same time rising energy prices further increased the profitability of Occidental’s close-to-home production.

In 1998, oil prices fell nearly $10 a barrel to their lowest level in 50 years. Oil-business earnings, which accounted for more than half of the company’s $6.6 billion in total revenue in 1997, fell by $314 million in 1998 from the $694 million of the previous year. As chemical prices were also falling, Irani could seek no relief from the chemical division. In 1999, analysts thought that they saw the company rebounding. The company’s stock rose 20 percent—but still fell behind the 26 percent increase in the Standard & Poor’s index of major oil-company stocks. In fact, Occidental stock was worth less in 1999 than it had been 20 years earlier. Although some analysts saw plenty of good signs in the company’s growth, the analyst Christopher Stavros told James F. Peltz of the Los Angeles Times, “They still need to win back investor credibility” (August 29, 1999). Industry watchers noted that Occidental had made a deal that might ultimately be critical to its turnaround: in 1998 the company bought the U.S. government’s 78 percent interest in the Elk Hills oil field of Bakersfield, California, for $3.5 billion. Analysts pointed out that the site would be a good longterm source of oil and gas, which Occidental would be able to produce more efficiently as it incorporated the use of higher-technology production equipment. Nevertheless a poor overall 1998 showing, including a fourth-quarter loss of $35 million, led to Irani being denied his annual cash bonus.

SUCCESS AT LAST Despite the perennial criticism, Irani remained focused on transforming Occidental, and by 2002 the former largely in-


Though analysts expected Occidental to be able to keep these aging sources active for another dozen years, Irani realized that he would not be able to squeeze oil and gas production from them forever; he soon began to focus on developing large overseas oil fields. A new pipeline in Ecuador and a 25 percent stake in the Dolphin Project, which could transport two billion cubic feet of natural gas per day from Qatar to the United Arab Emirates, were promising new sources of income for the company. In 2004, Irani announced a deal with Libya shortly after President George W. Bush lifted the embargo on business dealings with the country. Occidental had long produced oil in Libya but had been forced to leave the country in the 1980s due to economic sanctions. Occidental owned a stake in Libya’s Waha oil concession, and Irani quickly arranged highlevel meetings with Libyan officials, including the President Muammar Qaddafi. Between 1970 and 1986, Occidental had participated in discoveries in Libya totaling three billion barrels of oil. In 1985 the company had net production of 44,000 barrels per day from three fields and owned three exploration concessions. Irani noted that Oxy’s frozen Libyan assets were producing at a gross rate of 85,000 barrels a day in 2004, a rate that had been declining rapidly due to a lack of investment and the application of modern technology. Irani told Paul Merolli of Oil Daily, “We are confident we can achieve a substantial increase in gross recovery” (April 26, 2004).

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Ray R. Irani

MANAGEMENT STYLE: HIERARCHICAL Analysts noted that Irani continually made the tough decisions necessary to turn Occidental around. Laying off workers and cutting dividends did not make him popular in the early years, but Irani had recognized that the company was mired in a period of instability and fierce competition. Jack Linder told Dara Glover of the Los Angeles Business Journal, “Ray is obviously a man of word and conviction” (March 23, 1992). Analysts noted that Irani ran Occidental with an emphasis on following the hierarchical chain of command. While his predecessor Hammer was known to speak with anyone in the building, Irani was known to perhaps talk only to the executive vice president and let his thoughts and directions then be passed down. Colleagues and industry insiders noted that Irani was also different in that he did not have Hammer’s charismatic free spirit but was much more businesslike and pragmatic. He gave his staff more responsibility and clearly defined goals for which they would be held accountable. Many believed that Hammer took to Irani and designated him the heir of Occidental because he liked his toughness; while working at Olin, Irani had garnered a reputation for being feisty. Colleagues noted that when the company owner John Olin ignored his advice, Irani would snap at Olin and ask what he was being paid for; Hammer liked such spunk. Irani summed up the differences between himself and his Occidental predecessor for Bancroft of Forbes: “Dr. Hammer was more of a romantic. He could fall in love with businesses, where I don’t” (September 2, 1991).

LOOKING TOWARD THE FUTURE In the 2003 annual report Irani expressed optimism that Occidental had finally broken through and would succeed in the future. The company reported a net income of $1.53 billion, or $3.98 a share—the second-highest annual earnings in the company’s history—up 51 percent from 2002. Occidental’s year-end closing price of $42.24 per share was the company’s highest in 30 years. In February 2004 Irani and Occidental announced an increase in the dividend rate for the second consecutive year.

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In addition to his duties at Occidental, Irani served on the boards of the American Petroleum Institute, Oxy Oil and Gas USA, Occidental Oil and Gas Corporation, Occidental Petroleum Investment Corporation, Kaufman and Broad Home Corporation, and the Jonsson Cancer Center Foundation at UCLA. He was a member of the National Petroleum Council, the American Institute of Chemists, the Industrial Research Institute, the CEO Roundtable, and the U.S.-Russian Business Council, among others. He served as a vice chair for the American University of Beirut, a trustee of the University of Southern California, and a member of the Los Angeles Town Hall and the Los Angeles World Affairs Council.

See also entry on Occidental Petroleum Corporation in International Directory of Company Histories.


Bancroft, Thomas, “The Pragmatist,” Forbes, September 2, 1991, p. 128. Dorman, Dan, “Cranky Money Managers Try to Light a Fire under These 10 Big Stocks,” Money, June 1995, p. 21. Frook, John Evan, “New Heir Apparent at Occidental Doesn’t Pacify Unhappy Shareholders, Analysts Say,” Los Angeles Business Journal, April 2, 1990, p. 4. Glover, Kara, “Ray Irani Brings New Ways to Occidental,” Los Angeles Business Journal, March 23, 1992, p. 12. Merolli, Paul, “Sanctions Lifted, Oxy Ready to Deal in Libya,” Oil Daily, April 26, 2004. “Occidental: From Excess to Success,” America’s Intelligence Wire, April 7, 2003. Peltz, James F., “A New, Truly Improved Occidental Petroleum?” Los Angeles Times, August 29, 1999. Ramirez, Anthony, “Hammer Hits 90! Oxy Grows Up Too,” Fortune, November 7, 1988, p. 59. Sidel, Robin, “Oxy Chief Still Unsatisfied with Results of Restructuring,” Houston Chronicle, November 20, 1994, p. 11. —David Petechuk


■■■

Michael J. Jackson 1949– Chairman and chief executive officer, AutoNation Nationality: American. Born: 1949, in Philadelphia, Pennsylvania. Education: Saint Joseph’s College, BA, 1971. Family: Married Patricia; children: one. Career: Mercedes-Benz North America, 1974–1979, technical specialist and, later, job in marketing; Euro Motorcars, 1979–1990, managing partner; MercedesBenz North America, 1990–1997, variety of marketing positions, including executive vice president, marketing; Mercedes-Benz USA, 1997–1999, president and, later, CEO; AutoNation, 1999, CEO and director; 2003–, CEO, director, and chairman. Awards: All-Star Dealer Award, Sports Illustrated, 1990; Industry Leader of the Year, Automotive Hall of Fame, 2003; two-time nominee to All-Star Team of automotive executives, Automotive News; named four times to annual Marketing 100, Advertising Age. Address: AutoNation, 110 S.E. 6th Street, Fort Lauderdale, Florida 33301; http://corp.autonation.com.

■ The auto industry veteran Michael J. Jackson impressed industry observers in the 1990s when he totally reshaped the stodgy image of Mercedes-Benz in the United States. The turnaround, driven by the addition of sportier models and an advertising campaign designed to appeal to a younger, more affluent market, lifted the German automaker from the doldrums in the U.S. auto market and made Mercedes-Benz one of America’s best-selling luxury brand names.

JACKSON HEADS AUTONATION Among those particularly impressed by Jackson’s accomplishments at Mercedes-Benz USA was H. Wayne Huizenga, the Florida-based entrepreneur and businessman best known for his earlier leadership of Waste Management and Block-


Michael J. Jackson. © Jeffery Allan Salter/Corbis SABA.

buster Entertainment. In the late 1990s, Huizenga was struggling to make a go of AutoNation, the country’s largest publicly traded chain of auto dealerships, spun off from Republic Industries, a company with its roots in the waste-management business. In 1999, Huizenga sought out Jackson and asked him if he would be interested in taking on the challenge of running AutoNation, which at that point was struggling. Jackson accepted. Pressured by the high cost of its rapid expansion, AutoNation in 1999 managed to make an operating income of only $463.1 million on revenue of just over $20 billion, for an operating margin of only 2.3 percent. The previous year the company reported operating income of $356.3 million on sales of roughly $12.7 billion, representing an operating margin of 2.8 percent. Huizenga hoped that the company’s operating margins would improve under Jackson’s leadership.

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Michael J. Jackson

Another major problem for AutoNation, and one that was quickly identified by Jackson, was the company’s venture into the used-car superstore market. The company had hoped that its innovative megastore approach to used-car sales would give it an edge over its principal competitors in the market— franchised new-car dealers. In the end, however, the scheme was a failure. Less than three months after joining AutoNation as its president and chief executive officer on October 1, 1999, Jackson announced that the company was shutting down 23 of its used-car megastores and integrating the remainder with the chain’s new-car dealerships. In 2000, AutoNation’s first full year under Jackson as CEO, the company posted an operating income of $721 million on sales of $20.6 billion, representing an operating margin of 3.5 percent, a significant improvement over its performance in 1999. With the economy facing a recession in 2001, AutoNation’s operating margin once again came under pressure, falling to 2.6 percent, or operating income of nearly $515 million on revenue of just under $20 billion. Operating margins widened to 3.7 percent in 2002, when the company reported operating income of $716 million on sales of roughly $19.5 billion.

JACKSON’S EARLY WORK AS A MERCEDES-BENZ TECHNICAL SPECIALIST It was a serendipitous car breakdown in 1971 that helped steer Jackson into a career in the auto industry. After graduating from Saint Joseph’s College in Philadelphia, his hometown, with a bachelor’s degree in political science, Jackson was scheduled to enroll at Georgetown Law School in Washington, D.C., to fulfill his dream of becoming a lawyer. While Jackson was on a trip with his wife, Patricia, the 1959 Mercedes 190SL they were driving broke down. Hard pressed for money at the time, Jackson negotiated a deal with the local Mercedes dealership to work off his repair bill by doing odd jobs around the garage. After a couple of months working around the dealership’s garage, Jackson found himself so fascinated by the car business that he abandoned his plans for a career in law. Although he had no formal training as an auto mechanic, he discovered that he had a natural affinity for car repair and took a full-time job with the dealership as a service technician. In 1974 Jackson signed on with Mercedes-Benz of North America (MBNA) as a technical specialist. In this post he traveled around the country to Mercedes dealerships to help mechanics resolve technical problems. He worked as a technical field representative for MBNA for a couple of years, after which he decided that he was on the wrong side of the business. As he told Steve Finlay of Ward’s Dealer Business, “I figured out I’m on the technical end of the business without an engineering degree working for an engi-

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neering-oriented company. So I figured I better move over to the sales and marketing side of MBNA.”

JACKSON’S CAREER IN SALES AND MARKETING After five years at MBNA, Jackson in March 1979 teamed up with a group of European investors to buy Euro Motorcars, a Mercedes dealership in Bethesda, Maryland. This was the same place where years earlier he had done odd jobs in return for repairs on his 190SL. Over the next decade Jackson guided the dealership from annual sales of approximately three hundred Mercedes cars to sales of about 1,700 autos, including not only Mercedes but also such other foreign brands as Acura, Bentley, and Saab. Under Jackson’s leadership, Euro Motorcars grew into a regional dealer group that owned and operated 11 automotive dealership franchises. In the late 1980s Jackson was tapped to head the Mercedes U.S. dealer council, a position he held for two years. He used the post to lobby DaimlerBenz to be more responsive to U.S. auto-buying tastes and trends. The automaker’s failure to do so had caused Mercedes sales in the United States to plummet to 58,000 by the end of the decade, roughly half what it had been in the early 1980s.

JACKSON BECOMES MERCEDES-BENZ EXECUTIVE Jackson’s keen grasp of U.S. auto-buying tastes was not lost on DaimlerBenz executives, who in 1990 asked the dealer if he wanted to return to MBNA to see if he could reverse the company’s declining fortunes in the U.S. market. Although he was doing well as a dealer, Jackson told Finlay, he decided to accept the challenge. It was a difficult time and not a challenge he would care to experience again. “But it really was a chance to make changes. If everything was beautiful, they wouldn’t have asked me to come back and they wouldn’t have been receptive to change.” Indeed, there were plenty of changes at MBNA. Jackson, who returned to MBNA as senior vice president for sales and marketing in July 1990, pushed Stuttgart-based DaimlerBenz executives relentlessly to produce sportier, more stylish cars that better reflected U.S. auto buyers’ demands. He was also responsible for significant changes in the Mercedes advertising campaign in the United States, scrapping the company’s ponderous commercials touting its engineering expertise in favor of lighter, music-filled ad spots more suited to U.S. tastes. Other changes credited to Jackson included a revamped customer care strategy designed to convert Mercedes loyalists into advocates and a restructuring of the Mercedes-Benz retail organization. As part of the latter move, the company asked its U.S. dealers to sell Mercedes-Benz vehicles exclusively, buying out those who refused to sign on to the new program. Particularly successful was the Jackson-directed change in U.S. marketing strategy. Despite strong resistance from Stuttgart,


Michael J. Jackson

Jackson managed to push through a U.S. marketing campaign that portrayed Mercedes cars as youthful and fun. It was not an easy sell. As Jackson told Ward’s Dealer Business, “Not only did ‘youthful’ and ‘fun’ not apply to the old Mercedes, the company wouldn’t want them to apply.” To help boost Mercedes sales in the United States, Jackson pressured dealers to cut their markup over invoice from 13 to 7 percent. This move, coupled with all the other changes in Mercedes strategy, reinvigorated the company’s U.S. sales, which rose from fewer than 60,000 at the end of the 1980s to nearly 190,000 in 1999. For his role in reversing the company’s fortunes, Jackson was steadily moved up through the Mercedes management ranks, and in March 1997 he was named president of Mercedes-Benz USA. Two years later he was given the added responsibility of CEO.

APPOINTMENT TO CEO OF AUTONATION Jackson’s appeal to Huizenga as a successful auto retailer and manager was obvious. After a lengthy search for likely candidates to lead his AutoNation into the new millennium, Huizenga decided that Jackson was the perfect man for the job. According to a company press release, in announcing Jackson’s appointment as AutoNation’s new CEO in late September 1999, Huizenga said: “Mike has a great combination of automotive retailing experience from both the dealer and the manufacturer perspective. He also understands what it takes to be a successful brand marketer as well as a successful automotive retailer.” Jackson wasted no time in getting down to business at AutoNation. In addition to closing down the company’s unsuccessful used-car megastores, the new CEO moved quickly to bring the company’s spiraling costs under control. Closure of the superstores cut AutoNation’s payroll by roughly 1,800 employees, to which Jackson soon added two hundred of the company’s six hundred workers at its headquarters in Fort Lauderdale, Florida. Despite the economic recession that got under way in early 2001, AutoNation, under Jackson’s direction, still managed to post respectable financial numbers through the early 2000s. Although the company’s net income after taxes dipped in 2001 to $245 million from $328.1 million in 2000, it bounced back dramatically in 2002, hitting $381.6 million. For the first three quarters of 2003, AutoNation’s net income totaled more than $425 million, and its operating margin never slipped below 3.8 percent. A major challenge faced by Jackson in his first couple of years at AutoNation was the establishment of a corporate culture that reached out to every employee in the company’s farflung chain of more than 370 new-car dealerships in 17 states. In most cases, AutoNation’s field employees faced the difficult


transition from working for a privately held auto dealership to being part of a large, $20 billion corporation. To help ensure that all AutoNation employees felt as though they were integral to the corporation headquartered in southern Florida, Jackson instituted a program of informal get-togethers for employees and their families. In addition to its network of new-car dealerships, more than 60 percent of which, in the early 2000s, was concentrated in the Sunbelt states of California, Florida, Nevada, and Texas, AutoNation fully exploited opportunities for online marketing. In 2002 the company generated just over 11 percent of its $19.5 billion revenue, or $2.2 billion, from online sales. To attract online buyers, AutoNation promoted “no-haggling” Internet sales policies and offered a full-scale Web site that offered consumers several tools for making the car-buying experience as efficient and pleasant as possible.

JACKSON’S RECOGNITION BY PEERS Jackson’s accomplishments in the auto industry were widely recognized by his peers. In 1990, while he was still running the Euro Motorcars dealership network, he was given the Sports Illustrated All-Star Dealer Award. He was twice named by Automotive News to its All-Star Team of automotive executives and four times selected as a member of Advertising Age’s Marketing 100. In December 2003 the Automotive Hall of Fame, based in Dearborn, Michigan, named Jackson as its Industry Leader of the Year for 2003. On February 1, 2004, he was honored by the Automotive Hall of Fame at its annual awards luncheon in Las Vegas, during the annual convention of the National Automobile Dealer Association. In announcing the award, according to a report in Collision Repair Industry Insight, the Hall of Fame’s president, Jeffrey Leetsma, said that Jackson’s “leadership at AutoNation is significant not only in the sheer volume of units delivered but in raising the bar in all areas of the customer experience.”

See also entries on AutoNation, Inc. and Daimler-Chrysler AG in International Directory of Company Histories.


“Automotive Hall of Fame Selects AutoNation CEO Jackson 2003 Automotive Industry Leader of the Year,” Collision Repair Industry Insight, December 8, 2003. “AutoNation at Goldman Sachs Tenth Annual Global Retailing Conference,” Fair Disclosure Wire, September 4, 2003. Dyer, Leigh, “Auto Sales Contribute Only Part of Dealerships’ Profits,” Charlotte Observer, December 22, 2003. Finlay, Steve, “How a Dealer Revived Mercedes-Benz,” Ward’s Dealer Business, December 1, 1998.

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Michael J. Jackson Harris, Donna, “AutoNation Striving for Corporate Culture,” Automotive News, January 29, 2001.

Ritzler, Karl, “Florida-Based AutoNation Stumbles over UsedCar Hurdles,” Atlanta Journal and Constitution, December 14, 1999.

Mann, Joseph, “AutoNation Chief Says Vehicle Sales Gaining Speed Nationwide in 2003,” South Florida Sun-Sentinel, May 15, 2003.

Seemuth, Mike, “AutoNation Finance Chief, CEO Sell $6M in Stock,” Daily Business Review, August 7, 2003.

Patel, Purva, “AutoNation Sees Higher Profits on Stronger Car Sales, Cost-Cutting Measures,” South Florida Sun-Sentinel, October 31, 2003.

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Welch, David, “AutoNation’s Driver Takes a Sharp Turn,” BusinessWeek, March 13, 2000. —Don Amerman


■■■

Tony James 1951– Vice chairman, The Blackstone Group

then went to Harvard Business School as a Baker scholar and earned his master’s of business administration degree with distinction. After graduation in 1975 James ventured to Wall Street and became an investment banking associate at Donaldson, Lufkin & Jenrette.

Nationality: American. Born: February 3, 1951, in Wyandotte, Michigan.

MERGERS IN THE 1980S

Education: Harvard College, BA, 1973; Harvard Business School, MBA, 1975.

In the merger mania of the 1980s, James was at the top of his game. By 1982 James headed Donaldson’s global mergers and acquisitions department and was busy brokering multimillion-dollar mergers for international conglomerates. By 1986 James, at the age of 35, was earning more than $1 million annually at Donaldson and was profiled by the Wall Street Journal as one of the financial world’s three “merger whiz kids.” While James in his mid-30s and a married father of three was hardly a “kid,” his meteoric rise was not only noteworthy but also well earned. James worked long hours, traveled frequently, and headed a division of 30 like-minded individuals. According to the Wall Street Journal, the unit in 1985 brought in approximately $10 billion to Donaldson’s mergers and acquisitions coffers.

Family: Son of Hamilton and Waleska; Married Amabel Boyce, 1973; children: three. Career: Donaldson, Lufkin & Jenrette, 1975–1982, investment banking associate to chair of banking group; 1982–1995, head, global mergers and acquisitions department; 1995–2000, chairman, banking group; Credit Suisse First Boston, 2000–2002, cochief, global investment banking; 2002, chairman, global investment banking and private equity; Blackstone Group, 2002–, vice chairman. Address: The Blackstone Group LP, 345 Park Avenue, New York, New York 10154; http://www.blackstone.com.

■ Hamilton E. “Tony” James spent 25 years at Donaldson, Lufkin & Jenrette working his way up from an investment banking associate to chairman of the firm’s mergers and acquisitions and private equity holdings. When Credit Suisse First Boston (CSFB) acquired the renowned investment group in 2000, James moved into the merged global banking and merchant banking unit. As chairman of the unit James worked among the world’s finest financial gurus but departed for another premier investment house, The Blackstone Group, in 2002. Many analysts believed that as vice chairman at Blackstone, James was heir apparent to the founding partner, Stephen Schwarzman.

EARLY LEADERSHIP SKILLS James proved his aptitude early, attending the prestigious Choate Rosemary Hall boarding school in Wallingford, Connecticut. After Choate, James attended Harvard College, where he studied as a John Harvard scholar and earned a bachelor’s degree in business, magna cum laude, in 1973. James


In addition to being shrewd in mergers and acquisitions, James urged Donaldson to enter the private equity market in 1985. In James’s capable hands, the new division became immensely successful. While rising young stars of the leveraged buyout era burned out or were indicted, James remained on the straight and narrow. In 1989 James and Donaldson, Lufkin & Jenrette engineered the takeover of CNW Corporation, the railway holding company of the Chicago & North Western Transportation Company, for the New York-based Blackstone Group. During the negotiations James met and worked with several Blackstone executives, including one of its founders, Stephen A. Schwarzman. Schwarzman figured prominently in James’s future. In the 1990s James was a power broker without peer and was making millions. During his tenure, investment banking had become Donaldson’s largest and most profitable division. Similar growth in Donaldson’s private equity holdings allowed the firm to join the ranks of the world’s most renowned fund managers. James was appointed chairman of Donaldson’s banking group in 1995. By 2000 Donaldson had suffered ups and downs and found itself the target of a takeover by CSFB.

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Tony James

CSFB, part of the Crédit Suisse Group international empire, which was based in Zurich, Switzerland, negotiated, bought, and merged with Donaldson in November 2000. Executives were paired up and moved around to lead the conglomerate’s various operations. James and Charles Ward, the president of CSFB, ran global banking as cochiefs of the new CSFB USA, as the merged Donaldson unit was called. By 2001 the chief executive of CSFB, Allen Wheat, was mired in controversy over regulatory missteps and was forced to resign. James was initially considered for the executive position but was passed over for John Mack, the former president of Morgan Stanley. In March 2002, after Ward left CFSB to head Lazard, Mack tried to lure other Morgan Stanley executives to CSFB. While Mack hoped to recruit a Morgan Stanley veteran to run global banking with James, the ploy did not work, and James was given sole control as chairman of CSFB’s global investment banking and private equity business.

vate equity and is one of the industry’s most dynamic senior executives in investment banking.”

NEW OPPORTUNITIES

“CSFB Shakes Up Top Management,” Investment Dealers’ Digest, February 25, 2002.

On November 1, 2002, James left CSFB to become vice chairman of the Blackstone Group. Answering directly to Blackstone’s president, Stephen Schwarzman, James was in familiar territory, overseeing the billion-dollar investment group’s mergers and acquisitions and private banking businesses. James also was charged with finding new business opportunities for Blackstone, a challenge for which Schwarzman believed James particularly capable. In an October 17, 2002, Blackstone press release announcing James’s appointment, Schwarzman commented, “This is an exciting day for Blackstone. Tony has developed an outstanding record on Wall Street, where he has one of the best investment records in pri-

“Hamilton Evans James,” Marquis Who’s Who, 2004, available at Biography Resource Center Online, http:// www.galenet.galegroup.com.

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James continued to make his mark at Blackstone in 2003 and 2004, and his experience and business acumen earned him seats on several other prestigious boards. James served as a director of Costco Wholesale Corporation, the American Ballet Theatre, Second Stage Theatre, and Trout Unlimited and as a trustee of Choate Rosemary Hall school. See also entries on Crédit Suisse Group and Donaldson, Lufkin & Jenrette, Inc. in International Directory of Company Histories.


Anders, George, et al., “Merger Whiz Kids,” Wall Street Journal, June 2, 1986.

Kiviat, Barbara, “Trying to Loosen Things Up,” Time, December 1, 2003, p. 79. Orr, Deborah, “The New Titans,” Forbes, April 4, 2004, p. 68. Scannel, Kara, “Blackstone Group Hires Deal Maker Who Guided DLJ,” Wall Street Journal, October 18, 2002. —Nelson Rhodes


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Charles H. Jenkins Jr. 1944– Chief executive officer and director, Publix Super Markets Nationality: American. Born: 1944. Education: Emory University, BBA, 1964; MBA, 1965; Harvard, PhD, 1969. Family: Son of Charles Jenkins Sr. (retailer); married Dorothy Chao; children: two. Career: Publix Super Markets, 1969–1974, assistant to the vice president of real estate; 1974–1988, vice president of real estate; 1988–1990, executive vice president; 1990–2000, chairman of the executive committee; 2000–2001, chief operating officer; 2001–, chief executive officer. Address: Publix Super Markets, 3300 Airport Road, Lakeland, Florida 33811; http://www.publix.com.

■ Charles H. Jenkins Jr. began his career in the retail food business in 1969 at Publix Super Markets in Lakeland, Florida. After working his way up the management ladder of the family-run business, he became chief operating officer (COO) in 2000, a position that was eliminated upon his appointment as chief executive officer (CEO) in 2001. During his tenure at Publix he developed a reputation for meticulous planning and a careful, methodical approach to growth.

EARLY LIFE AND CAREER Charles H. Jenkins Jr.’s uncle George Jenkins opened the first Publix Super Market in Winter Haven, Florida, in 1930. From the beginning, stock was sold only to employees, family members, and members of the board of directors, making Publix the largest employee-owned grocery-store chain in the United States and Florida’s largest private employer. Charles Jr.’s father, Charles Sr., began working for his older brother George in 1945, shortly after the company purchased the All American grocery store chain.


Jenkins received a PhD in real estate from Harvard in 1969 and immediately went to work for Publix, beginning as assistant to the vice president of real estate. In 1974 he became vice president of real estate and was appointed to the company’s board of directors. As the first generation of senior executives began to reach retirement age, Jenkins and his peers were put into key positions within the company. Industry insiders noted that this gradual process of turning over power was a key reason that Publix remained a consistent presence in the retail food business amid change and supermarket takeovers. In the book Fifty Years of Pleasure, Pat Watters writes that Jenkins applied for a job at Publix upon completion of his doctorate. He wrote his thesis on shopping-center development. At first his uncle refused to employ him, telling Jenkins that the grocery-store business was too difficult for the younger man to master. Jenkins persisted, telling his uncle that he had tied up 90 percent of his personal investments in Publix stock and that he wanted to have the chance to turn his investments into large profits. His uncle understood that reasoning and put him to work in the real-estate division. Jenkins admitted in an interview for the book that he believed Publix was simply the best chance he had for achieving his potential. Jenkins achieved a reputation equal to his uncle’s in knowing how to locate stores in profitable areas.

BEST PLACE TO WORK Under Jenkins’s leadership, Publix expanded into the convenience-store and gas-station market under the name of Pix. Almost immediately these stores earned the reputation of being top of the line in that market, offering deli items and Publix private-label goods. Enterprise Florida recognized Publix in 2003 for its efforts to diversify and add to the state’s economy. The Major Market Business Expansion Award recognized the efforts of Jenkins in 2002 to create jobs with higher wages and Publix’s community involvement. The award cited Publix for spending $500 million on an expansion of the company’s headquarters in Lakeland and opening 51 new stores. Jenkins accepted the award from Governor Jeb Bush. The award also recognized the company’s humanitarian efforts for instituting the Food Industry Against Hunger campaign in 2002 and for its support of local, state, and national

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charities such as the March of Dimes. The family-run business stressed customer satisfaction as well as employee contentment. In 2003 readers of Florida Monthly magazine voted Publix the best grocery store in the state. Fortune 500 named it one of its most admired companies in 2003. As of 2004 employees owned about 27 percent of the company.

designation was determined by a survey of randomly selected employees that asked about management, peer relationships, and pride in working for Publix. Jenkins told Fortune, “It is thrilling to know that our associates still consider Publix to be one of the best companies to work for in America.” Publix also received the highest scores of any other supermarket for customer satisfaction in a national survey conducted by the American Customer Satisfaction Index in 2003.

SWIFT ON OPPORTUNITIES FOR EXPANSION When Jenkins replaced his cousin, Howard Jenkins, as CEO, he vowed to honor the company’s motto, “Where shopping is always a pleasure.” Noted for his careful planning, Jenkins established a reputation in his early years for taking meticulous, well-planned steps toward building the company. He continued that approach as CEO. Until 1990 Jenkins and the company remained dedicated to the concept of not expanding outside of Florida. When the economic climate warranted a change, however, Jenkins led the company’s expansion into Georgia, South Carolina, Alabama, and Tennessee. His research and homework in preparing the expansion impressed those watching the Fortune 500 company. Publix entered the Atlanta market in 1990. A research consultant noted that the growth of Publix in that area awed industry insiders. Within a decade the company had gone from having no stores to competing with Kroger for dominance in the area. When Publix moved into Tennessee and bought stores from Albertsons in 2002, industry insiders were impressed with the thoroughness with which the company entered the market in the Nashville area. Analysts noted that Publix contacted the proper regulatory agencies and personally supervised every detail. During negotiations and development of the expansion, the owners of the company personally attended the meetings and made the phone calls. Jenkins continued following the original mission of Publix to promote high-quality food in order to become the best retailer in the world. He focused on giving customers value while not tolerating waste. Jenkins dedicated the business to remaining loyal to its stockholders and taking civic duties seriously. In his first year as CEO, profits grew 19 percent, with a 4.3 percent increase in revenue. Local residents are quick to praise and defend Lakeland’s largest employer. One observer of Publix’s success noted, with a hint of bias, that finding a disgruntled employee was impossible. Andrew Wolf, an analyst at BB&T Capital Markets in Richmond, Virginia, told Progressive Grocer in 2003 that one of the reasons for employee loyalty were the incentives employees had as owners of the company. In 2003, for the seventh consecutive year, Publix received recognition as one of Fortune magazine’s Top One Hundred Companies To Work For. This

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AGGRESSIVE STRATEGIES BRING RESULTS Jenkins followed established business standards while remaining willing to make changes that made good business sense. For example, he began a new policy in the 1970s while still working in the real estate division that saved the company time and money. When Jenkins began as vice president of real estate in 1974, Publix owned 25 percent of its locations. According to company records in 1980, it owned only one in six. Jenkins remain committed to the company’s focus on carefully determining each store’s location. When he could not find a developer to build and lease on a favorable site, Publix would build the store itself. Jenkins remarked in Fifty Years of Pleasure that locating developers to build stores was easy because of Publix’s reputation: “They know that having a good merchant in their shopping center is going to make it a more successful one.” In 2003 Progressive Grocer compared Publix to Walt Disney World in Orlando. Like the renowned amusement park, Publix created a clean and pleasant experience for the shopper. The magazine noted that building loyalty among its customers left Publix with a heritage and its customers with a tradition.

FAMILY-OWNED BUSINESS EARNS RESPECT Publix developed a loyalty among its customers in Florida. The industry regarded Publix as a well-run supermarket chain, a view that continued under Jenkins’s leadership. He did not waiver from his family’s philosophy in providing a pleasant place to shop and work. As a result, Publix became one of the most respected family-run businesses in the United States. As expansion occurred outside the state of Florida, the same loyal following occurred. When Jenkins stopped the loyalty discount-card program, analysts initially wondered if the strategy would work. Later they conceded that the move had been successful because Publix had other strengths that its customers admired. Andrew Wolf noted in Progressive Grocer that “A loyalty card is not powerful enough to trump what they offer, which is better merchandising, better service, higher quality, and superior facilities” (February 15, 2003).



When the corporate headquarters in Lakeland were completed in 2003, observers noted that the 320,000-square-foot, crescent-shaped complex reflected the steady growth of Publix under the leadership of Jenkins and sent a message to the city of Lakeland that Publix planned to stay in its home community. Other supermarket companies looked to Publix with envy because it managed to retain its high quality while going through a rapid expansion.

See also entry on Publix Super Markets Inc. in International Directory of Company Histories.



Major, Meg, “Publix, Florida’s Other Magic Kingdom: Employee Ownership and a Culture of Excellence,” Progressive Grocer, February 15, 2003, p. 22. “Seizing the Best Opportunities (Publix),” MMR, May 12, 2003, p. 102. Watters, Pat, Fifty Years of Pleasure: The Illustrated History of Publix Super Markets, Inc., Lakeland, Florida: Publix Super Markets, 1980.

—Patricia C. Behnke

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David Ji 1952– Chairman and chief executive officer, Apex Digital

Chinese language and a deep understanding of Chinese business practices helped Ji to achieve business success. Newfound prosperity allowed Ji to bring his wife and child to the United States in 1994.

BEATING THE INDUSTRY GIANTS

Nationality: American. Born: 1952, in Jiangsu, China. Education: Received BA and MBA. Family: Married (wife’s name unknown); children: one. Career: Apex Digital, 1999–, chairman and chief executive officer. Address: 2919 East Philadelphia Street, Ontario, California 91761; http://www.apexdigitalinc.com.

■ David Ji cofounded Apex Digital, a manufacturer of home entertainment equipment, in 1988 and served as its chairman and chief executive officer. Apex captured nearly 25 percent of the DVD market from giants such as Sony by using Chinese labor to make inexpensive DVD players. Although it was quick to market new technologies, the company also was faulted for quality control problems. Analysts described Ji, a notably modest and practical man, as a cutthroat businessman who enjoyed overnight success.

MODEST BEGINNINGS Ji was born and raised in the Jiangsu province of China and immigrated to the United States in 1987 as a graduate student. While pursuing a master’s degree in business administration, Ji worked as a part-time house painter and sent money to his wife and daughter in Shanghai. Ji said he was so short of cash, “I wanted a VCR, but I couldn’t afford to buy one” (Berestein, December 2, 2002). In the early 1990s Ji worked at a Los Angeles scrap metal business with another Chinese immigrant, Ancle Hsu. The two began a friendship and formed their own scrap-metal business, United Delta, in 1992. United Delta expanded to sell vitamins and herbal food supplements, disposable gloves, car stereos, and boom boxes imported from China. Mastery of the

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In late 1999 Ji and Hsu decided to enter the DVD market. They established Apex Digital as a division of United Delta and hired Chinese manufacturers to build DVD players to Apex specifications with American-produced microchips. The company struck success in February 2000 when the retailer Circuit City bought five thousand of its players and sold them almost immediately. Apex players cost approximately $100 less than similar devices and, perhaps just as important, were the only DVD players that could also play MP3 music discs. A manufacturing error that Ji claimed took him by surprise allowed users to copy DVDs to videotape and to override coding that prevented DVDs of films from being viewed in countries where they had not been officially released. Apex’s promise of “more for your money” took on a new dimension and excited technology-savvy consumers who quickly spread the word via the Internet. Sales of Apex DVD players soared. Ji and Hsu persuaded Wal-Mart, Kmart, Best Buy, and other discount retailers to stock Apex products. Apex saw its revenues jump from $120 million in 2000 to more than $500 million in 2001. Profit margins, however, remained slim, and little money was spent on advertising. Apex found success through aggressive pricing, desirable features, and a product design capable of being realized in three to six months instead of the industry standard two years.

EXPANSION INTO TELEVISION Apex contracted its products from several Chinese manufacturers but in 2001 bought 60 percent of Zhenjiang Jiangkui Electronic Group, a state-owned enterprise near Shanghai. The deal gave Apex control of its own manufacturing for the first time, in-house design capability, and more than 100 Chinese engineers to enhance Apex’s 60-person American staff. A joint venture begun in 2002 with the Chinese television manufacturer Changdong Electric allowed Apex to enter the television market. Analysts, however, remained skeptical about


David Ji

whether Ji was an experienced enough manager to compete with large electronics manufacturers such as Sony and Hitachi. Ji argued that the Japanese companies had lost touch with U.S. consumers. “We are the only real American brand,” he insisted (Lyons, March 18, 2002). Despite the success of the company that he founded, Ji did not embrace the trappings of the executive life. A slight man, Ji customarily accompanied handshakes with a subtle bow in the Asian tradition. A Cartier watch, a gift from Hsu, remained in its box while Ji wore the same battered watch that had adorned his wrist for at least a decade. In 2002 a shocked employee discovered the chairman scrubbing the men’s room at Apex headquarters. Ji said that he made products for the average American, and he appeared intent on maintaining his ordinariness.



Arensman, Russ, “Watch Out Sony,” Electronic Business, May 1, 2002, http://www.reed-electronics.com/eb-mag/article/ CA211743?pubdate=5%2F1%2F2002. Berestein, Leslie, “David Ji and Ancle Hsu,” Time South Pacific, December 2, 2002, p. 68. Lyons, Daniel, “Smart and Smarter,” Forbes, March 18, 2002, p. 40–42. Mack, Rebecca, “Apex Digital Selects ESS Technology’s DVD Chip for Microsoft’s Windows Media Audio Application,” PR Newswire, November 29, 2001.

—Caryn E. Neumann

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Jiang Jianqing President and chairman, Industrial and Commercial Bank of China

1995 to 1997 he was the general manager of the Shanghai City Cooperative Bank, and from 1997 to 1999 he was the general manager of the Shanghai Municipal Branch of ICBC. In 1999 Jiang became the vice chairman and executive vice president of ICBC, and in February 2000, he become chairman and president.

Nationality: Chinese. Education: Shanghai University of Finance and Economics, BS; Shanghai Jiaotong University, MS. Career: Jiang’an Banking Office, 1979–; People’s Bank of China; Industrial and Commercial Bank of China, Shanghai Branch; deputy general manager, Shanghai Municipal Branch; general manager, Pudong Branch, Shanghai; Shanghai City Cooperative Bank, 1995–1997, general manager; Industrial and Commercial Bank of China, Shanghai Municipal Branch, 1997–1999, general manager; 1999–2000, vice chairman and executive vice president; 2000–, chairman and president. Awards: One of the world’s 30 best online finance business people, Institutional Investor, 2004. Address: 55 Fuxingmenmei Street, Xicheng District, Beijing, People’s Repulic of China 100032; http:// www.icbc.com.cn/e_index.jsp.

■ Jiang Jianqing was president of the Industrial and Commercial Bank of China (ICBC), China’s largest financial institution. His plan was to make the bank, unknown outside China, as large as Citibank, which was well known internationally. By 2004 ICBC had more than 70 banks worldwide. Jiang’s financial prowess was so respected that he was a guest professor at several of China’s most highly respected universities, including both of the institutions he had attended as well as the Shanghai International Studies University. Jiang started his financial career by attending the Shanghai University of Finance and Economics and earning a degree in finance and economics. He went on to earn his master’s degree in database administration at Shanghai Jiaotong University. Beginning in 1979 Jiang worked in the banking industry at several institutions, including the Jing’an Banking Office, the People’s Bank of China, and the Shanghai Branch of ICBC. Jiang then held a list of prominent positions such as deputy general manager at ICBC Shanghai Municipal Branch and general manager at ICBC Pudong Branch, Shanghai. From

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PRESIDENT OF ICBC In 2000 ICBC was the largest bank in China and was ranked tenth in the world by Tier One Capital. The bank was almost unknown internationally, however, and Jiang was eager to change that status. Under Jiang’s leadership ICBC expanded outside of China. Despite competition with the older and more established Bank of China, ICBC was the first bank to buy a publicly listed bank outside China. In 2000 ICBC bought the Union Bank of Hong Kong and renamed it ICBC Asia. China opened its doors to the World Trade Organization in 2001, a move that allowed foreign companies and banks into the country. Many banks were uneasy, but Jiang was optimistic about the change. He saw the higher level of competition as positive for China’s banking industry. He told Asiamoney, “Competition helps us to raise our standards” (July 2001). Jiang also said that the 30,000 ICBC branches across China should leave the company in good stead for competition. Jiang did not leave anything to chance, however. He planned on improving his ICBC’s electronic banking capabilities, creating software to help in the assessment and evaluation of credit risk, enlarging the marketing for consumer loans, and revisiting the bank’s target clientele in the hope of expanding that pool. In 2002 China’s economy was released from its previous ideological system, and companies started taking a more western approach to commerce. Jiang’s duty was to undo the influence that 40 years of socialism had had on ICBC. He made many reforms in an attempt to decrease the company’s debt and its nonperforming loans.

WORKING WITH MICROSOFT In February 2003 Jiang made a deal with Microsoft, asking the software company to help ICBC develop personal online banking services, set up the platform, and make certain that


Jiang Jianqing

security was high. According to an article on the Asia Africa Intelligence Wire, Jiang said, “The co-operation with Microsoft will help promote the ICBC’s information construction, develop its e-banking system, and boost its comprehensive competitiveness” (February 28, 2003). In June 2003 ICBC made a large coup when it opened a branch in London, England. At that point ICBC had more than 70 branches worldwide. Also in 2003 Asiamoney named ICBC the best domestic bank, citing the bank’s profits and Jiang’s vision for the future, which was that ICBC become like Citibank. Jiang knew that when it started to expand, ICBC would mainly be a draw for Chinese people living around the world, but he wanted the bank eventually to become one that people everywhere counted on and depended on. In December 2003 Jiang announced the launch of Banking @ Home, the ICBC personal online banking system developed with help from Microsoft. Banking @ Home offered almost all the services available at branch offices, and Jiang was proud of the system. Jiang believed that by 2006, 20 million customers, approximately 60 percent of the market in China, would be using the online service. The platform implemented a USB key chip, which ICBC developed with Microsoft. As reported on the Asia Africa Intelligence Wire, Jiang said, “I can say that security is guaranteed” (December 19, 2003). In 2004 Jiang continued to deal with an overload of nonperforming loans left over from the old system. The Chinese government called on banks to rein in financial risks in loan growth. “This is not only necessary for implementing a prudent monetary policy, but is needed to prevent lending risks and ensure stable business growth,” Jiang said in a story on the Asia Africa Intelligence Wire (February 12, 2004). Jiang also said that ICBC would be granting $42 billion in new loans in 2004, more than $4.82 billion less than it had in 2003. In addition, the bank did not plan to grant new loans to the steel, aluminum, and cement sectors, which were considered overheated markets. Chinese banks were learning to be cautious.

JOINT CREDIT CARD WITH AMERICAN EXPRESS Jiang told the press in March 2004 that ICBC hoped to raise its operating profits 10 percent by the end of the year. The company looked mainly to its new credit card program to ensure this outcome. ICBC signed a deal with American Express to issue the first American Express credit card with a Chinese co-brand. Jiang said he felt the company could distribute four million cards by the end of 2014, a figure that American Express called very conservative. Jiang also focused on other intermediary businesses to help boost profits. One of those businesses was banking cards, which ICBC hoped would become a source of growth over the next 10 years. Mainly because of the success of ICBC’s online banking services, Jiang was named one of the world’s 30 best online fi-


nance business persons by Institutional Investor. He was the only Chinese executive on the list. Jiang also was asked to be a guest professor and doctor’s tutor at Shanghai Jiaotong University and a guest professor at Shanghai International Studies University and Shanghai University of Finance and Economics. Jiang was chairman of China’s Banking Association, vice president of the China Financial Institute, and director of the board of Fudan University. He wrote more than 20 publications.


“Asia’s Finest: The Honours Roll—Home-Grown Institutions Are Often Overlooked,” Asiamoney, May 2003, p. 46. “Back in the Black?” The Banker, May 2001, p. 5. “Bank Chief Wants Change to Oust Major Policy Obstructions,” Asia Africa Intelligence Wire, March 20, 2003. “Bank Ties Up with Microsoft,” Asia Africa Intelligence Wire, February 28, 2003. Chan, Christine, “Big Four Can’t Walk Tall as Reforms Stall,” Asia Africa Intelligence Wire, April 12, 2004. ———, “ICBC Tightens Lending to Hot Sectors: The Move Supports Top-Level Calls to Check Over-investment,” Asia Africa Intelligence Wire, February 12, 2004. “China Banks Get Combat Ready,” Asiamoney, July 2001, p. 36. “China Industry: AmEx and ICBC Announce Alliance to Issue Co-branded Credit Cards,” Country ViewsWire, April 9, 2004. “China’s ICBC to Pull Back on Loans for ‘Overheated’ Industries,” Asia Africa Intelligence Wire, February 12, 2004. “Focus-China’s ICBC Struggles to Offload Historical Debt to Allow for Listing,” Asia Africa Intelligence Wire, January 16, 2004. “ICBC Chief Optimistic about Reforms,” Asia Africa Intelligence Wire, January 9, 2003. “ICBC Inks Deal on Credit Cards with Amex Logo,” Asia Africa Intelligence Wire, April 7, 2004. “ICBC Launches New Personal Online Banking Services,” Asia Africa Intelligence Wire, December 19, 2003. “ICBC Offers Speedier Online Service Platform,” Asia Africa Intelligence Wire, December 18, 2003. “ICBC Sets Lower 2004 New-Loan Target of US$42.18b to Cut Risk,” Asia Africa Intelligence Wire, February 13, 2004. “ICBC Tries to Secure Top Position,” Asia Africa Intelligence Wire, April 6, 2004.

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Jiang Jianqing “ICBC’s Jiang: Building ‘China’s Citibank’,” March 2001, http://www.businessweek.com/bwdaily/dnflash/mar2001/ nf2001035_183.htm. “In Brief,” Asia Africa Intelligence Wire, April 9, 2004. “Jiang Jianqing,” August 17, 2001, http://www.weforum.org/ site/knowledgenavigator.nsf/Content/Jiang%20Jianqing%20. “Jiang Jianqing, President of Industrial and Commercial Bank of China (ICBC),” December 13, 2000, http:// www.chinaonline.com/refer/biographies/secure/ c00121267.asp. “The Two Faces of Chinese Capital,” Euromoney, December 2000, p. 46.

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Wang, Weiping, “Roundup: China’s Biggest Bank Confident of 10 Percent Profit Growth,” Xinhua News Agency, March 30, 2004. “Watch Out Citi, You’ve Competition,” Asiamoney, June 2003, p. 48. Zhang, Dingmin, “ICBC Controls Loans to Saturated Industries,” Asia Africa Intelligence Wire, February 12, 2004.



■■■

Steve Jobs 1955– Chief executive officer, Apple Computer, and chief executive officer and chairman of the board, Pixar Animation Studios Nationality: American. Born: February 24, 1955, in San Francisco, California. Education: Attended Reed College, 1972. Family: Adopted son of Paul (bill collector) and Clara (accountant) Jobs; married Laurene Powell; children: four. Career: Atari, 1974, game designer; Apple Computer, 1975, co-founder; Apple Computer, 1975–1977, chairman of the board; 1977–1981, de facto chief executive officer; 1981–1984, chairman of the board; NeXT, 1985–1996, president and CEO; Pixar Animation Studios, 1986–, CEO and chairman of the board; Apple Computer, 1995–1997, consultant; 1997–2000, interim CEO; 2000–, CEO. Awards: Technical Excellence Award and Lifetime Achievement, PC Magazine, 1997; Hall of Fame, Fortune, 2000. Address: Apple, 1 Infinite Loop, Cupertino, California 95014; http://www.apple.com.

■ Steven Paul (Steve) Jobs was responsible for building Apple Computer twice, as well as for rescuing Pixar Animation Studios and turning it into one of the world’s most successful motion picture studios. He also built NeXT, a good idea that did not catch on. He was a hands-on manager, who studied even the minutest details of his products, with the heart and eye of an artist. His insistence on high-quality, good-looking products struck a chord with many people who appreciated the beauty of Apple products, resulting in such fabulous successes as the Macintosh computer and the iPod portable music system. These successes often reshaped how consumers viewed technology and also reshaped the technology itself. Steve Jobs and Microsoft’s Bill Gates are the two people most often credited with the development of the mass-market personal computer, perhaps decades before it might otherwise have evolved.


Steve Jobs. AP/Wide World Photos.

ROUGH BEGINNING Jobs was adopted in February 1955 by Paul and Clara Jobs, who were indulgent parents. They were so focused on their son’s needs that they even moved from Mountain View, California, to Los Altos, California, in 1968, to put Jobs in a new school because he said that he could not get along with the children in his old school. (One account says that he told his parents that he was not learning anything at his old school.) He was an odd student, out of step with both classmates and teachers, with a mind that looked at science from unusual angles. He preferred to spend his time with older students rather than ones his own age, including Stephen Wozniak, an electronics genius four years older than Jobs. Jobs worked during the summers, spending one summer in an apple orchard; he was so happy there that he later named his first legitimate business “Apple.” Even in grade school he

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Steve Jobs

had shown a great aptitude for electronics, and he had been fortunate to have an engineer for a neighbor, who answered his many questions about how electronic devices worked. While he was in high school, he built electronic devices. Once, he wanted for his projects some rare parts made by HewlettPackard; he wrote to William Hewlett, cofounder of HewlettPackard, and asked for the parts to be sent to him. Hewlett responded by giving Jobs a summer job in a Hewlett-Packard factory. Wozniak already worked there as an up-and-coming engineer. In 1972 Jobs attended Reed College, in Portland, Oregon, dropping out after one semester. He hung around the school for about a year longer, before submitting a résumé that greatly inflated his electronics experience to Atari, a pioneer in video gaming. For part of 1974 he worked as a game designer, helping create Breakout. After saving up enough money to pay his way, he left Atari and journeyed with friends to India to search for enlightenment. He shaved his head and walked through what he saw to be appalling poverty. He soon left India believing that Thomas Edison had done more for the betterment of humanity than all the gurus in the world. Jobs lived briefly in a farm commune and then returned to his parents’ home. In 1975 he joined the Homebrew computer club, which included Wozniak among its members. Wozniak had discovered that a toy in Cap’n Crunch cereal boxes made the same tones that telephone companies used for long-distance switching. Soon, with Jobs’s help, he was making small blue boxes that could be used with telephones to circumvent the safeguards of telephone companies and make free long-distance calls. It was Jobs who turned this into a business venture by selling the boxes to college students.

APPLE II Wozniak was an electronics enthusiast. He enjoyed making gadgets and then sharing his inventions with anyone who was interested, without concern for patents or profit. It was Jobs who soon saw the potential marketability of Wozniak’s circuit board combined with the microprocessor chips. In 1975 he and Wozniak became partners, and Jobs gave their enterprise the name “Apple.” They designed their simple computer in Jobs’s bedroom. When more space was needed, Jobs’s father cleared out his home’s garage, where Jobs and Wozniak cobbled together their combination of a circuit board, a microprocessor, a video screen, and Jobs’s most important contribution, a typewriter-style keyboard. The inventors called it the Apple I. Jobs had already discovered a local electronics store owner who wanted 50 personal computers to sell to college students, who were the bulk of electronics enthusiasts. Jobs and Wozniak gave the Apple I the whimsical price of $666.66 and ended up selling more than 600 of them, making $774,000.

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The Apple I was a hobbyist’s machine, a clumsy-looking beast of wires and boards that invited tinkering. The partners wanted to build something more sophisticated and easier to use— making technology easier to use would become essential to Jobs’s views for building his companies. In 1977 the former Intel executive Mike Markkula, a venture capitalist, invested in Apple, becoming its chairman of the board and bringing in outsiders to help govern the company. Jobs persuaded a successful publicist, Regis McKenna, to join Apple. That year the Apple II was introduced. It took only about four hours for a purchaser to set it up and have it running, and it could run some business programs, reducing to minutes from hours certain accounting tasks. With a canny sales campaign created by McKenna, and Jobs’s own magnetic personality helping persuade corporate buyers, the Apple II became the first successful mass-market personal computer. Jobs had to have been a concern for McKenna: Jobs had long hair and a scruffy beard, and he usually wore jeans when meeting the conservatively dressed businessmen who had the power to order dozens of Apple IIs at a time. But Jobs was charismatic. When he spoke of what his machines could do and of the future the machines would shape, he created what came to be known as his “reality distortion field.” His power to persuade was remarkable, and he often had potential customers vying for his attention. He was soon perceived to be a visionary genius who foresaw how to marry high-technology electronics and everyday business.

CHANGING THE WORLD The Xerox Palo Alto Research Center, known as PARC, attracted some of the best engineers in the world. It was a secretive place, but after years of trying, in 1979 Jobs was allowed to visit PARC with a few of his Apple colleagues. Legend has it that he saw Xerox’s graphical interface, featuring drop-down menus and pictures that could be clicked on with arrows to start programs, and he was gripped by the potential marketability to which Xerox’s employees seemed oblivious. The truth is more complex: The interface at Xerox was one of several that various computer developers had been toying with for several years, and Jobs was already very familiar with them. What he may have picked up from PARC was the utility of a little handheld device called a “mouse.” In December 1980 Apple had its initial public offering of stock, becoming Apple Computer. Shares opened at $22 but rose to $29, making Apple’s value $1.2 billion. Jobs was the company’s leading shareholder, with 15 percent of the stock. His shares were soon worth $239 million. In 1980 the Apple III was introduced, but the first 14,000 units were recalled because of defects. The Apple II remained the machine preferred by customers. In 1981 IBM introduced a personal computer. Whereas Apple made all of its machines proprietary, not allow-


Steve Jobs

ing anyone to even license the technology, IBM made its machine an open architecture, meaning that outsiders were welcome to write programs for it and to build their own variations of it. Jobs set about waging war for personal computer supremacy. A striking feature of his work over the next five years was that he had no official corporate authority; he ruled by force of personality, making numerous enemies with his ridiculing of the ideas of others, his unwillingness to hear views contrary to his own, and his outbursts of bad temper. In 1982 he hired the executive John Sculley away from PepsiCo to become CEO of Apple. In 1982 Apple for the first time grossed $1 billion. In 1983 the Lisa computer was introduced. It had a 32-bit microprocessor as well as an inexpensive mouse. Jobs had worked on Lisa obsessively, demanding that it be easy to use, attractive to look at, and more powerful than any other personal computer. In the process, he pushed Lisa’s costs too high; the machine was too expensive and flopped. Still, Jobs and Sculley already had put Apple to work developing a machine that would be called the Macintosh. It would use much of Lisa’s internal architecture, but it would be simpler. In 1984 the machine debuted with a spectacular television commercial during the Super Bowl, showing a gallant woman athlete defying a monolithic, oppressive government by hurling her hammer into a screen that represented, without actually saying so, IBM. The first Macintosh was small and beige, featuring the style of graphical interface that would become the world’s standard. It sold for $2,495 and was a hit. Jobs was great recruiter of talent, but he tended to belittle and mock employees after he recruited them; Sculley, for one, had had enough of Jobs’s bizarre behavior. He persuaded the board of directors to make Jobs chairman of the board but without any authority over anything. Too many of his colleagues avoided him, and Jobs found himself with no work to do. In 1985 he quit Apple and sold all but one share of his Apple stock, losing about $500 million by selling shares when the stock was low but still leaving with about $250 million.

NEXT In 1986 Jobs founded NeXT in Redwood City, California, investing $15 million of his own money to start the company. He discovered that he was held in high regard by most of the high-technology businesses in California’s Silicon Valley, and his charisma was still magical. After seeing Jobs in a PBS documentary, the billionaire H. Ross Perot offered to help fund NeXT. Major businesses soon followed. In a couple of years, Jobs had raised over $250 million, mostly on his word alone.


Also in 1986 Jobs bought a computer animation studio from the motion picture magnate George Lucas, saving it from dissolution. Named Pixar Animation Studios, the newly independent company found in Jobs a CEO and chairman of the board who understood the creative process very well and who could combine his artistic nature with a sound understanding of computers. Further, Jobs financed the company himself and gave his new employees freedom to explore what they could do. It was part of Jobs’s evolving vision of computers: he became an advocate of the technology as enhancing creativity, telling people that computers were not important but that what could be done with them was important. By 1988 Pixar had done well enough to win an Oscar for its computeranimated short film Tin Toy. In October 1989 the NeXT computer was introduced. It was beautiful, with careful attention paid to the looks of every detail inside and out. To meet FCC rules on electronic interference, Jobs had the entire case made of magnesium poured into a single mold and then carefully sanded to remove sharp edges. The magnesium was good at containing electronic emissions and was strong, but it was hard to work with and drove manufacturing costs up. Repeatedly, Jobs had made workers redo work, trying to incorporate great power into NeXT while making it easy to use. It cost $9,950, too much for the mass market that might have appreciated it best. From 1989 to 1992 only 50,000 were sold. In 1989 Jobs gave a lecture at Stanford University. While there, he met Laurene Powell, an MBA student. In 1991 they married, and they would have three children over the next dozen years. In May 1991 Jobs negotiated a contract with Walt Disney Pictures, under the terms of which Disney would pay for half the production costs of three computer-animated feature films and would receive half the income plus distribution fees for each motion picture. Pixar began work on Toy Story. By 1993 NeXT was doing badly. Jobs was harshly criticized for supposedly wasting money and for bad management, even though those who worked for NeXT still believed that he knew what he was doing. He had spent much of his career defying criticism and insisting that he knew better than anyone else which choices were the best, but in February 1993, he closed NeXT’s Fremont factory, laid off half of NeXT’s employees, and stopped making computers, focusing instead on software. NeXT’s computer had dazzled with its programming, and Jobs put the company’s future in the open programming of Unix and the object-based programming of NeXT, which made programming simple enough that consumers could write their own programs to work with NeXT. In 1994 Digital Equipment Corporation, Hewlett-Packard, and Sun Microsystems contracted with NeXT to put NeXT operating software in their workstations.

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TRIUMPHANT RETURN Meanwhile, Apple was ailing. In 1993 Apple’s share of the personal computer market was 8 percent; it had fallen to the status of an also-ran, becoming almost irrelevant to the future of computers. Sculley was fired and replaced by Michael Spindler as CEO. In 1995 Spindler left Apple and was replaced by Gilbert F. Amelio, who also became chairman of the board. Amelio found a company in disarray; the corporate culture was one of indifference and depression. When he would call meetings, people would not show up; his orders were ignored; and employees refused to cooperate with each other. Apple’s share of the market had fallen to 5.3 percent. It may have been desperation or exasperation that led Amelio to ask Jobs to join the board of directors and become a consultant to management. The year 1995 was good for Jobs. For the first time, NeXT turned a profit. He and his antagonist Bill Gates contracted for NeXT and Microsoft to collaborate on the designing of object-oriented software for Windows NT. On November 22, 1995, Toy Story was released to acclaim; by then Jobs had invested $60 million in Pixar. In its first release, Toy Story grossed $360 million worldwide. On November 29, 1995, Pixar had its initial public offering. Shares were offered at $22 but rose to $39. Jobs owned 80 million shares and had become a billionaire. In December 1995 Apple bought NeXT for $400 million. By 1996 Apple’s sales were in free fall. That year it shipped 3.7 million computers, for a 5.2 percent market share; in 1997 it was 2.6 million units for a 3.2 percent share. In 1997 Jobs was named “interim” CEO, at a salary of $1 per year, and Amelio left Apple. Jobs dropped the NeXT operating system that Apple had purchased. On August 6, 1997, Apple and Microsoft announced that Microsoft would invest $150 million for a minority stake in Apple. Many in the audience at the MacWorld convention in Boston booed the announcement. Although he was still certain that his vision for Apple was the only right one, Jobs’s management style had radically changed from what it had been in 1985; he seemed more relaxed and open to ideas. In fact, he seemed to relish other people’s ideas; perhaps his work at Pixar had improved his ability to work with the creative people at Apple. He wisely surrounded himself with top-notch executives in all the key corporate positions, and he held on to them rather than driving them away. Almost by willing it, he transformed the corporate culture into one in which employees wanted to come to work and where they saw themselves as part of a great company that had a mission to change the world for the better. Moreover, Jobs, the hobbyist of old, brought the fun back into tinkering with electronics. In August 1998 one of Jobs’s big risks, the iMac was released. It was sleek, with elegant lines, and the “i” was for “Internet”—that is, it was designed to work well with the Internet. Selling 278,000 units in its first six weeks, the iMac at first

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did not seem to be enough to pull Apple out of the doldrums, but then it took off, selling six million units and making Apple an important player in computers again. In 1999 Jobs had the iMac released in a choice of several colors, which proved popular. In January 2000 he was made CEO without the “interim” addition to the title. In March 2000 Apple shares peaked at $75 each. Apple grossed $7.98 billion and netted $786 million for fiscal 2000. In 2001 Jobs began opening a chain of Apple retail stores, where customers could try out the computers, making multimedia shows and playing with the software, with unobtrusive salespeople ready to help, if asked. It was a big risk, but the idea was that if people had the opportunity to use Apple’s goods, they would find them worth a higher price than competing brands. In 2003 the stores began turning a profit. Another event in 2001 launched Apple into a broader world of consumer electronics: in October, Apple introduced the iPod. So shiny and attractive that owners delighted in showing it off, it downloaded and played thousands of MP3 files, at first only from Apple computers but, in a year, from IBM compatibles as well. The iPod was pricey at $399 and a risk, but Apple had a cash reserve of $4.1 billion to fall back on, up from $280 million at the time Jobs had returned to the company. Even so, Apple shares dropped to about $25 for 2001. In what may have been the most brilliant salesmanship of his career, Jobs persuaded every major record company to sell Apple the rights to market their songs on the Internet, even though the companies were suspicious of the Internet, viewing it as a haven for thieves of their music. In April 2003 Apple opened the online store iTunes, at first only for Macintoshes but soon for Windows operating system computers as well. At 99 cents per song, with 65 cents going to the music companies, 25 cents to overhead, and only 10 cents to Apple, iTunes seemed fated to lose money. But as Jobs pointed out, the idea was to sell iPods, which could download music from iTunes. By 2004 iPod was the world’s dominant portable music player, with iTunes owning 70 percent of the market of downloaded music.

See also entries on Apple Computer, Inc. and Pixar Animation Studios in International Directory of Company Histories.


Landrum, Gene N., “Steven Jobs (Apple)–Autocratic,” Profiles of Genius: Thirteen Men Who Changed the World. Buffalo, NY: Prometheus Books, 1993. Langer, Andy, “The God of Music? If Apple’s Brash and Bold New Digital-Music Venture Works, That’s Pretty Much What He’ll Be: A Conversation with Steve Jobs,” Esquire, July 2003, pp. 82–85.


Steve Jobs Quittner, Josh, “Steve Jobs: The Fountain of Fresh Ideas,” Time, April 26, 2004, p. 75. Stross, Randall E., Steve Jobs and the NeXT Big Thing. New York: Atheneum, 1993. —Kirk H. Beetz


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Jeffrey A. Joerres 1960– Chairman, chief executive officer, and president, Manpower Nationality: American. Born: 1960, in Milwaukee, Wisconsin. Education: Marquette University, BA, 1983. Career: IBM Corporation, 1983–1987, various management positions; ARI Network Services, 1987–1993, vice president of sales and marketing; Manpower, 1993–1995, vice president of marketing, 1995–1998, senior vice president of Major Account Development, 1998–1999, senior vice president of European Operations, 1999–2001, CEO and president, 2001–, chairman, CEO, and president. Awards: Distinguished Alumnus Award, Marquette University, 2001. Address: Manpower, 5301 North Ironwood Road, Milwaukee, Wisconsin 53217; http://www. manpower.com.

■ Jeffrey A. Joerres was named president and CEO of Manpower, the world’s second-largest provider of temporary employees, in April 1999 and became chairman of the board in 2001. Known as a strong proponent of job training and workforce development initiatives, Joerres was largely credited with developing Manpower’s portfolio of global accounts to represent more than $1 billion in annual sales volume. Colleagues and industry insiders described Joerres as an amiable manager who emphasized open and honest communication as the key to success.

FROM THE SOUTH SIDE Joerres grew up in South Milwaukee and recalled that, contrary to the opinion of many, the neighborhood was not especially tough, and he thoroughly enjoyed his childhood there. The first member of his family to attend college, he graduated from Marquette University in 1983 with a bachelor’s degree

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in business administration. He then took a job with IBM Corporation, at first installing typewriters, then moving on to computer equipment and providing other IBM services to customers. At the time, Manpower was one of his accounts; through that affiliation he first met Manpower’s CEO and chairman Mitchell S. Fromstein. Joerres maintained his connection with Fromstein when he left IBM in 1987 to work for ARI Network Services as vice president of sales and marketing. Coincidentally, Fromstein also served on ARI’s board. In 1993 Fromstein offered Joerres a position at Manpower as vice president of sales and marketing. Joerres recalled that he accepted the job because he was aware of Manpower from his time at IBM and was excited about the transformations going on in the staffing industry. In an interview with Robert Mullins of the Business Journal–Milwaukee, Joerres commented, “It’s a very intriguing and complex company in the way that all of us feel the passion for what they do. I looked at what Manpower stood for and I looked at where the company would go and it was very attractive” (September 24, 1999). Joerres had joined the nation’s largest private employer, which would continue to grow, filing some 800,000 W-2 forms annually by the mid-1990s. Joerres eventually rose to the position of senior vice president of European Operations, overseeing one of the company’s fastest-growing areas of business. By the late 1990s, however, the company had slipped to number two in its industry behind the Swiss company Adecco, largely because the aggressive Adecco as well as other staffing companies had begun commanding market shares. Many analysts thought that Fromstein and Manpower had begun too late to tap into the growing information-technology worker market. Some stockholders had been calling for Fromstein’s retirement when he decided to step down, but many were surprised when Joerres, a relative newcomer who had only been with the company for six years, was named as Fromstein’s replacement in 1999. John R. Walter was named chairman, but as president and CEO Joerres would handle the day-to-day affairs of the company. Many saw him as the dark-horse candidate who had obtained the job after the expected successor, the CFO Jon F. Chait, resigned over a dispute with Fromstein. Upon Joerres’s appointment the investment analyst Judith Scott told Mullins of the Business Journal–Milwaukee, “Just the idea of having someone new at the top is going to bring renewed energy to the company” (September 24, 1999).


Jeffrey A. Joerres

FACES CHALLENGES Yet analysts were unsure as to how Joerres would resuscitate his faltering company, whose earnings had been flat for three of the previous four years. Some industry analysts were expecting another company to make a takeover bid for Manpower. In August 1999, just four months after Joerres had taken over, the company’s stock had fallen to around $22.50—less than half of its August 1997 peak of just over $50. The money manager Anthony E. Spare noted in BusinessWeek, “Either the current management fixes it, they look outside for new managers, or the company gets acquired” (August 16, 1999). Part of Joerres’s job would be to remake the company into one that focused more on revenue and market share than on profits, return on capital, and margins. For his part Joerres said he had several ideas for turning the company around: He planned to target more profitable sectors such as technology, an area in which Manpower would supply everyone from programmers to desktop-support staff. He said that he would pay more attention to the $800 million professional-services unit that he had helped build and that accounted for 10 percent of Manpower’s sales. He noted that Manpower’s largest market, in France, had a profit falloff of 21 percent from 1998; as such he was going to install new management there within 12 to 18 months. To address the fact that Manpower was lagging behind competitors in supplying tech workers, Joerres decided to institute online tech-training courses that would boost Manpower’s listings on the Monster.com job-search Web site. Joerres agreed with analysts, however, that he could not ignore companies’ other basic staffing needs. He looked far and wide to recruit workers to Manpower, targeting Native Americans, the disabled, and even church groups in its Detroit offices. Joerres’s game plan included structuring executive pay based on a variety of financial returns and other performance indicators. Before long many began to believe that Joerres was bringing Manpower around. The company’s sluggish earnings improved in the second quarter of 1999, with net income rising to $31.8 million on $2.3 billion in revenue—a 21 percent increase over the same period from the previous year. The positive outlook raised Manpower’s share price to over $28 a share from the $22 a share of just a few months earlier. One of Manpower’s largest shareholders was quoted in BusinessWeek as saying, “He has a real focus on improving shareholder value” (August 16, 1999).

FOCUSES ON CORPORATE HR The downturn in the worldwide economy that began in the latter half of 2000 affected staffing companies worldwide. Where companies had once been unable to find enough people


to fill all the available jobs, the tables had turned, with too many workers and too few jobs as employers made layoffs without rehiring. Nevertheless in 2000 Joerres increased Manpower’s number of network offices to 3,700, adding 285 offices in fast-growing markets such as Switzerland, Japan, and Italy. Joerres also decided to provide recruits with free training such that they could hold various office jobs in humanresource departments. Furthermore Manpower’s U.S. operations grew by 12 percent, substantially exceeding overall industry growth. Joerres appointed Robert Lincoln as the company’s first global head of human resources (HR). He assigned Lincoln the task of clearly communicating the company’s strategies across the globe, taking the best practices from each country and appropriating them for use across the corporation. Joerres told Morice Mendoza of Human Resources magazine, “There is a unified culture at the core of the business. If you go to Japan, Singapore, France, or the U.S. and walk into any Manpower office, it will have the same feel and the same energy” (September 2002). Around the same time Joerres planned and carried out several purchases, placing a growing emphasis on foreign countries such as Ireland and England, where he purchased Elan Group, a U.K. and European information-technology staffing leader, for approximately $145 million. In a Manpower news release Joerres stated, “With this acquisition, we have done more than create an IT staffing leader in the United Kingdom. We have created a springboard for the growth of our IT staffing business throughout Europe” (January 11, 2000). In one of his biggest deals, Joerres oversaw the $488 million buyout of Right Management Consultants, the world’s leading provider of outplacement services. The purchase provided Manpower with an expanded continuum of services, from screening, training, and placing workers to easing transitions for those who lost their jobs. Joerres told Joel Dresang of the Knight Ridder/Tribune Business News, “We’ve been seeing across the industry an acceleration in firms’ requirements to be more exact in matching the talent to the business strategy quickly—which means they need to bring people in, but it also means they may need to take people out” (December 12, 2003). Joerres’s global business outlook spread to Manpower’s quarterly survey of the job market. He expanded the survey across 18 countries to provide a broader international view of employers’ forecast hiring intentions. The well-respected survey had been in existence since 1962, providing customers, government officials, economists, and labor-market specialists alike insight into the labor-market changes that would likely occur over coming quarters. Company revenue for 2003 was $12.2 billion, an increase of 14.8 percent, with especially strong fourth-quarter profits—

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but Joerres remained troubled, as companies were holding back from hiring, even as the U.S. economy showed clear signs of recovery. Joerres told Jeremy Grant of the Financial Times, “We’ve got the spinnaker up, but the sail is sort of flapping at the moment” (February 4, 2004).

of directors of Artisan Funds, Johnson Controls, and the National Association of Manufacturers (NAM). He was a trustee for NAM’s Center for Workforce Success and served on the board of directors of the YMCA Wisconsin, Junior Achievement of Wisconsin, the Medical College of Wisconsin, the United Way of Greater Milwaukee, and the Susan G. Komen Breast Cancer Foundation of Milwaukee.

MANAGEMENT STYLE Joerres was typically described by colleagues and industry analysts as laid-back, gracious, and unassuming. The desire to match corporate culture with company values played a large role in the several acquisitions that Joerres oversaw as the head of Manpower; he viewed the company’s many worldwide staffing entities as comprising one corporate culture. Analysts commended Joerres for his patience. When he was put in charge of Manpower, he took the time to carefully place key members of management before attempting to determine a long-term strategy for the company. He noted in the company’s 2003 annual report that the “constant, disciplined focus on strengthening and improving our business is an imperative, not an option” (2004).

LOOKS FOR STRONGER ECONOMY In 2004 Joerres continued to focus on the Manpower brand and the integrity of the business services offered by the company. He had successfully directed Manpower during a period of high unemployment and low hiring—a formidable nemesis in the staffing business. When asked how long he saw himself holding onto his job, Joerres told Grant of the Financial Times, “I’ve been in this job for five years, and three and a half have been in a recession. I want to stick around just to see the good times” (February 4, 2004). In addition to his duties at Manpower, Joerres served as a member of the boards

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See also entry on Manpower, Inc. in International Directory of Company Histories.


Dresang, Joel, “$488 Million Deal to Give Manpower Inc. a Full Range of Employment Services,” Knight Ridder/Tribune Business News, December 12, 2003. Grant, Jeremy, “Manpower Chief Warns of Skilled-Worker Shortage,” Financial Times, February 4, 2004, p. 28. “I’m Working My Tail Off to Fix It,” BusinessWeek, August 16, 1999, p. 72. Joerres, Jeffrey, “Chairman’s Message,” Manpower 2003 Annual Report, http://investor.manpower.com/annual.cfm. “Manpower to Acquire Elan Group Ltd.,” January 11, 2000, http://www.manpowernet-jp.com/elan.html. Mendoza, Morice, “HR Goes Global,” Human Resources, September 2002, http://www.manpower.co.uk/news/articles/ article35_mainpage.asp. Mullins, Robert, “Manpower’s New Man: Fromstein Successor to Update Pioneer Staffing Firm,” Business Journal–Milwaukee, September 24, 1999, p. 25. —David Petechuk


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Leif Johansson 1951– President and chief executive officer, Volvo Nationality: Swedish. Born: August 30, 1951, in Gothenburg, Sweden. Education: Chalmers University of Technology, MS, 1977. Family: Son of Lennart (business executive and industrialist) and Inger Hedberg Johansson; married Eva Birgitta Fjellman; children: five. Career: Centro Morgardshammar, 1977–1979, research and development manager; Husqvarna Motorcyklar, 1979–1982, unit manager; Electrolux, 1983–1988, manager, major appliance division; 1988–1991, executive vice president; 1991–1994, president; 1994–1997, chief executive; Volvo, 1997–; president and chief executive officer. Address: Volvo AB, S-405 08 Gothenburg, Sweden; http:// www.volvo.com.

■ Leif Johansson distinguished himself in the corporate world as a chief executive willing to make the hard, unpopular choices necessary to take a struggling company to the top of its game. As chief executive of Volvo since 1997, Johansson shocked the world by divesting Volvo’s car unit, considered Sweden’s claim to automotive fame, and selling it to Ford Motor Company in 1999. Before taking the helm at Volvo, Johansson worked among Sweden’s corporate royalty, the Wallenbergs, at Electrolux, the world’s top maker of household appliances.

EARLY YEARS Johansson was born in August 1951 and grew up in Gothenburg, in western Sweden. He was the son of Lennart “Erik” Johansson, a corporate maestro who worked for the country’s ruling industrial family, the Wallenbergs. The Wallenbergs were legends in Scandinavia, owning majority stakes in numerous companies, such as Electrolux and Scania, and having vast


Leif Johansson. AP/Wide World Photos.

holdings in other companies through their investment company, Investor. As a teenager Johansson worked on an assembly line at Volvo, which was headquartered in Gothenburg. Although Johansson did not make his corporate mark in the auto industry until much later in life, the assembly job was an auspicious start to a long and distinguished corporate career. At the end of 1960s Johansson studied in the United States and used those years to his advantage, making many valuable business and personal contacts before returning to Sweden. Like his father Johansson studied engineering and in 1977 received a master’s degree in science and engineering from Chalmers University of Technology in Gothenburg. Johansson went to work as a research and development manager at Centro Morgardshammar before joining Husqvarna Motorcyklar, which was owned by the Wallenbergs, in 1979. A tinkerer by nature, Johansson enjoyed the internal workings of both mo-

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torcycles and cars and frequently worked under the hood of an old Jaguar during his spare time at home.

FROM ELECTROLUX TO VOLVO Johansson went to Stockholm and joined Electrolux as manager of its major appliance division in 1983. He steadily worked his way up the corporate ladder and was promoted to executive vice president in 1988 and president in 1991. He added the title and duties of chief executive in 1994. After only three years of running the home appliance giant, Johansson tendered his resignation in April 1997 to head Volvo, the Swedish auto and truck manufacturer. Sören Gyll, who had been CEO of Volvo since 1992 and with the company since 1990, had surprised investors and colleagues with his abrupt departure. While some analysts maintained Gyll was forced to retire by Volvo’s board, his exit shook up the top management of several of Sweden’s top corporations as Johansson left for Volvo and the Wallenberg empire was forced to look for a replacement at Electrolux. Some analysts in Sweden were shocked at Johansson’s departure from Electrolux, but others believed the move was part of a Wallenberg master plan to have an insider at one of its largest rivals. Johansson settled in at Volvo and assessed its manufacturing and marketing problems. His predecessor, Gyll, had sold off all of the company’s nonautomotive subsidiaries, but there was still much to be done. As Johansson told the Wall Street Journal, “We’re a small player participating in a brutally competitive industry” (April 14, 1998). To compete more effectively Johansson began a series of moves that produced positive results in the long run but much negative commentary in the short term. He slashed Volvo’s European workforce 7 percent in as many months and looked to the possibility of a merger to bolster Volvo’s sagging bottom line. Many suitors were eager to merge with Volvo, and Johansson talked with Germany’s Volkswagen, but the discussions broke down. Johansson also contended with a friendly takeover offer from the Italian automaker Fiat, which was also declined. Next came the smoothing of strained relations with the Japanese automaker Mitsubishi Motors. Volvo had bought a 20 percent stake in Mitsubishi’s heavy truck and construction division, and the two companies had been planning the design and manufacture of a new line of heavy trucks. Production was to take place in a shared manufacturing plant in the Netherlands.

VOLVO AND SCANIA Amid the merger and new product talks, Johansson stunned Sweden and the auto industry in 1999 by announcing

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the sale of Volvo’s iconic automotive division to Ford Motor Company for $6.5 billion. While his countrymen were reeling from the loss of jobs and brand recognition caused by the Volvo automotive sale, Johansson had already begun to implement his master plan: to turn Volvo into the world’s largest and best producer of commercial trucks. Johansson quietly bought up stock of Scania, the truck manufacturer owned by the Wallenbergs. Volvo owned 13 percent of Scania by early 1999, much to the dismay of Johansson’s former employers. Although many Swedes considered Volvo cars the country’s claim to fame, Johansson believed his long-term plans to capitalize on Volvo’s trucks and buses would be the firm’s salvation. BusinessWeek characterized Volvo and Scania trucks as the “Rolls Royces of heavy trucks in Europe,” and Volvo had always earned better profit margins with trucks than with cars. Johansson’s aim was to merge Sweden’s top two truck makers, Volvo and Scania, which already dominated one-third of the market. Scania’s officials rarely commented directly about Johansson’s plans. So much of Scania’s stock had been purchased, however, that it was feared a merger with Volvo was the only way to escape a hostile takeover by another company. Many Swedes were not happy about a Scania-Volvo merger, because consolidation would mean the loss of perhaps thousands of jobs. Heedless of the negative reactions, Johansson continued to buy more than 45 percent of Scania. By 2000, however, the plan was falling apart. The European Union Commission halted plans for a merger, calling it an antitrust violation, and ordered Volvo to sell its stake in Scania by early 2004.

TRUCK AND PRODUCTION After the Scania fiasco Volvo tiptoed around its former suitor Fiat, which had expressed an interest in merging its truck manufacturing operations. Although there was some interest, Fiat trucks were considered of inferior quality, and Johansson looked in another direction. The French auto and truck maker Renault, which had brokered a merger with Volvo in 1993 only to be rebuffed by Swedish shareholders, entered talks with Johansson in 2000. Johansson intended to buy Renault’s heavy-duty trucks unit and its United States-based subsidiary, Mack Trucks. The deal was completed in 2001. Renault received a 15 percent stake (worth more than $1.5 billion) in Volvo, and Volvo became Europe’s top producer of heavy trucks and was second in the world only to DaimlerChrysler. Volvo celebrated its 75th anniversary in 2002 after nearly two years of poor truck sales in North America and Europe. Johansson and Volvo executives were confident the market would turn around and continued to look for opportunities. After nearly four years of discussions Volvo finally signed a deal with Chinese truck makers to share technology and begin


Leif Johansson

manufacturing a line of heavy-duty trucks. Volvo worldwide operations had bounced back by 2003 as trucks began to roll off assembly lines in China and Russia. By early 2004 Johansson had created a subsidiary to distribute Scania stock to shareholders according to the mandate of the European Union Commission, and the drawn-out debacle faded away. In seven years at the helm of Volvo, Johansson proved his mettle. He had not only astonished Volvo loyalists but also earned their grudging respect. He divested the “crown jewels” of the legendary automaker and in the process turned Volvo into one of the world’s leading manufacturers of commercial trucks and buses. Annual sales topped $25 billion, nearly double Volvo’s figures of three years earlier (2000 sales had reached $13.8 billion). Volvo, once an automaker without peer for safety and design, had turned its back on this legacy in favor of another: to be the world’s top manufacturer of commercial and heavy-duty trucks.

See also entries on Electrolux Group and AB Volvo in International Directory of Company Histories.


“A $6.5 Billion War Chest,” BusinessWeek, February 15, 1999, p. 27.


Brown-Hughes, Christopher, “Volvo Sees Truck Upturn,” Financial Times, April 6, 2002. Burt, Tim, “Leif Accused of Selling Country’s Crown Jewels,” Financial Times, January 29, 1999. Dahl, Sverker, “Volvo’s Gyll Retires: New Chief Named,” Automotive News, February 3, 1997, p. 147. Feast, Richard, “How Volvo Plans to Stay Single,” Automotive News, July 1998, p. 55. Latour, Almar, “Volvo CEO Sets Plan for Firm: A Faster Image,” Wall Street Journal, April 14, 1998. McIvor, Greg, “Electrolux Chief Takes Over as Gyll Retires from Volvo,” Financial Times, January 28, 1997. ———, “New Volvo Chief Takes the Wheel,” Financial Times, April 23, 1997. “Set to Roll in Sweden,” BusinessWeek, March 8, 2000, p. 74. Simonian, Haig, “Remodeled Volvo Gets Back in Gear,” Financial Times, December 9, 1997. “Sneak Attack on the Wallenbergs,” BusinessWeek, February 8, 1999, p. 28. “Volvo Poised to Launch Spending Spree,” Auto Industry, March 9, 2001, p.1.

—Nelson Rhodes

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Abby Johnson 1961– President, Fidelity Investments Nationality: American. Born: December 19, 1961, in Boston, Massachusetts. Education: Hobart and William Smith College, BA, 1984; Harvard University, MBA, 1988. Family: Daughter of Edward C. Johnson III (chief executive officer and chairman, Fidelity Investments) and Elizabeth Hodges Johnson; married Christopher J. McKown (cofounder, Health Dialog); children: two. Career: Booz Allen Hamilton, 1984–1986, research associate; Fidelity Investments, 1988–1993, investment analyst; 1993–1996, fund manager; 1996–1997, manager, Fidelity Trend Fund; 1997–2001, senior vice president; 2001–, president. Address: Fidelity Investments (FMR Corporation), 82 Devonshire Street, Boston, Massachusetts 02109; http://www.fidelity.com.

■ Abigail “Abby” Pierrepont Johnson was the president of Fidelity Investments and the third in line in control of the company. She became a member of the Fidelity board of directors in 1994 and oversaw Fidelity’s $1 trillion mutual fund operation. Johnson was well versed in the Fidelity culture. Her grandfather had founded the company, her father was the CEO and chairman, and through her college years, Johnson spent her summers working at Fidelity. After two-year stints at the consulting firm Booz Allen Hamilton and Harvard Business School, Johnson became a full-fledged member of Fidelity in 1988. Johnson was low-key in demeanor and action, shunning the limelight much as her father had. She exuded gentle pressure to achieve the results she wanted. BusinessWeek called Johnson the most powerful woman in U.S. finance and as 25.4 percent owner of Fidelity one of the richest women in the world, with an estimated net worth of $10 billion.

THE APPRENTICE Johnson followed the path of her father, whose father Edward C. Johnson II, had founded Fidelity in 1946. Edward C.

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Johnson III took over when his father retired in 1977. Abby Johnson shared her father’s philosophy of being discreet and shunning publicity. She had visited her father numerous times while growing up and was drawn to the buzz and energy of the trading room. After graduating from Hobart in 1984, Johnson spent two years at Booz Allen Hamilton because she believed that she should not spend her entire career at Fidelity. However, after graduating from Harvard Business School, Johnson began her apprenticeship at Fidelity. Johnson’s first job at Fidelity was an analyst covering the industrial equipment industry. She looked back fondly on this first job, having kept models of trucks and bulldozers. She then managed six mutual funds, among them the Select Industrial Equipment Fund, the Dividend Growth Fund, the OTC Portfolio, and the Fidelity Trend Fund. She was successful in achieving good results in the management of these funds. Johnson’s success as a fund manager led in 1997 to her appointment as associate director and senior vice president of the equity division of Fidelity. She was one of three senior vice presidents who reported to Robert Pozen, the head of Fidelity’s mutual fund division. During her tenure in this role, Johnson served as a mentor to new fund managers and learned from her father’s closest advisors how to be a better manager of people. Two of these advisors were Peter Lynch, the vice chairman of Fidelity, and James Curvey, the retired vice chairman. Other executives who influenced Johnson were Robert Reynolds, the COO of Fidelity; Andrew Grove, the chairman of Intel; and Jack Welch, the former CEO of General Electric.

HEIR APPARENT In 2001, after reported personality conflicts with Pozen, Abby Johnson was appointed president of Fidelity. This appointment led many analysts to speculate that Edward Johnson III was grooming her to succeed him, although both Johnson and her father said that he had no plans to retire from Fidelity. Abby Johnson did not expect to be handed the role. In an August 8, 1999, article in the Boston Globe, she was quoted as saying, “I work here because I want to, not because people think I have to. . . . I definitely want to continue to have


Abby Johnson

a role at Fidelity.” In her first year as president, Johnson tried to push Fidelity in a new direction. Under Pozen’s leadership Fidelity had created benchmarks, and Pozen had instilled discipline among its fund managers. Johnson, who continued to use the benchmark system, urged managers to take more risks and to use the art of stock picking to revitalize Fidelity’s mutual funds. By adding a broader range of investment options, Johnson hoped to regain customers lost to higher-performing mutual funds. After September 11, 2001, Fidelity allowed its customers access to its accounts in a good-faith attempt to show the company was customer oriented. When asked about her investment philosophy for an article for the New York Times, Johnson replied, “It’s helpful to use kung fu” (May 22, 2001). Johnson, who rarely made public statements, in June 2004 castigated Fidelity’s competition for allowing trading abuses. Fidelity profited from the missteps of its competitors. Under Johnson’s leadership from 2001 to 2004 Fidelity added $100 billion to its mutual fund. Lawrence Lieberman, a managing director at Orion Group, told the Contra Costa Times, “She’s silenced the critics who questioned whether she was the right person for the job” (June 4, 2004).

See also entry on Fidelity Investments Inc. in International Directory of Company Histories.


Browning, Lynnley, “Fidelity’s Unassuming Heir: Johnson Daughter Weighs Her Options,” Boston Globe, August 8, 1999. “Fidelity Investments Announces Management Changes in Equity Division,” BusinessWire, January 17, 1997. “Fidelity Investments Announces New Management Structure for Equity Division,” BusinessWire, April 30, 1997. Hakim, Danny, “Fidelity Picks a President of Funds Unit,” New York Times, May 22, 2001. Hunter, Matthew, “Key Fidelity Post for CEO’s Daughter,” American Banker, May 22, 2001, p. 19. Lau, Debra, “Fidelity Promotes Abigail Johnson to President,” Forbes.com, May 21, 2001, http://www.forbes.com/2001/05/ 21/0521fidelity.html. Smith, Geoffrey, “Here Comes Abby,” BusinessWeek, July 8, 2002, p. 56. Teitelbaum, Richard, and Aaron Pressman, “Fidelity President Says Fund Firms Did ‘Stupid Things,’” Contra Costa Times June 4, 2004. Wyatt, Edward, “Making Way For Fidelity’s Heir Apparent,” New York Times, February 15, 1998. —Jill Meister


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■■■

John D. Johnson 1949– President and chief executive officer, CHS

Black Hills State University in Spearfish, in 1970 earning his bachelor’s degree in business administration with a minor in economics. Early in his career, Johnson worked as a production supervisor for Western Electric Company and as a livestock feed salesman for ConAgra.

Nationality: American.

RISING THROUGH THE RANKS AT GTA

Born: September 24, 1949, in Rhame, North Dakota.

In 1976 Johnson accepted a position as a feed consultant for the former Farmers Union Grain Terminal Association (GTA). GTA was one of several individual cooperatives operating in the Midwest and Northwest. By the 1970s agricultural cooperatives and the farming industry had experienced a period of expansion. GTA, along with other cooperatives such as Cenex (formerly Farmers Union Central Exchange) and North Pacific Grain Growers, began to grow by acquiring local cooperatives.

Education: Black Hills State University, BBA, 1970. Family: Married Shirley (maiden name unknown); children: three. Career: Western Electric, 1970–1974, production supervisor; ConAgra, 1974–1976, feed salesman; Farmers Union Grain Terminal Association, 1976–1981, feed consultant; 1981–1986, regional sales manager; 1986–1989, director of sales; 1989–1992, vice president and general manager, GTA Feeds; Harvest States Cooperatives, 1992–1994, vice president, farm marketing and supply division; 1994–1998, president and chief executive officer; Cenex Harvest States Cooperatives (later CHS), 1998–2000, president and general manager; 2000–, president and chief executive officer. Address: CHS, 5500 Cenex Drive, Inver Grove Heights, Minnesota 55077; http://www.chsinc.com.

■ John D. Johnson rose through the ranks from the position of feed consultant to president and CEO of Cenex Harvest States Cooperatives, later known as CHS, one of the largest agricultural cooperatives in the United States. Johnson led CHS and its predecessors through several difficult financial periods and helped the cooperative maintain its status as a Fortune 500 company. Johnson’s experience in marketing helped CHS to increase returns to farmers and ranchers by exploring new means of linking these food producers to customers.

FROM THE FARM TO MARKETING Beginning in his childhood, Johnson invested his life in agriculture. He was born in 1949 in Rhame, North Dakota, where members of his family operated a wheat farm and cattle ranch. He grew up in Spearfish, South Dakota, and attended

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Johnson quickly rose through the ranks of GTA, progressing to the position of regional sales manager and, later, director of sales of GTA Feeds. Early in Johnson’s career, GTA acquired the Wisconsin-based Holsum Foods, which produced processed foods. This acquisition proved important during the 1980s, when the farming industry suffered heavy losses and several large cooperatives filed for bankruptcy or consolidated with other cooperatives. In 1983 GTA merged with North Pacific Grain Growers to form Harvest States Cooperatives. By the mid-1980s Harvest States had the highest revenues among cooperatives in the Midwest. In 1989 Johnson was appointed to the position of vice president and general manager of GTA.

APPOINTED PRESIDENT OF HARVEST STATES Harvest States survived the turmoil of the 1980s and was producing record distributions to its members by the early 1990s. Johnson’s meteoric rise continued in 1992, when he was promoted to group vice president for the farm marketing and supply division of Harvest States. In 1994 Johnson was named to succeed Allen D. Hanson as CEO of Harvest States by the end of that year. Johnson’s background in marketing represented a significant change in direction from the philosophy of the cooperative’s three previous chief executives, each of whom had a background in grain merchandising. When Johnson was named president at Harvest States, the coopera-


John D. Johnson

tive provided grain marketing and related services to approximately five hundred member cooperatives representing 125,000 producer-growers in the Midwest and Northwest. The cooperative built flour mills in Wisconsin, Texas, and Pennsylvania during the mid-1990s. Harvest States continued its growth under Johnson’s direction. In Johnson’s first year as president of Harvest States, the cooperative announced that it was trying to find new ways for farmers to invest in their processing plants. According to Johnson, farmers at that time had turned to smaller cooperatives with closed memberships because these farmers believed that they had a greater sense of ownership. Johnson maintained, however, as reported in The Bismarck Tribune, that the smaller cooperatives had “a tendency toward over-promising and under-delivering” (December 14, 1995). During the mid1990s Johnson was optimistic about world demand for agricultural products, and he continued to be so for the rest of the decade. According to Johnson, the United States had the infrastructure, technology, and information resources that could take advantage of this demand.

HARVEST STATES MERGES WITH CENEX In 1997 Cenex and Harvest States announced that the two cooperatives had agreed to explore the possibility of a partnership or merger. Noel Estenson, then the president and CEO of Cenex, said that the potential merger could strengthen the positions of the members of the two cooperatives and create greater operational efficiencies. Johnson agreed, noting in the announcement, as reported by Dee Depass in the Minneapolis–Saint Paul Star-Tribune, “We have an opportunity to build a system that extends all the way from inputs on the producer side to domestic and global food markets. All the components are there. We will be looking for ways to put them together in a way that best serves our procedure and local cooperative members” (October 7, 1997). At the time of the proposed merger Harvest States had six hundred local cooperative members, representing approximately 38,000 direct farmer members and 2,350 employees. Cenex, on the other hand, had 1,400 local cooperative members and employed approximately 2,500 persons. Cenex, which was based in Inver Grove Heights, Minnesota, sold plant food, petroleum, lubricants, tires, and crop production products. The possible merger of the two large cooperatives would, according to a Harvest States spokesperson as reported by Depass, “serve the farmer all the way from providing him with the fertilizer he needs on the farm and petroleum all the way to marketing his product through the co-op system and even processing it” (October 7, 1997). The merger between Cenex and Harvest States became official on June 1, 1998. Johnson was named president and general manager, and Estenson served as the cooperative’s CEO.


In 1998 the two cooperatives had combined revenues of $8.8 billion, although both cooperatives had suffered losses in the previous year. In 1997 Harvest States under Johnson’s leadership experienced a 22 percent decline in revenue as the result of reduced grain prices and volume. Nevertheless, Johnson remained bullish about the merged cooperative’s ability to compete with larger rivals.

LEADING CONTINUED DOMESTIC AND INTERNATIONAL GROWTH As president of Cenex Harvest States Johnson led the cooperative through continued periods of growth and expansion. Soon after the merger in 1998 the cooperative announced that it would enter into a joint venture with United Grain Corporation, a subsidiary of Japan-based Mitsui & Company, and Mitsui USA. The venture joined Cenex’s wheat and barley operations in the western United States with those of United Grain Corporation. In 1999 Cenex Harvest States agreed to acquire Sparta Foods, a regional market leader in the production and distribution of tortillas. Johnson had served as a member of the Sparta board of directors since 1998. The merger with Sparta came at a time when Cenex Harvest States had suffered financial difficulties. In 1999 the cooperative’s income fell 51 percent to $86 million. Johnson remained committed to increasing returns. In an interview with Ann Merrill of the Star-Tribune, Johnson said, “With the markets being like they are, at record lows, the only way farms can get better value for their production is by investing themselves further into the food chain” (January 16, 2000). Johnson said that Cenex Harvest States would continue to look at new opportunities to acquire companies, form partnerships, or construct new facilities in an effort to maximize the returns given to its members.

NAMED PRESIDENT AND CEO OF CENEX HARVEST STATES When Estenson retired in 2000, Cenex Harvest States announced that Johnson would assume the position of president and CEO. Steven Burnet, the chairman of the board of Cenex, said for a press release, “John Johnson’s experience spans from the farm gate to the international arena. Under his leadership, we will continue to build Cenex Harvest States into an organization that returns value to farmers and rangers by finding new ways to link them to the consumer” (May 3, 2000). Johnson continued to identify new opportunities. For the May 3, 2000, press release, Johnson said, “Producer-owned co-ops like Cenex Harvest States are uniquely positioned to respond to the evolving marketplace, especially changing consumer demands for food that have special health or convenience characteristics.” Between 2000 and 2004 Cenex

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John D. Johnson

Harvest States, the name of which was abbreviated to CHS in 2003, continued to build new facilities and to acquire interest in other companies and cooperatives. In 2003 CHS had an annual revenue of nearly $9.4 billion, an increase of 19.8 percent from the previous year. Johnson served on the boards of several companies and associations, including Ventura Foods, the National Cooperative Refinery Association, and Rooster.com, an online agricultural network.

See also entry on CHS Inc. in International Directory of Company Histories.

“Cenex Harvest States Names New CEO,” Associated Press Newswires, May 4, 2000. Depass, Dee, “Farm Co-ops Might Unite,” Star-Tribune, October 7, 1997. “Johnson to Succeed Estenson as Cenex Harvest States CEO,” May 3, 2000, http://www.chsinc.com/ go.asp?Page=122&Template=02&Get=article_000985826. Levy, Melissa, “Cenex Says It’s Ready to Compete,” StarTribune, December 11, 1998. Merrill, Ann, “Merger Shows Cenex Harvest States Is Hungry for Growth,” Star-Tribune, January 16, 2000.


“Briefly,” The Bismarck Tribune, December 14, 1995.

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—Matthew C. Cordon


■■■

John H. Johnson 1918– Chairman and publisher, Johnson Publishing Company Nationality: American. Born: January 18, 1918, in Arkansas City, Arkansas. Education: Attended University of Chicago, 1936; attended Northwestern University. Family: Son of Leroy Johnson (sawmill worker and laborer) and Gertrude Johnson Williams (domestic); married Eunice Walker; children: two. Career: Supreme Liberty Life Insurance Company, 1936–, began as office assistant, became chairman and CEO, 1974–; Johnson Publishing Company, 1942–2002, CEO; 1942–, chairman and publisher. Awards: NAACP, Spingarn Medal, 1966; named to Forbes list of 400 Richest Americans, 1982; National Press Foundation Award, 1986; No. 1 Black Business Award 1986 and 1987, Black Enterprise; inducted into Black Press Hall of Fame, 1987; inducted into Illinois Business Hall of Fame, 1989; inducted into Chicago Journalism Hall of Fame, 1990; Distinguished Service Award, Harvard University Graduate School of Business Administration, 1991; Dow Jones Entrepreneurial Excellence Award, Dow Jones and the Wall Street Journal, 1993; Presidential Medal of Freedom, 1996; Lifetime Achievement Award, American Advertising Federation, 1996; Arkansas Business Hall of Fame, 2001. Publications: With Lerone Bennett Jr., Succeeding against the Odds, 1989. Address: Johnson Publishing Company, 820 South Michigan Avenue, Chicago, Illinois 60605; http:// www.ebony.com.

■ John H. Johnson overcame the barriers of poverty and racism to develop the leading black-owned publishing and blackowned cosmetics companies in the world. Both Johnson Publishing Company, publisher of Ebony and Jet magazines, and Fashion Fair Cosmetics are privately held, family-owned and family-operated enterprises. International Directory of Business Biographies

John H. Johnson. AP/Wide World Photos.

John H. Johnson’s creativity, determination, and business savvy as a publisher blazed the trail for other black-oriented magazines such as Black Enterprise, Essence, and Emerge. Johnson opened the eyes of mainstream American businesses to the multibillion-dollar influence of the African American consumer market by breaking down advertising barriers. He also played a key role in launching and promoting the careers of a large number of African American professionals in publishing and advertising.

EARLY LIFE Johnson came of age in a time of socially accepted lynching and legal segregation in the rural South. His mother, Gertrude, worked as a domestic and cook in rural Arkansas. She sought to earn the means to take her son north to further his educa-

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John H. Johnson

tion beyond the eighth-grade level. Johnson called this relocation in 1933 to Chicago’s South Parkway, a mecca for black business and culture, a crucial turning point in his life. In high school Johnson took journalism courses and was the editor of the school newspaper. Despite her best efforts, Gertrude Johnson and her son were dependent on welfare for two years. These humble beginnings, along with his mother’s faith and hope and his exposure to the vast possibilities of black business, social, and political life guided Johnson’s drive to succeed. In September 1936 Johnson met with Harry H. Pace, chief executive officer (CEO) and president of Supreme Life Insurance Company. Pace gave him an entry-level, part-time office position while he attended the University of Chicago part-time. Johnson dropped out of school, preferring the on-the-job education and curriculum provided by Supreme Life, where he learned the value of entrepreneurship and the importance of private enterprise. In 1939 Johnson was promoted to editor of Supreme Life’s newsletter, and he began to dabble in local political campaigns. In 1940 Johnson met Eunice Walker, whom he married the next year. Johnson’s first publishing endeavor was born in 1942. With permission from Pace, he used the Supreme Life mailing list and a $500 loan to buy the first subscriptions to the Negro Digest, which in turn financed the first issue.

BUSINESS ACHIEVEMENTS From the beginning Johnson held total ownership of the Negro Digest. Because positive news on black people was scarce in the white-owned and white-oriented media, Negro Digest gathered news from many sources in digest form and also published original articles. Blacks could now see news of themselves in society, sports, politics, business, education, and other aspects of life, rather than just the criminal context found in white publications. Johnson established an informal, unique, and—in the South—underground system of magazine distribution, whereby he created dealers and salesmen where none existed previously. In the same way Johnson established a generation of photographers, advertisers, marketers, and circulation specialists for the Negro Digest, where none existed previously. His formal and informal staff utilized guerilla tactics, particularly in the South, selling issues on buses, streetcars, and in cotton fields. Eleanor Roosevelt contributed a cover story titled, “If I Were a Negro,” in the October 1943 issue, raising circulation from 50,000 to 100,000 almost overnight. The creation of Ebony in 1945 was a response to the popular pictorial content of Life and Look. Johnson realized that his customer base was not only interested in reading about events; they also wanted to see the events. Ebony portrayed the positive achievements of blacks but also presented harsh realities and difficulties to give a balanced aspect of the total black experi-

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ence. Ebony‘s debut was acknowledged by Time and Newsweek and had an initial press run of 25,000, which sold out within hours. Ebony had a healthy circulation but suffered from a lack of advertising. For this reason, Johnson created Beauty Star cosmetics and other businesses to generate revenue. Relying on his own sales ability and that of William P. Grayson, who left the Afro-American to join Ebony, Johnson finally managed to secure advertising accounts with major corporations. The November 1947 issue featured Lena Horne on the cover and sold 333,445 copies. The sale of Beauty Star hair products made it possible for Johnson to pay $52,000 cash for an office building at a prestigious location in Chicago—1820 South Michigan Avenue. When Look magazine produced the pocket-sized Quick, Johnson created the pocket-sized Jet in 1951. The first issue sold out and became a collector’s item. The successes of Ebony and Jet led to Johnson’s selection as one of the Ten Outstanding Young Men of 1951 by the U.S. Junior Chamber of Commerce (Jaycees). The success of Ebony eroded the circulation of Negro Digest, leading Johnson to make the difficult business decision to discontinue the latter’s publication in 1951. He hired additional administrative staff and raided other black publications for journalists and photographers. He faced the unique challenge of developing black advertising specialists, of whom there was a scarcity at the time. He found success by hiring LeRoy Jeffries of the National Urban League as Midwest advertising manager. Johnson Publishing went on to acquire hard-won advertising accounts with Chrysler, General Motors, and Sears Roebuck. With these advertisers, Johnson stressed the importance of using black models to appeal to black consumers, thereby creating a generation of models like Diahann Carroll, who debuted in Ebony at the age of 14, Pam Grier, Jayne Kennedy, and Lola Falana. Johnson Publishing Company opened branch offices in Rockefeller Center in New York City and one-half block from the White House in Washington, D.C., using the time-proven tactic of employing a white representative to negotiate the lease. The mid-1950s ushered in an exciting, politically charged decade of civil-rights protest. Ebony’s coverage of these events cemented its place in American publishing history. In the late 1950s Johnson traveled with the future president Richard Nixon to Africa and Russia. Later, he met President John F. Kennedy and traveled with Robert Kennedy to the Ivory Coast. As interest in black history grew, Johnson Publishing created a book division. As Ebony took on a greater leadership role, more and more political leaders, including Kennedy’s successor Lyndon B. Johnson, turned to Johnson for answers to the racial unrest in America. In 1964 Ebony grossed $5.5 million in advertising revenue. At Ebony’s 20th anniversary in November 1965, the magazine was selling 900,000 copies per month. Coverage of the 1968 assassination


John H. Johnson

of Martin Luther King Jr. in Ebony included Pulitzer Prize award-winning photos by Moneta Sleet. Johnson built the first downtown Chicago building to be exclusively designed and constructed by a black-owned corporation, and it became the new home of Johnson Publishing Company at the end of 1971. Johnson expanded his business and social contacts by sitting on the boards of numerous Fortune 500 companies. His first board membership was with Twentieth Century Fox in 1971, which was followed by Greyhound, Bell and Howell, Zenith, Continental Bank, Dillard’s Department Stores, and Chrysler. In 1974 Johnson acquired a majority interest in Supreme Life Insurance Company, his first employer, and later became its chairman and CEO. Johnson’s efforts to diversify expanded the reach of Johnson Publishing Company into television and radio where, though he encountered systematic discrimination, he managed to buy the radio station WGRT, which became WJPC, the first black-owned radio station in Chicago. With careful strategizing and the continued use of white representatives to bypass racial roadblocks, Johnson acquired a suburban FMradio station and changed the format. Johnson sponsored numerous television shows including the Ebony Music Awards show, the American Black Achievement Awards show, and Ebony/Jet Showcase. The success of the Ebony Fashion Fair, which began in 1958, led to the launch of Fashion Fair Cosmetics, filling the needs of black women as well as darkerskinned white women and Latinas for makeup that complemented their skin colors. To better appeal to advertising and printing needs, Johnson reduced the physical size of Ebony to a standard magazine size. Forbes added Johnson to its list of 400 richest Americans in 1982. Numerous industry awards from publishing colleagues, journalism societies, and business organizations followed. Howard University, the biggest awarder of baccalaureate degrees in communication to African-Americans, named its school the John H. Johnson School of Communications. In 2001, as Johnson was inducted into the Arkansas Business Hall of Fame (joining previous inductees such as Sam Walton of Wal-Mart, Don J. Tyson of Tyson Foods, and William T. Dillard Sr. of Dillard’s Department Stores), plans were announced to transfer his birthplace in Arkansas City to the John H. Johnson Cultural and Entrepreneurial Center as a permanent testament to his legacy. In 2002 Johnson kept true to the spirit of family ownership by installing his daughter, Linda Johnson Rice, at the helm of Johnson Publishing Company as president and CEO, while remaining chairman and publisher himself. As of 2004 the Ebony Fashion Show had attracted an average of 300,000 patrons per year and had raised a total of $49 million for charity, most of which went toward scholarships for 475 students. Despite the proliferation of magazine titles,


Jet maintained a readership of over 950,000 and Ebony over 10 million, including over one million subscribers. While often criticized for its feel-good focus on entertainment and lifestyle pieces, Johnson compared Ebony’s content to that of disguising castor oil (that is, more serious issues) in orange juice (or entertainment), making it easier to swallow.

MANAGEMENT AND LEADERSHIP STRATEGIES Dr. Doyle Z. Williams, dean of the Sam M. Walton College of Business Administration, described Johnson as a “sterling example of what can be accomplished through vigor, mettle, vision, and persistence” (Ebony, May 2001). Jannette L. Dates, dean of the John H. Johnson School of Communications at Howard University, noted Johnson’s “entrepreneurial spirit, his rooted-ness in the black community, his passion for excellence, his business acumen, his love of family, and his love of community” (Ebony, May 2001). Johnson rationed his time and sized up people and situations to advance his interests. He did not believe in wasting time, emotion, or energy, and he was a hands-on, detailoriented manager. He felt that is was important to review and renew commitments in any relationship, including one’s relationship with employees. When making decisions, Johnson noted in his autobiography that he asked two questions: “Will this help me?” and “Will this get me in trouble?” He used lessons gained from past failures and successes to make decisions, and his decision-making was informed by the belief that “the greatest victory is always closest to the greatest danger.” Often asked about the secret to his success and whether others could achieve the same goals, Johnson stated in Succeeding against the Odds that in business and entrepreneurship, what is needed is “an idea for a business that meets a need that cannot be satisfied elsewhere.” His business philosophy was based on the idea that “if you can somehow think and dream of success in small steps, every time you make a step, every time you accomplish a small goal, it gives you confidence to go on from there.” Johnson’s view of himself and his success was relatively modest: “I was lucky, the timing was right, and I worked hard.” Much of his wisdom was rooted in the common sense he learned from his mother: “Never burn your bridges behind you. And leave every job and every situation so you can come back, if you want to or need to.” With magazines, books, fashion, cosmetics, hair products, radio, and television, Johnson’s impact and success in business was measurable by the wealth of his holdings, the numerous journalism professionals he mentored, and the wide-ranging accolades he received.

See also entry on Johnson Publishing Company, Inc. in International Directory of Company Histories.

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John H. Johnson SOURCES FOR FURTHER INFORMATION

Henderson, Eric, “Ebony and Jet Forever!” Africana.com, http://www.africana.com/articles/daily/bk20030528 ebonyjet.asp. “Howard University Honors Publishing Pioneer,” Ebony 59, no. 2 (December 2003), p.56.

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Johnson, John H., and Lerone Bennett Jr., Succeeding Against the Odds: The Inspiring Autobiography of One of America’s Wealthiest Entrepreneurs, New York: Warner Books, 1989. Scott, Matthew S., “Johnson Celebrates 50th,”Black Enterprise 23, no. 4 (November 1992), p. 26. —Lee McQueen


■■■

Robert L. Johnson 1946– Chief executive officer, Black Entertainment Television Nationality: American. Born: April 8, 1946, in Hickory, Mississippi. Education: University of Illinois, BA, 1968; Princeton University, MPA, 1972. Family: Son of Archie (timber seller) and Edna (teacher) Johnson; married Sheila Crump; children: two. Career: Corporation for Public Broadcasting, public affairs officer; National Urban League, Washington office, director of communication; Sterling Tucker, press aide; Walter E. Fauntroy, 1973, press secretary; National Cable Television Association, 1976, vice president for governmental relations; Black Entertainment Television, 1980–, chief executive officer; Charlotte Bobcats, 2002–, owner. Awards: Image Award, National Association for the Advancement of Colored People, 1982; Trumpet Award, Turner Broadcasting, 1993; President’s Award, National Cable Television Association, 1982; Pioneering Award, Capital Press Club, 1984; Business of the Year Award, Washington, D.C., Chamber of Commerce, 1985; Executive Leadership Council Award, 1992; Broadcasting & Cable, Hall of Fame Award, 1997; 20/20 Vision Award, Cablevision magazine. Address: BET Holdings, 1232 31st Street NW, Washington, DC 20007; http://www.bet.com.

■ Robert L. Johnson founded Black Entertainment Television (BET), the first U.S. television network aimed at African American audiences. Starting in 1979 with a $15,000 loan, Johnson turned BET into one of the richest franchises in the cable industry. BET was the first company controlled by African Americans to sell shares on the New York Stock Exchange, and Johnson was the first African American majority owner of a sports franchise. International Directory of Business Biographies

Robert L. Johnson. AP/Wide World Photos.

BEGINNING OF A MEDIA ENTREPRENEUR Johnson grew up in Freeport, Illinois, the ninth of 10 children. His entrepreneurial spirit was honed when he was a child. At the age of 12, Johnson began a job delivering the Rockford Morning Star. He did not like getting up early. In an interview with Erik Spanberg that appeared in The Business Journal Johnson said, “I realized if I want to make some money, I’d better work for myself” (March 28, 2003). Graduating from high school with honors in history, Johnson attended the University of Illinois on an academic scholarship. After earning his bachelor’s degree Johnson enrolled at Princeton University to study toward his goal of becoming a U.S. ambassador. In response to an effort to attract minority students to careers in international relations, Johnson attended the Woodrow Wilson School of Public and International Affairs with

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Robert L. Johnson

financial support from the Ford Foundation and the U.S. Foreign Service. He was graduated sixth in his class. After completing his studies at Princeton, Johnson worked primarily in the field of communication media. He had jobs as a public affairs officer for the Corporation for Public Broadcasting, director of communications for the Washington, D.C., office of the National Urban League, press aide to Sterling Tucker, the Washington, D.C., councilman, and press secretary to Walter E. Fauntroy, the congressional delegate from the District of Columbia. In 1976 Johnson was named vice president of governmental relations for the National Cable Television Association, a trade organization that represents cable television companies. As a lobbyist Johnson escorted an aspiring cable entrepreneur, Ken Silverman, to the office of Claude Pepper, the congressman from Florida, who was an advocate for senior citizens. Silverman wanted Pepper’s support for his idea of starting a cable channel for older Americans. Johnson realized this concept would work well for African Americans, an underserved market in communication and entertainment media. The programming would focus on African American entertainment, cultural themes, and lifestyles. Johnson approached John Malone, a board member of NCTA and the head of TCI, a cable operator, to invest in his idea. Malone agreed, and on January 25, 1980, BET made its debut on cable television.

pay-per-view. Building on brand identity outside of the cable industry, Johnson capitalized by launching African American publications such as YSB, Emerge, Heart & Soul, and Arabesque Books, a line of African American romance novels written by African American authors. Johnson also made a foray into the restaurant business by opening BET Soundstage and BET on Jazz, which were theme restaurants. In 2001 Johnson made an effort to become the only African American to own a major airline by becoming the owner of D.C. Air. His plans were halted when the U.S. Department of Justice threatened to sue to stop the deal over antitrust concerns.

NEW VENTURES In 2001 Johnson sold BET to Viacom. The deal was worth $3 billion and required that Johnson remain CEO for five more years. This move made Johnson the first African American billionaire in the United States. After selling BET, Johnson formed the RLJ Companies, where he began new ventures. Johnson purchased the National Basketball Association expansion franchise in North Carolina, the Charlotte Bobcats. He also developed hotels under L.J. Development; Leeward Islands Lottery Holdings Company, an online lottery company; Ortanique Restaurants; Wolverine Pizza; and Three Key Music, a jazz recording company.

THE RISE OF BET

MANAGEMENT STYLE

BET began operating a few hours a day. The content was primarily films from the 1940s and 1950s and blaxploitation films. With the advent of MTV, a cable television channel devoted to popular music, music videos had become ingrained into popular culture. In an effort to keep costs low Johnson took advantage of another void, the lack of African American artists appearing on MTV. Johnson formed relationships with record labels to promote on BET videos by rhythm and blues and hip-hop artists. The network also added infomercials, reruns of a gospel show, and African American college football and basketball games. For the first six years BET lost money, and Johnson sought new investors. He recruited Taft Broadcasting Company and Home Box Office. This move provided more money for the channel and increased BET air time to 24 hours a day. In the early 1990s BET turned its first profit.

The success of BET stemmed from Johnson’s vision to capitalize on cable programming to an underserved African American market. He also used African American talent by hiring executives, producers, and on-air performers. In an interview with Robert G. Miller in the Black Collegian, Johnson commented, “As an entrepreneur, sometimes you make it up as you go along. You have to have an unshaken belief in yourself, work harder than the next guy, and do whatever it takes with determination. You have to have an ability to engage people to believe in you, while being lucky enough to be in the right place at the right time. You must be able to marshal the resources to achieve that vision. That means you have to find good people, support them, and have the steadfastness to stay in there” (October 8, 2001).

Johnson established BET Holdings to serve as parent company and decided to offer public stock in BET. On October 30, 1991, BET Holdings became the first African American firm to be listed on the New York Stock Exchange. In 1999, believing the stock to be undervalued, Johnson reversed the decision, making his company private again. BET continued its growth by expanding programming to include BET on Jazz, BET on Jazz International, BET movies, and BET Action

See also entry on BET Holdings, Inc. in International Directory of Company Histories.

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Hughes, Alan, “Slam Dunk!,” Black Enterprise, March 2003, pp. 94–99.


Robert L. Johnson Jones, Joyce, “Betting on Black,” Black Enterprise, January 2001, pp. 58–61.

———, “The Cable Capitalist,” Forbes, October 8, 2001, pp. 42–54.

Miller, Robert G., “A Business Titan: Redefining Black Entrepreneurial Success,” Black Collegian, October 2000, pp. 140–143.

Spanberg, Erik, “Taking Care of Business: Robert Johnson has a Long History of Seizing Every Opportunity to Build a Business Empire,” The Business Journal, March 28, 2003, p. A4.

Pulley, Brett, The Billion Dollar BET: Robert Johnson and the Inside Story of Black Entertainment Television, New York: John Wiley & Sons, 2004.


—Tiffeni J. Fontno

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William R. Johnson 1949– CEO and president, H.J. Heinz Company Nationality: American. Born: 1949. Education: University of California–Los Angeles, BA, 1971; University of Texas–Austin, MBA, 1974. Family: Son of Bill “Tiger” Johnson, a professional football player and coach, and mother’s name unknown; married Susie (maiden name unknown), c. 1973; children: two. Career: Drackett Company, 1974–1977, assistant brand manager; Ralston Purina, 1977; Frito-Lay, 1977–1979; Anderson-Clayton Foods, 1979–1982, group product manager, then vice president and director of marketing for consumer products; Heinz U.S.A., 1982–1988, general manager of new business, then general manager of marketing and vice president of marketing; 1988–1993, president and chief executive officer of Heinz Pet Products, then also supervisor of StarKist Foods; H.J. Heinz Company, 1993–1996, senior vice president and director; 1996–1998, president and COO; 1998–2000, CEO and president; 2000–, chairman, CEO, and president.

William R. Johnson. AP/Wide World Photos.

LIFE IS LIKE A FOOTBALL GAME Address: H.J. Heinz Company, 600 Grant Street, Pittsburgh, Pennsylvania 15219; http://www.heinz.com.

■ William R. Johnson was recruited to Heinz U.S.A. in 1982 and made a name for himself turning around Heinz’s poorly performing StarKist and Pet Products divisions, which some industry analysts had considered unsalvageable. Johnson was appointed president and chief executive officer of H.J. Heinz Company in 1998 and was made chairman in 2000. After taking over, Johnson focused on cost cutting and the performance of major brands to help turn Heinz around, as it had suffered from stiffer competition and pricing demands from wholesalers. Johnson was described by himself and coworkers alike as incredibly intense; industry analysts noted that Johnson was a fiscal conservative and dedicated cost cutter.

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Johnson’s father, Bill “Tiger” Johnson, was a center for the San Francisco Forty-Niners professional football team and later the head coach of the Cincinnati Bengals. According to Johnson, who grew up in Palo Alto, California, following his father’s career helped instill him with a fiercely competitive spirit and a passionate distaste for losing. He credited his father as being a major influence on his life and continued to take advice from him throughout his career. Johnson said he also learned how to motivate people by examining the methods used by his father and other coaches. In an interview with Patricia Sabatini for the Pittsburgh Post-Gazette, Johnson noted, “Some people need to be handled gently. Other people you can kick in the rear end” (May 18, 1998). After receiving his master’s in business administration from the University of Texas–Austin in 1974, Johnson went to


William R. Johnson

work briefly for Ralston Purina in St. Louis and then Frito-Lay in Dallas. In 1979 he joined Clayton Foods, also in Dallas, and quickly impressed the company’s CEO. Before long, he was made vice president of marketing and of the consumer product group. As the then CEO Rick Avery later recalled, Johnson was results oriented, and every year he was with the company the bottom line went up.

ESTABLISHING “PRICE-BASED COSTING” Johnson’s success at Clayton Foods caught the attention of the Heinz Company, which began to recruit him. Avery said he fought off Heinz’s advances but knew he had lost the war when Heinz sent a corporate jet to pick Johnson and his wife up for a meeting. Johnson joined Heinz U.S.A. in 1982 as general manager of new business and was later appointed general manager of marketing. In 1988 Johnson was made president of Heinz’s Pet Products division and four years later he took over one of the company’s most visible divisions, StarKist Foods. As the head of these divisions Johnson reached new heights, successfully turning them around partly through a process he helped pioneer called “price-based costing.” The traditional formula of 1980s business was the simple equation, cost plus margin equals the price of the product. In the new business era of the 1990s, with increased competition offering consumers more and more product choices, Johnson turned to the philosophy of determining what consumers were willing to spend and then doing whatever was necessary to be profitable at those prices. This goal was primarily met by slashing costs in every possible realm of the business. Johnson described the concept as simple but noted that its execution could be painful. Johnson’s strategy at Pet Products and StarKist was a success. As sales and profits soared, so did Johnson’s renown within the company. In 1993 he was named to Heinz’s board and became a senior vice president responsible for Heinz’s burgeoning operations in Asia Pacific. The experience would prove invaluable with respect to his eventual leadership of H.J. Heinz. In an interview for an alumni profile on the University of Texas–Austin Web site, Johnson noted, “Working overseas, you have to learn to be flexible, to adjudicate issues in local terminology” (March 3, 1998). He pointed out that each overseas market required a unique approach and marketing technique and that establishing a brand was often more important than seeking profits in the early stages.

NAMED CEO In 1998 Johnson took over the position of CEO at Heinz from the longtime and popular CEO and chairman, Anthony J. F. O’Reilly. The first step Johnson took as CEO was to announce several top management appointments, as he installed


his own senior administrative team. Unlike his predecessor, who was surrounded by older top executives, Johnson was intent on recruiting and promoting a new generation of younger talented executives, most in their 40s. Johnson also established that he would continue to be dedicated to cost cutting and to restructuring the company, which he had begun the year before through Heinz’s Project Millennia. He also announced that he would centralize decisionmaking at Heinz’s Pittsburgh headquarters and increase headquarters’ role in tracking the performance of Heinz’s numerous international operations. Some analysts feared that Johnson would be overeager in his cost-cutting wars with other large food companies. The Industry analyst Nomi Ghez also noted that Johnson was changing the centralized structure of the company and told Patty Tascarella, in an interview for the Pittsburgh Business Times, that “the risk is to hurt a culture of a company while you’re achieving efficiencies” (December 12, 1997). Nevertheless, many analysts saw Johnson as the right person for the job at the right time, because his strength in operations would help the company better compete in a tougher industry environment.

FACED MANY CHALLENGES When he took over the reins at Heinz, Johnson was dealing with a much-changed business environment in the processedfood industry. For example, Heinz and most other foodproduct companies were facing increased competition from retail giants who were able to squeeze suppliers to keep costs down. In addition, low inflation was leaving little opportunity to raise prices, and more and more consumers were eating out. In a BusinessWeek article, Johnson noted, “You can no longer price your way to prosperity” (December 20, 1999). In 1998 Johnson announced that Heinz would consolidate its ketchup and condiment business into one advertising and brand-image account valued at $50 million. The move was made to establish a consistent worldwide image for Heinz ketchup that would be similar to images created by Coca-Cola and McDonald’s. Johnson also set out to increase sales and cash flow while reducing company debt. He simplified the company’s distribution chain by closing warehouses, outsourcing more work, trimming inventories, and disposing of slowmoving products. Johnson’s strategy also included returning to basics by focusing on Heinz’s core lines, including ketchup and condiments, frozen foods, and infant and nutritional products. In the process, Johnson oversaw the selling of Heinz’s tuna and pet-food businesses in a $2.5 billion deal with Del Monte Foods. Johnson further restructured the company through programs such as the Operation Excel and Streamline initiatives.

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Nevertheless, Johnson and Heinz continued to struggle with the “good news–bad news” dilemma faced by many corporate food giants. In March 2003, the good news was that Heinz’s 15 core brands were doing well, as evidenced by its U.S. ketchup sales garnering a 60 percent share of the market and an overall sales increase of between 14 and 15 percent in its European and Asian markets. However, Heinz reported only modest performance overall, with a net income of $151.6 million (43 cents per share), down from the $201.7 million (57 cents per share) of a year earlier. In 2003 Heinz’s stock was trading at approximately $30, a 25 percent decline from the previous year. Furthermore, Heinz had a total of 24 charges against earnings over the previous 26 quarters. Some analysts noted that Johnson’s seemingly endless restructuring programs had earned little profit for shareholders. Others, however, were more optimistic of Johnson’s moves within the company. The industry analyst William Leach told David Shock for a BusinessWeek Online article, “I think people don’t realize that this company, over many years, had cobbled together a messy portfolio of businesses, and the recent restructurings and assets sales will make Heinz healthier” (April 29, 2003).

er—until you’ve taken the ball across the finish line” (March 3, 1988).

GETTING HEINZ ON TRACK In a meeting with investors and analysts in 2003 Johnson said that the company intended to introduce something new to their ketchup business every 12 to 18 months, such as the company’s recent additions of colored ketchup and the Easy Squeeze! Bottle. In addition to focusing on Heinz’s giant frozen-foods and condiments businesses, Johnson’s strategy emphasized increasing international sales in its European and Asian markets. Johnson told investors that he wanted to establish six markets with more than $100 million in sales. In a 2004 address to the Consumer Analyst Group of New York, Johnson said that Heinz was on track to meet its 2004 netsales, cash, and earnings goals. As reported by Business Wire, he added, “We have turned our U.S. food-service business around with 8 percent sales growth in the first half of fiscal 2004. We have exciting innovations planned for our U.S. and European brands, and we are on pace for record cash flow” (February 18, 2004). Johnson also held positions as a member of the board of directors of Grocery Manufacturers of America and a director of the Clorox Company.

MANAGEMENT STYLE: LOW-KEY AND PERSONAL In contrast to his predecessor, who was known as a raconteur who enjoyed the spotlight, coworkers and analysts described Johnson as decidedly low-key with an unpretentious and casual demeanor. On the other hand, his management style was described as hard charging and sometimes even brusque, but also refreshingly direct. In an interview with Tascarella for the Pittsburgh Business Times, the lawyer Art Schwab noted, “Bill is incredibly detail oriented and focused on the objective that’s before him at that moment” (December 12, 1997). Heinz employees described Johnson as a good-natured but demanding boss who set a clear agenda. He was noted for his approachable management style and his preference for conversing in person rather than via telephone or e-mails. Johnson himself commented that he didn’t think exclusively about getting ahead because such an approach would get a manager in trouble. He told the Pittsburgh Post-Gazette staff-writer Sabatini, “You become risk-averse and focus on trying to do what everyone thinks you ought to do as opposed to what you really ought to do” (May 18, 1998). Perhaps recalling his father’s coaching days, Johnson described his approach to success in management and business as akin to a football game where heroic 99-yard kickoff returns are few and far between. However, as he noted in his alumni profile on the University of Texas–Austin Web site, “if you plan each play in your drive meticulously and execute it flawlessly, you can make one first down, then another, then anoth-

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See also entry on H.J. Heinz Company in International Directory of Company Histories.


“Alumni Profile: William Johnson,” University of Texas–Austin, March 3, 1998, http:// www.mccombs.utexas.edu/news/profiles/johnson.asp. “Back at Heinz, the Stock Needs Stirring,” BusinessWeek, December 20, 1999, p. 162. “Heinz on Track for 8 to 9 Percent Earnings Growth,” Business Wire, February 18, 2004, http:// www.businesswire.com. Sabatini, Patricia, “Heinz’s CEO Is a Lot Like Tiger,” Pittsburgh Post-Gazette, May 18, 1998, http://www.postgazette.com/businessnews/19980518bheinz1.asp. Shook, David, “Heinz: In the Soup, or On a Roll?” BusinessWeek Online, April 28, 2003, http:// www.businessweek.com/bwdaily/dnflash/apr2003/ nf20030428_6278_db014.htm. Tascarella, Patty, “Following a Heinz Legend: New CEO Is Much Like His Cost-Cutting Predecessor,” Pittsburgh Business Times, December 12, 1997. —David Petechuk


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Lawrence R. Johnston 1949– Chairman and chief executive officer, Albertsons Nationality: American. Born: 1949, in New York. Education: Stetson University, BBA, 1972. Career: General Electric (GE), 1972, management trainee; 1972–1978, retail-sales management in GE Appliances (GEA); 1979–1983, marketing manager; 1983–1989, merchandising manager for Washington, D.C., then Cleveland, Ohio, regions, then manager of GEA’s Eastern Sales and Distribution, president of International GE Puerto Rico, general manager of Domestic Sales Operations; 1989–1997, vice president of sales and distribution for GEA and corporate vice president; 1997–1999, president and CEO of GE Medical Systems, Europe; 1999–2000, president and CEO of GEA and corporate senior vice president; Albertsons, 2001–, chairman and CEO. Address: Albertsons, 250 East Parkcenter Boulevard, Boise, Idaho 83706; http://www.albertsons.com.

■ The 2001 hiring of Lawrence Johnston by the Albertsons grocery and drugstore chain was a notable example of outside recruitment for top leadership in a company perceived as needing change. Having spent his entire career at General Electric, Johnston brought the management philosophy of the driving force behind GE, the CEO Jack Welch, to the grocery sector. Johnston immediately outlined a five-part plan for remaking the organization that included closing low-performing stores, increasing the utilization of technology, and reducing waste in the supply chain. Johnston was a perpetual optimist and a technophile who enjoyed a high profile, driving a bright yellow Hummer H2 around Boise, Idaho, the location of Albertsons’ headquarters.

RISING THROUGH GEA’S RANKS After growing up in upstate New York, Johnston decided to follow in the footsteps of his older brother Jerry and attend-


ed college at Stetson University in Deland, Florida. In 1972 he graduated with a degree in business administration and was recruited by General Electric to enter the company’s management training program. The day after graduation Johnston drove from Florida to Charlotte, North Carolina, to begin what would become a 28-year career with General Electric. Upon completing the training program, Johnston spent several years in various field locations as a retail and contract sales manager for GE Appliances (GEA). He moved to Appliance Park in Louisville, Kentucky, where he held several marketing-management positions in the Contract, Private Label, and International Market segments. He became the merchandising manager for the Washington, D.C., region in 1984 and later the manager of the Cleveland, Ohio, region. Returning to Appliance Park, he served as general manager of GEA’s Eastern Sales and Distributions Operations, then as president of International General Electric Puerto Rico, and then as general manager of Domestic Sales Operations. In 1989 Johnston was elected to GE’s board of directors, appointed a corporate vice president, and also named vice president of sales and distribution for GEA. His career then took an international turn when he was named president and CEO of GE Medical Systems, Europe, headquartered in Paris, France, in February 1997. The Medical Systems subsidiary generated approximately $1 billion in revenues across Europe, the Middle East, and Africa through sales of medical products and employed over four thousand associates. Johnston was chairman of GE’s European Corporate Executive Council from 1998 to 1999. In 1999 he was elected a senior vice president of the company and also named president and CEO of GEA, a $5.6 billion global business with over 21,000 associates.

JOINING ALBERTSONS In April 2001 Johnston was tapped to head Albertsons, one of the world’s largest food and drug retailers, with revenues of over $35 billion and more than 200,000 associates. Although lacking in experience in the food and drug business, Johnston had substantial marketing experience, which was seen as a key factor in his selection. At the time of his appointment Johnston stated that he saw the position as an opportunity to run his own company and looked forward to the challenges that the job would offer.

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Lawrence R. Johnston

The position indeed proved to hold many challenges. Albertsons’ business was deeply depressed; the recent acquisition of American Stores had doubled its store count but had also led to financial issues. Revenues were flat, profits were falling, and the stock price was off. Johnston immediately closed 165 stores and let go of 20 percent of both corporate and divisional staff. He pulled Albertsons out of many major markets, including the Houston, San Antonio, Memphis, Nashville, and New Orleans areas, following the GE edict that if a company could not be number one or two in a given market, it should not stay. Johnston poured the saved capital into the remaining stores, emphasizing the development of dual-branded supermarket and drugstore retail outlets. He then laid off over 35,000 store-level associates and significantly limited increases in salaries and benefits. Yet continued keen competition from retailers such as Wal-Mart and a significant labor dispute in the southern California market prevented Johnston’s measures from resulting in the profitability he sought.

MOTIVATIONAL SPEAKERS AND STORES OF THE FUTURE Johnston utilized the consultant Ed F. Foreman, a motivational speaker, throughout his career at GE and subsequently had executives from Albertsons attend three-day seminars entitled “Successful Life Course.” Foreman’s philosophy emphasized attitude realignment and utilized both physical and mental exercises to achieve the positive attitude needed to reach corporate goals. Foreman’s motivational approaches had been highly successful in Johnston’s restructuring of GE Medical Systems, and the speaker would play a key role in Johnston’s attempts to reach his stated goal for Albertsons: to someday become the world’s biggest food and drug retailer.

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A significant aspect of Johnston’s vision was the Albertsons “Store of the Future,” which combined his love of technology and his desire to outplay Wal-Mart in the grocery market. Albertsons’ forward-looking stores featured Internet list building and the use of handheld devices to access those lists during face-to-face visits. The handheld devices presented promotions based on previous shopping patterns and could signal the customer when prescriptions or film processing were ready for pickup. The device also sped up checkout and payment. Critics said that such devices were digital overkill, but Johnston was convinced that technology-assisted shopping would be the future of grocery and drug retail. Johnston’s steps in streamlining Albertsons’ organization and dragging the company into the 21st century had yet to have an effect on the company’s bottom line as of 2004. However analysts felt that the restructuring and investment in technology were necessary to make up for the company’s years of stagnation, and positive financial results were expected to arrive in the near future.

See also entry on Albertson’s Inc. in International Directory of Company Histories.


Burke, Monte, “The Guru in the Vegetable Bin,” Forbes, March 3, 2003, pp. 56–58. Duvall, Mel, and Kim S. Nash, “Albertsons: A Shot at the Crown,” Baseline, February 5, 2004, http:// www.baselinemag.com/article2/0,1397,1522244,00.asp. Foster, Julie, and Monica Roman, “Up the Food Chain,” BusinessWeek, May 7, 2001, p. 54. —Michelle L. Johnson


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Jeff Jordan 1959– Senior vice president, eBay Inc. Nationality: American. Born: 1959. Education: Amherst College, BA; Stanford University, MBA, 1987. Family: Married Karen (maiden name unknown); children: two. Career: Boston Consulting Group, 1987–1990, consultant; Walt Disney Company, 1990–1998, various positions, senior vice president and chief financial officer, The Disney Store; Hollywood Entertainment Corporation, 1998–1999, chief financial officer, president, Reel.com; eBay Inc., 1999–2000, vice president, regionals and services; 2000–, senior vice president, U.S. business. Awards: Global Business Influentials, Time, 2003. Address: eBay Inc., 2145 Hamilton Avenue, San Jose, California 95125; http://www.ebay.com.

■ Jeff Jordan in 2000 was appointed senior vice president of U.S. business at eBay Inc., the online auction marketplace. Jordan was a key leader in eBay’s rapid growth through the late 1990s and early 2000s and spearheaded several successful initiatives. He was regarded by his colleagues as highly energetic and a possible replacement for the incumbent chief executive officer, Meg Whitman, should she step down.

CORPORATE BACKGROUND Jordan attended Amherst College, where he graduated with a bachelor of arts degree in political science and psychology. He received a master’s degree in business administration from Stanford University in 1987. After graduating, Jordan returned to Massachusetts, where he worked for Boston Consulting Group, an international strategy and management consulting firm. He remained with the company until 1990, when he began an eight-year stint with Walt Disney Company. One


Jeff Jordan. © Kim Kulish/Corbis.

of Jordan’s bosses at Disney was Meg Whitman, who would later choose him for a key position with eBay. Before leaving Disney in 1998 Jordan served as senior vice president and chief financial officer of Disney’s subsidiary The Disney Store. Jordan joined the team at Hollywood Entertainment Corporation, a specialty retailer of rental videos and video games. His roles at the company included executive vice president, chief financial officer, and president of Hollywood’s online retailer, Reel.com. Jordan had been involved with the online venture since its inception, helping it to achieve $40 million in sales after two years. Jordan was unsatisfied with the overall performance, however. As quoted on America’s Intelligence Wire, Jordan said of the project, “It was a model where we were spending $40 million in marketing to sell $40 million of revenue at a loss” (December 20, 2003). Jordan left Hollywood Entertainment and Reel.com in 1999.

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EBAY, INC. Jordan began looking for other opportunities and fielded offers from several dot-com companies. He was contacted by his former boss at Disney, Whitman, who offered him a position with the online auction company eBay. Jordan spent a year as vice president of regionals and services and in 2000 made the transition to the role of senior vice president of U.S. business. Jordan’s responsibilities included overseeing all of eBay’s U.S. operations, including eBay.com; nine of 23 product categories, including motors, electronics, and sports and collectibles; and Half.com, a retailer of used books, movies, and music media. Jordan’s U.S. division handled approximately 60 percent of eBay’s total transactions. When Jordan joined eBay in 1999 the company had approximately four hundred employees and ten million registered users and was generating net revenue of approximately $225 million a year. By 2004 the company had 5,600 employees and nearly 95 million registered users and had posted net revenues for year-end 2003 of $2.17 billion. Two of Jordan’s proposed acquisitions played key roles in eBay’s rapid growth: PayPal, an online financial services company popular among eBay users for making and receiving payments, and Half.com. Jordan was quick to point out, however, that a leadership position at eBay was unlike that of a traditional corporation: The community of users played a unique role in directing the future of the company. “We’re enablers, not doers. It’s hard for an MBA to make that transition. You’re used to doing and now you’re enabling. And you’re giving up control and power.

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Our goals are really simple. We want to share ideas,” he was quoted by America’s Intelligence Wire (December 20, 2003). Jordan’s corporate background caught up with him with the implementation in 2001 of a new checkout system. While in theory the system worked well, eBay users had a strong reaction. “About one-third of the sellers hated it,” Jordan told Adam Lashinsky of Fortune. “For me it was a lesson in humility and an object lesson that this is a joint venture.” Jordan was described by his colleagues as high energy, as evidenced by his caricature as the Tasmanian Devil in a company conference room. Jordan was an eBay seller and was popular with eBay users for responding to their e-mail queries and concerns. He was called a weekend warrior because of his mountain biking adventures and frequent trips to the gym.

See also entry on eBay Inc. in International Directory of Company Histories.


Lashinsky, Adam, “Meg and the Machine,” Fortune, September 1, 2003, p. 68. Lisovicz, Susan, “Global Business Influentials,” America’s Intelligence Wire, December 20, 2003. Taylor, Chris, “Getting a Little Wild on the Net: Jeff Jordan, eBay,” Time, December 1, 2003, p. 72. —Stephanie Dionne Sherk


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Michael H. Jordan 1936– Chairman and chief executive officer, Electronic Data Systems; chairman, eOriginal Nationality: American.

Jordan was raised in a lower-middle-class area of Kansas City, Missouri, in the wake of the Great Depression. From an early age he desired to have a career in which his talent would be in demand no matter what shape the U.S. economy was in. Following high school Jordan earned an academic scholarship to Yale University, where he received a chemical engineering degree in 1957 and developed a passion for science. In the Dallas Morning News, he explained: “I love the rigor of science, the opportunity to generate hypotheses, to figure them out, to try to prove or disprove them” (April 10, 2003).

Born: June 13, 1936, in Kansas City, Missouri. Education: Yale University, BS, 1957; Princeton University, MS, 1959; U.S. Navy Westinghouse Bettis Atomic Power Laboratory, certificate in nuclear engineering, 1960. Family: Married Kim (maiden name unknown; marriage ended); married Hilary Cecil; children: three. Career: McKinsey & Company, 1964–1974, consultant and principal; PepsiCo, 1974–1986, held various positions including director of financial planning, executive vice president and chief financial officer, president of Frito Lay, and president of PepsiCo Foods International; 1986–1990, president and chief executive officer of PepsiCo Worldwide Foods; 1990–1992, chief executive officer; Clayton, Dubilier & Rice, 1992–1993, partner; Westinghouse Electric Corporation, 1993–1998, chairman and chief executive officer; CBS Corporation, 1995–1998, chairman and chief executive officer; Luminant Worldwide Corporporation, 1999–2001, chairman; eOriginal, 1999–, chairman; Electronic Data Systems, 2003–, chairman and chief executive officer. Address: EDS Headquarters, 5400 Legacy Drive, Plano, Texas 75024-3199; http://www.eds.com.

■ Trained as a chemical engineer, Michael H. Jordan’s business career began in consulting. After joining PepsiCo as a planner, Jordan continually honed his corporate skills and was named president in 1986. Following 18 years with PepsiCo, Jordan demonstrated his strategic prowess at the helm of Westinghouse Electric Corporation, where he orchestrated a major corporate transformation that included the acquisition of CBS Corporation. At age 66 Jordan was coaxed out of semiretirement to reinvigorate the computer-services giant Electronic Data Systems (EDS), which had seen its stock fall sharply under previous leadership. International Directory of Business Biographies

Jordan went on to earn a master’s degree in chemical engineering from Princeton University in 1959. He considered pursuing a doctorate but ultimately decided that the laboratory life was too isolated and joined the navy. Jordan entered the nuclear submarine program and received a certificate in nuclear engineering in 1960 from the U.S. Navy Westinghouse Bettis Atomic Power Laboratory. Upon discharge, Jordan joined McKinsey & Company as a consultant in 1964, where his business career would blossom over the course of 10 years. Jordan felt that McKinsey’s approach to problem solving was very much like the one he used as a scientist. In 1974 Jordan joined PepsiCo as head of corporate planning. His accomplishments at Pepsi included expansion of the company’s international snack-food business. Under his leadership sales within the category grew to $1.8 billion in 1991, up from $300 million in 1986.

TRANSFORMING WESTINGHOUSE Jordan was tapped to rescue the troubled Westinghouse Electric Corporation in 1993. The company was saddled with $6 billion in debt related to its poorly managed Westinghouse Financial Services division, which dabbled in commercial real estate, leveraged buyouts, and junk bonds. As chairman and CEO, Jordan was the first outsider to lead the enterprise. Within two years he sold the company’s defense-electronics and office-furniture units and cut 7,200 jobs. Next, Jordan completely transformed the struggling enterprise by acquiring CBS Corporation for $5.4 billion in 1995. As Jordan’s restructuring plan continued to unfold, Westinghouse began focusing more heavily on media properties. This was reflected in the company’s June 1996 merger with radio giant Infinity Broadcasting. In December 1997, Westinghouse

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ceased to exist when Jordan announced the company would completely shed its industrial divisions and become simply CBS. Jordan was praised for exhibiting confidence while making big changes and maintaining composure under the scrutiny of investors and the news media. Jordan has been described as being intellectual, analytical, contemplative, and quiet. Prior to accepting the top post at EDS, he finished writing a mystery novel. These traits have been interpreted in different ways. While he was at the helm of CBS, Fortune named Jordan one of the nation’s least charismatic CEOs, and some observers called him unimaginative. Others, however, described Jordan as being personable and informal, as someone who opted for casual dress and enjoyed engaging in deep conversations. In any case, many agreed that he was a skilled corporate turnaround artist and a gifted dealmaker.

where it could once again compete against the likes of IBM, vying for contracts that would have been out of reach a year earlier. Although Jordan faced further challenges, the work was made easier by his appointing trusted colleagues in several key EDS positions and a new management approach that included locating senior executive offices in closer proximity. Commenting on the “new” EDS culture in the Dallas Morning News, Jordan said: “I’d say what’s interesting now is the intensity and the rapidity with which things happen in the company. You don’t screw around studying stuff. You just say: ‘OK, let’s get at it. Let’s go after this’” (February 11, 2004).

See also entries on CBS Corporation, Electronic Data Systems Corporation, McKinsey & Company, Inc., Pepsico, Inc., and Westinghouse Electric Corporation in International Directory of Company Histories.

REBUILDING EDS When the financially troubled EDS fired its chairman and CEO, Dick Brown, in March 2003, Jordan, a Dallas resident who had ties to a number of EDS board members, was chosen as his successor. EDS’s stock had fallen sharply in the previous six months amid a weak economy, reduced corporate spending, and poor management decisions. In addition, lofty forecasts by Brown had failed to materialize, leading to drastic revisions to the company’s third-quarter earnings and a subsequent investigation by the Securities and Exchange Commission. Along with former EDS employee Jeff Heller, who was rehired as chief operating officer, Jordan sought to turn things around. He immediately took the position that EDS was a solid company that lacked strategic focus and said he would concentrate on improving morale, as well as identifying the things that set EDS apart from its competitors. In addition, Jordan called for a more accurate method of calculating revenue projections. A review of EDS’s human-resources policies quickly followed, leading to increased funds for salary increases and bonuses, as well as an improved severance package. Jordan then began what he called an “evolutionary process” of rebuilding EDS over the course of several years. This included plans to expand in low-cost nations like India and the Philippines. In 2004 EDS sought to increase its workforce in such countries from 9,000 to 20,000 by the year’s end. Jordan also called for cost reductions, and EDS shed more than 5,000 workers during his first year with the company. Eventually, Jordan declared that EDS had reduced expenses to the point

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Fuquay, Jim, “New EDS Chairman Says Company on Way to Recovery,” Fort Worth Star-Telegram, January 28, 2004. Harrison, Crayton, “EDS Chief Taps Old Friends for Top Spots in Effort to Revive Firm’s Fortunes,” Dallas Morning News, November 19, 2003. ———, “Electronic Data Systems Finalizes Plan for Cost Cutting, Strategy Tweaking,” Dallas Morning News, June 19, 2003. ———, “Electronic Data Systems Has Right Strategy, Leadership Now, CEO Says,” Dallas Morning News, February 11, 2004. ———, “New CEO’s Background May Be Key to EDS’ Turnaround,” Dallas Morning News, April 10, 2003. Hylton, Richard D., “If You Like Turnarounds, Look at Westinghouse,” Fortune, March 6, 1995, p. 210. Labich, Kenneth, “Maybe Jordan Does Know What He’s Doing at Westinghouse,” Fortune, July 22, 1996, p. 20. Landy, Heather, “Changes Suit New Chairman at EDS,” Fort Worth Star-Telegram, March 21, 2003. Romero, Simon, “In a Low Key, New E.D.S. Chief Hopes to Regain Skeptics’ Trust,” New York Times, May 20, 2003. “Westinghouse RIP,” Economist, November 29, 1997, p. 63. —Paul R. Greenland


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Abdallah Jum’ah 1941– President, chief executive officer, and director, Saudi Arabian Oil Company (Saudi Aramco) Nationality: Saudi Arabian. Born: 1941, in al-Khobar, Saudi Arabia. Education: Attended American University of Cairo; American University of Beirut, BA, 1968; attended Harvard Business School, Program for Management Development, 1976; attended King Fahd University of Petroleum and Mineral Resources. Career: Aramco, 1968–1972, government affairs; 1972–1977, general supervisor of publications in the public relations department; 1975, department manager; Aramco Power Systems, 1977–1981, executive; 1981–1984, vice president, employee relations; Aramco, 1984–1988, vice president of government affairs; Saudi Aramco, 1988–1991, senior vice president of industrial relations; 1991–1992, senior vice president of international operations; 1992–1994, executive vice president of international operations; 1994, director; 1995–, president and chief executive officer. Awards: Named one of the “Twenty-five Most Powerful Business Leaders Outside of the U.S.,” Fortune International, 2003; Employer Professional Development Award, Institute of Electrical and Electronics Engineers, 2003. Address: Saudi Aramco, P.O. Box 5000, Dhahran 31311, Saudi Arabia; http://www.saudiaramco.com.

■ Abdallah Jum’ah was appointed president and chief executive officer of Saudi Aramco by royal decree in 1995 after 27 years of employment with the company. With an eye toward expanding Saudi Aramco’s global footprint, Jum’ah led the company to its place as the world’s number-one oil producer for the 14th straight year (2003) and through a period of instability in the Middle East in the early 2000s. Saudi Aramco is an international petroleum company headquartered in Dhahran, Saudi Arabia, with control of over 25 percent of worldwide oil reserves. International Directory of Business Biographies

EARLY YEARS AT ARAMCO Jum’ah was born in al-Khobar, a major city in the Eastern Province of Saudi Arabia, in 1941. He attended the American University of Cairo as well as the American University of Beirut, where he gained an education in the tradition of the American liberal arts college. He earned a BA in political science from the American University of Beirut in 1968. Later that year Jum’ah joined Aramco, working in the company’s government affairs department. He transferred to the public relations department in 1972 as general supervisor of publications and was promoted to department manager in 1975. With a career in management in mind, he underwent training with Aramco and also completed the Program for Management Development at Harvard Business School in 1976. He moved to Aramco’s power systems department in 1977 and worked closely with the development of the Saudi Consolidated Electric Company for the Eastern Province (SCECO-East). Jum’ah was appointed to his first executive position at Aramco in 1981 as vice president of the power systems division as well as managing director of SCECO-East. In 1984 he became Aramco’s vice president of government affairs and then senior vice president of industrial relations in 1988. That same year the company’s name was changed to Saudi Aramco to reflect a formal shift in control from American oil companies to the Saudi government. Jum’ah was named executive vice president of international operations in 1992 and in this capacity gained considerable experience in marketing, industrial relations, and negotiations on an international level. He led the company’s downstream expansion, or international distribution of Saudi Aramco’s products; his stated goals were to “protect and potentially increase the market share of Arabian crude, maximize the revenues from the sale of Arabian crude, and provide secure outlets through strategic alliances with refining companies in our major markets” (Saudi Aramco World, September/October 1993). Jum’ah played a key role in the creation of joint ventures with international firms in the United States (1988), South Korea (1991), the Philippines (1994), and Greece (1995). He was named to the company’s board of directors in 1994.

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NAMED PRESIDENT AND EXECUTIVE On August 2, 1995, Ali al-Naimi, Saudi Aramco’s incumbent leader, was appointed minister of petroleum and mineral resources for the Kingdom of Saudi Arabia. Two days later Jum’ah was named acting president and chief executive officer. As al-Naimi’s recommended candidate and with more than 25 years of relevant experience, Jum’ah was officially named to the position in December 1995 by royal decree, with the explanation that “while Naimi as a geologist was made oil minister to help speed up upstream expansions at home and function as a minister, Jum’ah was given the top Saudi Aramco post to emphasize the company’s international role and overseas acquisitions” (APS Diplomat Operations in Oil Diplomacy, October 28, 2002). In his new role, Jum’ah retained the American style of management that had been carried over from the company’s early years under the direction of U.S. companies. In 1998 Jum’ah became chairman of Motiva Enterprises, a joint venture of Saudi Aramco, Shell, and Texaco based in Houston, Texas. He also served on the boards of the U.S.Saudi Arabian Business Council, Aramco Services Company, Saudi Refining, S-Oil Corporation, Petron Corporation, Motor Oil (Hellas) Corinth Refineries, and Saudi Petroleum International. In 2000 Jum’ah was named a member of the Supreme Council for Petroleum and Minerals, a board of 13 overseers in charge of the strategies for Saudi Aramco as well as the kingdom’s petroleum and mineral sectors.

INNOVATIONS AND CHALLENGES IN THE EARLY 2000S In 2002 Jum’ah directed the establishment of a training center for Saudi Aramco contractors to improve their professional skills and performance, as part of a push to “Saudize” 3,600 jobs over the next five years, given that more than 3,400 jobs at the time were held by non-Saudis. In 2003 Jum’ah received the Employer Professional Development Award from the Institute of Electrical and Electronics Engineers as a result of such efforts. New facilities were brought online in 2001 (Hawiyah Gas Plant) and 2003 (Haradh Gas Plant) to exploit the kingdom’s gas reserves. Also in 2003 Saudi Aramco was named the number-one oil company in the world by Petroleum Intelligence Weekly for the 14th consecutive year. The U.S. invasion of Iraq in March 2003 heralded a period of unrest in the Middle East and for Saudi Aramco. Jum’ah remained confident that his company—and thus the company’s oil production—would be protected against terrorists, despite a targeted attack at an Arab Petroleum Investment Corporation facility in late May 2004. “Our facilities are protected by technology, by physical barriers, by cameras,” he said. “We have over 5,000 security guards. Over and above that, we have government security” (Arab News, May 10, 2004). A deal with the Japanese Sumimoto Chemical Company for a $4.3 billion

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petrochemical and refining project, signed into effect in May 2004, “sends a powerful message that this country is secure and stable,” Jum’ah also said. Despite what he called a “mammoth” demand on Saudi Aramco, Jum’ah remained humble about his role in leading the company through difficult times: “Saudi Aramco is the world’s single most important energy provider and while that role is a source of great pride, it is also a huge responsibility” (Asia Africa Intelligence Wire, March 6, 2003). He also reaffirmed Saudi Aramco’s commitment to pick up any slack in worldwide oil supply as a result of the war: “In case of a US attack upon Iraq, there would be no world oil shortage, since in a short time Saudi Aramco could make available an additional 3 million barrels per day of oil, aside from its present 7 million barrels per day output” (Oil and Gas Journal, September 9, 2002). The company established precedents for such an action in 1979 during the Iranian revolution, in 1980 during the Iran-Iraq war, and in 1990 during the Persian Gulf crisis.

SAUDI ARAMCO Saudi Aramco’s path to establishing itself as the world’s largest oil producer began in 1933, when Standard Oil Company of California (which would later become Chevron) signed an agreement with the government of Saudi Arabia in which a portion of the kingdom’s desert terrain could be explored for the presence of oil. Several other oil companies joined in the endeavor, and the Arabian American Oil Company (Aramco) was born. It was not until 1938 that the first viable oil field was established in Dhahran, and the first shipment of oil left Saudi Arabia via tanker in 1939. More than 60 years later, Saudi Aramco controlled approximately 25 percent (261.8 billion barrels) of the world’s oil reserves. Between 1945 and 1974 the company’s crude oil production increased by an average of 19 percent a year, and by 2002 nearly 2.5 billion barrels of crude oil were produced, or an average of 6.8 million barrels per day. In 2004 Saudi Aramco had more than 54,000 employees and a solid worldwide presence, with operations in North America, Europe, and Asia.

See also entries on Arabian American Oil Co. and Saudi Arabian Oil Company in International Directory of Company Histories.


“Abdullah Saleh Jum’ah,” APS Diplomat Operations in Oil Diplomacy, October 28, 2002. “Aramco CEO: Employees Key at This Critical Time,” Asia Africa Intelligence Wire, March 6, 2003. Chandler, Clay, Janet Guyon, Paola Hjelt, Cait Murphy, and Richard Tomlinson, “Global Power: The 25 Most Powerful


Abdallah Jum’ah Business Leaders Outside the U.S.,” Fortune International, August 11, 2003, p. 48. Clark, Arthur, “Saudi Aramco at Sixty,” Saudi Aramco World, September/October 1993. Elass, Jareer. “OPEC Members Step Up Overproduction, Paced by Venezuela, Saudi Arabia, Iran,” Oil Daily, August 11, 1995, pp. 1-2.

“Saudi Paper Says Aramco Plans to Saudize 3,600 Jobs in Oil Industry,” Asia Africa Intelligence Wire, November 3, 2003. World Petroleum Congress, “Government Developments: Global Oil Supply Ensured against U.S./Iraqi War,” Oil and Gas Journal, September 9, 2002, p. 7.

“Saudi Aramco Chief Says Oil Facilities Are Well Protected,” Arab News, May 10, 2004.

—Stephanie Dionne Sherk


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Andrea Jung 1959– Chairman and chief executive officer, Avon Products Nationality: American. Born: 1959, in Toronto, Ontario, Canada. Education: Princeton University, BA, 1979. Family: Daughter of Hong Kong–born father (architect) and Shanghai-born mother (pianist and chemical engineer); married Michael Gould (CEO of Bloomingdale’s; separated); children: two. Career: Bloomingdale’s, 1979–1985, vice president and merchandising manager; J. W. Robinson’s, 1985–1987, general merchandising manager; I. Magnin, 1987–1991, senior vice president and general merchandising manager; Neiman Marcus, 1991–1994, executive vice president; Avon, 1994–1996, president, product marketing; 1996–1997, president of global marketing; 1997–1998, executive vice president and president of global marketing; 1998–1999, president and chief operating officer; 1999–, chief executive officer; 2001–, chairman. Address: Avon Products, Inc., 1345 Avenue of the Americas, New York, New York 10105; http:// www.avon.com.

■ Andrea Jung was a trailblazer. One of only two women CEOs of a Fortune 500 company, she was also the highestranking Chinese American in corporate America. After becoming Avon’s first female CEO, she began transforming the company. To become the global powerhouse that Jung envisioned, Avon needed to entice younger customers while still retaining middle-aged buyers. After three years at the company’s helm, Jung had managed to retain core customers and sales reps while reaching out to a new generation of buyers and sellers. The daughter of Chinese immigrants, Jung earned respect from both industry peers and the Avon direct sales force comprised largely of suburban mothers. Jung led one of the world’s largest sellers of cosmetics, an operation with sales of $6.8 billion in 2003 and a presence in about 137 countries.

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Andrea Jung. AP/Wide World Photos.

DESTINED FOR SUCCESS Jung’s parents were highly accomplished, first-generation immigrants from China who moved to the United States for their children’s education. Her father, born in Hong Kong, received a master’s degree in architecture from the Massachusetts Institute of Technology, and her mother, born in Shanghai, was a chemical engineer and later an accomplished pianist. Jung grew up in Massachusetts in a household that placed a high priority on achievement, and she responded with resolute drive. She once recalled coveting a box of colored pencils as a school child: “My mother said to me that if I got a set of perfect marks I could have that box. I got the box” (Financial Times, November 6, 2003). Jung embraced her parents’ high standards. Academically she earned high marks, learned classical piano, and became flu-


Andrea Jung

ent in Mandarin. Her heritage was a source of pride that she brought to work each day. “My father was worried that raising me as a respectful Chinese daughter would be a barrier to what he perceived as the cut-throat traits of an American CEO. So, it has been interesting for me to marry my cultural background with succeeding in a tough business world” (London Times, June 29, 2002). Jung began her career as a management trainee for Bloomingdale’s, and she quickly revealed her drive to succeed. She became second in command at I. Magnin & Company in her late twenties and was in charge of all women’s apparel for Neiman Marcus by age 32. Along the way, she developed key relationships, befriending such notable fashion executives as the designer Donna Karan and Anne Sutherland Fuchs, then publisher of Vogue. Jung even brought work home with her, marrying Michael Gould, CEO of Bloomingdale’s, in 1993. Jung began to develop a keen sense of the importance her image could play. After moving to Manhattan, New York, she and her husband became regular fixtures in local newspapers’ society pages.

A NEW ADDITION SHAKES UP AN OLD COMPANY Jung left her job at Neiman Marcus and joined Avon in 1994. Immediately she made her mark. In one of her first contributions to the company, she unified Avon’s assortment of disparate regional brands into powerful global lines like Avon Color. She fired Avon’s ad agency and oversaw a complete packaging redesign. Her decisiveness caught the eye of then CEO James E. Preston, who appreciated her bold take on the business. Said Preston, “We looked at the market through one set of glasses. She had a fresh take on what Avon could be” (BusinessWeek, September 18, 2000). Preston became her mentor and ally, asking her to speak at board meetings and increasing her exposure to upper management, ensuring a quick climb up the corporate ladder. Just three years after joining the company, Jung was named head of global marketing at age 37. In 1997 the Avon board began a search for Preston’s successor, and Jung was temporarily passed over due to her lack of experience in operations and overseas business. But the board had noticed her talent, and she was promoted to COO in 1998. Some thought she was ascending the corporate ladder too quickly. Preston recalls the senior manager with 25 years of experience protesting her promotion, complaining that she would never be accepted overseas. He reversed his position after Jung earned high marks on a two-day visit to Latin America. As COO, Jung got the necessary grooming required to become the leader of Avon.

LANDING THE TOP JOB In November 1999, shortly after the announcement of a dreadful fourth quarter that plummeted the company’s shares


by 50 percent, Charles R. Perrin resigned, and Jung became the ninth president and CEO—and the first woman to claim the title. The management shake-up left Jung with the daunting task of turning around a consumer products company whose direct sales business model seemed out of touch with modern business practices. With little operating experience, Jung was not the obvious choice to run a company with millions of independent sales reps and operations in 137 countries. The pressure to succeed—and the possibility of a very public failure—loomed in every decision she made. The executive headhunter Herbert Mines said of Jung, “She’s a young woman with a very big job. She has an opportunity to really demonstrate her abilities, and if she does well, others will undoubtedly reach for her” (BusinessWeek, September 18, 2000). Jung was committed to both the task and her title. On her office couch she displayed a pillow with the affirmation “If you are not the lead dog, the view never changes.” As CEO she quickly established her goal to resuscitate Avon’s old-world image with a reorganization that would make Avon the onestop shopping center for the modern woman. To achieve that goal, Jung had to contend with the fact that Avon’s direct sales force required customers to track down an Avon representative. This method of doing business was an outmoded concept, an unrealistic notion for the millions of women in the workforce. Jung knew that Avon must position itself so that its customers could choose whether they wanted to buy from a rep, on the Internet, or at a store. Jung announced a trial run of 50 kiosks based in shopping malls and, in a particularly brash move, a deal to create a separate line of products for sale at a major mass retailer such as Wal-Mart. The Internet represented another potential opportunity for growth.

REACHING OUT TO AVON REPS But embracing these new distribution channels was not without risk. Ever since the first Avon representative, armed with makeup samples and catalogs, knocked on her neighbor’s doors, direct salespeople had been the backbone of the company. The danger of alienating those reps became painfully clear with the advent of the Web. In the late 1990s, Avon printed its Web site on catalogs, only to find that its outraged reps covered them up with their own stickers. Additional criticism followed Avon’s decision to sell online while prohibiting sales reps from setting up their own sites. Until Jung found a way to resolve those issues and integrate the reps into her new vision for the company, Avon’s future would rest on a precarious foundation. Jung noted, “If we don’t include them in everything we do, then we’re just another retail brand, just another Internet site, and I don’t see the world needing more of those” (BusinessWeek, September 18, 2000). To that end, Jung an-

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nounced her decision to invest $60 million to build a Web site that would involve, not alienate, Avon’s reps. Reps could sign up to become “e-representatives” for $15 a month, earning commissions of 20 to 25 percent on orders shipped directly or 30 to 50 percent for orders they delivered to customers themselves. The initiative promised additional income for Avon reps as well as considerable savings for the company. The cost of processing an order from the Web is 30 cents, or roughly one-third the cost of processing the paper order. The site gave customers the option of shopping with Avon directly or with the help of an e-representative in their zip code. Said Jung of the new opportunities for an Avon rep, “She can actually sell at retail in a licensed way, she can have a kiosk in a mall today. She has an Internet opportunity to have her own Web site” (The Early Show, CBS, July 26, 2001). Avon reps responded enthusiastically to Jung’s initiatives, made all the more remarkable by how little in common the CEO had with the suburban moms who sell Avon’s products. Jung wore Chanel and pearl chokers. Her colleagues joked that she was allergic to casual wear. Yet Avon reps routinely waited in long lines for photo ops with Jung. The Avon executive Brian C. Connolly observed, “Four years ago, I saw an extremely private, incredibly brilliant person. Now I see a leader who’s willing to tell the story of her heritage, her grandmother, her daughter. She’s more comfortable in herself” (BusinessWeek, September 18, 2000).

EXPANDING PRODUCT LINES In the early 21st century, Jung expanded Avon’s lines of cosmetics, jewelry, and clothing by adding nutritional supplements and vitamins manufactured by Roche Holding, a line that the company said could generate $300 million in five years. Taking a cue from the Avon competitor Mary Kay, Jung launched Beauty Advisor, a program that turned Avon reps into beauty consultants who help customers choose the clothing and makeup that work best for them. She even floated the possibility of offering financial and legal services to women. Throughout Jung’s ambitious expansion, her management style was to emphasize open communication, goal orientation, and feedback from her sales force. To that end, she set up a CEO advisory council of 10 top salespeople from every level of the company internationally. In addition, she brought panels of Avon representatives to New York City to share their concerns and react to her ideas. She even enlisted as an Avon lady in New York City. “I was terrible,” she said (London Times, June 29, 2002). In the first half of 2000 Jung received an auspicious report card—sales and earnings were up 9 percent and 40 percent respectively. The investor Robert Hagstrom, senior vice president of Legg Mason Fund Manager and director of Legg

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Mason’s Focus Capital, remarked, “She bit off a lot. The challenges are great. But at this point, it would be very hard to give her anything less than A’s” (BusinessWeek, September 18, 2000).

BUOYED BY A RECESSION The dismal economy of the early 21st century gave Avon a new relevance. Sales reps who were unable to find employment in the traditional job market flocked to the company, as did customers who were turned off by the high prices and nonexistent service indigenous to department stores. In 2002 Avon’s sales force grew by about 10 percent to nearly four million, and unit sales rose 13 percent worldwide. In Russia and other parts of eastern Europe, sales spiked 40 percent. Such fashion arbiters as Allure and Marie Claire even began mentioning Avon’s products in their magazine pages. According to Thomson First Call, in early 2003 Avon had the strongest buy recommendations of companies that sold personal care products. Said one analyst with Goldman Sachs, “This is one of the highest-quality growth stocks that I cover” (New York Times, June 1, 2003). Still, investors remained cautious about Avon’s diversification efforts, especially since so many of its attempts under previous CEOs had failed. Some of Jung’s own attempts also lost money. Only a few months after she signed a deal allowing JC Penney to carry a new Avon line of mid-priced cosmetics, the department store pulled the brand. A Penney spokeswoman said, “We wouldn’t have given up a product that was profitable” (New York Times, June 1, 2003). Jung blamed the failure on Penney, saying that the company failed to provide enough support, and wrote off the venture as a learning experience. Concurrent with the global recession that started in March 2001, it remained to be seen whether sales reps would seek other jobs once the economy turned around. Allan G. Mottus, a consultant to the beauty industry and publisher of The Informationist, a trade publication, remarked that “Avon does well in a recession, because it provides low-cost items that are sold by women who cannot move up in the workplace. In a full economy, a lot of good people are going to defect” (New York Times, June 1, 2003).

ADDING GLOSS TO AN OLD BRAND Jung’s underlying goal was to build a global name. In 2001 Avon was listed for the first time in the BusinessWeek annual survey of the world’s 100 leading global brands. As with many multinationals, China factored largely in Avon’s global strategy. The Chinese market had the potential to dovetail effectively with Jung’s Chinese heritage. In 1998, after the Chinese government banned direct selling, Avon began opening stand-


Andrea Jung

alone franchised stores; the company planned to open 500 stores a year for the foreseeable future. Jung was also working on a plan to launch a wellness program in China and planned to resume direct selling in China by 2005 (China was required to reverse the ban in order to gain entry into the World Trade Organization). But Russia remains the company’s fastestgrowing market; in 2003 sales grew $100 million from the $140 million base of 2002. In order to achieve Jung’s stated goal of enticing younger customers while retaining middle-aged buyers, Avon began to offer new products, such as vitamins, weight-control programs, and other “wellness” offerings aimed at women 35 and older. Jung launched Mark. cosmetics—the punctuation is meant to emphasize women making their mark—a line that is used and sold by younger women. (Just a few months after the 2003 launch, Avon had recruited about 20,000 sales reps; sales of the line contributed one point of growth to the thirdquarter sales in the United States.) Ever conscious of the power of image, Jung also gave Avon’s brochures a modern makeover, printing them on glossier paper and featuring the tennis champions Venus and Serena Williams. An Avon spa joined Fifth Avenue in New York City. The average age of Avon’s typical customer proved that Jung was on the right track. When Jung became the first woman to head Avon in 1999, the typical customer was 43; as of 2003 she was 37.

A ROLE MODEL FOR WOMEN IN BUSINESS Jung’s own career trajectory also contributed to the company’s newfound relevance. “We have all of these three and half million representatives and the whole Avon story is about being able to make it—to make dreams come true. And I know that certainly they look at me and say, ‘Well, at Avon, you really can do anything. You can start as a child of Chinese immigrants and go all the way to the top’” (The Early Show, CBS, July 26, 2001). As a frequent speaker at women’s leadership events, Jung expressed optimism that other females would soon be joining her in the corner offices of corporate America. For her own part, she encouraged flexible work schedules at Avon and even conceded that family sometimes takes precedence over work. When asked for her advice for balancing family and work, she replied in a speech that she learned that she cannot be everywhere at once. “Eliminate 10 out of 20 things you don’t have to do, and pick the 10 most important things for your family. Some days the company loses” (Akron Beacon Journal, November 1, 2002).


PERSONAL VALUES FOCUS A COMPANY’S PHILANTHROPY CEOs of leading multinationals frequently use charitable giving to further their business goals. Jung was no exception. Most fashion-related companies have been major supporters of the fight against breast cancer and AIDS, two diseases that have taken heavy tolls on fashion. In a true nexus of her own values and corporate citizenship, Jung personally led Avon’s philanthropic efforts in the area of breast cancer. Her grandmother died of the disease at age 63 when Jung was 14. This loss had a deep effect on Jung, who recalled, “It was the early Seventies, and the C-word was forbidden in our house. She didn’t want us around her in case it was contagious. There was such fear about the subject” (London Times, June 29, 2002). In September 2002 Avon announced that it was making $30 million in grants to fight breast cancer. The grants were announced at the first-ever Kiss Goodbye to Breast Cancer Concert & Awards at Avery Fisher Hall. Natalie Cole headlined the concert, which itself raised more than $2 million for the Avon Breast Cancer Crusade. The campaign focused on funding five critical areas: breast cancer biomedical research, clinical care, support services, education, and early detection programs. The motivation for Jung’s corporate largesse transcended her empathy for breast cancer victims; she saw philanthropy as the duty of a corporate citizenry. “The new generation of leaders have to be committed to giving back more. Corporations have a responsibility to the communities where they do business” (London Times, June 29, 2002). But even Jung would not shy away from the positive publicity her charitable commitments brought to her company. Philanthropy is just good business.

See also entries on Avon Products, Inc., Bloomingdale’s Inc., I. Magnin Inc., and The Neiman Marcus Group, Inc. in International Directory of Company Histories.


Byrnes, Nanette, “The New Calling,” BusinessWeek, September 18, 2000, p. 136. Deutsch, Claudia H., “In a Dull Economy, Avon Finds a Hidden Gloss,” New York Times, June 1, 2003. Foster, Lauren, “Mistress of the Turnaround Answers Avon’s Calling: Andrea Jung Has Led a Revival at the Cosmetics Group. Now She Has Her Sights Set on Expansion,” Financial Times (London), November 6, 2003, p. 14. Gumbel, Bryant, “Andrea Jung, CEO of Avon Products, Discusses the Success of Avon and Their Move to Retail,” Transcript of The Early Show (CBS), July 26, 2001.

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Andrea Jung Lin-Fisher, Betty, “She’s No Boys Club Member,” Akron Beacon Journal, November 1, 2002. Preston, Morag, “Avon’s New Calling,” Times (London), June 29, 2002. —Tim Halpern

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William G. Jurgensen 1952– Chief executive officer, Nationwide Financial Services and Nationwide Mutual Insurance Company Nationality: American. Born: 1952, in Nebraska. Education: Creighton University, BBA, 1973; MBA, 1976. Family: Married (wife’s name unknown); children: two. Career: Norwest Corporation, 1973–1990, eventually executive vice president; First Chicago NBD Corporation, 1990–1998, chief financial officer and executive vice president; Bank One Corporation, 1998–2000, executive vice president of corporate banking; Nationwide Financial Services and Nationwide Mutual Insurance Company, 2000–, chief executive officer. Address: Nationwide, One Nationwide Plaza, Columbus, Ohio 43215-2220; http://www.nationwide.com.

■ William Jurgensen was named chief executive officer of Nationwide Financial Services and Nationwide Mutual Insurance Company in 2000. A Fortune 500 company, Nationwide was one of the world’s largest providers of diversified insurance and financial-services products. Jurgensen’s career in commercial and consumer banking facilitated a smooth transition into the insurance industry. His management style was described as hands-on and open; he encouraged participation from all employees regardless of their position within the company. BUILDS CAREER IN BANKING Jurgensen was born and raised in Nebraska and earned both his bachelor’s and master’s degrees in business administration from Creighton University in Omaha. His career in banking began in the early 1970s when he went to work for Norwest Corporation, an investment-services firm that later became part of Wells Fargo & Company. Jurgensen stayed with Norwest for 17 years, moving up through progressively more responsible and visible positions and ultimately becoming an executive vice president.


In 1990 Jurgensen moved to First Chicago NBD Corporation, where until 1998 he served as chief financial officer and executive vice president of the corporate and commercial banking units; he also oversaw operations, finance, and systems. In addition, from 1996 to 1998 Jurgensen was the chairman of FCC National Bank, First Chicago’s credit-card subsidiary. In 1998 First Chicago merged with Bank One Corporation to form one of the largest U.S. bank-holding companies. Jurgensen stayed on in his role as executive vice president of corporate and commercial banking. He left Bank One in 2000 to become the chief executive officer of Nationwide.

MOVES TO NATIONWIDE Jurgensen became the chief executive officer of Nationwide Financial Services and Nationwide Mutual Insurance Company in 2000. He held seats on the boards of directors of Nationwide as well as several of its subsidiaries and affiliates and served as chairman of the central board from 2001 to 2003, when the functions of CEO and chairman were separated. As one of the world’s largest providers of diversified insurance and financial-services products, Nationwide conducted business throughout the United States, Latin America, Europe, and Asia. Nationwide affiliates operated in the areas of domestic property and casualty insurance, life insurance and retirement savings, asset management, and strategic investments. The insurance industry was new to Jurgensen, but his background in commercial banking eased his transition. His prior experience spanned financial services, products, and functions, and he was thus able to adeptly step into his new role at the helm of Nationwide. Jurgensen’s initial efforts as CEO focused on strategically planned growth and management changes. Nationwide’s traditional product and service lines were underperforming in the sluggish economy of the early 2000s; in attempts to recover market share and restore profitability, Jurgensen intended to take the company in new directions. His efforts would conform with Nationwide’s long history of groundbreaking approaches to remaining profitable during unfavorable economic times. In the 1920s the company had been the first to introduce discount auto insurance and in the 1930s was the first to offer both life and casualty insurance from the same agents.

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In the 1950s, going against common industry practice, Nationwide began offering mutual funds along with life insurance. Innovative variable-annuity products were introduced in the 1970s. Although he recognized that a diversified company could be more difficult to manage successfully, Jurgensen was committed to finding new avenues of growth. Still, believing that the company had strong presences in each existing market segment, he saw no compelling reason to make changes to Nationwide’s core offerings, holdings, or business practices. He attributed much of the company’s past success to its diverse product lines and distribution channels. He told Business First–Columbus, “One of the things that attracted me to Nationwide in the first place was the fact that it had embraced multiple forms of distribution across all of its companies. It hasn’t put a stake in the ground that it thinks there’s only one way the future will unfold” (January 19, 2001). The company focused on growth prospects that would add secure value to the bottom line. Under Jurgensen’s leadership Nationwide began expanding into new areas of financial services and worked to build a larger distribution network in order to increase sales capabilities; the company experienced dramatic international growth. Product lines were expanded as well, and Nationwide evolved into a global provider of total solutions for insurance and financial management needs. Jurgensen’s approach was successful. In 2001 Nationwide had reported a loss of $295 million; one year later the company amassed $252 million in income. The property and casualty units alone added approximately four hundred new employees during an economic era in which job losses and corporate cutbacks were making headlines across the United States. Jurgensen commented in Business First–Columbus, “I think the number-one imperative for us now that we’ve established a foundation of profitability is to focus on the growth of the company. I think our focus is much more on policy count than it is on pricing increases. You’re never really done. I think strategy formulation is a journey, not a destination” (January 19, 2001).

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MANAGEMENT STYLE Jurgensen’s management style was described as both handson and open; he attempted to make daily contact with key executives. He endeavored to remain accessible and approachable and to create an environment in which any worker could talk directly to executives. Under Jurgensen’s leadership, input from employees at all levels was expected, not just accepted. He especially stressed the importance of gaining input from agents and agency staff, noting that they were the employees who interacted directly with policyholders on a daily basis. In his “Winning with Diversity” statement on the Nationwide Web site, Jurgensen remarked, “We have a tremendous amount of talent in this organization. We have a responsibility to use it. We must appreciate and leverage the skills and talents of every person in Nationwide. Each of us brings a unique background and set of personal experiences to our job. Mutual respect for, and trust in, these differences is critical if we are to maximize our collective knowledge.” Community service was an important part of Jurgensen’s leadership at Nationwide as well as his private life. Jurgensen himself was involved in organizations working in the areas of education, social service, and the arts. During his tenure at Nationwide the company contributed approximately $17 million annually to an array of charitable organizations around the world.


Chase, Brett, “New Choice for Key Role at Bank One,” American Banker, July 16, 1998, p. 24. Chordas, Lori, “Making Contacts,” Best’s Review 2003, pp. 21–22. Hoke, Kathy, “New Leader for New Times,” Business First–Columbus, January 19, 2001, p. A1. Jurgensen, W. G., “Winning with Diversity,” http:// www.nationwide.com/aboutus/diversity/index.htm, July 11, 2004. Ptacek, Megan J., “Executive Changes,” American Banker, June 5, 2000, p. 2. —Peggy K. Daniels


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CAREER BEGINNINGS

Eugene S. Kahn

Kahn began his retailing career in 1971 as an assistant buyer at Gimbel’s Department Store in New York. He then moved to Bamberger’s (formerly a division of Macy’s) in New Jersey, where he eventually rose to the positions of senior vice president and general merchandise manager. In 1988 he became group senior vice president for the consolidated Macy’s Northeast division and, a year later, group senior vice president for Macy’s South/Bullock’s.

Chairman of the board and chief executive officer, May Department Stores Company Nationality: American. Education: City College of New York, BA, 1971. Family: Married Connie (maiden name unknown); children: two. Career: Gimbel’s East, 1971–1973, assistant buyer; 1973–1976, buyer; Bamberger’s Department Store, 1976–1984, buyer, then held various merchandising positions; 1984–1988, senior vice president and general merchandise manager; Macy’s Northeast, 1988–1989, group senior vice president; Macy’s South/Bullock’s, 1989–1990, group senior vice president; May Department Stores Company, 1990–1992, president and CEO of G. Fox division; 1992–1996, president and CEO of Filene’s division; 1996–1997, vice chairman; 1997–1998, executive vice chairman; 1998–, president, CEO and chairman. Awards: Named one of America’s Most Powerful People, Forbes, 2001. Address: 611 Olive Street, St. Louis, Missouri 63101; http://www2.mayco.com/common/index.jsp.

■ Eugene Kahn, a longtime veteran of the retailing industry, rose through the ranks of several department store chains to head the May Department Stores Company. May was a multimillion-dollar retail chain that owned more than four hundred department stores as well as over 180 David’s Bridal wedding stores in the early 2000s. The company’s divisions included Lord & Taylor, Hecht’s, Filene’s, and Strawbridge’s. Kahn succeeded the retail pioneer David Farrell as chairman and CEO of May in the late 1990s as the company was beginning to lose its leadership of the retail industry. Kahn launched an aggressive campaign designed to reach new customers and restore the company to its former market share. He was regarded within the industry as an intelligent and hard-working retailer who was not afraid to take risks. International Directory of Business Biographies

He joined the May Department Stores Company in 1990 as president and CEO of the G. Fox department store division in Hartford, Connecticut and went on to become president and CEO of Filene’s, the company’s Boston-based division. Kahn then helped oversee the merger between G. Fox and Filene’s in the early 1990s. He was named vice chairman of May, elected to its board of directors, and transferred to its St. Louis headquarters in 1996. He leveraged his years of retail experience into higher positions within the company. In 1997 he was promoted to executive vice chairman and, in 1998, became the company’s president and CEO.

MODERNIZING MAY After Kahn became the company’s CEO, he had major tasks ahead of him—and big shoes to fill. His predecessor, David Farrell, had guided the most recent restructuring of the May department stores. Many colleagues thought, however, that Kahn had the right qualities for the job. “He loves products, he loves the selling floor, and [he] is passionate about the whole retail process,” said one retailer who had worked with Kahn at Macy’s (Women’s Wear Daily, January 15, 1998). As Kahn stepped into Farrell’s job, May was losing market share to Internet companies as well as to other bricks-andmortar retailers. Whereas Farrell had tended to stick to triedand-true methods, however, Kahn was more willing to take risks. “He’s encouraged people to take chances and be different,” said Ralph Pucci, owner of a visual design house and mannequin maker, shortly after Kahn took the reins (Women’s Wear Daily, January 15, 1998). “He could bring a freshness to the organization from a visual, store-design point of view.” An example of Kahn’s creative thinking was his use of a unique set of mannequins for Filene’s junior department when he was running the division. The mannequins represented a radical departure for the conservative company.

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Store redesign was a major part of Kahn’s $3.6 billion strategy. He planned to open one hundred new department stores and remodel or expand another hundred stores. In addition to increasing the size of the May chains, he wanted to give all stores a fresh look and atmosphere to make shopping easier and more intuitive for customers. The changes were aimed at Kahn’s new target age group, the so-called “Generation Y,” or young people between the ages of 16 and 24. “May is vigorously pursuing the younger customer,” Kahn stated (Women’s Wear Daily, May 29, 2001). He tried to entice this age group with new styles, more exciting presentations of merchandise, and popular music played in the stores. At the same time that Kahn was courting younger shoppers, however, he also worked to strengthen May’s established private-label brands to retain the company’s loyal base of older “baby boomer” customers. Two other areas in which Kahn wanted to increase the company’s market share were the gift and formal wear businesses. Kahn sought to increase May’s gift registry, which accounted for the bulk of the company’s online presence. To enhance May’s holdings in the formal wear business, Kahn acquired David’s Bridal in 2000, followed by Priscilla of Boston and After Hours Formalwear. Soon after acquiring David’s Bridal, Kahn announced plans to double the number of stores in the chain.

cess. The company saved about $60 million annually from the consolidation, but the measure was controversial. The following year, the company laid off another 1,500 workers in Utah.

OTHER INTERESTS Although Kahn was committed to his company, he did not forget its surrounding community. He was a leader in supporting the city of St. Louis by revitalizing its downtown area. “We can and do change our worlds by changing our neighborhoods,” he said (Association of Fundraising Professionals). He also assisted needy families through company fund-raising and community service initiatives. Kahn was a member of the board of trustees of Washington University in St. Louis and the board of the Mary Institute/Country Day School, which his children had attended. He also served on the board of directors of Barnes-Jewish Hospital.

See also entries on R. H. Macy & Co. and May Department Stores Company in International Directory of Company Histories.


DIFFICULT TIMES May’s chairman, Jerome Loeb, retired in 2001, and Kahn stepped up to fill his vacant slot. Although the company had done well in the late 1990s, sales began to slip in 2001. The company also had legal problems. Kahn had launched a line of clothing under the label “Be” to appeal to young women. Another company, Bebe Stores, claimed that May was using its brand name and filed a lawsuit against the company for trademark infringement. Although the American economy as a whole had slumped in late 2001, many analysts blamed Kahn for declining sales. They compared him unfavorably with Farrell, who had been known for running a very tight ship. There was even talk in 2003 that Kahn would be replaced. As a cost-cutting measure, Kahn reduced four of May’s divisions to two in 2002, shedding some 1,600 jobs in the pro-

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Association of Fundraising Professionals, “May Department Stores Company Named Outstanding Corporation,” http:// www.afpnet.org/tier3_cd.cfm?folder_id=1846&content_ item_id=6307. Cole, Heather, “Poor Sales Could Spell Doom for May’s CEO Kahn,” St. Louis Business Journal, February 14, 2003. Moin, David, “May Co.’s Farrell to Retire April 30; Kahn, Loeb Move Up,” Women’s Wear Daily, January 15, 1998, pp. 1–3. Wright, Hassell Bradley, “May’s Private Push: More Focused Fashion, Double David’s Chain,” Women’s Wear Daily, May 29, 2001, p. 1.

—Stephanie Watson


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Akinobu Kanasugi 1941– President, NEC Corporation Nationality: Japanese. Born: 1941, in Kanagawa Prefecture, Japan. Education: Keio University, BS, 1964; University of California, Los Angeles, MBA, 1967. Career: NEC Corporation, 1967–1977, marketing and planning; 1977–1987, Systems Integration Business Division; 1987–1991, general manager in EDP Process Systems Division; 1991–1993, vice president and executive general manager in 4th C&C Systems Operations Unit; 1995–1999, associate senior vice president; 1999–2000, senior vice president; 2000–2003, senior vice president; 2003– president. Address: NEC Corporation, 7-1, Shiba 5-chome, Minatoku, Tokyo 108-8001, Japan; http://www.nec.com.

■ Based on his development of information-technology systems while overseeing NEC Corporation’s systems-integration sector in the late 1990s, Akinobu Kanasugi was appointed company president in 2003. NEC, a Global 500 company, manufactured, installed, and serviced the technology supporting global IT infrastructure, such as cellular phones, navigation systems, consumer electronics, and semiconductors. With $47 billion in 2004 sales—for one-year growth of 18.2 percent—and over 145,000 employees worldwide, NEC was the largest of Japan’s personal-computer manufacturers and ranked just behind Toshiba in semiconductor sales. Biglobe, NEC’s Internet service provider, had the second-largest subscriber base in Japan. Under Kanasugi’s direction NEC Corporation increased the reach of its services and took an active role in national-security debates, weighing in on Japan’s use of identification technology and the strengthening of national information security. As chairman of the Japanese Association of Health-Care Information Systems Industry, Kanasugi proposed solutions to the storage and bandwidth demands required by an increasingly digital health-care system. International Directory of Business Biographies

LEARNING MANAGEMENT Like many people who chose to enter the burgeoning field of computer technology during its infancy, Akinobu Kanasugi believed that computers would revolutionize daily practices for businesses, governments, and consumers alike. Knowing that the United States would play a major role in this technologically rooted change, Kanasugi sought to gain an understanding of U.S. culture and management style by pursuing an MBA at UCLA—which was then restructuring its education system according to the needs of the information economy. This experience in California in addition to the contacts he established there served him well: he honed his intuition with regard to the direction in which computing technology would proceed and how to keep track of that direction; he learned to set aside Japanese reserve in favor of audacity when interacting with foreigners, especially Americans; and finally Kanasugi

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Akinobu Kanasugi

developed a lifelong commitment to customer-friendly business practices, which entailed the inclusion of friendly user interfaces within computing systems. Kanasugi joined NEC Corporation during a period of expansion. The company had just entered the U.S. market, in 1963, diversified its interests, and achieved listings on Swiss, English, and Dutch exchanges; the company would go on to develop more than a dozen core divisions and develop nearly 150 key subcontractors by 1991. This expansion was built on the past company president Koji Kobayashi’s vision. In the 1950s Kobayashi instilled two beliefs at NEC: first, that longterm convergence in communication and computing technology would inevitably make the two fields inseparable, and second, that by mastering the necessary competencies in those two core areas, NEC would be guaranteed a crucial global market share. Together the two beliefs comprised NEC’s “computing and communication”—or C&C—vision. In mastering such areas as digital switching, NEC largely achieved its goal of supplying innovative industry leadership. Unfortunately NEC bet on Honeywell instead of IBM and suffered when Honeywell computers failed in the late 1970s. Already a leader in the computer industry at the time, NEC announced its C&C vision to the public in 1977. Most industry experts scoffed; they could not imagine a global economy dependent on distributed computers tied to mainframe computers. In 1980 NEC began articulating the advantages of distributed computing to corporations with multiple sites and global reach. When Tadahiro Sekimoto took over at NEC, he developed the company’s vision further. Altering the meaning behind C&C to the verbs “compute and communicate,” he made the firm’s vision human-centered instead of technologycentered. Accordingly NEC would lead the technological development of distributed computing that would enable humans to compute and communicate through networks. Thus, as described by Martin Fransman in his book entitled Japan’s Computer and Communications Industry, Sekimoto said globalization would occur as “mesh-globalization” (1995). In place of a hierarchy supported by mainframe computers, democratically distributed personal computers would support globalization using network technology. At NEC management set forth the vision, but the decentralized divisions realized the goal. Kanasugi achieved a management position in 1987 due to his work in furthering the C&C vision and his ability to realize advantages. He had proven himself in an area vital to C&C— network solutions—and by 1995 had worked his way up to a partner-level position in management. Likewise his company’s success knew no bounds; as described in Ulrich Jürgens’s book New Product Development and Production Networks, in the Japan of the early 1990s NEC “had a stronger position on this market than any other company at any time on any market in the world” (2000). In the global arena NEC was a key player and led the industry in many areas of digital-technology development.

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In the late 1990s, however, NEC suffered two major setbacks in the United States. A severe blow to corporate health occurred when the U.S. Commerce Department ruled against NEC on a complaint lodged by its U.S. mainframe-computer rival Cray Research. The U.S. firm claimed that it could not fairly compete against the speed of NEC’s SX-4 supercomputer, and the U.S. Commerce Department agreed; in 1997 a 454 percent tariff was placed on NEC supercomputers. While NEC’s dominance of the supercomputer sector evaporated, Microsoft’s release of Windows nearly banished NEC’s own personal-computer platform from the global marketplace. In Japan NEC’s market share dropped from 53 percent to 40 percent, and, embarrassingly, the company was forced to sell IBM PCs—packaged with Windows—in order to make ends meet. NEC’s planned reprisal through control of Packard Bell led only to financial losses. In 1999 NEC’s outlook was bleak.

NEC SOLUTIONS In order to salvage NEC, the new president Koji Nishigaki began to restructure the company from a decentralized collection of operations into a consolidated series company of three divisions all focused on one strength: network solutions. In keeping with an NEC tradition begun by Kobayashi, the division heads were virtually autonomous—as long as they produced profitable results in line with NEC’s vision. As one of Nishigaki’s first moves, Kanasugi was placed in charge of NEC Solutions in 1999; he was given wide latitude to develop what would become the core of the company. NEC Solutions constructed information-service systems and attached software platforms to special contract assignments for government agencies and corporations. The division specialized in ecommerce solutions for online businesses and set up corporate computers to tap into networks. Kanasugi made NEC Solutions a vital profit-making division of NEC by implementing Sekimoto’s traditional vision—but with greater emphasis on user friendliness. No matter how competent NEC became in the general technological convergence of computing and communications, Kanasugi knew that use by human beings had to be more greatly facilitated. NEC Solutions succeeded under Kanasugi because he accomplished that user and customer friendliness in distributed data networks regardless of national culture. Building network solutions involved the invitation by one corporation of another to access proprietary data. Due to the sensitive nature of the situation, the delivery of information solutions would depend on trust; in order to succeed through such a service, businesses needed reliable personnel and management. With Kanasugi in charge of NEC Solutions the company built a positive reputation in the areas of business-solutions software and network construction, based on success in Europe, North America, and Asia. Kanasugi became vital to NEC’s future.


Akinobu Kanasugi

Kanasugi’s international experience and his understanding of the U.S. business world contributed to his success. During the time of the Internet stock bubble, NEC Solutions management brought Kanasugi into contact with entrepreneurial hopefuls in the United States. He soon befriended John Kelly, who had sound ideas about a particular aspect of Internet technology. Kanasugi judged him to be a capable manager as well as an innovative designer; when Kelly’s Zefer company went bankrupt, Kanasugi saw an opportunity for both Kelly and NEC to benefit. He created the New York–based NEC subsidiary Niteo and placed it under the management of Kelly. Kanasugi was familiar enough with American operations to know that Niteo would function best without his involvement or meddling on the behalf of NEC Solutions. In this series of decisions Kanasugi acted less like a Japanese manager and more like a Californian. For a Japanese-owned subsidiary Niteo was peculiar; Japanese companies normally kept close tabs on subsidiaries, but Kanasugi did away with such intervention by seating himself on Niteo’s board, such that Niteo had no direct contact with NEC save through Kanasugi himself. Niteo thrived, and NEC became able to compete profitably with IBM. Meanwhile Kanasugi launched NEC Solutions America in 2002 to give NEC a more direct foothold in the U.S. solutions market. This subsidiary combined the resources of several U.S.-based NEC subsidiaries in line with Nishigaki’s overall restructuring plan. Kanasugi not only realized savings for NEC through this consolidation but was able to improve businessto-business products by ending internal NEC competition and streamlining NEC Solutions’ supply chain.

CRISIS AT NEC Nishigaki’s restructuring plan as well as the speed with which it was implemented had upset Sekimoto, who though merely chairman regarded himself as NEC’s soul. Sekimoto publicly criticized Nishigaki, calling for his resignation. In Japanese business culture public denunciation of corporate leadership was rare, and a president being sacked by his board of directors was unheard of—resignation being the preferable mode of removal. Shareholders and NEC board members decided that they could not stand by as the civil war between the chairman and president shamed the company; Sekimoto was forced into retirement, as he refused to support the restructuring of NEC as a solution to its loss of profitability and stature. Nishigaki, who had worked himself to exhaustion in his attempts to save the company—and was hospitalized for stress-related ailments—became board chairman. Nishigaki’s restructuring plan had focused NEC on software and information systems as well as on its traditional strength in mainframe computers—thus leaving behind the personal-computer business, reflecting the severe losses NEC


had suffered through investment in Packard Bell and often violent fluctuations in the home-PC market. The restructuring trimmed NEC’s workforce by 11 percent, or 16,000 jobs; Nishigaki also sold off chunks of the corporation, including its chip-making and plasma-display branches, as he had recognized that Taiwanese and South Korean companies had long since surpassed NEC in chip production. This last decision had set Sekimoto against Nishigaki; Sekimoto had insisted that chips were vital to NEC’s corporate identity. Kanasugi was tapped to lead the corporation on the path set out by Nishigaki; he was selected to be the next president because of the training in international relations and management skills that he had received at UCLA. He was also the most obvious candidate because he had headed NEC Solutions, the company’s most profitable division—and the one that according to Nishigaki’s plan would essentially become the whole of NEC. NEC lost ¥312 billion in 2001 but regained a profit margin in 2002 thanks to the restructuring. Having spun off its NEC Electronic Devices into two companies—a chip maker and a flat-screen maker—NEC remained with two divisions: NEC Solutions and NEC Networks. The appointment of Kanasugi as president affirmed the company’s direction toward business services and software related to Internet-supported information systems—Kanasugi’s specialties. NEC Networks, maker of the physical networks necessary to the software and information-service industries, remained a vital support for NEC Solutions. Integration of the two divisions into one company in order to create technology and management synergy became Kanasugi’s top priority. As the business-solutions market slowed down, Kanasugi increased NEC’s attention to China, where corporations were still catching up in terms of information-technology infrastructure.

SPEAKING BOLDLY Though NEC was still viewed as a lost cause simply trying to stay afloat, Kanasugi went on the offensive. Like past CEOs Kanasugi showed facility for the corporation’s vision. Fully appreciative of the recent restructuring, in the Business Times Singapore Kanasugi identified the areas of competency on which NEC needed to focus in order to maintain its vision: “NEC is still regarded as a mainframe maker, but we have had to shift to more open platforms to create a new core competence” (February 3, 2003). Despite such bold statements, a solid record at NEC Solutions, a comprehension of NEC’s vision history, and an ability to identify new areas of focus, Kanasugi’s ascendance to CEO of NEC did not satisfy industrial analysts. While no one wrote unkindly of Kanasugi, analysts expected him to oversee the final dismantlement of NEC. At a 2003 forum Kanasugi outlined NEC’s new vision. The company would still work on the convergence of computing

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Akinobu Kanasugi

and communication but with a more concrete understanding of the contribution C&C would make to the world. Kanasugi placed C&C at the heart of future growth, supporting “globalization,” “market-oriented business,” and a “ubiquitous environment” (December 3, 2003). With respect to globalization, NEC promised to increase the mobility, speed, and ease of network access in order to foster better supply-chain management as free-trade areas continued to be built. Increased free-trade agreements, Kanasugi argued, guaranteed increased use of network solutions as companies sought to lengthen their supply chains and tap into the best skills and resources at the most affordable prices. In this way businesses, suppliers, and customers would achieve their marketplace goals more quickly. NEC’s approach to globalization was clearly oriented toward the market, or customer, as defined by Kanasugi. Kanasugi also predicted an increasingly “ubiquitous environment” around the world, with Japan at the head of the movement. Based on its one- to two-year lead in digital and network infrastructure Japan had nearly become a computerembedded environment, wherein digital technology would completely surround and enhance human life. As society approached this point of saturation, Kanasugi noted, customers would tend to make purchases according to their values. In other words, customers no longer purchased goods priced according to, say, quality of materials used; instead humans purchased goods because they needed them or valued them for other purely subjective reasons—and they only wanted to buy cheap. In such a market speed and ease of network access would be paramount, and NEC would support all efforts to further perfect and enhance such a “ubiquitous environment.” Analysts predicted difficult times ahead for NEC. They pointed out that while the restructuring had been positive, the company’s debt-to-equity ratio had remained high. By 2003 the consensus was that Nishigaki’s restructuring would be deemed successful only if NEC accomplished several years of exceptional profit levels regardless of the market reality. Such a tight debt-profit ratio seemed impossible, said commentators, because NEC’s core profit division existed in the slowing sector of solutions. Still, Kanasugi stuck to the plan, selling off NEC’s plasma-display-panel manufacturing segment to Pioneer Corporation in 2004.

CREATING A GLOBAL OUTLOOK Under Kanasugi’s leadership NEC reorganized its management structure in 2003 to facilitate continued prosperity as Japan’s economy racked up its seventh consecutive quarter of growth. Kanasugi then made NEC proactive in the debate over network security. NEC subsequently focused on establishing standards for the securing of data networks nationally and within the Asian-Pacific Economic Community (APEC). Such

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security measures were coordinated with efforts in the public sector in order to iron out laws regarding technology and data transfer. NEC’s strategy and philosophy were outlined in a paper presented by Botaro Hirosaki, a member of the Intellectual Asset Operations Unit. Through the establishment of secure networks in cooperation with the work of legislative bodies, the APEC region would be prepared for the continuation of prosperity. NEC’s global outlook stipulated that for NEC and Japan to prosper, the region of Southeast Asia and by extension the rest of the world would also need to prosper. This global view necessitated the creation of a mechanism for keeping tabs on the health of the planet. To this end NEC implemented the Japanese Ministry of Education’s Earth Simulator project. No single computer could ever contain all the data and program memory necessary for the modeling of the Earth; however, with NEC’s network technology many computers linked together would have the capacity to undertake this simulation. The Earth Simulator project realized the NEC vision a half century after its invention. A distributed network of people engaged in the monitoring and stewardship of the planet epitomized the company’s dream of using technology to resolve the detrimental divisions among humankind—the network was the ultimate illustration of humans using technology to compute and communicate. Kanasugi’s leadership skills derived from his ability to further NEC’s vision by adapting it to the needs of the global business environment. His commitment to a collaborative style of management enabled NEC to complete necessary reforms in its structure and supply chain. Under Kanasugi NEC offered a new vision of global best practices that was dependent on dynamic networking and the company’s own experience. See also entry on NEC Corporation in International Directory of Company Histories.


“Analysis: Burned-Out NEC President Steps Down,” Nikkei Report, January 21, 2003. Fransman, Martin, Japan’s Computer and Communications Industry: The Evolution of Industrial Giants and Global Competitiveness, Oxford University Press (London and New York), 1995. ———, Visions of Innovation: The Firm and Japan, Oxford University Press (London and New York), 1999. Guth, Robert A., “NEC’s Nishigaki Steps Down as President— Splitting Computer Giant into Separate Companies May Be Successor’s Role,” Asian Wall Street Journal, January 21, 2003. Hirosaki, Botaro, “Prosperity of the APEC Region through Law and Technology,” ABAC Symposium, May 16, 2003,


Akinobu Kanasugi http://www.mofa.go.jp/policy/economy/apec/symposium/ sympo0305/session1-4.pdf. “How NEC Is Gunning for IBM,” Chief Executive, April 2003, http://articles.findarticles.com/p/articles/mi_m4070/ is_2003_April/ai_99982403. “Incoming NEC Chief Eyes Reforms,” Business Times Singapore, February 3, 2003. Jürgens, Ulrich, ed., New Product Development and Production Networks: Global Industrial Experience, Berlin: Springer, 2000.

Kanasugi, Akinobu, “Management Innovation in the ‘Ubiquitous’ Age Advanced by the IT/Network Integration,” keynote address, C&C User Forum, December 3, 2003. Nakamoto, Michiyo, and Barne Jopson, “NEC Changes Guard Earlier Than Expected,” Financial Times, January 20, 2003. “Pioneer Corp.: Accord Is Reached to Acquire NEC PlasmaDisplay Business,” Wall Street Journal, February 4, 2004.

Kageyama, Yuri, “Japanese Electronics Giant NEC Picks New President,” Associated Press Newswires, January 20, 2003.

—Jeremy W. Hubbell


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Isao Kaneko 1938– Chairman and chief executive officer, Japan Airlines International Company Nationality: Japanese. Born: March 1, 1938, in Japan. Education: Tokyo University, 1960. Career: Japan Airlines Company, 1958–1998, industrial relations and human resources; 1998–2002, president; Japan Airlines Systems Company, 2002–2004, CEO; Japan Airlines International Company, 2004–, chairman and CEO. Address: Japan Airlines International Company, 4-11 Higashi Shinagawa Shinagawa-ku Tokyo 140 Japan; http://www.jal.jp.

■ Japan Airlines Company (JAL) began as a government airline created in part by the United States at the end of its post–World War II occupation of Japan. JAL became a completely private company in 1987 and struggled, without profit, through its first decade of existence. Isao Kaneko took over the leadership of what was nevertheless Japan’s number-one airline under bleak circumstances in 1998: the previous president had resigned in shame after seven years of having failed to prevent record losses despite restructuring efforts. Kaneko not only survived poor financial reports, gangster showdowns, and further restructuring but made the airline profitable and composed a strategy for seeing the company through global security crises. In 2003 sales topped $17 billion—a 43.7 percent improvement over the post-9/11 downturn. The number of employees surpassed 54,000 as a result of JAL’s 2002 merger with Japan Air Systems. After April 1, 2004, the merged airline—Japan Airlines International Company (JAIL)—began operating under the JAL brand name as the sixth-largest airline in the world and the largest airline in Asia, with a $25.8 billion enterprise value.

STYLE Like most Japanese executives Isao Kaneko was employed by the same company for his entire working career. However,

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Isao Kaneko. AP/Wide World Photos.

Kaneko was unusual for a Japanese executive in that, as described by Neil Martin in a Barron’s article, he was said to be more like an American star executive with “his quick decision making and initiative” (January 5, 2004). To observers this aspect of his personality led to frequent comparisons to sports coaches, as he took employees under his management aside to explain corporate strategy, cheer them on, and demand that they excel. Kaneko was in fact a fan of basketball; on his desk lay a pair of shoes that belonged to Shaquille O’Neal, the Los Angeles Lakers center who epitomized Kaneko’s approach: do what it takes to win. In 1967 Kaneko created a basketball team and often later said that he would rather be coaching than running an airline. Kaneko’s team, the JAIL Rabbits, ranked second in the Japanese corporate league in 2004. Though unable to coach the Rabbits, Kaneko was named their honorary president. Off the


Isao Kaneko

basketball court, Kaneko had succeeded in coaching JAL to health, where a less determined executive would never have taken the floor—especially in the wake of the 1997 Asian financial crisis and the Japanese economic depression.

RESTRUCTURING Upon his ascent to the position of CEO of Japan Airlines Company in 1998, Kaneko began a restructuring program that differed from his predecessor’s in that it was thorough and genuine. The company’s board was cut from 28 to 11 members, the sales of costly assets reduced debt from $12 billion to nearly $9 billion, and 1,300 employees were trimmed from the workforce. Kaneko made better use of subsidiary charters and domestic companies as a prelude to general flight-route reconfigurations. Cutting labor costs became a major component of Kaneko’s restructuring effort. Realizing that pilots at JAL made 50 percent more than their U.S. counterparts and significantly more than their domestic counterparts as well, Kaneko sought to increase corporate profitability at the expense of pilot pay. The use of subsidiaries lowered labor costs; by closing down maintenance facilities in Japan and contracting with Chinese firms, Japanese workers lost jobs but the airline saved money. The results were immediate, as JAL posted its first profit ever in March 1999 and share prices rose 11.3 percent. JAL was soon welcomed into the Oneworld alliance with British Airways, thus expanding its customer base. From such a position of strength and with happy shareholders, Kaneko turned to face obstacles blocking further success.

SOKAIYA Japanese businesses had a unique problem preventing them from completely adopting the standards for shareholder rights that were common in the U.S. and European business environments. In Japan mobsters historically purchased enough shares to give them access to company meetings, where they would cause disruptions. Yakuza mobsters attended meetings simply to insult corporate chairmen or board members while preventing any legitimate business from taking place. To avoid this, company boards would pay these sokaiya—or extortionists—not to attend meetings. Another result of such unpleasantness was that legitimate shareholders were prevented from openly meeting with executives who were afraid of the extortionists. Sokaiya victimized JAL once it became a private corporation. An arrangement was made to allow JAL to hold some meetings: for eight years the company rented plants from the sokaiya as a payoff. Through that ostensible rent JAL paid the mobsters a total of ¥80 million, or roughly £420,000, as reported by Jonathan Watts of the Guardian (June 30, 1999).


Though Kaneko and other leading JAL officials denied knowledge of the arrangement, Kaneko admitted that such unfortunate occurrences were common in Japan in spite of their having been made illegal by a recent Commercial Code. Kaneko proved able to turn the scandalous revelations to JAL’s advantage. His eventual acknowledgment of the problem led to cooperation with the authorities in an investigation of JAL executives involved in the racketeering. Kaneko halved the salaries of JAL’s vice presidents—as well as his own—for three months as collective punishment, winning praise from the Japanese public. Kaneko also cooperated with two thousand other businesses in a massive sting operation conducted by Japanese authorities. By conducting shareholder meetings simultaneously, the firms were able to reduce the power of the sokaiya, who could not be present at all meetings. Arrests for shareholder extortion increased, and the prominence of sokaiya waned, though they did not disappear.

JAPAN AIR SYSTEM Having initiated the defeat of the sokaiya, Kaneko returned to his restructuring efforts. He proposed to enlarge JAL’s 8.25 percent stake in Japan Air Systems (JAS) to form a complete merger. JAS, a domestic carrier and Japan’s third-largest airline, would augment JAL’s international strength, allow a streamlining of air service, encourage further reductions in labor costs, and allow JAL to better compete regionally with All Nippon Airways (ANA), Japan’s second-largest airline. In 2002 the two companies formed a joint holding company while undergoing integration. Continuing his restructuring game plan, Kaneko capped pilot salaries, increased the ratio of foreign workers, and outsourced plane maintenance to China for both JAS and JAL. These moves reduced labor costs but also resulted in a strike among pilots. Kaneko faced the striking pilots by creating a separation between negotiators and workers; with the workers isolated Kaneko arranged a labor deal that helped him move toward his goal of bringing Japanese pilot salaries in line with those in the United States and Europe. The power of labor to safeguard worker interests subsequently weakened. JAL also hired Thai flight attendants at salaries lower than those of Japanese flight attendants. By 2004 Japan Airlines International Company (JAIL), the official name of the merged airlines, was operating under the JAL brand. Sales offices, maintenance, and staff had been successfully integrated into a single company. Duplicate personnel positions as well as routes and underused planes were eliminated. Flight traffic was reorganized into a trunk-and-regional pattern: former JAS flights would feed domestic fliers into JAL international flights. Such a system was more customer friendly as well as cost effective, as seat-occupancy rates were maximized. The increased operational efficiency resulting from the

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Isao Kaneko

merger would allow JAIL greater flexibility when faced with plummets in airline traffic following global crises. By altering labor contracts and plane-maintenance methods, JAIL sped up its ability to lay off workers, ground flights, and contract operations at such times. Analysts mostly approved of the merger’s progress as well as Kaneko’s profit forecasts.

SARS, TERRORISM, AND FLIGHT SECURITY

boost ticket sales and return tour groups to the airways, though concerns remained with respect to the war on terror and rising oil prices.

See also entry on Japan Airlines Company, Ltd. in International Directory of Company Histories.


As a historically troublesome industry surviving on periodic government bailouts and subsidies, the aviation sector was threatened with outright destruction by the global security issues brought to the forefront on September 11, 2001. In the United States all flights were grounded for several days after the terrorist attacks; globally tourists cancelled trips, while businesses increased reliance on phone and video conferencing. Japanese tourists—especially along the crucial JapanHawaii route—stopped flying for a cultural reason: the Japanese thought it impolite to travel anywhere, especially for a holiday, during a crisis. The Bali bombing and outbreaks of SARS followed; fears of encountering terrorism and contracting the deadly flu virus decimated travel from Japan to Southeast Asia and China.

Fuji, Chisako, “Marketing & Media: Hawaii Governor Urges the Return of Japan Tourists,” Wall Street Journal, October 10, 2001.

Kaneko adopted a cautious, sensitive approach to the plunge in air travel. To cover losses, he arranged for an emergency loan from the Development Bank of Japan. JAL refused to allow linked advertisement by tourist businesses during the crises, fearing the public would view JAL as callous or as trying to take advantage of another nation’s trouble. A year later, however, JAL reversed its stance and began heavy advertising campaigns; Kaneko encouraged Japanese runners to enter the Honolulu marathon, helping bring the number of race participants back to more than 30,000, a level not seen since 1998. Of those runners, more than 57 percent were Japanese.

Martin, Neil A., “Japan Airlines System: Clearer Skies Ahead,” Barron’s, January 5, 2004, pp. 22–23.

One of JAL’s most successful promotion efforts involved the use of Hideki Matsui, the baseball star and national hero who played for the New York Yankees when they lost the World Series to the Florida Marlins in 2003. Matsui’s face was painted on JAL planes, and a drawing placed 250 fans on a two-hour flight with the hero. Such advertising stunts helped

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Harney, Alexandra, “JAL to Cut 1,300 Jobs and Slash Board Size,” Financial Times, March 17, 1999, p. 20. Japan Airlines, A More Competitive JAL Group, Tokyo: Japan Airlines, 1999. “Japanese Form World’s Sixth-Largest Airline,” BizAsia.com, October 3, 2002, http://www.bizasia.com/companies_/fyqrj/ japanese_form_worlds_sixth.htm. Lopez, Joe, “Jobs and Safety Sacrificed in Global Airline Industry,” http://www.wsws.org/news/1998/nov1998/airn13.shtml.

Shirouzu, Norihiko, “Japan Air to Write Off $1.2 Billion in Losses: Top Officers to Step Down; Investments in Resorts, Competition Are Cited,” Wall Street Journal, March 18, 1998. Watts, Jonathan, “Japan Inc. Fights Off Racketeers,” Guardian, June 30, 1999. Yamanouchi, Kelly, “Skyrocketing Marathon Entries to Boost Tourism,” HonoluluAdvertiser.com, http:// the.honoluluadvertiser.com/article/2002/Nov/14/bz/ bz01a.html. Zaun, Todd, and Zach Coleman, “Japan Airlines to Buy JAS, Nation’s No. 3, as Travel Drops,” Wall Street Journal, November 13, 2001. —Jeremy W. Hubbell


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Ryotaro Kaneko 1939– President, Meiji Yasuda Life Insurance Company Nationality: Japanese. Born: 1939, in Japan. Career: Meiji Life Insurance Company, 1994, managing director, 1994–1998, senior managing director; 1998–2004, president; Mitsubishi Tokyo Financial Group, 2001–, director; auditor with Japanese Institute for Overseas Investment; Meiji Yasuda Life Insurance Company, 2004–, president. Address: Meiji Yasuda Life Insurance Company, 1-9-1 Nishi-Shinjuku, Shinjuku-ku Tokyo 169-92, Japan; http://www.meijiyasuda.co.jp/regular/english/.

■ If current trends continue, Japan will increasingly have an aging population. Insurers, already stressed by economic stagnation and deregulation, have reformed their practices to meet the business environment and prepare for the demands of this aging population. Key to the insurance-industry’s reform was the leadership of Ryotaro Kaneko. As president of Meiji Life Insurance Company since 1998, Kaneko oversaw the merger of his company with Yasuda Mutual Life Insurance, a groupinsurer specialist. The combination of Japan’s fourth- and sixth-largest insurers created its third-largest insurer, with assets of ¥27.7 trillion and contracts worth ¥316 trillion. The merged company, Meiji Yasuda Life Insurance Company, became a rival of Nippon Life Insurance Company, Japan’s second-largest firm. The merger proved to be Kaneko’s greatest management challenge, as it exposed an accumulation of accounting mistakes and misconduct. Through consummate devotion to the interests of policyholders and the industry at large, Kaneko improved the financial standing of his company and the Japanese insurance industry as a whole.

INSURANCE IN JAPAN In the 1850s after the U.S. Navy forced the Tokugawa shogunate to end Japan’s cultural and economic isolation from the


world, European and American firms scurried to help construct a modern economy. They brought globalization, with its demand for open markets and liberal economic policy, to Japan. One of the first results of this market liberalization was a British insurance policy procedure covering storage at one of Japan’s key ports. The first Japanese insurance firm, Meiji Life Insurance, was formed in 1881. During the 1980s Japan experienced trillions of dollars in bad loans that led to the overvaluation of stocks and real estate. This overvaluation created a discrepancy between Japan’s fundamental economic strength and investor confidence. This financial situation inflated Japan’s economic power and thus exacerbated the envy of U.S. and European policy makers. When market reality exposed the overvaluation in 1991, prices collapsed and profits disappeared; Japan’s economy entered recession, and resentment of Japan decreased. At this moment the

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Ryotaro Kaneko

United States forced Japan to undergo economic globalization anew. Using the threat of trade sanctions, in 1994 the Clinton administration pressured Prime Minister Hashimoto to adopt economic liberalization policies that were preferential to U.S. firms. The United States also obtained a new defense pact in which Japan would pay a share of U.S. defense costs in the area. Since the same Japanese finance ministers responsible for the bad loans of the 1980s made this agreement, many Japanese corporate heads and managers were upset. Leaders and senior management of Japan’s insurance industry, including Ryotaro Kaneko, threatened to refuse cooperation. They also warned that the insurance industry could never withstand the entry of insurance firms from the United States and Europe. Despite this protest, a reform of the entire Japanese financial industry in accordance with U.S. wishes, called the Big Bang, began in 1996. Japanese insurers had to open to foreign competition, tariffs evaporated, and financial and insurance markets were deregulated, or “demutualized.” The Big Bang reform was completed in 2001. Due to the deregulation of the Big Bang and the general financial downturn following the currency crisis of 1997, dozens of Japanese insurers went bankrupt. From a financier’s point of view, the Big Bang began an overdue wave of consolidations and mergers that made the financial sector and individual firms more profitable to shareholders. From an insurer’s point of view, the changes threatened to undermine the value of insurance policies at a crucial moment in Japan’s demographic shift. Kaneko, who became president of Meiji just after the Big Bang began, understood the full ramifications of deregulation and the changing demographics. He made educating the insurance industry and financial sectors about these ramifications central to his reform efforts while working to safeguard the interests of policyholders.

EMERGENT LEADERSHIP The Japanese baby boom following World War II created a large, young population that was able to finance social security and private insurance portfolios because more people were paying in than were withdrawing. As that generation aged, the growth of new premiums slowed while the rate of policy payments increased; this trend is expected to continue until after 2020. In addition, more people in Japan sought wealth management as they scrambled to prepare for retirement. Kaneko understood that Meiji would have to prepare for these marketplace changes while dealing with the repercussions of the Big Bang. Kaneko made clear statements of his commitment to company policies, which kept both the policyholders and the Japanese economy in mind. On one occasion he said: “Under the rapid introduction of de facto standards and increased competition from new market entrants from other industries and

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overseas, it has been increasingly important for Japanese insurers to achieve proper allocation of management resources, in addition to keeping the competitive edge by improving cost efficiency” (Asia Insurance Review, November 15, 2000). Specifically, Kaneko directed Meiji to develop new products combining traditional insurance with retirement savings. For example, in April 2000 Meiji replaced its main insurance product with a new product called Life Account L.A., which combined an easily liquidated savings account and a traditional life insurance policy. On the corporate level Kaneko sought increases in operational efficiency. He formed alliances with other firms when it seemed beneficial but refused to form them when they did not serve policyholders. For example, he refused to ally Meiji with Tokio Marine and Fire Insurance because only the shareholders would benefit while policy values might be deflated. Far from causing a rift or incurring enemies, Kaneko won praise for his principled stance even from Tokio. Finally, he encouraged savings through the use of information technology; Meiji realized significant savings through an overhaul of its infrastructure from three computer systems to one. Kaneko’s grasp of the economics of the insurance industry, his commitment to policyholder benefits, and his comprehension of the role of Japanese insurance within the global economy paved his way to the presidency of Meiji and gained him the respect of the Japanese corporate world. His reputation made him the unrivalled choice for head of the Japanese insurance-industry group, Life Insurers Association of Japan, from 2001 to 2004. Kaneko used his stature to weigh in on the practices of insurance companies, the ethics of business practice in Japan, and government policy. The collapse of seven large insurance firms due to the Big Bang led to calls within the industry for greater attention to the bottom line. Since 1998 the government and private insurance companies were jointly responsible for meeting the obligations of failed firms. By 2001 the portion to be paid by the private firms had already been reached. Fearing that more failures were inevitable, Kaneko publicized the state of the insurance and financial industry to the Japanese public. He called on the government to extend its coverage of failures beyond 2003. Then he refused to keep quiet as insurance companies underpaid policy claims to improve their solvency. Kaneko demanded full payment of policies because the practice of underpaying would devalue policies in general, thus devaluing the assets of insurance companies. This cycle of devaluation placed Japan’s newly established growth index at risk. His stance boosted Meiji’s stature among an insurance-buying public, and it also stemmed such duplicitous practices.

MERGER AND REFORM The continuing stagnation of Japan’s economy in the early 21st century, combined with the awareness of demographic


Ryotaro Kaneko

shifts, demanded a restructuring of the insurance industry. While 26 percent of global insurance-premium income came from Japan and its per-capita insurance rate was the highest in the world, an impending peak in population meant a steadily older population demanding insurance and greater levels of policy payments. Kaneko took this inauspicious moment to coordinate a merger, made possible only since the completion of the Big Bang in 2001, with Yasuda. Kaneko felt that only a larger insurance company would survive the existing business environment. Liberalization demanded transparency throughout corporate Japan. The insurance industry was not alone in admitting it had kept bad books, engaged in racketeering, or been less than forthcoming in its accounting practices. Electriccompany officials were actually arrested on racketeering charges. Heads of corporations cooperated with police investigations, sacked managers, and asked their workers directly to improve their personal ethics as part of a general effort to renew the Japanese business culture. Facing the stress of a merger and the mounting evidence of malfeasance, Kaneko used direct communication with employees through addresses read over internal broadcast systems and at company rallies. Tapping into traditional Japanese workplace pride, he urged employees to individually strengthen the collective task: “Think what each of you can do for the new company. Think dynamically and act bravely” (Daily Yomiuri, January 7, 2003). Meanwhile, Mikihiko Miyamoto, president of Yasuda Mutual Life and soon to be chairman of the merged firm, delivered similar encouragement to the workers at Yasuda by appealing to their sense of good manners in the run-up to the merger. Both sentiments reflected a widespread feeling in the Japanese corporate world as it continued to recover from the economic downturn as well as the series of scandals rocking Japan. Women traditionally sold insurance policies in Japan and it was mostly a clerical job. However, Kaneko instituted a gender-blind hiring policy and demanded that sales staff be trained to become personal financial managers. In the months before the merger, Meiji hired seven thousand new salespersons and Yasuda hired three thousand. When completely merged in 2004, Meiji Yasuda Life Insurance had assets totaling ¥26.8 trillion with a sales staff of 48,971. Though a stronger firm, savings from the merged insurance company could never compensate for money lost on investments while the Japanese economy struggled from 1997 to 2002. Only Japan’s continuation of a strong growth rate begun in 2003 alleviated that problem. This proved Kaneko correct: the insurance industry must act for the benefit of the whole economy and with an eye on the long-term trend as the means of safeguarding a company’s bottom lines. Decisions based on economic downturns served nobody’s interests.


GLOBAL INSURANCE FROM MEIJI YASUDA In 2001 more than one-quarter of global income from insurance premiums came from Japan, making it an attractive market for foreign investors. Since insurance capital secures the rest of the economy, any weakening of policyholder wealth or insurer’s fiscal health threatens the health of the global economy. Japanese insurers who are attentive to their policyholders’ needs, therefore, hold a great deal of power. In a world of increasing risk due to terrorism and global climate change, insurers like Kaneko found themselves taking public positions on government policy in order to safeguard their policyholders. He recognized that in a globalized business environment that demanded deregulation, governments would make efforts to cut social security. Insurance companies, therefore, had to defend individual policyholders by enabling greater selfreliance.


“Corporate Leaders Seek Reform for 2003,” Daily Yomiuri, January 7, 2003. “From The Chief Delegates Files—Quotes For The Day,” Asia Insurance Review, November 15, 2000. “Fujitsu Expertise and a Microsoft Windows-based Infrastructure Increase the Business Agility of Meiji Life,” http://www.microsoft.com/resources/casestudies/ ShowFile.asp?FileResourceID=3137. “Hold Japan’s Feet to the Fire; Trade: Refusal to Open the Insurance Industry Could Trigger U.S. Sanctions and a Further Loss of Trust,” Los Angeles Times, June 30, 1996. “Integration Not to Help Policyholders—Meiji Life,” Jiji Press English News Service, September 19, 2000. “Kaneko Cautious on Life Insurers’ Yield Cut,” Jiji Press English News Service, July 19, 2001. Kaneko, Ryotaro, “Down, But Not Out: Japanese Life Insurers Face New Challenges,” LIMRA’s MarketFacts Quarterly 21, no. 4-5, October 1, 2002. “Life Insurers Can No Longer Afford to Fund Industry Safety Net,” Kyodo News, October 19, 2001. “Meiji Life Insurance Company,” Hoover‘s Company Capsules, July 6, 2003. “Meiji Life to Merge with Yasuda Mutual,” Japan Times, January 25, 2002. Nagamasa, Tsutomu, “Review of the Japanese Insurance Industry,” Financial Times: Global Insurance Directory, 2001, pp. 17–18. —Jeremy W. Hubbell

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Mel Karmazin 1943– Former president and chief operating officer, Viacom Nationality: American. Born: August 24, 1943, in New York, New York. Education: Pace University, BS, 1967. Family: Married (wife’s name unknown; divorced 1996); children: two. Career: CBS Corporation, 1960–1970, radio sales; Metromedia, 1970–1981, vice president and general manager; Infinity Broadcasting Corporation, 1981–1996, president; 1988–1996, CEO; Westinghouse/CBS Station Group, 1997–1999, chairman and CEO; CBS Corporation, 1999–2000, president and CEO; Viacom, 2000–2004, president and COO. Awards: National Radio Award, National Association of Broadcasters, 1998; Gold Medal Award, International Radio and Television Society, 2000; Broadcasting Hall of Fame, National Association of Broadcasters, 2003. Mel Karmazin. AP/Wide World Photos.

■ Following its acquisition of CBS in 2000, Viacom named Mel Karmazin president and chief operating officer; at the time the company was a $20 billion diversified media corporation, one of the largest in the world. Karmazin had previously served as president and chief executive officer of the CBS Station Group. Known as a stickler for detail and thrift—traits that led some employees to nickname him “Mad Mel”— Karmazin was unusual among the inner elite of contemporary communications management in that he originally rose through the ranks as an organizational radio executive and thus had no background whatsoever in television and film or in the creative side of the media business.

SUCCESS IN RADIO Karmazin began his career in the communications industry just out of high school as an entry-level employee at the radio station WCBS in New York City; he eventually worked his

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way into advertising sales. He attended Pace University in Manhattan as a part-time student while working full-time at the station, earning a bachelor’s degree in marketing in 1967. Karmazin’s skill as an ad salesman earned him a reported $70,000 per year in commissions, which incurred him the jealousy of older supervisors and consequently limited his possibilities of advancement. In 1970 Karmazin was hired by John Kluge, the chair of Metromedia, the stations of which included the WCBS rival WNEW. For more than a decade Karmazin served as vice president and general manager of the Metromedia stations. Kluge, who saw the value of his radio and television stations increase enormously during Karmazin’s tenure, told Richard Siklos of BusinessWeek that Karmazin was “the kind of person who can do anything, because he has the energy and the drive” (April 5, 1999). In 1981 Infinity Broadcasting Company recruited Karmazin as its new president. At a time when radio was being written


Mel Karmazin

off by some media companies, Karmazin believed that new ownership rules that were about to come into effect, allowing companies to own more stations, would make radio a bargain in the mass-media industry. He aggressively pursued controversial radio personalities for Infinity, hiring Howard Stern and Don Imus, among others, and expanded Infinity’s string of stations from six to 44 during his 15 years at the company. A share of Infinity stock, which had been worth $17.50 in 1992, increased in value to $170 by December 1996, when Infinity was acquired by CBS for nearly $5 billion.

EXPANDED EXPERTISE Returning to CBS, the company where he had started his career as an advertising salesman, Karmazin headed the network’s owned-and-operated radio and television stations. In 1999 he was promoted to president and CEO of CBS Corporation. Among his first priorities was to reacquire television rights to National Football League (NFL) coverage, which CBS had lost to Rupert Murdoch’s Fox network in a bidding war several years earlier. Karmazin understood that the contract held greater significance than its face value: professional football was among the most effective broadcasting tools with which to reach males under the age of 35, an important demographic target for advertisers as well as for the promotion of prime-time programs. This was particularly significant at CBS, which had long suffered under a reputation as the network for “older” audiences. Though known at the office as a budget slasher and penny pincher who was not above questioning petty-cash receipts, Karmazin negotiated an eight-year deal with the NFL allowing the network to pay $500 million per year for NFL broadcast rights. In addition, under Karmazin’s management CBS radio consistently outpaced the rest of the radio industry in profits. Dan Rather, the anchor of the daily CBS Evening News, described Karmazin’s management style to Siklos in BusinessWeek as “blunt as a punch in the nose,” but added, “Mel’s direct, but with an ability to listen” (April 5, 1999). In 2000 another corporate merger took Karmazin to even greater heights. Viacom, whose portfolio of media companies included such varied properties as Paramount Pictures, MTV, Blockbuster Video, and Simon & Schuster, acquired CBS for


$39.8 billion. According to an article that appeared in Newsweek, the merger catapulted Karmazin “to the uppermost reaches of the media business, a clear signal that in the entertainment industry these days, business skills trump creative instincts” (September 20, 1999). At Viacom Karmazin was number two on the corporate ladder, reporting only to CEO Sumner Redstone, who owned more than 68 percent of voting stock. Karmazin was generally considered heir apparent to Redstone. Karmazin was known to value his privacy—so much so that he had written into the contracts of on-air personalities who worked for him that they were not to mention his name. He was vice chairman of the board of trustees of the Museum of Television and Radio in New York. Though widely feared as a two-fisted manager, Karmazin demonstrated strong support for marketplace and workplace diversity. He was a founder and supporter of the Prism Fund, a billion-dollar, industrysupported capital fund that worked to increase ownership of television and radio stations by women and members of minority groups. At CBS he instituted visible efforts to increase minority hiring in all departments. On June 1, 2004, Karmazin resigned from Viacom.

See also entries on CBS Corporation and Viacom Inc. in International Directory of Company Histories.


Bryant, Adam, “The Making of a Media Giant,”Newsweek, September 20, 1999, p. 34. Higgins, John M., “It’s Official: Mel’s Staying at Viacom,” Broadcasting & Cable, March 24, 2003, p. 4. Kuczynski, Alex, “A Chief Intent on Raising Eyebrows,” New York Times, November 14, 1999. Siklos, Richard, “Can Mel Karmazin Reinvent Network TV?” BusinessWeek, April 5, 1999. “Top Broadcasters Plan Billion-Dollar Fund to Push Blacks’ and Women’s Ownership in Radio and TV,” Jet, November 22, 1999, p. 12. —David Marc

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Karen Katen 1948– Executive vice president, Pfizer; president, Pfizer Global Pharmaceuticals Nationality: American. Born: 1948, in Kansas City, Missouri. Education: University of Chicago, BA, 1970; MBA, 1974. Career: Pfizer, 1974–1983, marketing associate in Roerig Division, then marketing and general-management positions; 1983–1986, vice president of marketing; 1986–1991, vice president and director of operations; 1991–1993, vice president and general manager; 1993–, executive vice president of Pfizer Pharmaceuticals Group; 1995–, president of Pfizer Global Pharmaceuticals and corporate executive vice president. Awards: 50 Most Powerful Women in Business, Fortune, 1998–2004; 25 Top Executives, BusinessWeek, 2002. Address: Pfizer, 235 East 42nd Street, New York, New York 10017; http://www.pfizer.com.

■ Karen L. Katen was executive vice president of Pfizer as well as president of Pfizer Global Pharmaceuticals, the company’s principal operating division, and held a seat on the company’s board of directors. After joining Pfizer in 1974, Katen was involved in the marketing of virtually every major drug launched by the company. Her group produced eight of the world’s top 25 pharmaceutical products, including the world’s top seller Lipitor, with annual sales approaching $10 billion. Described as one of Pfizer’s most respected leaders, Katen was known for disseminating knowledge throughout the organization, building strong cross-functional teams, and championing collaboration.

COLLEGE AND EARLY PROFESSIONAL DIRECTION A native of Kansas City, Missouri, Karen Katen attended the University of Chicago, where she graduated in 1970 with a bachelor’s degree in political science. Katen landed a job in

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Karen Katen. Lawrence Lucier/Getty Images.

sales at an office supply company shortly after graduation. After one year on the job, she returned to the University of Chicago and earned her MBA in 1974.

A FOCUSED CAREER Katen joined Pfizer in 1974 as a marketing associate in the Roerig Division. From the beginning she found a perfect fit for herself in marketing and management, eventually holding several management posts within the U.S. Pharmaceutical Division, including vice president of marketing in 1983, vice president and director of operations in 1986, and vice president and general manager in 1991. She was named executive vice president of the Pfizer Pharmaceuticals Group in 1993. By 1995 she was promoted again, to president of Pfizer U.S. Pharmaceuticals. In 2001 Katen assumed responsibility for


Karen Katen

global business in more than 90 countries as president of Pfizer Global Pharmaceuticals. Katen’s roles entailed direct management of worldwide medical and regulatory activities and the worldwide development of pharmaceutical products. She was also a member of the prestigious Pfizer Leadership Team. A SOLID RECORD OF ACHIEVEMENT Throughout her career at Pfizer, Katen developed and implemented several core strategies that, though considered givens by today’s management thinkers, were nevertheless in their time quite innovative. While most industry executives maintained that their companies’ products were prescription medicines, Katen reframed the conceptual model in asserting that pharmaceuticals was essentially a knowledge business grounded in intellectual capital. Fundamentally, she told Molly Rose Teuke of Chief Executive, “what we do is transfer scientific knowledge to physicians, and increasingly to patients, their families, and their communities” (July 2001). This distinction became central in her drive to distribute knowledge throughout Pfizer’s many internal functions— functions which were often encapsulated by silo mentalities at other companies. Indeed, as noted by Teuke, Katen was known to have a paperweight on her desk with the inscription, “Who else needs to know?” (July 2001)—a question alluding to the ongoing need to share information. Katen asserted, “Knowledge is a company asset, not the property of any individual, and that’s our greatest strength” (July 2001). At a time when many senior executives saw the dissemination of knowledge as a threat to their corporate fiefdoms, Katen applied the principle of knowledge dissemination relentlessly, thus propelling Pfizer to become a marketing powerhouse. Her philosophy was evident in Pfizer’s “Share Fairs.” At Pfizer meetings employees displayed “good practice” posters, enabling colleagues to learn about the latest best practices. Whoever wanted to implement a new concept could borrow the poster in question on the condition that they share a “good practice” of their own. All of a meeting’s participants could take two posters and display two posters of their own, ensuring the dynamic dissemination of knowledge. Katen noticed that the delivery of pharmaceuticals, as part of the delivery of health care in general, was an inherently local enterprise. As such global companies like Pfizer needed to adapt their messages to consumers in ways that suited local cultural and demographic conditions. Here too Katen fostered an environment of local empowerment. By the mid-1990s, breaking a long-standing tradition of launching products one market at a time over the course of a decade, under Katen’s leadership Pfizer localized product launches so that any given product was distributed throughout 75 markets within 24 months. During her tenure at Pfizer, Katen’s achievements fell into three general categories: blockbusters, partnerships, and the


sales force. In terms of blockbusters, during the 1990s Katen helped launch 10 innovative pharmaceuticals produced by Pfizer’s research and development program, including Viagra, for erectile dysfunction; Lipitor, to lower cholesterol; Zyrtec, an allergy medicine; Zoloft, for depression; Celebrex, for arthritis pain; Norvasc, for hypertension; and the leading antibiotic Zithromax. With respect to partnerships, before Pfizer’s 2000 acquisition of the company, in 1997 Katen engineered a lucrative co-marketing deal with Warner-Lambert to help market its cholesterol-lowering drug Lipitor, which became the number-one lipid-lowering agent in the United States by 2004. Finally, Katen oversaw the addition of 750 representatives to Pfizer’s sales force, which was one of the most respected in the industry. With two key acquisitions in the early 2000s—WarnerLambert in 2000 and Pharmacia in 2003—Katen managed the largest integrations in the history of the U.S. pharmaceutical industry. As a result of both internal growth and these acquisitions, revenues for the Global Pharmaceuticals group reached $45 billion in 2003—nine times greater than 1993 revenues.

MANAGEMENT PHILOSOPHY AND LEADERSHIP STYLE Katen’s management style was the very antithesis of the classic top-down, authoritarian approach; she was well known for her ability to build cohesive teams within a highly competitive company. She assembled cross-functional groups to launch products, a strategy that proved very successful as team members worked together for the full period—often 10 to 12 years—during which a product was undergoing clinical trial and awaiting regulatory approval. She encouraged open communication among individuals from various functions, including scientists, physicians, salespeople, and marketers, both before and after Food and Drug Administration product approval. The resulting sense for the need to communicate openly filtered down throughout the organization, permitting cross-functional team members to address issues quickly. Katen was known for fully developing the people working under her. Peter Brandt, the senior vice president for finance, planning, and business development at the Pfizer Pharmaceuticals Group, told John Slania of the University of Chicago Graduate School of Business, “Karen truly believes in and cares about her people. She realizes the importance of developing people and she does that by pushing them—keeping their feet to the fire—and also by providing them with the resources and support to get the job done” (March 2004). Dr. Joseph Feczko, Pfizer Pharmaceuticals Group’s senior vice president for medical and regulatory operations, offered Slania this perspective: “She relies very heavily on the experience and technical knowledge of the physicians in her group, but she’s not intimidated. While she’s a bottom-line type of

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Karen Katen

person, she brings a human face to the business. She’s interested in doing the right thing, even if it’s not supportive of the bottom line” (March 2004). This attitude was evident when Katen supported the Pfizer CEO Dr. Henry A. McKinnell’s initiative to provide Pfizer’s antifungal drug Diflucan to AIDS patients in Africa free of charge.

A SOARING REPUTATION Katen was one of the most highly respected women in the pharmaceutical industry, managing a larger business unit than any other female manager in the industry. Her stature was evident from her membership in the industry’s leading organization, the Pharmaceutical Research and Manufacturers Association of America, as well as a member of the boards of directors for General Motors, the Harris Corporation, and the RAND Corporation and was a trustee of the University of Chicago and a council member of its Graduate School of Business. She served on the boards of directors of several health and community organizations.

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See also entry on Pfizer Inc. in International Directory of Company Histories.


“Karen Katen,” Pfizer Web site, http://www.pfizer.com/are/ media/mn_news_media_biographies_katen.cfm. Slania, John T., “Prescription for Success,” University of Chicago Graduate School of Business, http:// gsbwww.uchicago.edu/news/gsbchicago/f00/features/daa/ katen.htm. Teuke, Molly Rose, “Think Globally, Inform Locally,” Chief Executive, July 2001, http://www.chiefexecutive.net/ ceoguides/july2001/p31.html.

—Carole S. Moussalli


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Jeffrey Katzenberg 1950– Founding partner and chairman, Dreamworks SKG Nationality: American. Born: December 21, 1950, in New York, New York. Education: Attended New York University, 1971–1972. Family: Son of a stockbroker and a tapestry artist (names unknown); married Marilyn Siegel (schoolteacher); children: two. Career: Mayor John Lindsay, 1972, presidential campaign assistant; David Picker, 1973–1975, talent agent; Paramount Pictures, 1975–1977, assistant to chairman, then executive director for marketing; 1977–1978, vice president for programming at Paramount TV; 1978–1980, vice president for feature production; 1980–1982, senior vice president of motion picture division; 1982–1984, president of motion picture and television production; Walt Disney Studios, 1984–1994, chair of film production; Dreamworks SKG, 1994–, founding partner and chairman. Address: Dreamworks SKG, 1000 Flower Street, Glendale, California 91201; http://www.dreamworks.com.

■ Jeffrey Katzenberg began his career at Paramount Pictures and came to public prominence in the 1980s as a young executive who helped to save the flagging Walt Disney Studios. In 1994 he left Disney to become a founding partner, with Steven Spielberg and David Geffen, of Dreamworks SKG, one of the world’s most technologically advanced and influential film studios.

EARLY LIFE AND CAREER Katzenberg was born in Manhattan to an upper middleclass family. He grew up in a Park Avenue apartment, attended the Ethical Culture Society’s Fieldston School, and spent summers in Maine. An indifferent student, he enrolled in New York University in 1971 but dropped out during his sopho-


Jeffrey Katzenberg. AP/Wide World Photos.

more year, ostensibly to work in New York City mayor John Lindsay’s unsuccessful campaign for the 1972 Democratic Party presidential nomination. Rather than return to school, Katzenberg attempted to find a career by exploiting some of the contacts he had made in the Lindsay campaign. With the backing of his family he went into partnership with two young Lindsay aides on a New York City restaurant. Finding this unsuitable, he went to work as a talent agent for David Picker, an independent film producer who was a personal friend of Lindsay’s. With a foot in the door of the film industry Katzenberg managed to meet Barry Diller, who then headed Paramount Pictures’ New York office. Diller hired Katzenberg to an entry-level position in 1975 and soon promoted him to his personal assistant. In 1977 Katzenberg moved to the Los Angeles headquarters of Paramount Pictures to work on programming for an ill-

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Jeffrey Katzenberg

fated attempt to launch what would have then been a fourth national television network. Remaining in Los Angeles, Katzenberg impressed the studio head Michael Eisner with an extraordinary ability to search out, evaluate, and recommend feature-film projects. These talents gained him the nickname of “Eisner’s Golden Retriever” and led to a swift rise through the corporate power structure. A member of the first generation of film executives who had grown up with television, Katzenberg understood the medium’s power to create lasting cultural impressions that could be translated into instant, highly promotable “brands” across a variety of media. Among his first successful projects for Paramount was Star Trek: The Motion Picture (1979), a blockbuster that led to a string of successful sequels as well as a handful of television series spin-offs. The original Star Trek television series, which aired on NBC from 1964 to 1967, had met with only middling success; when Katzenberg “retrieved” the property, it hardly seemed to merit backing for major motion picture production. Other Paramount successes credited to Katzenberg at Paramount included Raiders of the Lost Ark (1981), which reinvigorated the adventure genre, Airplane! (1980), a farce that owed much to the style of Mad magazine, and Beverly Hills Cop (1984), which marked Eddie Murphy’s successful transition from Saturday Night Live television comedian to screen actor.

SUCCESS AT DISNEY Widely credited with having revived Paramount, Eisner and Katzenberg were lured away by Walt Disney Studios, which was hoping for a similar reversal in fortunes, in 1984. As the new Disney CEO, Eisner appointed Katzenberg chair of film production. Katzenberg restored the power of the Disney brand by returning the studio to production of animated feature films. The Little Mermaid (1989), the first new animated Disney feature in thirty years, was the first of a string of hits, which would also include Aladdin (1993) and The Lion King (1994). Katzenberg expanded production in other directions as well, establishing new divisions for targeting adult audiences, such as Hollywood Pictures and Touchstone Pictures. In 1993, at Katzenberg’s initiative, Disney purchased Miramax, a New York–based “art studio” whose pictures seemed to be the antithesis of the Disney brand. All of the new divisions, however, scored hits. Disney/Touchstone Television produced prime-time sitcoms for network television, including such successes as The Golden Girls for NBC and Home Improvement for ABC. During Katzenberg’s decade-long tenure as chair of film production at Disney, revenues rose sixfold to $8.5 billion.

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HELPS FOUND DREAMWORKS SKG In 1994 Frank G. Wells, the president of Disney Studios, died suddenly in a helicopter crash. Katzenberg expected to be named Wells’ successor, but Eisner bypassed him. Hurt and angered, Katzenberg resigned and months later founded a new studio, Dreamworks SKG, in partnership with Steven Spielberg, the most successful filmmaker in Hollywood, and David Geffen, the powerful music-industry executive. Each of the partners invested more than $80 million to capitalize the venture. Dreamworks SKG began producing live-action films, animated films, musical recordings, and interactive media products. Financial success was virtually assured within the company’s first year by a series of agreements negotiated principally by Katzenberg, including a ten-year deal to supply HBO with as many as one hundred films; a seven-year deal to supply television series to ABC; and a $30 million deal with Microsoft to produce interactive computer-gaming software. Katzenberg’s principal creative responsibilities lay in the production of animated feature films. He served as executive producer of such Dreamworks hits as The Prince of Egypt (1998) and Chicken Run (2000) and as producer of Shrek (2001) and Shrek 2 (2004).

See also entries on Walt Disney Company and DreamWorks SKG in International Directory of Company Histories.


Abramowitz, Rachel, “Almost Infamous,” New York, November 13, 2000, pp. 32–33. Auletta, Ken, The Highwaymen: Warriors on the Information Superhighway, New York: Random House, 1997. Dutka, Elaine, “Profile of Jeffrey Katzenberg,” American Film, June 1990, pp. 40–43. Grover, Ronald, The Disney Touch: How a Daring Management Team Revived an Entertainment Empire, Homewood, IL: Business One Irwin, 1991. Ross, Lillian, “Jeffrey Katzenberg’s Road to the Gold,” New Yorker, February 14, 2000, p. 25. Turner, Adrian, “Interview with Jeffrey Katzenberg,” Guardian, December 14, 1989.

—David Marc


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Jim Kavanaugh 1963– Chief executive officer, World Wide Technology Nationality: American. Born: 1963, in St. Louis, Missouri. Education: St. Louis University, BA, 1986. Career: Major Indoor Soccer League, 1986–1987, player; Future Electronics, 1988–1990, sales manager; World Wide Technology, 1990–1999, president; Telcobuy.com, 1999–2002, CEO; World Wide Technology, 2002–, CEO. Awards: 40 Under 40, St. Louis Business Journal, 1998. Address: World Wide Technology, 60 Weldon Parkway, St. Louis, Missouri 63043-3101; http://www.wwt.com.

■ Jim Kavanaugh cofounded Word Wide Technology, the information-technology service provider, in 1990 along with David L. Steward and acted as its president until 1999. World Wide Technology, a leading reseller for companies such as Cisco, Dell, Hewlett-Packard, Microsoft, and Sun, combined procurement services and logistics functions with powerful Internet-based information-systems technology. From 1999 to 2002 Kavanaugh served as the chief executive officer of Telcobuy.com, the other operating company run by World Wide Technology Holding Company; in 2002 he returned to become the CEO of World Wide Technology. During his tenure at his various positions under the World Wide Technology Holding Company umbrella Kavanaugh developed a reputation as a savvy Internet strategist. He was known as a leader who fostered an atmosphere of teamwork among his employees.

drive to excel at the sport, he tried out for and was accepted to the U.S. Olympic men’s soccer team in 1984, with which he traveled around the world for 18 months. Kavanaugh credited much of his leadership and management style to the lessons he learned about teamwork through sports. After returning home, Kavanaugh graduated from St. Louis University with a bachelor’s degree in marketing in 1986. Again following his love of soccer, he became the number-two pick in the Major Indoor Soccer League draft. He played one year for the Los Angeles franchise and was then traded to the St. Louis Steamers. After a year with the Steamers, Kavanaugh decided to leave professional sports altogether. Kavanaugh began his business career as a sales manager for Future Electronics, the manufacturer and distributor of electronics components. While he enjoyed learning about technology at Future, he knew that he wanted to be more entrepreneurial. In 1990 Kavanaugh left Future to cofound World Wide Technology with his friend and colleague David Steward.

WORLD WIDE TECHNOLOGY VENTURE STRUGGLES, SUCCEEDS David Steward saw in Kavanaugh an expertise in electronics distribution, software development, and component manufacturing. Kavanaugh’s broad range of knowledge led to his running of day-to-day operations at World Wide Technology. The company’s goal was to provide information-technology services such as network design and installation, systems and application integration, and procurement.

SOCCER LEADS TO LESSONS IN TEAMWORK, LEADERSHIP

During its first few years of existence, World Wide Technology and its founders struggled to move out of debt. Kavanaugh and Steward grew concerned about the company’s prospects for long-term success; by 1993 it had accumulated $2 million in debt. Kavanaugh explained in a Black Enterprise interview, “Poor financial discipline and structure resulted in our having problems financing products” (June 1999). In fact at one point Kavanaugh used $15,000 from his own personal savings to pay for a product so that World Wide could deliver it to a customer.

Kavanaugh always called St. Louis, Missouri, home. He grew up in that Midwestern city and then attended St. Louis University, where he played collegiate soccer. Guided by his

Reassessing World Wide’s methodology, Kavanaugh sought to develop a more team-oriented approach to the company’s growth; he also pushed to deliver the highest-quality


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customer service in the industry. His strategies pulled World Wide Technology out of its slump, and the company began to make a name for itself. One particularly successful tactic was to spend portions of World Wide’s capital on new-technology research and development. In the Black Enterprise interview Kavanaugh stated, “It’s been a conscious strategy to build products internally on our nickel with the intent to make them robust enough to sell to the commercial marketplace” (June 1999).

HEADS TELCOBUY.COM In 1999 Kavanaugh and Steward decided to spin off World Wide Technology’s telecommunications division, creating Telcobuy.com; Kavanaugh was elected chief executive officer. At Telcobuy he sought to help telecommunications companies build out and improve infrastructures more efficiently by facilitating communication between sellers and buyers. During his tenure as the Telcobuy CEO, Kavanaugh became known for his ability to recognize and use emerging, cutting-edge technology; he was also skilled at employing smart Internet strategies for both his own company and customers. Kavanaugh knew that Internet start-ups needed help in developing strong foundations and then in continuing to expand; through Telcobuy he enabled them to establish back-to-basics platforms to quickly attract customers and investors. After three years of leading Telcobuy to becoming a successful operating company Kavanaugh returned to World Wide Technology to become the chief executive officer. In 2004 World Wide Technology notched over $1 billion in sales with 550 employees, making it one of the largest privately held companies in the Midwest.

businesses alike. Taking lessons from his varied experiences, he developed a system of teamwork that involved all of World Wide Technology’s employees, customers, and partners. Kavanaugh’s basic philosophy—“Be creative, take chances, make mistakes”—was propagated throughout the organization, motivating employees to feel confident and empowered. Kavanaugh believed strongly in trusting his workers. He assembled leadership teams from within his companies composed of people from a variety of backgrounds. His teams were involved in all aspects of business decisions, such as identifying new business opportunities and recognizing and handling potential problems. While Kavanaugh saw the importance of utilizing the skills of his fellow leaders in particular, he encouraged all employees to participate in company decision making. World Wide Technology employee retirement plans relied on the company’s solid financial performance, instilling workers with a greater sense of responsibility for both their own and the company’s success. To encourage communication between different levels within World Wide, Kavanaugh developed online employee suggestion boxes and held special meetings where employees could propose ways to make improvements. Kavanaugh strove to make all World Wide Technology employees feel as though they were an integral part of the company’s infrastructure. He provided workers with state-of-theart equipment with which to perform their jobs, comfortable office spaces, full medical coverage, and retirement plans that demonstrated their value to the organization.


Kavanaugh, James, “On Top of the World,” interview by Tariq Muhammad, Black Enterprise, June 1999, p. 118. Manning, Margie, “World Wide Booms,” St. Louis Business Journal, February 23, 2001.

MANAGEMENT STYLE As an Olympic and professional soccer player and then as a corporate executive Kavanaugh learned much about the value of leadership in spurring the success of sports teams and

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Sieckmann, Amy, “Jim Kavanaugh of Telcobuy.com,” St. Louis Business Journal, June 22, 2001. —Jennifer Long


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Robert Keegan 1947– Chairman, chief executive officer, and president, Goodyear Tire & Rubber Company Nationality: American. Born: 1947, in Rochester, New York. Education: Le Moyne College, BS, c. 1969; University of Rochester, MBA, 1972. Family: Son of Robert “Smiley” Keegan, a professional baseball player, and name unknown; married Lynn (maiden name unknown); children: two. Career: Gleason Corporation, 1969, mathematician; Eastman Kodak Company, 1972–1986, distribution and marketing, then finance and marketing; 1986, general manager of Kodak New Zealand; 1987–1990, director of finance for Photographic Products Group; 1990, general manager of Kodak Spain; 1991–1992, general manager of Consumer Imaging; 1993–1995, corporate vice president; Avery Dennison Corporation, 1995–1997, executive vice president and global strategy officer; Eastman Kodak Company, 1997–2000, president of Kodak Professional, then corporate vice president, then president of Consumer Imaging and senior vice president; 2000, executive vice president; Goodyear Tire & Rubber Company, 2000–2003, president, COO, and director; 2003–, chairman, CEO, and president. Awards: Oscar S. Stauffer Executive in Residence Award, Washburn Endowment Association, 2003. Address: Goodyear Tire & Rubber Company, 1144 East Market Street, Akron, Ohio 44316-0001; http:// www.goodyear.com.

■ Robert Keegan was named CEO and president of Goodyear Tire & Rubber Company in 2003 based on his experience in operations and global sales and marketing. Keegan developed a successful track record with the Eastman Kodak Company, where he spent 13 years working overseas in marketing and later helped fight off a challenge to Kodak’s dominance in North American film sales. At Goodyear he was put in International Directory of Business Biographies

Robert Keegan. Getty Images.

charge of turning around the ailing tire company, especially its North American Tire unit. Described as a savvy marketer by industry analysts, Keegan was also known for his enthusiasm and emphasis on teamwork.

DECIDES ON BUSINESS CAREER Keegan demonstrated his determination to succeed while still a college undergraduate studying mathematics. After his freshman year at Le Moyne College in Syracuse, New York, Keegan applied for a summer job at nearby Eastman Kodak to help pay for his college tuition. Kodak jobs typically went to the children of employees; Keegan was denied. Undaunted, he decided to wait in Kodak’s employment office indefinitely. On the second day of his vigil, one of the employees’ offspring quit, and Keegan was hired on the spot.

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Keegan spent the next three summers working for Kodak. When they offered him a job upon his impending graduation, however, Keegan declined, citing an interest in pursuing law. Instead, Keegan ended up working as a mathematician in the R&D department of the Gleason Corporation, a gearproduction technology company. Keegan soon decided that he wanted to pursue a career in business. As he told Hillary Appelman during an interview for SimonBusiness, “I went to business school because I saw finance and marketing and manufacturing, and I liked all those disciplines more than my work, which was very individual work” (2002). Keegan decided to return to school and received his master’s in business administration in 1972 from the University of Rochester’s Simon School. He then signed on with his old summer employer Kodak. Keegan began working in a number of positions in distribution and marketing, first in the United States and then overseas. Spending time in England, Spain, and New Zealand, Keegan later recalled that dealing with various cultures proved to be a tremendous learning experience. He noted in SimonBusiness that such an experience “forces you to think through all your assumptions—not just your business assumptions but your social assumptions” (2002).

FIGHTS OFF FUJI One of Keegan’s most noted accomplishments at Kodak was his role in fending off Fuji’s attempt to overtake Kodak in the American film market. In 1991, just a few months after Keegan had taken over Kodak’s Consumer Imaging division, Fuji cut film prices 30 to 40 percent; Kodak’s market shares quickly fell. Keegan believed that Kodak’s marketing efforts in the United States were largely at fault, as advertising dollars had been cut and customers wants and needs had not been addressed. Keegan’s counterstrategy was to step up a marketing emphasis on persuading consumers to buy more and higherpriced film. Part of this marketing effort involved instructing consumers, who primarily used 100-speed film, about the benefits of higher-speed films. While slashing Kodak’s prices on 100- and 200-speed film to compete with Fuji in that market, Keegan focused most of the company’s advertising dollars on promoting Kodak’s more expensive 400- and 800-speed film. He renamed the films “Kodak Max” and portrayed them as providing significantly higher-quality pictures. By 1994 Keegan’s strategy had proven an unmitigated success, as Kodak not only retained its market share but also improved cash flow and attained double-digit growth in sales. In 1993, after 21 years at Kodak, Keegan was promoted to senior vice president. Two years later he left Kodak to join the Avery Dennison Corporation as executive vice president and global strategy officer. As a key member of the senior management team for the manufacturer of self-adhesive materials,

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tapes, labels, chemicals, and office supplies, Keegan oversaw many of the company’s global businesses, including the Automotive and Graphic Systems Group, the Asia-Pacific Group, and the U.S. and European Chemical Divisions. Keegan played a central role in developing the company’s niche in the worldwide marketplace. In 1997 Keegan returned to Kodak, becoming president of Kodak Professional, a division focusing on professional photography; he was soon made head of the consumer-imaging division. Over the next two years, Keegan developed a marketing strategy that led to 10 percent annual growth in film sales. He also helped the company set new sales records for their line of cameras. Keegan’s key to success in sales was to follow a threepronged strategy that included marketing to youth, selling more expensive film, and tapping into new markets, such as China. In early 2000 Keegan was appointed to the post of executive vice president.

JOINS AILING TIRE COMPANY Within a few months of taking on his new duties at Kodak, Keegan was being wooed by the Goodyear Tire & Rubber Company, which was looking for a chief operating officer to help remedy a period of slow growth and poorly performing stock. They were especially interested in Keegan as a consumer-products guru who would be able to help the company refine its replacement-tire strategy—that is, to stimulate its consumer business as opposed to its business installing tires on new cars. In September 2000 Keegan accepted the post as Goodyear’s president and COO and immediately set out to boost global advertising spending. Keegan said the company was rethinking every aspect of its marketing strategy. An article in Rubber & Plastics News quoted Keegan as telling industry analysts in New York, “We need to increase the effectiveness of our message, and the efficiency of our media selection” (March 12, 2001). Keegan was facing enormous pressures as the company underwent a tough year in 2001, with a $170 million fourthquarter loss and an overall deficit of $204 million. Keegan decided to change the company’s business approach to reflect that of another tire company, Kelly-Springfield, which had merged into Goodyear just before Keegan came on board. Specifically, Keegan wanted Goodyear to become more market driven, with emphasis on the customer, rather than allow the company to be driven by various operating functions such as manufacturing, technology, and logistics. The move represented a fundamental change in the business philosophy at Goodyear, which had typically been guided primarily by function. Keegan told Dave Zielasko for a Tire Business article, “It’s really about understanding the consumer, what they want and what motivates them to purchase a particular brand and a particular product” (April 1, 2002).


Robert Keegan

Other strategies employed by Keegan to turn the company around included cutting production when demand declined. Previously the company had stockpiled and warehoused tires until the economy improved. It then sold the surplus tires, often at lower prices. Keegan also decided to improve the company’s product mix, emphasizing higher-end tires that would return more profits to Goodyear as well as to retailers and independent tire dealers.

teams. In Goodyear’s case he noted that in the several strategic areas needing attention if the company was to be assured of future success—for example, lower cost structure and leveraged distribution—leadership was key. As he told Appelman in SimonBusiness, “I try to build a team around me with good complementary skills”; he added that he wanted people who were “driven, very passionate about what we need to do” (2002).

Keegan stayed true to his previous successful marketing strategies. Believing that tires in general were severely undermarketed, Keegan noted that people drove on tires every day and that drivers’ and their families’ lives could depend on the quality of their tires. His goal was to convince consumers of the legitimacy of this concept, the desired result being that they would be more willing to purchase Goodyear’s top-ofthe-line products.

Industry analysts noted that although Keegan and his administrative team had initiated a clear turnaround plan for the financially troubled company’s North American Tire operations, their difficulties had not yet been surmounted. In December 2003 Moody’s Investors Service believed profits would remain elusive at the company’s American tire businesses despite gains in such areas as replacement and high-end tires. Keegan acknowledged that the company continued to face many challenges, including rising costs in raw materials that were largely responsible for a $106 million loss in the third quarter of 2003. Nevertheless, he remained optimistic and pointed to such innovations as the Goodyear Assurance line of premium tires in 2004. Keegan was quoted in Canada Newswire as saying, “Market launches of bold new Goodyear products have been true difference makers in the past” (February 5, 2004).

PROBLEMS PERSIST In January 2003 Keegan was named Goodyear’s CEO and quickly admitted that difficult and painful decisions would have to be made to counter persisting problems at the company. He laid out plans to slash costs by $1 billion to $1.5 billion and to reduce the size of the work force. He also began to pursue asset sales and adjust brand strategy. Meanwhile, he found himself facing intense labor negotiations with the United Steelworkers of America, in addition to strained relations with the company’s independent tire dealers, who represented Goodyear’s most important distribution channel. As noted by the editors of Tire Business, “With only two and a half years at the tire maker, much of what Mr. Keegan faces is the result of decisions made before his arrival” (May 26, 2003). A month after his appointment as CEO, Keegan addressed a dealer conference in Cleveland, saying that the problems facing Goodyear would not be solved by a grand revelation or plan. As noted by Bruce Davis in Crain’s Cleveland Business, Keegan told the dealers, “Many of our issues are right down at the execution level” (February 17, 2003). Keegan eventually renegotiated a three-year contract with the labor union, but only after announcing that Goodyear would cut 1,200 jobs in addition to the 2,600 jobs it had eliminated earlier in 2003. According to Keegan, the job cuts would save the company $350 million in 2004.

LOOKS TO THE FUTURE Throughout his career, Keegan emphasized strategic marketing initiatives that focused on building brand strength. He stressed developing good leadership able to work together in


See also entries on Eastman Kodak Company and Goodyear Tire & Rubber Company in International Directory of Company Histories.


Appelman, Hilary, “On the Wings of Goodyear,” SimonBusiness, Spring 2002, pp. 6–12. David, Bruce, “Goodyear’s Turnaround Plan Rests Heavily on Accountability,” Crain’s Cleveland Business, February 17, 2003, p. 4. “Goodyear to Boost Advertising Budget,” Rubber & Plastic News, March 12, 2001, p. 3. “Keegan’s Got No Time for Honeymoon,” Tire Business, May 26, 2003, p. 8. “New Products Represent Another Turnaround Step for Goodyear,” Canada NewsWire, February 5, 2004, http:// www.newswire.ca/en/releases/archive/February2004/05/ c6875.html. Zielasko, Dave, “From the Catbird Seat,” Tire Business, April 1, 2002, p. 1. —David Petechuk

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Herb Kelleher 1931– Chairman, Southwest Airlines Company Nationality: American. Born: March 12, 1931, in Camden, New Jersey. Education: Wesleyan University, BA, 1953; New York University, LLB, 1956. Family: Son of Harry Kelleher (general manager at Campbell’s Soup factory) and Ruth Moore; married Joan Negley, 1955; children: four. Career: New Jersey Supreme Court, 1956–1959, clerk; Lum, Biunno and Tompkins, 1959–1961, associate; Matthews, Nowlin, Macfarlane & Barrett, 1961–1969, partner; Oppenheimer, Rosenberg, Kelleher & Wheatley, 1969–1981, senior partner; Air Southwest Company, 1966–1971, legal counsel; Southwest Airlines Company, 1971–1982, legal counsel; 1982–2001, chairman, CEO, and president; 2001–, chairman. Awards: Distinguished Achievement Award, Wings Club, 1996; CEO of the Year, Chief Executive, 1999; CEO of the Century, Texas Monthly, 1999; Wright Brothers Memorial Trophy, Aero Club of Washington, 2000; CEO of the Year, Fortune, 2001; Bower Award for Business Leadership, Franklin Institute, 2003. Address: Southwest Airlines Company, 2702 Love Field Drive, Dallas, Texas 75235; http://www.southwest.com.

■ Herbert David Kelleher led Southwest Airlines Company to over 30 consecutive years of profitability, first as the company’s cofounder and legal counsel from 1966 to 1982, then as its president, CEO, and chairman from 1982 to 2001. During his tenure Herb Kelleher produced the highest return to shareholders of any company in the S&P 500. He was known for stringent cost cutting as much as for his friendly management style and love of parties and publicity stunts. By creating a fun and rewarding workplace, Kelleher was largely responsible for the company’s myriad awards and regonitions; Fortune magazine named Southwest the Best Place to Work in America in 1998. In 2001, at the age of 70, Kelleher retired from his positions as president and CEO, remaining chairman of the board.

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Herb Kelleher. AP/Wide World Photos.

DEVELOPING A BUSINESS ETHIC Herbert Kelleher was the youngest child in the close-knit family of Harry and Ruth Kelleher in Haddon Heights, New Jersey, near Camden. As a boy Kelleher worked after school and on summer breaks at the Campbell’s Soup factory where his father was a general manager. During his six years there Kelleher served as soup chef, warehouse foreman, and parttime analyst. Kelleher’s family splintered apart during World War II: Kelleher’s brother Harry joined the Navy; his sister Ruth went to work in New York; his older brother, Richard, was killed in combat in 1942; and in 1943 his father also died. As the last child at home, Kelleher formed a special bond with his mother, who became the biggest influence on his developing work ethic. The two sat in the kitchen until the wee hours of the morning discussing business, politics, and ethics. Ruth Kelleher was a working middle-class Irishwoman who in-


Herb Kelleher

stilled in her children the importance of treating people with respect. She taught them to be egalitarian and to judge on merit rather than appearance. Kelleher soon discovered how right she was, as he told Fortune magazine: “There was this very dignified gentleman in our neighborhood, the president of a local savings and loan, who used to stroll along in a very regal way up until he was indicted and convicted of embezzlement. My mother said that positions and titles signify absolutely nothing. They’re just adornments; they don’t represent the substance of anybody” (May 28, 2001). Kelleher was a good student at Haddon Heights High School as well as president of the junior class, captain of the football team, and a letterman in basketball and track. In addition to becoming a branch manager for the Philadelphia Bulletin for a wage of $2.50 an hour, Kelleher mowed lawns for several neighbors. Kelleher attended Wesleyan University in Middletown, Connecticut, where he was an Olin Scholar and graduated cum laude with a bachelor’s degree in English and philosophy in 1953. At college he began dating the Texas native Joan Negley, whom he had met on a blind date. Kelleher originally intended to pursue a career in journalism, but a Wesleyan trustee took the young man under his wing and persuaded him to try a career in law. Kelleher was accepted to New York University Law School, where he was a Root-Tilden Scholar. Hard-working and funloving even as a young man, Kelleher earned a coveted spot on the university’s law review while also enjoying the Greenwich Village scene. He described these years to Fortune: “I had a little apartment on Washington Square, and you could just open your door and entertaining people would walk in and you’d have an instant party” (May 2, 1994). Kelleher married Joan Negley in 1955 and earned his law degree in 1956. The following year he was admitted to the New Jersey State Bar and worked two years in the prestigious position of law clerk for a New Jersey Supreme Court Justice. In 1959 he joined the Newark, New Jersey, firm of Lum, Biunno and Tompkins, where he practiced law for two years. Through visits to the Negley family in Texas during this time, Kelleher and his wife became increasingly attracted to the lifestyle and opportunities available there. They decided to relocate to San Antonio, where Kelleher became a partner in the law firm of Matthews, Nowlin, Macfarlane & Barrett in 1961. Within a few years he became restless with his career and began seeking a new challenge. One evening, a discussion over drinks with a client, an air charter service owner, led to the opportunity for Kelleher to combine his practice of law with the adventure of starting a new business.


HELPS TO FOUND SOUTHWEST AIRLINES The Texas businessman Rollin King had hired Kelleher as outside counsel in 1966. One evening they were having drinks at the St. Anthony’s Club in San Antonio, when King, who already owned a small charter airline, sketched out a plan on a cocktail napkin. At that time air travel was affordable primarily to high-powered businessmen and the wealthy. King and his banker, John Parker, wanted to start a low-cost commuter airline so that the average traveler could fly between Dallas, Houston, and San Antonio. At first skeptical Kelleher soon became enthusiastic and scraped together enough money to buy a 1.8 percent stake in the proposed company. He also signed on as legal counsel and a director. In 1967 the airline was incorporated as Air Southwest Company, later to be renamed Southwest Airlines Company. In its early days the airline industry was highly regulated by the government. Large air carriers had virtual monopolies on their markets, and those in Texas had some of the highest prices in the industry. Southwest was hoping to slip in and offer low-cost point-to-point service while other airlines remained committed to the hub-and-spoke system, in which most travelers were routed through major airports and had to change planes in order to reach their final destinations. Someone traveling from Houston to El Paso might have been forced to fly a first leg from Houston to Dallas before taking a second flight to El Paso. In the point-to-point system, the flyer would travel directly, nonstop, from Houston to El Paso, saving both time and money. A few California airlines were experimenting with point-to-point routes, and King thought the system would work well in Texas. Existing Texas airlines felt that the proposed carrier would infringe on their markets. Thus, as tiny Southwest made plans to fly, the large airlines Braniff, Texas International, and Continental made plans to keep it grounded. As legal counsel to Southwest, Kelleher fought over 30 separate injunctions and lawsuits filed by those airlines in attempts to break Southwest before it had even started. By 1969 the big airlines seemed to have won: Southwest ran out of money, and the board of directors wanted to shut the company down. Kelleher, however, convinced them to persevere. At length Southwest Airlines won the legal battles; the company took to the skies on June 18, 1971. Headquartered out of Love Field in Dallas, Southwest initially had only four planes and fewer than 70 employees. As the company remained short of operating funds, executives soon had to decide between selling off one of the planes or laying off employees. They sold the plane and set a precedent: in over 30 years Southwest never had an involuntary furlough. The next big battle came in 1979 when the powerful Texas Congressman Jim Wright sponsored a law that prohibited airlines flying out of Love Field from servicing any states other

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than those which bordered Texas—New Mexico, Oklahoma, Arkansas, and Louisiana. The so-called “Wright Amendment” was intended to make the new Dallas–Fort Worth International Airport (DFW) the region’s long-haul hub as well as to restrict Southwest’s growth. Instead of limiting Southwest, however, the new law turned out to be the company’s big break. Love Field was a half hour closer to downtown Dallas than was DFW. Thus, businesspeople on quick trips to neighboring states preferred flying out of Love Field. Southwest carved out a niche, soon winning a solid reputation for its convenient, low-cost commuter service.

BECOMES PRESIDENT, CEO, AND CHAIRMAN OF SOUTHWEST Kelleher was eventually asked to take on increasing responsibilities at Southwest; he became the company’s chairman, CEO, and president in 1982, even though he had little executive experience. Kelleher told BusinessWeek Online how he had prepared for his new job: “I learned it by doing it. I was scared to death when I was summoned off the bench to run Southwest Airlines on a permanent basis. I stayed up all night familiarizing myself with its problems: The air-traffic controllers were on strike. We had six new airplanes coming in. An industry analyst downgraded the stock when I moved in because he said I was a lawyer—and lawyers couldn’t run anything” (December 22, 2003). Kelleher would prove any and all doubters wrong. While airlines like Braniff folded and the entire industry struggled, Southwest maintained steady growth. With Kelleher at the helm Southwest became the fourth-largest U.S. carrier in terms of originating customers boarded (63 million per year). It was the only U.S. airline to have over 30 consecutive profitable years—even after the September 11, 2001, terrorist attacks, which severely damaged the rest of the industry. In 2003 Southwest operated 2,800 flights a day to 60 airports in 30 states and employed 33,000 people. That year the company had annual revenues of $6 billion and net profits of $442 million. Southwest remained profitable in large part because of Kelleher’s legendary cost controls. Early on, the company crosstrained employees to perform many tasks. They were able to reduce aircraft turnaround time—the time needed to discharge passengers, clean the cabin, refuel, and take off with a new set of travelers—from 55 minutes to 15, with ramp agents, flight attendants, and even pilots pitching in where needed to get the aircraft ready. Rapid turnaround was crucial when Southwest had only three airplanes, but the company kept turnaround low even as the size of the fleet grew to 375. The Southwest pilot Roy Martin told the Wall Street Journal, “It all boils down to Herb’s corporate philosophy. Those airplanes aren’t making any money while they’re sitting on the ground” (October 26, 1992).

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The low-cost, no-frills strategy permeated every decision at the company. Southwest avoided large, congested airports in order to reduce flight delays. The company did not offer inflight meals or reserved seating, and it was the first to introduce ticketless travel. It purchased only Boeing 737 airplanes, so that maintenance would be simplified. Fortune magazine reported that Kelleher personally approved every expenditure over $1,000—“not because I don’t trust our people, but because I know if they know I’m watching, they’ll be just that much more careful” (May 2, 1994). Kelleher obsessively monitored key indicators like cost per available seat-mile to make sure that Southwest always operated below the industry average. In fact, under Kelleher Southwest’s unit costs ran 30 percent below most of its competitors.

CORPORATE CULTURE AND MANAGEMENT STYLE Like Kelleher, Southwest Airlines had a reputation for hard work and high spirits. The company was voted Fortune magazine’s Best Place to Work in America in 1998 and was consistently ranked among the top 10 most-admired companies in the nation. Southwest’s cross-utilization of workers was unique to the airline industry. Pilots helped clean up cabins, ramp workers sold tickets, and Kelleher himself spent time loading baggage, ticketing customers, and mixing drinks on board. Statistically, Southwest employees worked longer and harder than employees at any other airline. Rather than complaining, Southwest employees appeared to love their jobs. Flight attendants sang instructions and pilots cracked jokes. Kelleher continually cultivated such a funloving attitude at the company. He arm wrestled the CEO of another airline for the rights to use a slogan and posed as Elvis for an advertising campaign—although, company legend notwithstanding, he denied ever dressing up as the Easter Bunny. Kelleher seemed to have boundless energy, sleeping only four to five hours a night and reading several books each week. He was a chain-smoker and loved Wild Turkey bourbon and parties. When he was made aware that a night shift could not attend company celebrations due to their schedules, he turned up at an airport at two o’clock in the morning to throw a special barbeque. Kelleher told Investor’s Business Daily that the Southwest spirit was “the core of our success. That’s the most difficult thing for a competitor to imitate. They can buy all the physical things. The things you can’t buy are dedication, devotion, loyalty—the feeling you are participating in a crusade” (April 15, 2003). Stories abounded of Southwest employees going the extra mile: an employee stopped to help a stranded traveler change his tire, flight attendants visited passengers in the hospital, and a reservation agent drove an 85-year-old woman from DFW to Love Field so that she could make her connection.


Herb Kelleher

Kelleher said the company hired for attitude, enthusiasm, and sense of humor. Many applicants were made to take personality tests. The vice president of People—which was Southwest’s equivalent to a Human Resources department—once came to Kelleher embarrassed that she had interviewed 34 candidates for a ramp-agent position in Amarillo, Texas. Kelleher told her to interview 134 people if that was what it took to find the person with the right attitude for the job. The airline was among the most generous in terms of compensation and benefits. In 1974 Southwest became the first airline to offer a profit-sharing plan; employees owned 13 percent of the company’s common stock. Though it was the most heavily unionized carrier—85 percent of employees belonged to unions—management had an unusually cordial relationship with labor. The union leader Tom Burnett told the Wall Street Journal, “Lemme put it this way: how many CEOs do you know who come in to the cleaners’ break room at 3 a.m. on a Sunday passing out doughnuts or putting on a pair of coveralls to clean a plane?” (October 26, 1992). The company’s low costs and high spirits were related. To charge lower fares, both low costs and high employee productivity were needed. When asked who came first—customers, shareholders, or employees—Kelleher explained to BusinessWeek Online, “Employees come first; and if employees are treated right, they treat the outside world right, the outside world uses the company’s product again, and that makes the shareholders happy” (December 22, 2003). Kelleher’s strategy consistently worked. In an industry plagued by fare wars, recessions, oil crises, and disasters, Southwest did not have an annual loss from the time it first turned a profit in 1973 up through the early 2000s. Southwest won the industry’s monthly “Triple Crown” award, for best ontime record, best baggage handling, and fewest customer complaints, more than 30 times between 1988 and 2004, as well as five consecutive annual Triple Crowns between 1992 and 1996. No other airline even came close. Kelleher himself garnered numerous awards for his work at Southwest, including CEO of the Year from both Chief Executive magazine in 1999 and Fortune magazine in 2001. He was proclaimed the CEO of the Decade in the Airline Industry for the 1990s by Financial World, and Texas Monthly selected him as its CEO of the Century.

LOOKS BEYOND RETIREMENT Kelleher successfully battled prostate cancer in 2000. Calling his condition “a temporary setback,” he continued to work and smoke while receiving daily radiation treatments—“I don’t smoke with my prostate,” he quipped in BusinessWeek (January 8, 2001). However, in 2001 Kelleher finally began to think about stepping back from day-to-day management of the company.


He told Fortune, “For me, the cancer was never an issue. It was just something I had to get through, and I tried to keep my sense of humor about it. But I had an agreement with the board that when I got to be 70, we ought to do something about succession” (May 28, 2001). On June 19, 2001, Kelleher retired as president and CEO of Southwest Airlines, remaining chairman of the board. He continued to lead the company’s lobbying efforts in Washington, D.C., and maintained control of schedule planning and aircraft acquisitions. Kelleher was most concerned about finding a successor who would be respectful of Southwest’s culture; thus, he turned to two old friends: James Parker, the company’s longtime general counsel, was chosen to succeed Kelleher as CEO, and Colleen Barrett became president. Barrett began working for Kelleher in 1967 as his legal secretary and gradually moved up through the ranks, serving on the management team for several years before being appointed president. Never one to sit quietly on the porch swing, Kelleher spoke to Fortune about his next project: “When I start to have more time, I have thought that I might write a few things. I might write about science. I might write about astronomy. I might write about Southwest: It would be a fascinating story; I wouldn’t change a thing” (May 28, 2001). See also entry on Southwest Airlines Co. in International Directory of Company Histories.


Belden, Tom, “Cofounder of Southwest Airlines Learned Life, Business Lessons from Mom,” Knight Ridder/Tribune Business News, May 1, 2003. Brooker, Katrina, “The Chairman of the Board Looks Back,” Fortune, May 28, 2001, pp. 62–76. Donlon, J. P., “Air Herb’s Secret Weapon,” Chief Executive, July–August 1999, pp. 32–39. Freiberg, Kevin, and Jackie Freiberg, Nuts! Southwest Airlines’ Crazy Recipe for Business and Personal Success, Austin, Tex.: Bard Press, 1996. Gibson, Jane Whitney, and Charles W. Blackwell, “Flying High with Herb Kelleher: A Profile in Charismatic Leadership,” Journal of Leadership Studies, Summer–Fall 1999, pp. 120–137. Gittell, Jody Hoffer, The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance, New York, N.Y.: McGraw-Hill, 2003. Grugal, Robin, “Decide upon Your True Dreams and Goals: Corporate Culture Is the Key,” Investor’s Business Daily, April 15, 2003. “Herbert D. Kelleher,” BusinessWeek, January 8, 2001, p. 73.

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Herb Kelleher Labich, Kenneth, “Is Herb Kelleher America’s Best CEO?” Fortune, May 2, 1994, pp. 44–47, 50, 52. Morrison, Mark, “Herb Kelleher on the Record,” BusinessWeek Online, December 22, 2003, http://www.businessweek.com/ bwdaily/dnflash/dec2003/nf20031222_1926_db062.htm.

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O’Brian, Bridget, “Flying on the Cheap: Southwest Airlines Is a Rare Air Carrier; It Still Makes Money,” Wall Street Journal, October 26, 1992.

—Kris Swank


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Edmund F. Kelly 1946– President, chief executive officer, and chairman, Liberty Mutual Group Nationality: Irish. Born: 1946, in Ireland. Education: Queen’s University, Belfast, bachelor’s degree; Massachusetts Institute of Technology, PhD. Career: Aetna Life and Casualty Company, 1974–1992, began as actuarial student, became president of employee benefits; Liberty Mutual, 1992–1998, president and chief operating officer; 1998–, president and chief executive officer; 2000–, president, chief executive officer, and chairman. Address: Liberty Mutual, 175 Berkeley Street, Boston, Massachusetts 02116-5066; http://www.liberty mutual.com/.

■ Edmund F. Kelly became a successful leader of Liberty Mutual Group, the eighth-largest insurer in the United States, due to his hard work and ability to accomplish difficult tasks. When he began working for Liberty Mutual, Kelly had to make difficult decisions in order to make the company profitable.

EDUCATION AND EARLY CAREER Edmund Kelly was born in 1946 in Ireland. He earned a bachelor’s degree from Queen’s University in Belfast and a doctorate from the Massachusetts Institute of Technology. Shortly after earning his doctorate, Kelly began working as an assistant professor of mathematics at the University of New Brunswick and then at the University of Missouri at St. Louis.

JOINS AETNA LIFE AND CASUALTY Kelly left academia in 1974 to begin working for Aetna Life and Casualty. It was clear from the beginning that Kelly would


perform well. He was not afraid to take difficult jobs; he told Carol Davenport of Fortune that he had a “willingness to tackle jobs that others walked away from.” He became the head of the insurer’s pension and financial services unit in 1985. In this position he strengthened marketing and introduced new investment products. The result was a 38 percent increase in pension assets. By introducing cost controls and better risk management, he also increased pension earnings by 51 percent. Due to these successes, Kelly became president of employee benefits, which was Aetna’s largest division. After eighteen years with Aetna, Kelly left to work for Liberty Mutual.

JOINS LIBERTY MUTUAL In 1992 Kelly became president and chief operating officer for Liberty Mutual. Faced with stagnation in the industry, Kelly had to make some difficult decisions at Liberty Mutual, among them letting 1,500 people go. After this workforce reduction and with better marketing, Liberty Mutual saw its annual profits increase by as much as 67 percent. Kelly believed in a strong customer-focused business model. For example, he felt that it was essential for customers to be able to reach Liberty Mutual through the Internet, over the phone, or in person—“channel neutral,” as he described it to Lisa Howard of National Underwriter, meaning that customers could contact the company in the manner of their choosing. Emphasizing his belief in the importance of loyal customers, he boasted that the average Liberty Mutual customer had been with the company for fourteen years. He also believed that the company’s selection of customers had a great impact on profitability.

KELLY BECOMES CHAIRMAN In 1998 Kelly was elected chief executive officer, and in 2000, chairman, of Liberty Mutual Group. He expanded the international reach of the company, opening offices in Argentina, Australia, Brazil, Canada, France, Hong Kong, Japan, England, and China. In 2004 Liberty Mutual opened its first insurance sales office in Chongqing, China, a city of 31 million people. From 1994 to 2004 Kelly increased international insurance premiums from $190 million to $4 billion.

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In an effort to protect his company and maintain competitiveness, Kelly took part in reorganizing Liberty Mutual Group into a mutual-holding company. This new structure created three separate stock-insurance companies under the ownership of Liberty Mutual Holding Company. This was a difficult task that Kelly had to defend before the Massachusetts Division of Insurance headquarters in Boston, where he argued that the move was necessary to make Liberty Mutual more competitive.

See also entry on Liberty Mutual Holding Company in International Directory of Company Histories.


Arndt, Sheril, “Managed Care Key to Health Co. Survival,” National Underwriter Property & Casualty: Risk & Benefits Management, October 1, 1990, p. 9. Davenport, Carol, “On the Rise,” Fortune, November 6, 1989, p. 196. Howard, Lisa, “Liberty Focuses on Acquisition Channels,” National Underwriter, August 2, 1999, pp. 15–16. Nelson, Scott Bernard, “CEO of Boston Insurance Company Announces Plans for New Format,” Boston Globe Knight Ridder/Tribune Business News, October 11, 2001. —Deborah Kondek

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Mikhail Khodorkovsky 1963– Former chairman and chief executive officer, Yukos Oil Corporation Nationality: Russian. Born: June 26, 1963, in Moscow, USSR. Education: Mendeleev Institute of Chemical Technologies, BA, 1986. Family: Son of a construction worker and a production engineer; married twice; children: four. Career: Menetep Bank, 1989–1993, president; Russian Ministry of Fuel and Energy, deputy minister, 1993–1994; Rosprom, 1994–1996, chief executive officer; Yukos Oil Corporation, 1996–2003, chairman and chief executive officer.

■ Mikhail Khodorkovsky, the world’s 16th-wealthiest person in 2004, rose from the ashes of the Soviet Union to become the richest of the “oligarchs,” the hyperwealthy billionaires who rapidly gained control of Russian industry during President Boris Yeltsin’s anything-goes privatization of Soviet-era assets. The former Communist Youth League activist bought Yukos Oil Company for a pittance in 1995, but hardball tactics raised the ire of shareholders, foreign banks, and Western partners. Khodorkovsky responded by making Yukos the most transparent of Russian companies, further increasing his wealth. Accompanying that wealth was a growing interest in Russian politics; in October 2003 Khodorkovsky was jailed, charged with embezzlement, theft, and tax evasion by Russian authorities. Khodorkovsky and his supporters blamed Russian President Vladimir Putin, and fear of the oligarch’s political influence, for the arrest.

A COMMUNIST CAPITALIST A leading figure in one of his country’s most turbulent times, Mikhail Khodorkovsky thrived as both a Soviet and a Russian. Born to a lower-middle-class Jewish family in Moscow, he was a straight-A student all through school, eventually


Mikhail Khodorkovsky. AP/Wide World Photos.

studying at two of Moscow’s most prestigious universities. When the Soviet leader Mikhail Gorbachev began liberalizing the Soviet economy in 1986, Khodorkovsky was deputy chief of a Young Communist League district committee in Moscow. As private business opportunities slowly became legal, the young Communist quickly became a young entrepreneur, trafficking in blue jeans, brandy, and computers. Like others who rapidly became wealthy as the USSR crumbled, he also had ties with the Russian mafia—money laundering and trafficking in women were among his other alleged activities. With Gorbachev’s blessing, Khodorkovsky and his business partners established Menetep Bank, one of the Soviet Union’s first private banks, in 1988. Handling payments to victims of the Chernobyl nuclear reactor meltdown was one of its first tasks. Menetep evolved into Rosprom, an investment company that managed and modernized hundreds of post–Soviet era

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companies. The capital of that company, and the rising mogul’s political connections, enabled Khodorkovsky to buy Yukos, placing himself at the oil company’s head. Aggressive (and in most countries, illegal) acquisitions quickly made Yukos Russia’s second-largest oil company, but it also led to a crossroads in Khodorkovsky’s career.

PURER CAPITALISM, IMPURE POLITICS Like fellow oligarchs, such as the car shark Boris Berezovsky and the media magnate Vladimir Gusinsky, Khodorkovky essentially pursued gangster methods to push out competitors and rise to power in Yeltsin’s Russia. That strategy worked less well beyond Russia’s borders, however. Foreign investors were suspicious of the company’s books, and the instability of Russia’s economy as a whole, highlighted by the devaluation of the ruble in 1998, made outside capital difficult to attract. Khodorkovsky responded by making Yukos Russia’s most transparent company. Yukos was the first major Russian corporation to have a Western-style vertically integrated management structure, featuring a board of directors with Americans and Europeans overseeing the company. Yukos also followed American accounting standards, and by the turn of the twentyfirst century was a model for orderly capitalism in the new Russia.

ization of a fertilizer plant. Khodorkovsky’s many Western supporters cried selective prosecution and considered the tycoon a political prisoner. Putin called the arrest a statement that no one in Russia is above the law, even the wealthiest oligarch. In the spring of 2004 Khodorkovsky remained in jail, but Yukos continued to thrive—an orderly succession plan crafted before the CEO’s jailing maintained investor confidence, and the company saw profits increase greatly as oil prices reached record levels in 2004. As a result, Khodorkovsky’s wealth doubled, even as he languished in jail and Yukos’s assets were frozen by the Russian government. With a net worth of $15 billion, the onetime Communist from the lower middle class was 16th on Forbes magazine’s list of the world’s richest people, up from $8 billion and 26th place in 2003.


“Fortune in Hand, Russian Tries to Polish Image,” New York Times, August 18, 2001. Gumbel, Peter, “Down by Law: The Arrest of Mikhail Khodorkovsky, Russia’s Richest Man, Sends Markets Tumbling and Stokes Fears That Putin Is Moving Toward Authoritarianism,” Time International, November 10, 2003, pp. 26–31.

Meanwhile, Khodorkovsky attempt to rehabilitate his gangster image by employing the public relations firm APCO Worldwide to build investors’ trust. APCO told Khodorkovsky to adopt “honesty, openness, responsibility” as his new model. Khodorkovsky made himself available for sympathetic press interviews that highlighted his workaholic drive for success and common-man values. “I have to travel a lot, but relaxation to me is when I am at home” (Tavernise, October 31, 2003). He also began supporting free-market Russian political parties, allowing open speculation that he would be open to running for the Russian presidency in 2008.

Heintz, Jim, “Russian Tycoon Arrest Could Hurt Economy,” Guardian (UK), October 26, 2003.

Here he ran afoul of Vladimir Putin, who, since succeeding Yeltsin at the dawn of 2000, had successfully consolidated power and shown little tolerance of genuine political opposition. Months of investigation led to Khodorkovsky’s arrest in October 2003—the charges mainly dated to the 1994 privat-

Tavernise, Sabrina, “Interview with Mikhail Khodorkovsky: Money, Power and Politics,” Frontline/World, October 31, 2003.

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Hoffman, David, “Russia’s Billionaire Matchmaker to the West,” Washington Post, September 24, 2002. Isachenchov, Vladimir, “Tycoon Khodorkovsky Offers More Repentance for Liberals’ Mistakes,” Associated Press, April 14, 2004. Myers, Steven Lee, “Criminal Inquiry into Russian Oil Company Is Renewed,” New York Times, October 4, 2003.

—Alan Bjerga


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Naina Lal Kidwai 1957– Vice chairman, managing director, and head of investment banking, HSBC Group Nationality: Indian. Born: 1957, in India. Education: Delhi University, BS, 1977; Harvard University, MBA, 1982. Family: Daughter of an insurance company CEO; married Rashid K. Kidwai (managing director); children: two. Career: Price Waterhouse, 1977–1979, associate; ANZ Grindlays Bank, 1982–1985, investment banker; 1985–1989, head of merchant banking, western region; 1989–1991, head of merchant banking; 1991–1994, head of retail banking, western region; Morgan Stanley (India), 1994–1997, vice chairman and head of investment banking; JM Morgan Stanley, 1997–2002, vice chairman and head of investment banking; HSBC Group, 2002–, vice chairman, managing director, and head of investment banking. Awards: World’s Top 50 Corporate Women, Fortune, 2000–2003; Global Influentials, Time, 2002; International Power 50, Fortune, 2003; 25 Most Powerful Women in Business, Business Today (India), 2003. Address: HSBC India, 5th Floor, 52/60, Mahatma Gandhi Road, Mumbai 400 001 India; http://www.hsbc.co.in.

■ Naina Lal Kidwai combined a talent for business with a keen eye for emerging trends to become one of India’s most influential investment bankers. She helped some of the nation’s most-promising companies to grow and prosper. She combined her business acumen with a team-based management philosophy and a strong social consciousness.

BREAKING THE GLASS CEILING Naina Lal Kidwai came from a family of high achievers. Her father was the CEO of a leading Indian insurance compa-


ny, her sister became one of India’s top golfers, and her husband, Rashid K. Kidwai, was managing director of Digital Partners, a nonprofit organization. Kidwai finished first in her class every year at high school and was chosen school captain. Her lifelong friend, film director Mira Nair, told the Times of India, “When I first met Naina [in school], she was formidable—already something of a legend. She’d stand first every year, was a brilliant debater, represented the school in every sport” (March 23, 2003). By the age of 16 Kidwai had decided on a career in business, still a stronghold of male executives at the time. Kidwai earned an economics degree from Delhi University, where she was also elected president of the student union and won a college leadership award. She then completed a chartered accountancy course before applying to Price Waterhouse as a trainee in 1977. One of the partners told her that since there were no other women in the firm, they did not quite know what to do with her. She stayed with Price Waterhouse for three years as an independent auditor, examining clients’ accounting and finance records to ensure their compliance with established controls, policies, procedures, and laws. Kidwai decided that acquiring more degrees was her best defense against gender discrimination. In 1982 she became the first female from her country to earn an MBA from the prestigious Harvard Business School. After graduation Kidwai returned to India and joined ANZ Grindlays Bank. In the 1980s India’s investment-banking industry was in its infancy, and there was a decided lack of role models for young Indian businesswomen. Kidwai found her own path and within three years rose to head Grindlays’s western regional operations for investment banking. In 1989 she was promoted to head the entire division. By 1991 Kidwai felt it was time for a new challenge and made a lateral move to the company’s retail-banking division.

INVESTMENT BANKER TO HIGH-TECH COMPANIES In 1994 Morgan Stanley opened offices in India and recruited Kidwai to head their investment-banking business. She convinced Morgan Stanley to focus on emerging industries such as information technology (IT) and telecommunications. That turned out to be a winning strategy when Kidwai demonstrated a talent for brokering financial agreements between in-

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vestors and India’s hottest high-tech companies. She found financing for Wipro and Infosys, India’s top IT services firms. She managed the initial public offerings (IPOs) of India’s fastest-growing telecomm, Bharti Tele-Ventures, and leading automaker, Maruti Udyog. For Morgan Stanley, Kidwai engineered a joint venture with Mumbai-based JM Financials in 1997. Under Kidwai, the renamed JM Morgan Stanley became the most important investment bank in India, managing corporate mergers worth nearly $700 million in 1999. In 2002 Kidwai was recruited by HSBC Securities (part of the Hong Kong and Shanghai Bank Corporation) to become their vice chairman, managing director, and head of investment banking in India. She was also given oversight of the firm’s securities trading and research. Kidwai had been courted by American banks but, she told Time magazine, never wanted to work anywhere except India: “In the U.S. I may have brokered bigger deals, but here, it’s much more at the cutting edge of reform, the ability to influence, to shape” (December 2, 2002).

A TEAM PLAYER AT THE TOP Kidwai was called self-motivated, confident, and a shrewd negotiator. In 2003 she was estimated to be the highest-paid banker in India. She received numerous national and international honors. In 2002 Time magazine selected her as one the 15 most-promising young executives (the “global influentials”). Fortune magazine and India’s Business Today put her on their lists of the most powerful women in business. Yet she always gave credit for her success to the teams she assembled. “Investment banking is about getting people with various dimensions and skill-sets together,” she explained to India’s Business Today (November 23, 2003). “I believe the credit goes to the teams I have worked with,” she told the Times of India. “It is never the individual but groups of people who make an idea a success” (October 10, 2003). By 2003 Kidwai felt a glass ceiling no longer existed, pointing out that the number of women studying business and commerce had increased tenfold since she attended Harvard in the

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early 1980s. The same Price Waterhouse executive who was stumped about what to do with a woman banker in 1977 told her that by 2002 he had more trouble finding qualified male candidates than female. Kidwai was active in her community with organizations such as India’s Self-Employed Women’s Association and Digital Partners, a nonprofit organization managed by her husband dedicated to closing the technology gap between rich and poor. Kidwai told the Times of India, “I am a firm believer in the fact that one must give back to society what one has received” (October 10, 2003).

See also entries on HSBC Holdings plc and Price Waterhouse LLP in International Directory of Company Histories.


Carvalho, Brian, “Iron Lady: Naina Lal Kidwai; The 25 Most Powerful Women in Indian Business,” Business Today (India), November 23, 2003, p. 70. Chowdhury, Neel, “Naina Lal Kidwai, 43: Vice Chairman JM Morgan Stanley (India),” Fortune, October 16, 2000, p. 166. De, Papiya, “I Have Always Enjoyed Being in Positions of Leadership,” Financial Express (India), October 11, 2003. Nandi, Suresh, “Financial Sector: Hello Ms. Money,” India Today, October 20, 1997, p. 62. Orecklin, Michele, “Naina Lal Kidwai: Managing Director of HSBC India, She Stays in India because She Can Help Open Its Economy to the World,” Time, December 2, 2002, p. 55. Sanghvi, Malavika, “Two Women. Two Friends,” Times of India, March 23, 2003. Sawhney, Anubha, “Work Is Worship for Naina,” Times of India, October 10, 2003. —Kris Swank


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Kerry K. Killinger 1949– Chairman, president, and chief executive officer, Washington Mutual Nationality: American. Born: June 6, 1949, in Des Moines, Iowa. Education: University of Iowa, BBA, 1970; MBA, 1971. Family: Married Debbie Roush. Career: Bankers Life Insurance Company of Nebraska, 1972–1975, investment analyst; Murphey Favre, 1976–1982, securities analyst, then executive vice president; Washington Mutual, 1983–1986, executive vice president of financial management, investor relations, and corporate marketing; 1986–1988, senior vice president; 1988–1990, director; 1990–1991, president and chief executive officer; 1991–, chairman, president, and chief executive officer. Awards: Executive of the Year, Puget Sound Business Journal, 1997; Banker of the Year, American Banker magazine, 2001; Thomas Medal of Achievement, Fred Hutchinson Cancer Research Center, 2002; Educational Distinguished Leadership Award, Alliance for Education, 2004. Address: Washington Mutual Bank, 1201 3rd Avenue, Seattle, Washington 98101; http://www.wamu.com.

■ Under the leadership of Kerry Killinger, Washington Mutual grew from a little-known regional thrift to a national savings institution and lender, servicing more than 10 percent of the U.S. mortgage market. The company became the national leader in mortgage servicing and originations, with a loan portfolio of nearly $750 billion. Underlying this amazingly fast growth was Killinger’s focus on servicing the blue-collar and lower-end white-collar markets, which had often been underserved or overcharged by more traditional banking organizations. Killinger, a slight, quiet man, born and raised in Iowa, had the self-professed goal of reinventing how people thought about banking. International Directory of Business Biographies

DRIVEN During his early career, Killinger worked as an investment analyst for Bankers Life Insurance Company of Nebraska, then moved to the state of Washington to work as a securities analyst at Murphey Favre, a brokerage house. While living in Spokane, he spent evenings and weekends fixing up rundown properties around town, housing his family in a mobile home to keep personal expenses low. He systematically sold off a property every two months for several years and used his profits to purchase shares of his employer. In 1982 he brokered a deal to sell Murphey Favre to Washington Mutual, then a thrift in Seattle with $2.7 billion in assets. The deal earned him the position of executive vice present of financial management, investor relations, and corporate marketing. As Killinger rose through the executive ranks of the bank, he utilized what employees described as a genuine, down-to-earth management style to begin moving the regional bank into the national spotlight.

THE ART OF THE ACQUISITION When he took the reins in 1990, Killinger put his growth plan into full gear, undertaking numerous acquisitions and transforming Washington Mutual in the process. At a time when bank and brokerage takeovers often failed, Killinger developed a successful approach to these deals. First, he picked targets that would make Washington Mutual an instant market leader. Thus, Killinger ensured that the deals would give the bank greater market clout and efficiencies and avoided having to formulate a justifying strategy after the acquisition was made. Second, Killinger insisted on working with sellers whose values matched his own, which resulted in a good fit once the two companies merged. A third Killinger strategy was to make quick and blunt decisions about management, with executives from Washington Mutual clearly taking charge after the deal closed. Although less-senior executives of acquired companies often were offered great career opportunities, those at the top remained consistent. Killinger also smoothed the transition of the acquired businesses into the Washington Mutual organization by giving existing frontline management important functions in the assessment and integration process. He saw this as more efficient use of the company’s talent than relying on a specialized team

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created specifically for the acquisition deal. Killinger was known for closing deals quickly and immediately seeking, in person to win the new employees’ trust. This hands-on approach resulted in Killinger meeting over 11,000 of his new employees in the year following a particularly aggressive acquisition period. Finally, Killinger vowed to keep growing internally, even as acquisitions occurred. This consistent focus on the day-today tasks ensured that the company did not become so reliant on acquisitions that it abandoned its core business, and it helped investors remain confident in the underlying value of the bank. By combining acquisitions and internal growth, Killinger was able to meet his earnings-per-share goals. Despite his best efforts, however, Washington Mutual’s explosive growth did not come without some growing pains, such as late property-tax payments, bungled escrow accounts, and lost mortgage payments. However, by removing inefficient vendors and developing its own customer system, Washington Mutual has greatly reduced these issues.

teraction greatly increases the chance of cross-selling products and building customer retention in the process. Killinger applied retail approaches and philosophies to banking in order to achieve high-quality customer service, as could be seen not only in the appearance of bank branches but also in the way the company managed its associates. Killinger liked to hire employees with a retail, rather than a banking, background. He allowed control of branches to originate at the local level, giving a branch the freedom to style its products and staffing mix to the market it served. Killinger also promoted the use of unusual ideas, urging his employees to “think outside the vault.”

See also entry on Washington Mutual, Inc. in International Directory of Company Histories.


BANKS OF THE FUTURE Washington Mutual developed a new style of bank, which Killinger saw as having the feel of a comfortable department store. There are no teller windows or velvet ropes, but there is a WaMu kids corner where children can play while their parents do their banking. The look and feel of the bank is internally called occasio, which is Latin for “favorable opportunity.” A central aspect of the occasio approach is the teller tower, a pedestal where sales associates stand before screens to direct transactions. Although tellers handle no money (customers needing cash are sent to machines), they do have excellent opportunities to get to know their customers personally. This in-

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Anders, George, “7 Lessons from WaMu’s Playbook,” Fast Company, January 1, 2002, pp. 102–107. Morris, Kathleen, and Seanna Browder, “Washington Mutual’s CEO: Energizer Banker,” BusinessWeek, July 14, 1997, p. 54. Neurath, Peter, “All the Right Assets,” Puget Sound Business Journal, December 26, 1997. Tischler, Linda, “Bank of (Middle) America,” Fast Company, March 1, 2003, pp. 104–109.

—Michelle L. Johnson


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James M. Kilts 1948– Chairman and chief executive officer, Gillette Company Nationality: American. Born: February 10, 1948, in Chicago, Illinois. Education: Knox College, BA, 1970; University of Chicago, MBA, 1974. Family: Married Sandra. Career: General Foods Corporation, 1970–1984, various positions; Oscar Mayer Foods, 1984–1985, vice president and division manager, consumer products; Kraft Limited Canada, 1985–1987, president; Kraft General Foods, 1987–1989, senior vice president, strategy and development; Kraft USA and Oscar Mayer Foods, 1989–1994, president; Philip Morris Companies Food Operations, 1994–1997, executive vice president; Nabisco Holding Corporation, 1998–2000, president and chief executive officer; Gillette Company, 2001–, chairman and chief executive officer. Awards: Distinguished Corporate Alumnus, University of Chicago Graduate School of Business, 2001. Address: The Gillette Company, Prudential Tower Building, Boston, Massachusetts 02199; http://www.gillette.com.

■ James Kilts earned a reputation as one of the top executives in the consumer products sector by leading turnarounds at Nabisco Holding Corporation and the Gillette Company. He held a variety of positions with General Foods during the 1970s and 1980s before ascending to a leadership position as president of Kraft Limited Canada in 1985. After overseeing the integration of Kraft and General Foods as executive vice president with the Philip Morris Companies between 1994 and 1997, he was elected president of Nabisco. Four years later he accepted the position of chairman and chief executive officer at Gillette. Kilts was known for a decisive management style and a keen focus on essentials. International Directory of Business Biographies

EARLY EXPERIENCE IN THE FOOD INDUSTRY Kilts gained his first exposure to the food industry in high school, when he began working during the summers for General Foods in his hometown of Chicago. After graduating from high school, Kilts enrolled at Knox College in nearby Galesburg, Illinois. He received a BA in history from the school in 1970. He earned a position with General Foods after receiving his undergraduate degree. Kilts later enrolled at the University of Chicago Graduate School of Business, where he completed a master of business administration degree in marketing in 1974. Kilts remained with General Foods after he received his graduate degree. He held a series of lower-level executive positions for the next 10 years. He was promoted in 1984 to the position of vice president and division manager of consumer products for Oscar Mayer Foods, a division of General Foods. During the following year he was named president of Kraft Limited Canada, a position that he held from 1985 through 1987. He returned to Kraft General Foods in 1987, serving as senior vice president for strategy and development. Kilts was appointed president of Kraft USA and Oscar Mayer in 1989.

CONTINUING ASCENT AT PHILIP MORRIS Kilts’s standing in the corporate world grew during the 1990s. He served as president of Kraft USA and Oscar Mayer Foods from 1989 through 1994. In 1994 he was appointed senior vice president for food operations at the Philip Morris Companies, which had acquired Kraft and General Foods during the 1980s. Kilts was responsible for running the $27 billion divisions of Philip Morris, and he made his mark by successfully integrating these divisions. Kilts earned a reputation for efficiency and cost cutting. He required managers to justify virtually every expense, which measurably lowered costs within his divisions. Other companies attempted to recruit Kilts, including the Nabisco Holding Corporation. Nabisco had averaged nearly $450 million in capital expenditures during the mid- to late-1990s, yet the company did not experience significant growth during that period.

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SUCCESS AT NABISCO Nabisco hired Kilts as its president and chief executive officer in 1998. Kilts spent little time in his new position before he began making significant changes within the company. He announced in June 1998 that the company would lay off 3,500 employees throughout its work force. Nabisco, known for its cookie and cracker products, had seen many of its products lose market share. After cutting costs, Kilts used the savings to increase Nabisco’s advertising by 20 percent per year. Kilts’ strategies worked. He was credited with having revitalized such products as Grey Poupon Dijon mustard, Planters peanuts, and A1 steak sauce. New products were also successfully introduced, such as Cream Savers, an extension of the company’s Life Savers candy line. Philip Morris purchased Nabisco in 2000 for $14.9 billion after nearly all Nabisco’s major product lines had gained market share under Kilts’ leadership.

MANAGEMENT STYLE Analysts marveled at Kilts’ “relentless focus” in his management style (Symonds and Forster, January 26, 2001). “He’s thinking about business seven days a week,” said Douglas R. Conant, president and chief executive officer of Campbell Soup (January 26, 2001). In Kilts’s speeches, he identified four major factors he considered critical in turning a business around: integrity, enthusiasm, action, and understanding. He said that companies must make honest assessments of their specific situations. “Most companies get into trouble not because they make a world-class blunder, although that happens sometimes,” Kilts said in 2001. “Most often they get into trouble through a succession of well-intentioned, but flawed, decisions that build on each other until it becomes very difficult to unravel the problem.” (Chicago Business Online, November 5, 2001). Effective communication was also a key to Kilts’s success. When he took over at Nabisco, he immediately told employees what he expected of them and what they should expect from him. He also noted that the leader of a turnaround must be a “head cheerleader,” instilling confidence in those involved (Chicago Business Online, November 5, 2001). Although data studies may be necessary in business, Kilts said that they should not be conducted over a prolonged period of time without executive action. Kilts became a prized commodity on the basis of his performance at Nabisco. The Gillette Company, which had experienced four years of underproduction, looked outside its own ranks for the first time in nearly 70 years to choose a new leader. The company hired Kilts in 2001 based on his decisive management style. “Jim Kilts has one of the best track records

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in the entire consumer products sector,” said Richard R. Pivirotto, the non-executive chairman of Gillette’s board. “His broad-based consumer marketing background and decisive management style make him uniquely qualified to lead The Gillette Company into an era of sustained, profitable growth” (Business Wire, January 22, 2001).

MORE SUCCESS AT GILLETTE Kilts performed the same type of turnaround at Gillette as he had at Nabisco. He was critical of mistakes made by the company prior to his arrival and was “brutally honest” in discussions with analysts about the company’s past performances (New York Times, June 7, 2001). Kilts put into motion plans to increase spending on advertising, to adjust prices on products, to reduce shipments to retailers, and to eliminate poorselling products. Sales rose 5 percent during Kilts’s first year with the company to $8.45 billion. During the following year, sales rose even further to $9.25 billion. Gillette’s stock price increased 20 percent between 2001 and 2004. Based on this success, Kilts solidified his position as one of the top executives in the consumer products sector. Kilts was considered for the top position at the Coca-Cola Company in 2004 but withdrew his name from consideration, as he planned to remain with Gillette.

PHILANTHROPY Kilts contributed heavily to his alma maters, Knox College and the University of Chicago Graduate School of Business. In 1999, when he was still the head of Nabisco, he established the James M. Kilts Center for Marketing at the University of Chicago, which sponsors an array of marketing research projects. He also donated $11 million in 2001 to Knox College to increase the school’s endowment. Kilts served on the Knox College board of trustees as well as the Advisory Council for the University of Chicago Graduate School of Business.

See also entries on The Gillette Company, Kraft Foods Inc., Nabisco Foods Group, Oscar Mayer Foods Corp., and Philip Morris Companies Inc. in International Directory of Company Histories.


Barnes, Julian E., “Gillette’s Chief is Critical of the Company’s Missteps,” New York Times, June 7, 2001. Gatlin, Greg, “Kilts to Wear Mantle of New Gillette CEO,” Boston Herald, January 23, 2001. “Gillette Elects James M. Kilts Chairman and Chief Executive Officer,” Business Wire, January 22, 2001.


James M. Kilts McGlothlin, Ryan, “Escaping the Circle of Doom,” Chicago Business Online, November 5, 2001, http:// www.chibus.com/global_user_elements/ printpage.cfm?storyid=139722. Reidy, Chris, “Gillette Appoints Kilts Chairman,” Boston Globe, January 23, 2001.


Symonds, William C., and Julie Forster, “Can James Kilts Put a New Edge on Gillette?” BusinessWeek Online, January 26, 2001, http://www.businessweek.com/bwdaily/dnflash/ jan2001/nf20010126_543.htm.


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Eric Kim 1954– Executive vice president, Samsung Corporation Nationality: American. Born: 1954, in Korea. Education: Harvey Mudd College, BS; University of California–Los Angeles, MS; Harvard, MBA. Family: Married (wife’s name unknown); children: two. Career: Lotus Development Corporation, general manager; Dun & Bradstreet Corporation, chief technology officer; Pilot Software, president and chief executive officer; Spencer Trask Software Group, venture capitalist and chief executive officer; Samsung Corporation, 1999–, executive vice president. Address: Taepyung-ro Building, 310 Taepyung-ro 2-ka, Chung-ku, Seoul, South Korea; http://www. samsungusa.com.

■ Eric Kim was already an accomplished businessman when he joined Samsung in 1999. Thanks to his marketing strategies and creativity, he transformed Samsung from just another Asian electronics off-brand to an impressive household name—doubling U.S. profits and brand value for the company in less than three years. After partnering with Sprint PCS, Napster, and Warner Brothers, Samsung became one of the world’s fastest-growing electronics leaders, recognized as a brand symbol on the cutting edge of technological innovation.

A CALIFORNIA DREAM FOR AN ASIAN ELECTRONICS COMPANY Kim was born in Korea but left at the age of 11 and was reared by his Korean parents in Southern California. He graduated from Harvey Mudd College in Claremont, California, with a BS in physics. After earning his MS in engineering from the University of California at Los Angeles, he went on to get an MBA from Harvard. His considerable knowledge in the areas of software and electronics, combined with advanced finance and marketing skills, gave him an unequivocal advantage in the job market.

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He became a general manager for Lotus Development Corporation, a recognized leader in computer software. From there, Kim took the job of chief technology officer at Dun & Bradstreet Corporation and then president and chief executive officer of Pilot Software. Wanting more unbridled freedom for his creative marketing skills, Kim took over as venture capitalist and chief executive officer for Spencer Trask Software Group, a technology-focused venture capital firm in New York. Around that time (1990s), Samsung had been operating (out of South Korea) for nearly three decades as a behind-thescenes supplier of computer monitors and semiconductors for large multinational electronics corporations. Even as it ventured into its own products for the end-user market, Samsung had little name recognition of its own and was arguably the biggest consumer electronics manufacturer that consumers had never heard of. According to Kim, that was partly because the company had 55 advertising agencies promoting its products. The challenge was too much for Kim to resist. Having lived the West Coast life, he knew the enormous market potential for some of Samsung’s ideas, and marketing was his forte. He later recounted, for Time (November 30, 2002) reporter Donald MacIntyre, how he convinced Samsung that it needed to have a single message: “We were the new kids on the block, and the block was noisy.”

THE WORLD NOTICES SAMSUNG In 1999 Kim returned to his homeland, Korea, to become marketing executive vice president for Samsung Electronics Company in Seoul. In addition to his technical skills, his bilingual English and Korean language proficiency clearly gave him an advantage in the worldwide market he wanted to develop. His first big success was talking Samsung into spending $400 million on a worldwide advertising campaign all under one roof—that of Madison Avenue’s Foote, Cone & Belding Worldwide. The new advertising featured sleek new Samsung products being used by sexy, angelic models in a surreal dreamlike world. The world noticed. Next, Kim ordered a redesign of the company’s Nexio handheld device, also ordering a better screen, keyboard, and wireless lan connection for it. In the United States the average selling price of Samsung phones soon shot ahead of competitor


Eric Kim

Nokia products. People could use their phones to read and send e-mail, in addition to accessing English/Korean dictionaries, Buddhist songbooks, the Bible, and electronic games, all loaded into the devices’ memory banks. Soon Samsung had been transformed from an original equipment manufacturer for use in others’ products to a company that proudly developed products bearing its own name.

REACHING FOR THE STARS Another Kim signature strategy was to align Samsung with high-end recognized leaders in the industry. Thanks to his marketing savvy and direct-approach management style, Samsung developed a partnership in the United States with Sprint PCS, with which it coordinated from a design and marketing center in Dallas, Texas. It also partnered with Napster for a flashy new portable music device. In 2003 Samsung announced a groundbreaking global partnership with Warner Brothers, covering worldwide promotional rights to the popular Matrix trilogy. By the beginning of 2003 Samsung’s brand value had doubled, and soon it became the fastest-growing global brand. Kim did not rest on his laurels. He continued to aim for new markets in more high-end distribution channels and to cut the time it took to get new products on the retail shelves world-


wide. In the end, Samsung metamorphosed from a brand that one purchased if one could not afford Sony or Toshiba to a brand sought after by global consumers looking for the most stylish and fun models of a variety of products, from cell phones to plasma screen televisions, California-style.

See also entries on The Dun & Bradstreet Corporation, Lotus Development Corporation, and Samsung Electronics Co., Ltd. in International Directory of Company Histories.


MacIntyre, Donald, “2002 Global Influentials: Eric Kim, Marketing Chief of Samsung,” Time, November 30, 2002, http://www.time.com/time/2002/globalinfluentials/ gbikim.html. “Samsung and Napster Partner on New Portable Music Device,” audiorevolution.com, September 19, 2003, http:// www.audiorevolution.com/news/0903/19.napster.shtml. “Samsung Electronics and Warner Bros. Consumer Products Announce Groundbreaking Matrix Partnership,” February 6, 2003, http://www.samsung.com/sg/presscenter/ pressrelease/corporatenews_20030206_0000016177.asp. —Lauri R. Harding

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Kim Jung-tae 1947– Chief executive officer and president, Kookmin Bank Nationality: Korean. Born: August 15, 1947, in South Chohlla, Korea. Education: Seoul National University, BA, 1970; MBA, 1974. Career: Cho Hung Bank, 1974–1976, research clerk; Daishin Securities Company, 1976–1982, eventually executive director; Dongwon Securities, 1982–1997, eventually vice president of Dongwon Venture Capital; 1997–1998, CEO; Housing & Commercial Bank, 1998–2001, CEO and president; Kookmin Bank, 2001–, CEO and president. Address: Kookmin Bank, 9-1 2-ka, Namdaemun-ro, Chung-ku, Seoul, 100-703, South Korea; http:// www.kookminbank.com.

value of sound economics over cronyism. Throughout his career Kim maintained a strong tie to his parents and continued to work on the family farm on weekends. He worked in the securities business for more than 20 years, eventually becoming executive director of Daishin Securities Company and later CEO of Dongwon Securities in the 1990s, where analysts noted he cut his business teeth. His refusal to borrow in order to promote growth paid off when an economic crisis hit South Korea’s and most of the rest of Asia’s financial and banking markets in 1997. Unsaddled with debt, Kim was able to ride out the storm; while other securities firms collapsed, Dongwon made it through the crisis relatively unscathed. The Seoul National University professor Cho Dong Sung took note of Kim’s record at Dongwon, eventually recommending him to the Housing & Commercial Bank’s (H&CB) board, which was looking for a new leader outside of the traditional banking community. Analysts noted that Kim’s profitfirst approach was unique in Korean banking circles. In 1998 he was named president and CEO of H&CB; he had taken the first step on a meteoric ride through the banking business.

■ Over the course of his career Kim Jung-tae became a legend

TURNS H&CB AROUND

in the Korean banking industry. As president of South Korea’s Housing & Commercial Bank, which later became H&CB, he turned the company into the most profitable bank in South Korea and completed the biggest bank turnaround in the country’s history. He also ushered in a new Western approach to banking, one that did not rely on government backing or old-school approaches to business. In the process Kim reshaped the entire industry and brought South Korea’s banking system back to financial health. He helped create the country’s first “super” bank, Kookmin Bank, with the merger of H&CB and Kookmin. He subsequently became the head of Kookmin and set out to further revolutionize the banking industry in South Korea. Analysts and colleagues noted that Kim’s downto-earth demeanor belied a tough banker who hired and rewarded employees based solely on performance and capabilities.

H&CB was in trouble, largely because it had relied too heavily on its Korean monopoly in home-mortgage lending. The bank was privatized in 1996, and in 1997 the government opened the mortgage market to competition. When the 1997 crisis hit, the bank began to crumble primarily because of bad loans, and Kim was brought in to perform a rescue operation. He later said in Forbes, “I wanted to bring to the banking industry some of the factors that make the securities industry so dynamic, such as performance-based rewards and a demand for transparency” (September 18, 2000).

CATCHES PROFESSOR’S EYE Kim’s parents were South Korean rice farmers; he said that his father’s insistence on honesty at all times taught him the

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Kim set out to run a tight ship at H&CB, cutting staff by 25 percent; analysts credited him with quickly recognizing that H&CB simply had to take its medicine. He organized badloan write-offs of $304 million, with the bank losing $231 million in his first year as president and CEO. Although the bank initially struggled under his leadership, Kim was slowly instituting a well-formed plan. He hired foreigners—a relatively rare practice in Korean banking—and worked on instilling the bank’s employees with Western business practices, bringing in a Western company to create an in-


Kim Jung-tae

centive pay system for employees and management. One of the most astonishing aspects of Kim’s appointment at H&CB was his turning down a salary in favor of stock options, a move many analysts saw as extremely risky. (Officially his contract paid him a salary of about 12 Korean wons, or one cent a year.) Kim told Kevin Hamlin of Institutional Investor International Edition, “I could hardly accept a salary-based position and then preach performance-based pay to other bank employees” (August 1999). Kim quickly turned H&CB into a model institution of Western-style banking. He established a strict credit-review system and cut another 5 percent of the workforce. Investors were impressed, and in 2000 H&CB made a record profit of $400 million. By early 2001 shares that had been trading below $3 when he took over had reached nearly $22. Kim’s decision to take stock options over a salary paid off, earning him around $7 million in his first two years alone, compared to the average of $150,000 that Korean bank CEOs were typically paid at the time. By 2001 Kim had turned H&CB into Korea’s most profitable bank, with a return on equity of 22 percent. Industry analysts almost unanimously regarded H&CB as one of the bestmanaged companies in South Korea, and some expected the Korean government to ask him to become the country’s Minister of Finance & Economy. Analysts noted that he effectively tapped into H&CB’s junior and middle management, who had been largely ignored when the bank had functioned as a state-owned enterprise. He emphasized transparency in decision-making processes and in accounting and reporting. These efforts culminated in H&CB being listed on the New York Stock Exchange, with respect to which Asianmoney reported Kim as saying, “The NYSE’s listing regulations are very stiff. That we were able to meet the exchange’s requirements shows that our standards are at international levels” (May 2001).

HEADS SUPER BANK Although he had only been in the banking business for a few years, as soon as his forming of a merger between H&CB and Kookmin Bank occurred, analysts were calling it his crowning achievement. The two strongest banks in Korea signed a merger agreement on April 23, 2001, at which time many wondered why Kim would negotiate a merger putting his job as the head of H&CB at risk. Analysts noted that he could have easily been named second in command at the new bank, as the Kookmin president Kim Sang Hoon came from the larger organization. But Kim saw the opportunities presented by the merger as too great to pass up. As reported by Asianmoney, Kim explained that he organized the merger in order “to maximize shareholder value and to begin reforming the Korean financial system” (May 2001). Regardless of who would head the company, the merger was seen as creating Korea’s first consumer-banking giant, with


more than 1,100 branches and 28 million accounts. In the end the board indeed chose Kim as president of the colossus, which began operating jointly as Kookmin Bank in November 2001. Analysts quickly noted that H&CB employees would not receive preferential treatment from the victorious Kim, who quickly looked into corporate-office and branch job cuts. Kim told John Larkin of Far Eastern Economic Review, “Past mergers suffered because everything had to be split 50-50. I will erase those old legacies. Which bank, which region, which school you’re from is not important. Capabilities and performance are the most important things” (August 23, 2001). Kim took the new challenge, which wouldn’t be easy, head on. Analysts noted that he had to consolidate 1,125 overlapping branches and thin a staff of 23,000 employees, most of whom had been against the merger. Kim almost immediately faced trouble from Kookmin’s aggressive union, which sought a court injunction to have his appointment overturned. The would-be chief executive had in fact appeared at the union’s office unannounced, challenging the unionists to boost profits and shareholder value. BusinessWeek noted that Kim told the union leaders, “Speak up now if my plan is wrong. I’ll listen to you, but your ideas better be good for the bank” (April 8, 2002). Kim took control of Kookmin and quickly turned it into a model for all Asian banks. He cut off delinquent customers and sped up integration of the banks’ information and technology systems. He also held managers to tougher standards, reshuffling senior managers based on their performance over the first four months of the merger. Just five months after taking over, Kookmin reported a 24 percent jump in profits, to $2.8 billion, over the combined Kookmin-H&CB total in 2000. By the fall of 2002 analysts called Kookmin Korea’s most progressive financial institution. Kim had instilled his vision throughout the company, whose avowed mission was to lead South Korea into a new financial era. Kim envisioned a banking system that did not cave in to business or government demands to make more money available whenever a big company was in trouble. Nevertheless, some analysts did not see the bank’s future as entirely rosy. They noted that Kookmin was primarily a retail bank and that the South Korean economy was cooling in terms of consumer spending; Kookmin was at risk because it had feasted on the voracious borrowing of consumers. In fact, analysts’ concerns about Kookmin’s problems with the possibly tapped-out local consumer market led to a 35 percent decline in Kookmin shares over the course of 2002—far worse than that year’s 5 percent overall drop in the Korean Stock Exchange. The analysts appeared to have been right when in October 2003 Kookmin announced a net loss of $287.45 million for the quarter that had just ended. Kim and the bank attributed the deficit to the provision of additional loan-loss reserves that

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resulted from the merger with its subsidiary Kookmin Credit Card Company in September. By early 2004 Kim announced that the bank was at war with worsening business conditions. According to AsiaPulse News, Kim noted at a monthly staff meeting, “Kookmin Bank has no choice but to go into emergency mode to overcome unfavorable market conditions” (March 2, 2004). Kim noted that the prolonged slump in private consumption and Citigroup’s advance into the domestic banking market were making business conditions difficult. Nevertheless Kim and Kookmin announced shortly afterward that the bank saw a net profit of $145.85 million in the first quarter of 2004, up 311.4 percent from the year before. Operating profits before the setting aside of loan-loss provisions also increased during the three-month period.

MANAGEMENT STYLE: HIGH NOON Analysts noted that Kim was an early proponent of attending Western business seminars and made his reputation as a leader who was not afraid to try a different course by pushing new ideas. He particularly hated the bloated management hierarchies that typified many Korean financial and banking companies, which were often either owned outright by or maintained close ties with the government. According to Donald Kirk of Institutional Investor International Edition, Kim modeled himself after “two titans of the U.S. corporate scene: the former chiefs of General Electric and Intel Corporation, Jack Welch and Andy Grove” (November 2002). Specifically Kim admired their audacious management style, boldness, and vision. Industry analysts noted that Kim was blunt, decisive, and aggressive in his own management style, which he topped with an uncanny sense of timing that— for the most part—helped him avoid the sorts of financial crises that plagued other Korean financial institutions. Kim was known for his ability to delegate power to his juniors. Above all, as one former aide pointed out to Kirk in Institutional Investor International Edition, “He not only worked hard, he studied hard” (November 2002). More than anything else, Kim’s insistent adherence to Western banking and accounting principles made him stand out from the South Korean banking crowd. Some analysts believed that his initial status as an outsider helped him to see

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what was wrong with Korea’s banking system and focus on the areas that needed fixing. The overall management philosophy that he preached was to maximize shareholder value through transparency of operations, customer service, and performance-based awards. In the area of risk management Kim was credited with bringing about a banking-culture change by holding credit officers accountable for their decisions, with their entire careers dependent on their performances. His companywide institution of performance-based reward systems was the first such action in a Korean bank.

TAKING ON THE WORLD Despite occasional setbacks Kim maintained his reputation as a visionary South Korean financier. He continued to advance his global vision for Kookmin to become a world-class retail bank delivering impeccable services. Kim stated that his ultimate goal was to make Kookmin Bank one of the top 30 banks in the world.

See also entry on Kookmin Bank in International Directory of Company Histories.


“The Bank That’s Rewriting All the Rules,” BusinessWeek, April 8, 2002, p. 36. Hamlin, Kevin, “Asia’s Most Influential Banker, Institutional Investor International Edition, August 1999, p. 41. “Jung Tae Kim Creates a Korean Bank That Can Say No,” Asianmoney, May 2001, p. 34. Kirk, Donald, “Riding Korea’s Big Tiger,” Institutional Investor International Edition, November 2002, p. 62. “Kookmin Bank President Rallies Staff to Face Market Challenges,” AsiaPulse News, March 2, 2004. “Korea’s King of Options,” Forbes, September 18, 2000, http:// www.forbes.com/global/2000/0918/0318066a_print.html. Larkin, John, “Punching Above His Weight,” Far Eastern Economic Review, August 23, 2001, p. 44. —David Petechuk


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Ewald Kist 1944– Former chairman, ING Group Nationality: Dutch. Born: January 22, 1944, in Wassenaar, Netherlands. Education: Leiden University, MA, 1967. Family: Son of a Netherlands Supreme Court justice; married Ammy (a lawyer); children: five. Career: Nationale-Nederlanden (NN), 1969–1986, management trainee, various general management positions in NN General, NN Life, and NN International; 1986–1989, president of NN-US Corporation; 1989–1991, chairman and general manager for NN Netherlands Group; ING Nederland, 1991–1999, chairman and member of executive board; ING Group, 1999–2000, vice chairman; 2000–2004, chairman. Awards: Officer in the Order of Orange-Nassau, 2004, Queen Beatrix of the Netherlands.

■ Ewald Kist led the ING Group—the company formed by the merger of the Nationale-Nederlanden insurance company and the NMB Postbank Groep finance company—through significant expansion in the 1990s and the early 21st century. During Kist’s tenure ING acquired several insurance and financial services companies in Europe and North America, and it established a popular and profitable online consumerbanking operation, ING Direct. While noted for innovative business strategies, Kist also gained a reputation for keeping employees, investors, and customers satisfied and for stressing social responsibility as well as profits. He advised businesspeople to lead balanced lives, with time for recreation, and to avoid micromanaging. He retired as chairman of ING Group’s executive board in 2004.

Ewald Kist. Getty Images.

LESSONS LEARNED FROM SPORTS

was poor,” Kist wrote in an article for the New York Times (July 13, 2003). Despite his family’s circumstances, Kist had the opportunity to travel in his youth as a member of the Dutch national field hockey team. The team made trips to India and Pakistan and to Mexico for the 1968 Summer Olympics. “Through sports I learned to be a team player and to go for the gold,” Kist wrote in his New York Times article. Besides field hockey, Kist’s sports included ice-skating and marathon running; he took up the latter at age 45. He participated twice in the 11-Cities Tour of the Netherlands, in which thousands of skaters go across 200 kilometers of frozen lakes and canals, and he ran in the New York City Marathon, a race that ING sponsored.

Kist credited his interest in sports with influencing his management style. He was one of five children of a Netherlands Supreme Court justice—“an important job, but the pay

After he graduated from Leiden University, he was drafted into the army, another experience that Kist said prepared him for corporate leadership. Serving in the Cold War era, Lieuten-


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Ewald Kist

ant Kist was in charge of troops prepared to repel an invasion by the Soviet Union, which never happened. He had to keep his soldiers motivated nonetheless, and one way he did this was by having them conduct target practice on a large white blanket towed by an unmanned plane. This, he recalled, gave them something “useful and fun” to do.

RISING THROUGH THE RANKS AT NATIONALENEDERLANDEN Following his tour in the army, Kist entered a training program with Nationale-Nederlanden in 1969. From 1977 through 1986, he held management positions in several of the company’s subsidiaries, including NN General, NN Life, and NN International. The U.S. market was important to Nationale-Nederlanden, and in 1986 Kist began a three-year stint as president of the company’s U.S. operation, NN-US Corporation. He returned to the Netherlands in 1989 and became chairman of Nationale-Nederlanden in 1991. That was also the year Nationale-Nederlanden and NMB Postbank Groep merged to create Internationale Nederlanden Group, known popularly, and later officially, as ING. With Kist at the helm starting in 1993, the company began a period of rapid expansion.

ACQUISITIONS WORLDWIDE AND GROWTH ONLINE Much of ING’s growth came from its homegrown operations, but the company also made several significant acquisitions: the investment bank and asset management firm Barings in 1995; the American insurer Equitable of Iowa Companies in 1997; the Belgian Bank Brussels Lambert in 1998; the German BHF-Bank in 1999; the American insurers ReliaStar, Aetna Financial Services, and Aetna International in 2000; the Polish Bank Slaski and the Mexican insurer Seguros Comercial America in 2001; and the German direct bank Entrium in 2003. The Aetna and ReliaStar purchases made ING one of the largest U.S. insurers. In Europe in the 1990s, ING was one of the first companies to offer both insurance and banking services. To expand its banking operations, it took advantage of the Internet. In 1996 it set up the online bank ING Direct, which within six years had attracted 7.5 million customers in eight countries and $85 billion in assets, significantly outpacing other online banks. “Its growth has been remarkable,” Sven Janssen, an analyst with the German private bank Bankhaus Metzler, told BusinessWeek (July 7, 2003). ING Direct broke even in the third quarter of 2002 and by 2003 began contributing to the parent company’s profits—all much earlier than expected, according to Kist. ING Direct reached customers by offering a savings account at an interest rate higher than those paid by most com-

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petitors and following up with other products. Moreover, unlike some online banks, it offered technical support over the phone. It advertised heavily, with its trademark orange ball becoming widely recognized. In markets where ING had no physical offices, it did not need to build them because consumers could either conduct all transactions from their computers or from the cybercafes ING opened in some regions. “More and more European banks are taking the online route to increase their customer base without boosting costs,” a BusinessWeek reporter observed. “But none has expanded as quickly as ING Direct” (July 7, 2003).

COMING TO AMERICA A regulatory change brought ING Direct to the United States. In 1999 the repeal of the Glass-Steagall Act ended the separation of banking and insurance operations. U.S. companies remained cautious about such combinations, but ING, having had success in Europe, was eager to go into the U.S. retail banking market and saw ING Direct as the way to do it. “We could have bought a bricks-and-mortar bank, but that would be nothing new for the U.S. market,” Kist told the New York Times in 2000, as ING Direct launched in the United States. “We’re not in competition with hundreds of thousands of banks. We’re doing a new trick” (August 26, 2000). Consumers responded to the new trick; by 2003 ING Direct had 1 million U.S. customers, with the high interest rates on savings and widespread, clever advertising and promotions proving as attractive in the United States as they were in Europe. As an example of the latter, ING Direct advertised to Los Angeles consumers by offering free gasoline at certain service stations and then distributing brochures to drivers who came in. In the early years of the 21st century, ING also heightened its profile in the United States by putting its name and logo on all its U.S. companies. Kist promised the New York Times there would be “a lot of noise about ING in the U.S.” (August 26, 2000).

CORPORATE CITIZENSHIP AND WORK-LIFE BALANCE Kist stressed that ING’s focus went beyond profits. For instance, information technology brought the company not only a lucrative online banking operation but also a way to reduce the amount of travel its executives did—and the means to reduce the impact of travel on the environment. In 2002 ING established the ING India Foundation for Social Development, aimed at alleviating child poverty and increasing women’s educational opportunities in that country. ING published a report assessing its degree of social responsibility and sponsored a Georgetown University conference on corporate


Ewald Kist

citizenship. ING’s designated “stakeholders” consisted of investors, customers, employees, and society as a whole. Reflecting Kist’s sports-influenced emphasis on teamwork, ING sought consensus in management decisions and worked to make all employees feel they were important to the company. It did so by offering them offices that were both architecturally attractive and energy efficient, encouraging them to move around within the company, and fostering smooth worker-manager relationships. There were a few little extras as well, such as Kist’s annual in-person delivery of chocolate Easter eggs. Corporate efficiency remained a priority for Kist, but he believed that one need not be a micromanager or a workaholic to achieve this. For him, aids to efficiency included speedreading and assigning degrees of importance to various tasks and problems. “The slow, unimportant things I leave to one side; many solve themselves,” Kist wrote in his New York Times article (July 13, 2003). Moreover, he believed his participation


in sports showed ING employees the importance of interests outside the office. “I’m not impressed by workaholics,” he wrote.


“The Brains Behind a Profitable Online Bank,” BusinessWeek, July 7, 2003. Kist, Ewald, with Joseph B. Treaster, “A Sports Guy’s Credo,” New York Times, July 13, 2003. Moskowitz, Milton, and Robert Levering, “10 Great Companies to Work For: Combining Style and Substance, These European Companies Stand Out,” Fortune International, February 4, 2002. Treaster, Joseph B., “A Dutch Behemoth Invades America,” New York Times, August 26, 2000. —Trudy Ring

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Gerard J. Kleisterlee 1946– Chairman of the management board and president, Royal Philips Electronics Nationality: German. Born: 1946, in Germany. Education: Eindhoven Technical University, degree in electronic engineering. Career: Royal Philips Electronics, 1974–1981, manufacturing management in Medical Systems; 1981–1986, general manager of Professional Audio Systems; 1986–1994, general manager of Display Components Europe; 1994–1996, managing director of Display Components Worldwide; 1996–1999, president in Taiwan; 1996–1999, regional manager of Components in Asia Pacific; 1999–2000, president and CEO of Components; 2000–2001, executive vice president and COO; 2001–, chair of management board and president. Address: Koninklijke Philips Electronics, Breitner Center, Amstelplein 2, Amsterdam, 1096 BC, The Netherlands; http://www.philips.com. Gerard J. Kleisterlee. AP/Wide World Photos.

■ In early 2001 Gerard Kleisterlee became president and chairman of the board of Royal Philips Electronics as the world economy went into a downturn. His mission early on was to realign Philips according to the trajectories of emerging technologies and to remarket the company to the world. Prior to becoming president and chairman he brought the Philips Components division back to profitability. As was the case with his father, Kleisterlee worked for Philips all his life.

TURNS PHILIPS COMPONENTS DIVISION AROUND Kleisterlee joined Philips as soon as he left Eindhoven Technical University. His work at Philips Components eventually earned him the position of president. The components division had formerly focused on the passive-components business; Kleisterlee shifted the focus to emerging technologies, and under his tenure the group realigned to make such prod-

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ucts as displays and chips for mobile phones, personalcomputer DVD drives, and flat-panel displays. In a joint venture with LG LCD of South Korea, the company became a global power in the field of liquid-crystal displays. Thanks to another joint venture with the South Korean LG Electronics, Philips became a global supplier in the CRT-monitor arena. While at the Philips Components division Kleisterlee envisioned unified Philips products that would meet a variety of future technology needs for such applications as wireless services, storage, and various displays. Jack Robertson wrote in Electronic Buyers’ News, “Philips Components has probably gone the furthest in recasting itself in profitable mass production of new leading-edge technologies—which is probably why Kleisterlee was picked to become the new Philips chairman” (December 18, 2000). Kleisterlee received that appointment in April 2001; he would need to bring a conservative company


Gerard J. Kleisterlee

that had been relying on traditional business models into a new culture based on collaboration, the outsourcing of mature technologies, and aggressive branding.

FROM RECORD LOWS, BRINGING THE COMPANY BACK Though Philips’s profits for 2000 had reached record levels, after Kleisterlee took the helm business fell due to the global economic downturn. The personal-computer components and semiconductor segments were extremely sluggish, the latter of which was producing less than half of its capacity due to the downturn. The business of the mobile-phone unit that Philips had recently acquired also slowed to half its 2000 levels; Kleisterlee made plans to either sell or close the division. In January 2002 he announced a restructuring plan that entailed the cutting of 12,000 jobs in less than a year and a reduction in the number of company factories from 269 to 160. The following month Philips released its financial figures for the year 2001, revealing a company-record annual loss of $2.3 billion. Philips needed to change into a high-growth, high-tech company recognizable by consumers, in a vein similar to that of Sony. At the Consumer Electronics Show in January 2002 Kleisterlee gave the keynote speech, commenting on his plans for Philips to focus its technologies on connectivity, storage, and displays. In order to attend to such new technologies he expected to jettison mature or dying technologies, such as videocassettes, or at least outsource their production. Kleisterlee felt that the former chair had overambitiously separated the various divisions of the company; he wanted the divisions to work with each other in order to reach common goals rather than compete. Forcing the implementation of such a unified approach, Kleisterlee challenged the three Philips divisions to create and produce together a DVD recorder—at the time a new technology—with shared deadlines and quickly enough to beat the competition to market. In fact the production of the DVD recorder was completed six months ahead of schedule, allowing the company to attain a dominant market position. Unlike with previous Philips products—and against the grain of traditional corporate beliefs—the DVD recorder’s underlying technology was created in cooperation with five other companies, including Philips’s archrival Sony. In 2002 Philips focused on trimming itself and advancing research and production rather than on profits.


In 2003 Kleisterlee forged alliances to manufacture semiconductors along with Motorola and ST Microelectronics, two other Philips competitors. Philips also launched services directly tied to the Internet: with the German company Deutsch Telecom (DT), the music service Philips Streamium 250 Internet, which would be bundled with DT’s broadband service, was introduced. Kleisterlee hoped to continue to create such partnerships and expand Internet services and products. Philips entered into additional broadband partnerships with several European telecom companies, including British Telecom and KPN of the Netherlands, to connect nearly any electronic device—such as televisions and DVD recorders—to the Internet. Furthering efforts to earn recognition and business in the U.S. market, Philips entered into a partnership with Nike to produce MP3 players for use during exercise. By the end of 2003 the world economy was improving and Philips’s business was too. For the first quarter of 2004 the company earned profits of $660 million. The dramatically improved revenues along with brighter world economic forecasts meant that the company would almost certainly remain profitable for some time to come. Kleisterlee began promoting growth in China and set a goal of doubling sales there, from $6.7 billion to $12 billion, in three to five years. In Electronic Buyers’ News Robertson remarked, “Associates describe Kleisterlee as an enthusiastic drum-beater, comfortable with people, and easily approachable” (December 18, 2000).


“Philips Under the Knife?” BusinessWeek, July 2, 2001, p. 26. Robertson, Jack, “Gerard Kleisterlee—Royal Philips,” Electronic Buyers’ News, December 18, 2000, p. 72. Rossingh, Danielle, “Philips Signs Up Telecoms to Outsmart China,” Daily Telegraph, August 28, 2003, p. 36. Schenker, Jennifer L., “Fine-Tuning a Fuzzy Image,” Time International, March 18, 2002, p. TD2. “Struggling with a Supertanker, Philips,” Economist, February 9, 2002. —Deborah Kondek

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FROM LAWYER TO EXECUTIVE

Lowry F. Kline

Career: Miller and Martin, 1970–1995, attorney and partner; 1981–1991, general counsel for Johnston Coca-Cola Bottling Group; 1991–1995, general counselor for Coca-Cola Enterprises; Coca-Cola Enterprises, 1996–1997, senior vice president and general counsel; 1997–1999, executive vice president and general counsel; 1999–2001, executive vice president and chief administrative officer; 2000–2002, vice chairman; 2001–2002, vice chairman and chief executive officer; 2002–2003, chairman and chief executive officer; 2003–, executive chairman of the board.

Lowry Kline began his career as a lawyer in the Chattanooga, Tennessee, law firm of Miller and Martin, where he learned to weigh facts judiciously and make decisions. Kline also gained practical experience in leadership as a partner in Miller and Martin, president of the Chattanooga Bar Association, president of the Tennessee Board of Law Examiners, and chairman of the Tennessee Bar Foundation. In 1981 Kline became general counsel for Johnston Coca-Cola Bottling group and began his work with Coca-Cola. As general counsel of the bottling group, Kline developed a wide base of knowledge about the legal issues, trends, and events surrounding the bottling industry. In 1991 he worked with Coca-Cola Enterprises in the position of general counsel. In 1995 Kline successfully defended Coca-Cola Enterprises against charges of bribing workers to halt a union-organizing campaign. In 1996, based on his intelligence, good judgment, and excellent people skills, Kline was moved from the law team into executive roles that culminated in his selection as CEO in 2001. Upon becoming CEO of Coca-Cola Enterprises, Kline stated that the transition from lawyer to executive was a reasonable move since business lawyers are “directly involved in a lot of the events, developments, and trends in the businesses they represent” (Beverage Digest, April 31, 2001).

Awards: Named one of the Best Lawyers in America in Business Litigation, Best Lawyers in America, 1995–1996; named a fellow of the Chattanooga Bar Foundation, 1996.

CHALLENGES

1940– Chairman and former president and chief executive officer, Coca-Cola Enterprises Nationality: American. Born: 1940, in Loudon, Tennessee. Education: University of Tennessee, BA, 1962; JD, 1965. Family: Son of James Franklin Kline; married Jane (maiden name unknown); children: three.

Address: Coca-Cola Enterprises, 2500 Windy Ridge Parkway SE, Atlanta, Georgia 30339-5677; http:// www.cokecce.com.

■ Lowry F. Kline served as chief executive officer (CEO) and chairman of Coca-Cola Enterprises, the world’s largest marketer, distributor, and producer of bottled and canned nonalcoholic beverages. Kline was known as a shrewd businessman and tactician whose logic and reasoning skills made him an effective and successful CEO. At Coca-Cola Enterprises, Kline developed a strong marketing and leadership team that was able to think of creative ways to increase profits as the company expanded further into the international market and introduced new products in the United States.

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As CEO, Kline faced three major challenges: consumer tastes were moving beyond the core carbonated-beverage market, Coca-Cola Enterprises needed to increase the marketing of core carbonated beverages such as Coca-Cola and Sprite in the United States and Europe, and the relationship between Coca-Cola Enterprises and the Coca-Cola Company, the producer of Coca-Cola, was troubled. Kline confronted changing consumer tastes by introducing a line of noncarbonated Minute Maid lemonade products. The lemonade proved to be a successful drink and was later expanded to include pink and diet lemonades. In the carbonated-beverage market, Kline led the introduction of Vanilla Coke, Diet Vanilla Coke, and Sprite Remix. He smoothed the relationship with the Coca-Cola Company by working closely with the other com-


Lowry F. Kline

pany to decrease the impact of various external issues on the partnership. Kline came into the CEO position aware of the largest issues and ready to meet the challenge of the position. By the third quarter of Kline’s second year as CEO, CocaCola Enterprises reported a net income growth of 35.6 percent with a net income of $259 million on $4.7 billion in revenue. In 2003 Coca-Cola Enterprises showed successful management in Europe with a 10 percent volume increase due to the successful introductions of Vanilla Coke and Diet Vanilla Coke and local marketing campaigns. By 2003 third-quarter profits were up 36 percent in Europe. By 2002 Kline felt he was not doing enough to increase efficiency and cut costs, and he led the formation of a new company, Coca-Cola Bottler Sales and Service Company, as a subsidiary of Coca-Cola Enterprises. The new company combined 80 North American bottlers into one entity in an effort to centralize procurement and seek quicker routes to market new products. The creation of a single bargaining entity also increased buying power of materials such as aluminum and brought the individual bottlers together to work as a team. The hope was that the combined company would reduce overall costs significantly. By 2004 the Coca-Cola Bottler Sales and Service Company was considered a model of how to consolidate and create a one-bottler purchasing system.


DEVELOPING A STRONG LEGACY In 2003 Kline turned over the CEO role and the executive and administrative functions of Coca-Cola Enterprises to John Alm, the president and chief operating officer of the company. During his two years as CEO, Kline built a strong leadership team and with that team deployed several innovative ideas that improved profitability and efficiency. Kline continued as executive chairman of the board of directors to help develop strategic business plans for the company.

See also entry on Coca-Cola Enterprises, Inc. in International Directory of Company Histories.


“CCE Profit Jumps 35.6 Percent,” Atlanta Business Chronicle, October 17, 2003. “Former General Counsel Become CEO of Coca-Cola Enterprises,” Beverage Digest, April 13, 2001, p. 2. Leith, Scott, “Coca-Cola Enterprises: Operating Chief Takes No. 1 Job at Bottler; Changeover No Surprise,” Atlanta Journal-Constitution, December 17, 2003.

—Dawn Jacob Laney

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Philip H. Knight 1938– Chairman and chief executive officer, Nike Nationality: American. Born: February 24, 1938, in Portland, Oregon. Education: University of Oregon, BBA, 1959; Stanford University, MBA, 1962. Family: Married Penny (maiden name unknown), 1968; children: two. Career: Blue Ribbon Sports, 1964–1972, chief executive officer; Portland State University, 1964–1969, assistant professor of business administration; Nike, 1972–, chairman and chief executive officer. Awards: Most Powerful Man in Sports, Sporting News, 1992; Pioneer Award, University of Oregon, 1982; one of America’s top managers, Business Weekly, 1997. Address: Nike, 1 Bowman Drive, Beaverton, Oregon 97005-6453; http://www.nike.com.

■ In 1963 Philip H. Knight began selling track shoes out of the trunk of his car. Forty years later he presided over the largest and most visible athletic apparel company in the world. From 1964 to 1972 Knight and his former track coach, Bill Bowerman, distributed Japanese-made running shoes in America and gradually laid the foundation for the Nike empire. By the late 1980s, the Nike “swoosh” trademark had become ubiquitous, and Knight was well on his way toward managing a multibillion-dollar company.

BEGINNINGS OF NIKE Three events shaped Knight’s future as the leader of Nike. The first occurred in 1957 when he met Bowerman, his coach on the University of Oregon track team. Bowerman was a former Olympian whose passion for athletes and innovation would eventually inspire Knight to create a business dedicated to those two things. When Knight began his business selling shoes to track athletes, Bowerman became his partner. The

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Philip H. Knight. AP/Wide World Photos.

second event occurred when Knight was attending business school at Stanford University. In response to an assignment from Professor Frank Shallenberger, Knight devised a business and marketing plan for importing high-quality running shoes from Japan and selling them in the United States at a high profit margin. In a sense the vision of Nike was born in that class. The third event occurred in 1963 when Knight traveled to Japan and met with executives from the Onitsaka Company, which distributed Tiger running shoes. Knight talked himself into a distribution contract with the company, and when the executives asked which company he represented, Knight blurted out the first thing to come into his head: Blue Ribbon Sports. The trip initiated Knight’s lifelong fascination with Japanese culture and presaged the globalization of Nike.


Philip H. Knight

BLUE RIBBON SPORTS In 1964 Knight and Bill Bowerman both invested $500 to start Blue Ribbon Sports, which would work together with the Onitsaka Company to develop and distribute running shoes for the North American market. As the company struggled to grow, Knight worked as a certified public accountant and taught at Portland State University. Over the next few years BRS retail stores opened in Santa Monica, California, and Eugene, Oregon, and the company began to assemble employees who would later take on key roles at Nike. In 1969 alone Knight sold $1 million worth of Tiger shoes. By the end of 1971 contract disagreements with Onitsaka prompted Knight and Bowerman to consider starting their own shoe company. Knight paid a former Portland State student to develop the swoosh design, and Jeff Johnson, a Blue Ribbon Sports employee, literally dreamed up the Nike name. The first model of shoe, the Cortez, debuted at the 1972 Olympic trials, and in that first year Nike had revenues of more than $3 million.

FOCUSING ON THE ATHLETE Being an athlete himself, Knight wanted to shape his company around the needs of athletes. He also wanted to create products that the world’s greatest athletes would want to use and be associated with. At first Knight reached out to Olympic track athletes, such as the long-distance runner Steve Prefontaine, who would influence other runners to try the shoes. In 1978 Nike approached the tennis star John McEnroe and signed him to an endorsement deal. This choice of spokesperson reflected Knight’s vision that the great athlete was the ultimate free spirit. By 1980 Nike had captured one-half of the athletic shoe market and carried out its initial public offering on the New York Stock Exchange. The escalating wealth of the company allowed Nike to sign additional topflight athletes to endorsement contracts, including highly lucrative relationships with Michael Jordan and Tiger Woods.

WEATHERING CRITICISM As Nike’s market share grew throughout the 1980s and 1990s, so did public criticism of the company’s business strategies. Much of this criticism focused directly on Knight, whose enigmatic personality and casual appearance became a focus of the news media. At the 1992 Olympic games Michael Jordan and other National Basketball Association players with Nike endorsements refused to appear on television with the insignia of their official Reebok sweat suits showing. When Knight, in trying to defuse the controversy, failed to vigorously support


the athletes, his relationship with some of them was strained. The greatest controversy Knight had to confront in the 1990s was growing criticism of how Nike contracted with “sweatshops” in Southeast Asia to produce its shoes. Although Knight eventually responded to Nike’s critics with a program of reforms, he and Nike continued to be a prime focus of many antiglobalization groups.

CONTINUAL EXPANSION Knight was vigilant to keep Nike at the top of the industry. In the late 1980s, when Reebok briefly supplanted Nike as the most profitable athletic shoe company, Knight streamlined the Nike campus in Beaverton, Oregon, and gave it a corporate atmosphere while maintaining the image of a company run by casually rebellious athletes. In the 1990s, despite criticism, Knight involved the company in environmental and community service activities. At the same time Nike branched out into hockey, golf, and soccer apparel, opened huge Niketown stores in shopping malls, and continued its dominance in the area of track-and-field apparel. As the result of this aggressive expansion, Nike had more than $10 billion in yearly sales before 1999. Knight was said to be not fond of advertising. Yet slogans such as “Just do it” and images such as that of Michael Jordan soaring through the air cemented Nike’s place in the industry. Nike advertisements portrayed great athletes as objects worthy of worship but also implied that everyone has greatness within themselves. The global power of these messages was such that in 2003 Nike’s international sales exceeded its U.S. revenues for the first time in the company’s history.

See also entry on NIKE, Inc. in International Directory of Company Histories.


Goldman, Robert, and Stephen Papson, Nike Culture: The Sign of the Swoosh, London: Sage, 1998. Katz, Donald R., Just Do It: The Nike Spirit in the Corporate World, New York: Random House, 1994. Saporito, Bill, “Can Nike Get Unstuck?” Time, March 30 1998, pp. 48–53.

—Michael T. Van Dyke

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LEARNING THE BUSINESS

Charles Koch

Charles Koch said that his career, like the name of his business, is a tribute to his father, an independent Texas oilman who established Koch Industries’ predecessor company in the 1940s. Fred Koch made his first mark by helping the Soviet Union build its oil industry in the 1920s but lost most of his fortune during the Great Depression. By the time Charles and his three brothers were growing up in Wichita, Kansas, the family business was well established. Charles attended the Massachusetts Institute of Technology, where he received several engineering degrees. After briefly working for Arthur D. Little, he joined the family company to be groomed for leadership. But leadership came to him sooner than expected.

1935– Chairman and chief executive officer, Koch Industries Nationality: American. Born: November 1, 1935, in Wichita, Kansas. Education: Massachusetts Institute of Technology, BA, 1957; MA, 1958; MA, 1959. Family: Son of Fred (founder of Koch Industries) and Mary (homemaker; maiden name unknown); married Liz (homemaker; maiden name unknown); children: two. Career: Arthur D. Little, 1959–1961, engineer; Koch Engineering Company, 1961–1963, vice president; 1963–1971, president; Koch Industries, 1966–1974, president; 1967–, chairman and chief executive officer. Awards: Adam Smith Award, American Legislative Exchange Council, 1994; Distinguished Citizen Award, Boy Scouts of America, 1995; member of the Kansas Oil and Gas Hall of Fame, 1996; Year 2000 National Distinguished Service Award, the Tax Foundation. Address: Koch Industries, 4111 East 37th Street North, Wichita, Kansas 67220; http://www.kochind.com.

■ Charles Koch took over his father’s moderately successful oil company, Rock Island Oil and Refining, in 1967 and over the next three decades transformed it into Koch Industries, a diversified petroleum products and trading company that, with an estimated $40 billion in annual revenues, is the second-largest privately held company in the United States. Koch companies include Flint Hills Refineries, which processed 600,000 barrels per day of crude oil in 2003; Koch Minerals, which traded about 20 million tons of mineral and fertilizer products in 2003; and Koch Ventures/Genesis, which invested nearly $185 million in technology-based startups between 1997 and 2003. Koch is known for his “Market-Based Management” (MBM) style of leadership, in which employees are encouraged to act as entrepreneurs within Koch Industries. He is also one of the leading contributors to conservative politicians and think tanks, having founded the prominent libertarian think tank the Cato Institute.

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Fred Koch’s death from cancer in 1967 put Charles in charge of Rock Island Oil and Refining, a prominent regional oil company but far from a major national player. Through the 1970s and 1980s Charles aggressively grew the company and expanded it from its base in oil refining into other oil-related fields. By the year 2000 Koch Industries employed 17,000 people and owned 37,000 miles of oil and gas pipeline in the Midwest and Great Plains. Among its prominent subsidiaries, Koch Materials Company was selling enough asphalt through its facilities in the United States, Mexico, Brazil, and China to pave 125,000 miles of road annually; Koch Nitrogen Company had the largest production capacity for free ammonia in the Western Hemisphere; and Koch Financial Corporation had completed more than $3.7 billion in public financing transactions. Koch even employed 25 cowboys—for its cattle ranches in Kansas, Montana, and Texas.

MARKET-BASED MANAGEMENT Central to the acquisitions and to Koch’s growth philosophy, Koch said, was his commitment to “Market-Based Management,” a term he uses to describe encouragement of entrepreneurship within his company. The thinking behind MBM reflects the free-market philosophies of the economic theorists Friedrich von Hayek, Ludwig von Mises, Joseph Schumpeter, and others who believed that encouraging entrepreneurial behavior and individual responsibility would make societies wealthier. Koch felt that the same principles that underlie market economies could be applied with success to an individual com-


Charles Koch

pany. Working to create a culture of continuous improvement, Koch eliminated employee salary structures and formal job titles for all but the most senior officers; instead, Koch Industries paid based on the “value” employees brought to the company. In addition to the company’s seven-member board of directors, there is a 20-member “discovery board” that discusses strategy quarterly. Koch considered the private nature of Koch Industries crucial to the company’s success, as it allowed the company to focus on long-term goals rather than make shortsighted decisions based on the whims of a fickle marketplace.

ployees who claimed they were acting as entrepreneurs within the company. But Koch Industries continued to expand early in the first decade of the 21st century, acquiring Invista, du Pont’s polymers and resins division and an innovator in apparels, in 2004.

Charles Koch’s approach to business—creative destruction combined with legendarily long workdays and a no-nonsense attitude toward stifling competition—created controversy, as did Koch family contributions to Republican political candidates and conservative groups, which critics considered an attempt to buy government influence. Charles Koch’s wellpublicized feud with his younger brother William led to a decade-long lawsuit over control over the company, which Bill Koch eventually lost. Charles and his brother David controlled the company after Fred’s death, although Charles took the lead in the day-to-day operations of Koch Industries. A fourth brother, Frederick, sided with Bill in the ownership dispute and is no longer associated with the company.


Koch Industries lost a high-profile court case in 1999 over theft of oil from American Indian lands—theft caused by em-


See also entry on Koch Industries, Inc. in International Directory of Company Histories.

Boulton, Guy, “Lean, Patient, Ready to Pounce,” Wichita Eagle, June 27, 1994. ———, “Politics That Can’t Be Pigeonholed,” Wichita Eagle, June 26, 1994. Grant, Jeremy, “The Private Empire of Koch Industries,” Financial Times, January 30, 2004, p. 14. Koch, Charles G., “Succeeding through the Foundations of Science,” Executive Speaker, January 1999, pp. 12–19. O’Reilly, Brian, “The Curse on the Koch Brothers,” Fortune, February 17, 1997, pp. 78–84. —Alan Bjerga

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Richard Jay Kogan 1941– Former chairman and chief executive officer, Schering-Plough Corporation

ufacturing infrastructure and quality control to deteriorate. Kogan alienated the U.S. Congress, the U.S. Food and Drug Administration (FDA), and finally the U.S. Securities and Exchange Commission (SEC). As SP’s financial standing eroded, Kogan announced his retirement. Shortly afterward he became the first individual ever to be fined under the SEC’s fairdisclosure regulation.

Nationality: American. Born: June 6, 1941, in Bronx, New York.

FROM THE STREETS TO THE TOP

Education: City College of the City University of New York, BA, 1963; Stern School of Business at New York University, MBA, 1968.

Kogan grew up in New York City, working in his father’s bar and grill in the Hell’s Kitchen district of Manhattan. In an incident that foreshadowed his future maneuverings at Schering-Plough, he refused to join the vendors’ union while selling peanuts at Yankee Stadium, relenting only after being physically beaten by other vendors. Kogan graduated from City College of the City University of New York in 1963. He later dropped out of a doctoral program at Rutgers University and joined the U.S. Army Reserves; he eventually earned his MBA from the Stern School of Business of New York University.

Family: Son of Benjamin Kogan (bar-and-grill owner) and Ida (maiden name unknown); married Susan Linda Scher (chemist). Career: Ciba-Geigy, 1975–1976, vice president of planning and administration for pharmaceuticals division; 1976–1979, president of Canadian pharmaceutical operations; 1979–1982, president of U.S. pharmaceutical division; Schering-Plough Corporation, 1982–1986, executive vice president of pharmaceutical operations; 1986–1995, president and COO; 1996–1998, CEO and president; 1998–2003, chairman and CEO.

■ Richard Jay Kogan worked his way up through the ranks of the pharmaceutical industry to become the president, CEO, and chairman of Schering-Plough Corporation (SP). Under his guidance SP evolved from a small company with a niche market into an industry leader, its market value increasing almost fivefold between 1996 and 2000. Kogan was viewed as the consummate drug-company executive, understanding the complex political and marketing challenges of the industry as well as the sophisticated science that supported it. His massive advertising campaign transformed SP’s prescription allergy medicine Claritin (loratadine) into one of the best-known and best-selling drugs in the world. For years Kogan met and exceeded SP’s earnings forecasts; he was known as a tight-fisted cost cutter and a feisty and stubborn opponent with a talent for behind-the-scenes deal making. Ironically some of the same qualities that led to Kogan’s success eventually contributed to his downfall. He invested heavily in research and development while allowing SP’s man-

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The pharmaceutical industry first took notice of Kogan in 1975 when he was named vice president of planning and administration for the pharmaceuticals division of Ciba-Geigy (later Novartis). The following year he was promoted to president of the company’s Canadian pharmaceutical operations. In 1979 he became president of Ciba-Geigy’s U.S. pharmaceutical division. Kogan moved to Schering-Plough in April 1982 as executive vice president for pharmaceutical operations. In January 1986 he was elected president and COO; in 1996 he succeeded Robert P. Luciano as CEO and president. For two decades Luciano had built SP into a worldwide research-based pharmaceutical company that developed, manufactured, and marketed prescription and over-the-counter products. When Luciano retired as board chairman on November 1, 1998, Kogan was elected to succeed him while remaining CEO.

A BRIGHT FUTURE FOR SCHERING-PLOUGH When Kogan took control of SP, he announced that he would continue to expand the company’s operations and prosper against the competition. He promised to attract talented


Richard Jay Kogan

employees, develop their skills, and challenge and reward them. He would remain committed to research and development, focusing on innovative products that prevented, treated, and cured life-threatening diseases. He would also maintain SP’s strong financial position by tightly controlling costs, thus enabling SP’s resources to grow and providing high returns for its shareholders. Finally Kogan vowed to uphold the highest standards of ethics, business conduct, and compliance throughout the company’s worldwide operations. A great marketer, Kogan directed the ad campaign that turned Claritin, a moderately effective antihistamine, into the best-selling allergy medicine in the United States and one of the world’s most profitable drugs. SP was soon selling $3 billion worth of Claritin’s five formulations annually. During the spring allergy season of 1999, Claritin accounted for 54 percent of all prescription-drug sales in the United States, as well as for one-third of SP’s sales and 40 percent of its profits. That year SP experienced its 14th consecutive year of double-digit growth. Between 1996 and 2000 Kogan doubled the company’s annual net income to $2.4 billion and increased sales 73 percent to $9.8 billion. SP became an industry favorite among analysts. Kogan kept manufacturing costs down while gradually doubling spending for research and development, which resulted in the development of promising new drugs for the treatment of cancer and hepatitis C. As a leader of the Pharmaceutical Research and Manufacturers of America, a trade organization, Kogan helped defeat the Clinton administration’s efforts to impose price controls on drugs. By 1999 mergers were becoming a trend among large pharmaceutical companies; SP was an exception. Although SP was smaller than many of its competitors, Kogan insisted that the company was in strong financial shape and had no need to merge. Kogan himself became one of the best-paid CEOs in the pharmaceutical industry; from 1998 through 2000 he earned $86.8 million in salary, bonuses, and stock options. However, with trouble brewing at SP, the board cut his 2000 bonus by $300,000, to $1.87 million.

MANUFACTURING AND PATENT CRISES Kogan’s stringent reductions in manufacturing costs led to near disaster when, in late 1999 and 2000, SP was forced to recall 59 million asthma inhalers that lacked the active ingredient. Soon afterward the AAC Consulting Group of Rockville, Maryland, conducted an audit of SP’s Kenilworth, New Jersey, plant. Their report, which was leaked to the consumeradvocacy group Public Citizen, was scathing. According to BusinessWeek, the report stated that managers felt “a continual push for increased production and decreased downtime, sometimes at the expense of high-quality work” (July 16, 2001). Supervisors questioned whether SP management had a long-term commitment to high-quality products.


To add to difficulties, SP’s patent on Claritin would expire in 2002 and the FDA was pressuring SP to market the drug over-the-counter, which would further erode profits. In his efforts to extend Claritin’s patent Kogan alienated the FDA. He led a massive and very expensive congressional-lobbying campaign to weaken the FDA’s control over patent issues; when his efforts failed, Kogan publicly denounced the FDA for its lengthy reviews of new-drug applications. Kogan placed his hopes on Clarinex, a Claritin spin-off. However, the FDA became increasingly frustrated with Kogan’s meager attempts to improve quality control and the testing of drug ingredients. In February 2001 the FDA told Kogan that Clarinex would not be approved until he fixed problems with his plants in New Jersey and Puerto Rico. As such SP would have significantly less time before the patent expiration to switch loyal consumers from Claritin to Clarinex. Investors began selling SP stock.

MORE TROUBLES FOR SCHERING-PLOUGH In the spring of 2001 Kogan finally yielded to the FDA’s demands, spending $60 million on manufacturing improvements and hiring five hundred new quality-control and production employees. On June 22, 2001, SP admitted publicly that it had failed the latest FDA inspections. Five days later SP’s president—and Kogan’s presumed successor—Raul E. Cesan resigned. Observers were unclear as to whether Cesan was taking the blame—he had been directly responsible for plant operations—or believed that SP would be sold and he would be out of a job. The following day, according to BusinessWeek, Kogan told analysts that quality control “is my number-one priority and the FDA is my number-one customer” (July 16, 2001). As expected Claritin’s market share declined and SP’s stock price fell. As a relatively small player in a rapidly consolidating industry, no competitor stepped forward to bail the company out. SP’s drug pipeline was one of the slimmest in the industry, and its most promising new product, the cholesterol-lowering drug Zetia, was tied up in a marketing partnership with Merck & Company. If a large competitor wanted to buy out SP, Merck had the right to buy out SP’s share of Zetia, making such a buyout unattractive to any company other than Merck—and Merck was well known for avoiding mergers. Next SP came under investigation by the U.S. Justice Department due to questionable sales and marketing practices and clinical trials. A U.S. attorney in New Jersey was investigating certain SP products made in Puerto Rico. On November 13, 2002, SP announced that Kogan would retire by April 2003. A BusinessWeek story quoted an industry investment banker as saying, “This is a crippled company” (December 2, 2002).

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Richard Jay Kogan

CHARGED WITH VIOLATING FAIR DISCLOSURE On March 12, 2003, the SEC notified Kogan and SP that it was recommending civil action under the fair-disclosure regulation, which had been enacted in October 2000 to prevent selective disclosure of sensitive market information. On September 30, 2002, SP shares had closed at $21.32. According to the SEC, that evening and the following day Kogan had held private meetings with executives from four investment firms. As quoted in Chemistry and Industry, the SEC charged that in those meetings, “through a combination of spoken language, tone, emphasis, and demeanor, Kogan disclosed negative, material, nonpublic information about SP’s earnings prospects” (October 6, 2003). Kogan had apparently implied that analysts’ estimates of SP’s third-quarter 2002 results were too high and that sales would fall significantly in 2003. Following those first meetings, although Wellington Management’s drug analyst maintained her “buy” recommendation for SP, several Wellington portfolio managers sold off large chunks of SP stock. Massachusetts Financial Services, a division of Sun Life Financial, owned very few SP shares because their analyst had already been worried about the company. Meanwhile analysts from Fidelity Investments and Putnam Investments immediately issued “underperform” or “sell” recommendations. Within three days Fidelity and Putnam had each sold more than 10 million shares of SP—about 30 percent of the trading volume—saving their investors many millions of dollars. On October 3, 2002, according to the SEC, Kogan held a private meeting for 25 additional analysts and portfolio managers. He told them that SP’s earnings in 2003 would be “terrible” (New York Times, September 10, 2003). That evening SP issued a press release announcing that 2002 and 2003 projec-

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tions would be far below analysts’ consensus estimates as well as earnings from previous years. The next day SP’s shares opened at $16.10. Neither Kogan nor SP either confirmed or denied the SEC’s charges and findings. Kogan agreed to pay a $50,000 fine, and the company agreed to a $1 million civil penalty. For the first time the SEC had fined an individual for fairdisclosure violations; the company fine issued was the largest possible.

See also entry on Schering-Plough Corporation in International Directory of Company Histories.


Barrett, Amy, “Needed: A New Chief—and Intensive Care,” BusinessWeek, December 2, 2002, p. 52. “Ex-CEO Kogan Fined Heavily for Earning Prospects ‘Implications,’” Chemistry and Industry, October 6, 2003, p. 9. Norris, Floyd, “SEC Penalizes Schering-Plough over a Fair Disclosure Violation,” New York Times, September 10, 2003. “Schering-Plough Board of Directors Elects Richard Jay Kogan Chairman of Board and CEO, Raul E. Cesan as President and Chief Operating Officer,” PR Newswire, September 25, 1998, p. 7788. Weber, Joseph, “Is Kogan in a Corner?” BusinessWeek, July 16, 2001, pp. 68–69. —Margaret Alic


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John Koo 1946– Chairman, LG Cable Nationality: Korean. Born: December 11, 1946, in Jinjoo, Kyongsang Nambo province, Korea.

ceived a BA in 1973. He went to work for LG Electronics in 1977, serving as director of LG International in Hong Kong from 1977 to 1979. He moved to the Singapore office in 1982, where he worked as the regional director until 1987. In 1987 Koo was appointed senior vice president of the international business division of LG Electronics. Through his hard work and dedication, he became the CEO and president in 1996. In 1999 the company appointed him vice chairman and CEO.

Education: Princeton University, BA, 1973. Family: Son of Koo Tae-hwoi. Career: LG Electronics, 1977–1979, director of LG International, Hong Kong; 1982–1987, regional director of LG International, Singapore; 1987–1995, senior vice president, then senior executive vice president; 1996–1998, president and chief executive officer; 1999–2003, vice chairman and chief executive officer; 2003–2004, chairman and chief executive officer; LG Cable, 2004–, chairman. Address: LG Cable, 159 Samsong 1-dong, Kangnam-du, Seoul, South Korea; http://www.lgcable4u.com.

■ Before becoming chairman of LG Cable in 2004, John Koo worked with LG Electronics for over 25 years, from 1977 to 2003. He moved up in the company from director to chairman and CEO. He resigned from LG Electronics in 2003 to become chairman of LG Cable. John Koo was a very effective leader who liked to work and develop products for the digital age of computers and wireless communication. His successor, Kim Ssang-su, had much respect for Koo and said he hoped to continue with the work that Koo began: “on the basis of John Koo’s accomplishments, I will do my utmost to develop LG Electronics into one of the world’s top-three electronic and telecom companies by 2010” (AsiaPulse News, September 30, 2003).

THE EARLY YEARS John Koo was born on December 11, 1946, in Jinjoo, Kyongsang Nambo province, Korea. He graduated from Kyonggi High School and then left Korea for the United States. Koo studied economics at Princeton University and re-


KOO BECOMES A SUCCESSFUL CEO Koo defined his time with LG Electronics as the digital age. Information was exchanged quickly and relationships with clients varied from having one to one interactions to having one person working with many clients. In order to keep up with the times, Koo made plans to restructure LG Electronics. He identified four areas that would create value in the new electronics age: customer focus, mutual cooperation, market responsiveness, and products. He recruited high-quality resources to meet the demands of the digital corporation. Koo looked to Silicon Valley in the United States as a model for the Asia Pacific region and urged others to create an open network based on mutual cooperation. During his time as vice chairman and CEO, Koo actively pursued a variety of business ventures for LG Electronics. He targeted an investment of $430 million between 2000 and 2003 to increase the presence of LG Electronics in China, which Koo hoped to create into an outpost for its advance into the global market. He also worked diligently at targeting the Chinese market for sales of cutting edge, high-quality electronics. His vision was a success, and LG Electronics became one of the largest electronics companies.

MAKING SUCCESSFUL DECISIONS Koo appreciated his employees and the hard work they did to make LG Electronics successful. He also continued to create new goals for himself and the company. In 2003, for example, he set a goal of $50 billion in sales and a profit of 10 percent. He made specific goals for his company. He wanted to respond proactively to the network business environment by developing new mobile information devices.

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John Koo

Koo worked hard to create a positive climate within his company and made sure it was a fun and exciting place to be. Employees were encouraged to pursue their goals with passion and confidence because he trusted and respected them. Koo also compensated his employees well for their efforts and achievements. He knew that if employees were happy, they would be better workers. In 2004 Koo resigned from LG Electronics and became the new chairman of LG Cable, a leading South Korean maker of cables and electronics components.

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“Kim Ssang-su Replaces John Koo as LG Electronics CEO,” AsiaPulse News, September 30, 2003. Sang-woo, Kim, “LG Cable Reorganizes and Keeps It In Family,” JoongAng Daily, December 22, 2003.

—Deborah Kondek


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Timothy Koogle 1951– Former CEO, Yahoo! Nationality: American. Born: 1951, in Alexandria, Virginia. Education: University of Virginia, Charlottesville, BS, 1973; Stanford University, MS, 1975, PhD, 1977. Family: Son of a machinist and mechanic (name unknown); divorced; children: none. Career: Company that manufactured equipment for electronic manufacturing companies, 1977–1983, founder; Motorola, 1983–1992; Western Atlas, 1992–1995, corporate vice president and also president of subsidiary Intermec Corporation; Yahoo!, 1995–2001, CEO and president, 1999–2001, chairman of the board of directors. Awards: Named one of the Top 25 Executives of the Year, BusinessWeek, 1999, 2000.

■ The venture capitalist and communications executive Timothy Koogle was recruited by Yahoo! founders David Filo and Jerry Yang as the first chief executive officer and president in March 1995, a month before the company went public. Koogle, who had nearly 20 years of operating and venture capital experience, along with a natural poise and seasoned professionalism, was an ideal match for the talented but inexperienced founders. Right from the start Koogle helped shape Yahoo! into a company with a $21.4 billion market capitalization (in 2001) and oversaw nearly $10 billion in critical acquisitions.

REPAIRING CARS AS PROUD SON While growing up, Koogle was a race car enthusiast who liked to rebuild engines and aspired to become an engineer. In fact, when Koogle was five years old his father—who was a machinist and mechanic—began to teach him about repairing cars. Known for his industriousness, even before the age of 10, he sold gardening services to neighbors and later in-


Timothy Koogle. AP/Wide World Photos.

spected and repaired hamburger equipment for McDonald’s, the fast-food provider. Koogle proudly stated that his father was the greatest influence on his life. While attending the University of Virginia, Charlottesville, Koogle repaired cars to pay for many of his school expenses. In 1973 he graduated at the top of his class from the School of Engineering and Applied Science with a BS in mechanical engineering. Koogle was a member of both the Raven Society (the school’s oldest and most prestigious honorary society) and the Omicron Delta Kappa honor society and was a selfdescribed “antiwar radical.” During his undergraduate days, Koogle impressed his professors, who asked him to teach an alternative course in automobile engine repair. He also restored antique cars and rebuilt and modified race car engines part time while earning his master’s and doctoral degrees in mechanical engineering at Stanford University in 1977.

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Timothy Koogle

FOUNDING A COMPANY AND VISUALIZING THE INTERNET Koogle started his own company after graduation, making equipment for electronic manufacturing companies. He later sold the company to Chicago-based Motorola. After completing the sale, he began working for Motorola in 1983, spending nine years employed in the company’s operations and corporate venture capital groups, where he attained a number of executive management positions. In 1992 Koogle became president of Intermec, an automated data collection and communications systems manufacturer located in Seattle, Washington, that had (earlier) invented bar code symbols. From 1992 to 1995 Koogle helped the company increase its sales by 50 percent to more than $300 million. During this time Koogle was also the corporate vice president of Intermec’s parent company, Western Atlas, a multinational information services and technology company. As the Internet grew in popularity in the early 1990s, Koogle became interested in the new technology. In 1995 a corporate headhunter informed Koogle about a small company called Yahoo!, whose four employees needed an experienced manager to run its business operations. Two of the employees were also the company’s founders—David Filo and Jerry Yang —who had dropped out of Stanford University to develop their Web directory. Even though Koogle was risking his career by switching from a large and growing company to a fledgling start-up with virtually no sales, he decided the change was worth the risk. He joined Yahoo! as CEO and president in 1995. Koogle’s first job was to find the best way to make money from the millions of people who were surfing the Internet. He also needed to make Yahoo! distinctive from all of the other Internet portals that were crowding the new media source. He decided that Yahoo! should sell advertising from its free site to bring in revenue. At first, Filo and Yang were hesitant about the commercialized concept, but they finally came around to Koogle’s novel idea.

AGGRESSIVELY ADVERTISING YAHOO! Jeffrey Mallett, as Yahoo!’s chief operating officer, and Koogle, as its CEO, engineered an amazing campaign to make Yahoo! the most famous brand on the Internet. Mallett concentrated on the day-to-day operations of the company, while Koogle focused on developing large-scale partnerships and deciding where all revenues would come from. Critical in this action were several crucial deals that allowed Yahoo! to offer users specialized content, free e-mail, community offerings, and commerce. In 1996 Yahoo! began airing its humorous and now-famous tagline, “Do you Yahoo!?” Owen Shapiro, a senior analyst at the market and brand research firm Leo J. Shapiro & Associates, said of the advertising campaign, “The

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name contains the promise of the product. It reinforces the idea that when I go to Yahoo!, I’ll be so pleased I’ll be Yahooing afterwards” (BusinessWeek, September 7, 1998). By 1997 Yahoo!’s stock price rose over 500 percent from its initial public offering, making it the fourth-best performing stock on NASDAQ. Yahoo! soon announced that its earnings were twice as high as analysts’ consensus estimates—creating an amazing market value of $6.09 billion, compared with a valuation of $334 million when it went public two years earlier. Yang said about the Koogle-Mallett team, “Without a doubt, there would be no Yahoo! as it is today without them. Their execution of our business plan has been key to the company’s success” (Wall Street Journal, April 10, 1998). In just three years Koogle’s practical wisdom helped the cofounders develop a valid business strategy that offered a tremendous array of services and information and that transformed Yahoo! from an untested concept to a very lucrative, one-stop Web site directory. While its competitors were working on faster software, Koogle hired experts to edit the Internet to bring order to a chaotic vehicle. As a result, by 1998 many stock analysts were calling Yahoo!, which had 40 million people logging on to it every month, one of the best Internet stocks. It was widely considered the new media company for the 21st century.

KOOGLE’S ACCOMPLISHMENTS Koogle accomplished his feat with Yahoo! by keeping tight control on expenses and avoiding the capital losses that were so common with most fledgling Internet companies. Perhaps the most important asset in Koogle’s arsenal was the power of Yahoo!’s brand name. But equally important was its strong asset base of hundreds of millions of dollars. During its first few years many companies were heavily investing in Yahoo!; for instance, Softbank Corporation invested $250 million to own 31 percent of the company. Koogle built advertising revenues with a strategy of aggressively promoting the brand name, increasing services, and making sure that the operations of Yahoo! were distributed everywhere possible. Koogle insisted that the name Yahoo! be placed in high-profile arenas, including the two popular television shows Ally McBeal and Caroline in the City, the Oakland Athletics’ professional baseball team, and the popular Comedy Central cable channel. Koogle had already placed Yahoo! on minor but still important places, such as T-shirts, computer bags, yo-yos, surfboards, parachutes, and shoes. Knowing that mere name recognition was not enough, Koogle also aggressively acquired many companies as a way to expand Yahoo!’s services and fight off mounting competition. For instance, Yahoo! purchased ViaWeb for $49 million; Four11 Corporation, a free e-mail company, in 1997 for $92


Timothy Koogle

million; and GeoCities for $3.5 billion. In January 1998 Koogle signed a partnership deal with the long-distance telephone giant MCI Communications Corporation to jointly market a special online services where the Yahoo! name received top billing. Koogle also dealt with such popular ecommerce companies as Amazon.com, CD-Now, and E*Trade to drive business Yahoo!’s way. In all, Koogle continued to stress refinement of Yahoo!’s product by adding reliable access and by refining features such as personalized home pages, stock quotes, chat rooms, and free e-mail. By 1998 Koogle had expanded Yahoo!’s reach into 14 countries, with Web sites in nine different languages. With Yahoo! Japan as its most popular overseas site, Koogle estimated that 30 percent of its traffic came from outside North America.

ENDLESS WORK By the late 1990s competition was fierce for Yahoo! as many established brick-and-mortar businesses, such as NBC/ General Electric, Disney, Time Warner, and Microsoft sought to establish their presence on the Web. Their number-one enemy was the upstart but mighty Yahoo! With this in mind, Koogle and his troops worked tirelessly to make sure that Yahoo!’s Web pages were accessible anywhere and from any device. Koogle expanded the services offered by Yahoo! with the introduction of Yahoo! Wallet, which allowed users to register their credit cards and shipping addresses with Yahoo! so they could shop safely anywhere on the Web. Koogle directed Yahoo! to maintain a monthly online bill for its customers, again making it easy and safe to traverse the Internet. At the same time, Koogle was tailoring each person’s Web page for particular tastes, interests, and buying history. One of Koogle’s main ideas was to use technology to provide people what they want on the Web. Koogle said, “I can picture Yahoo! as a big depository for people’s preferences and consumption patterns. We’ll have the ability to notify people of things they should tune into” (BusinessWeek, September 7, 1998). By 1999 the company had grown to 800 employees, 2,200 advertisers, 35 million registered users, and profits of $25.6 million. Under Koogle’s leadership as CEO and chairman (he had been appointed to the latter post in 1999), Yahoo! grew from a relatively unknown startup to a leading global Internet media company with annual net revenues of more than $1 billion in 2000. Koogle had a visionary sense in developing Yahoo! by constantly pushing the company’s horizon toward the future. During his tenure, BusinessWeek magazine named Koogle one of the Top 25 Executives of the Year in 1999 and 2000. Koogle also appeared regularly as an industry expert on many


business and financially oriented broadcast programs such as CNBC, CNN/fn, and Fox News.

STEPPING DOWN AS TOP YAHOO! By 2000 the dot-com implosion was in full swing as the major stock market indexes reversed themselves after the long 1990s bull market, in which stock prices continually rose in value, came to an end. Koogle had a $295,000 salary and Yahoo! shares worth $365 million, but Yahoo! was no longer immune to the troubles that were plaguing other Internet companies. In 2000 Yahoo!, the Internet’s number-one portal, had a stock price that was 90 percent below its peak of $237.50. Meanwhile, its market capitalization plunged from $100 billion to $10 billion as the market for online advertising unraveled at the seams. Investors demanded something be done about the falling value of Yahoo! and its failed attempts to merge with companies. Eventually, sentiment from Wall Street showed that most analysts felt Yahoo! needed a new CEO who was from the media side, not the technology side (where Koogle came from). In March 2001 Koogle stepped down as CEO but remained in his chairman position. In 2003 he resigned from the company’s board of directors, one of many changes that occurred in the two years following the naming of Terry Semel as the new CEO in May 2001. Koogle was described as driven, savvy, decisive, and very focused, but he was also a southern gentleman with a strong character who often used folksy phrases reminiscent of his Virginia roots. His hobbies included collecting and playing vintage guitars and auto racing. Koogle served as the chairman of the board of directors for the Association for Automatic Identification and Mobility, the principal worldwide trade association for the automated data collection industry.

See also entries on Intermec Corporation, Motorola, Inc., Western Atlas Inc., and Yahoo! Inc. in International Directory of Company Histories.


Himelstein, Linda, with Heather Green, Richard Siklos, and Catherine Yang, “Yahoo! the Company, the Strategy, the Stock Today, It’s the Lord of the Web. But Powerful Rivals Are Moving in Fast. Can Yahoo! Keep Clicking?” BusinessWeek, September 7, 1998, p. 66. Swisher, Kara, “The Two Grown-Ups behind Yahoo!’s Surge,” Wall Street Journal, April 10, 1998. —William Arthur Atkins

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Hans-Joachim Körber 1946– Chairman and chief executive officer, Metro Group Nationality: German. Born: July 9, 1946, in Brunswick, Germany. Education: Technical University of Berlin, master brewer; PhD. Career: R. A. Oetker Headquarters, 1974–1980, senior controller for the beverages division; Söhnlein Rheingold, 1980–1985, manager of finance, accounting, controlling, information technology, purchasing, and personnel; Metro SB-Großmärkte GmbH & Company, 1985–1991, manager of finance, accounting, controlling, logistics, and information technology; Metro International Management, 1991–1996, member of the general directorate; Metro AG, 1996–1999, member of the management board; Metro AG, 1999–2000, spokesman of the management board; Metro Group, 2001–, chairman and chief executive officer. Address: Metro AG, Corporate Communications, MetroStraße 1, 40235 Düsseldorf, Germany; http:// www.metrogroup.de.

■ In 2001 Hans-Joachim Körber became the CEO of Metro Group of Germany, the fifth-largest global food retailer with over two thousand stores worldwide and $48.5 billion in sales. In his many years of experience at Metro, Körber improved the management style, business strategies, and corporate image of the company to maintain profits in the face of competition from powerful international discount companies, such as WalMart.

EARLY CAREER AS A MASTER BREWER Hans-Joachim Körber was born in Brunswick, Germany, on July 9, 1946. He attended the Technical University of Berlin, where he studied brewing technology and earned a degree as a master brewer. He later continued his education and earned a PhD in business management. Körber’s early business

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experience was in the beverage industry. From 1974 to 1980 he worked as a senior controller for the beverages division of R. A. Oetker Headquarters in Bielefeld, Germany. From 1980 to 1985 he worked as part of the management team of Söhnlein Rheingold, a wine company in Wiesbaden, Germany. He was responsible for finance and accounting, controlling, information technology, purchasing, and personnel. Körber first became involved with the company that would eventually become the Metro Group in 1985, when he became a member of the management team for Metro SB-Großmärkte GmbH & Company, a cash-and-carry, self-service wholesale trade company. Körber was in charge of finance and accounting, controlling, logistics, and information technology for six years. In 1991 he joined the general directorate of Metro International Management in Baar, Switzerland. In this role, Körber expanded his responsibilities to include international cashand-carry activities in six countries.

BECOMES METRO LEADER In 1996 Metro AG was formed after a merger of the independent retail companies Asko Deutsche Kaufhaus, Kaufhof Holding, and Deutsche SB-Kauf. When the new company was listed on the stock exchange in 1996, it was among the 20 largest companies listed in Germany. That same year Körber became part of the management board for Metro, located in Düsseldorf, Germany. In 1999 Körber became the spokesperson of the management board, and his responsibilities were expanded to include corporate development, corporate communications, and investor relations. After a power struggle with the board in 2000, Körber became the chairman and chief executive officer of the company in 2001. When Körber took control of Metro, the company had a mixed reputation. It originally had 16 business lines, including food hypermarkets, computer stores, shoe shops, and a textile business; however, only the cash-and-carry and electricalgoods outlets were generating profits. Additionally, the company was facing fierce competition from large discounters, particularly the U.S.-based company Wal-Mart. In 1999 Metro lost its position as Europe’s largest retailer when the French companies Carrefour and Promode merged. In the face of a stagnating German economy and fierce competition from international retailers, Körber streamlined


Hans-Joachim Körber

Metro to focus on only six divisions. He also decided that rather than sell parts of the company or merge outright with WalMart, he would give the six surviving divisions two years to achieve their profit targets. He also sought to improve the company’s overall profits through internationalization. “We are going for long-term shareholder value with a focus on profitability, internationalization, and critical mass,” Körber explained to Bertrand Benoit of the Financial Times (December 20, 2000).

well as Asia to expand the reach of the Metro group. He followed a specific formula for introducing his company into these new markets. In particular, he first introduced the cashand-carry wholesale stores because they had very little competition. Then, if the market seemed promising, other branches of Metro would follow, such as hypermarkets, consumer electronics, and do-it-yourself stores. Körber’s rapid industrialization led to Metro’s development of 2,300 stores in 26 countries by 2003.

INTRODUCED NEW MANAGEMENT STYLE

CREATING THE “FUTURE STORE”

Körber also introduced a new management style to Metro. Germany had a tradition of managing by consensus, which Körber believed was a problem because it introduced uncertainty into the market. In contrast, Körber introduced a management approach similar to the Anglo-Saxon capitalist model, with incentives such as stock options for managers and merit pay for shop employees. He also utilized new management tools, such as benchmarking and economic value added, that had not been used before in the company.

After only two years as CEO of Metro Group, Körber was able to improve the company’s profitability. In 2002 Metro reported a 10 percent sales increase as well as an increase in earnings per share. In 2004 Metro Group increased net profits by 23 percent during an overall downturn in German retailing. Because of these successes, Metro Group renewed Körber’s contract until 2009.

Additionally, Körber introduced a more sophisticated form of financial management than had been used previously in the company. He focused finances on capital intensity and cash. He moved the company from German accounting practices to international accounting standards, which included quarterly reporting. He also adopted a comprehensive corporategovernance code. In addition to changing Metro internally, Körber also improved the company’s external image and relations. He focused on improving the recognition levels of the company’s brands in Germany and even changed the company’s name from Metro AG to Metro Group to establish a uniform corporate identity. Körber believed that this strategy would help keep the company competitive against discounters. “There is too much emphasis on price at the expense of brand advertising and this can only lead to long-term category decline,” he explained to the Grocer (May 24, 2003). Körber recognized that Metro Group would have to look outside of Germany to increase profitability. The German markets were suffering from overcapacity, price wars, and depressed consumer spending. Körber took advantage of the new markets developing in post-Communist Eastern Europe as


In 2004 Körber and the Metro Group were looking to the future with the development of the Future Store. The company built a 41,000-square-foot store in Rheinberg, Germany, as a laboratory to develop new technologies for shopping. The Future Store included innovations such as a computerized shopping assistant, intelligent scales, and computer chips to tag and track products. See also entry on Metro AG in International Directory of Company Histories.


Benoit, Bertrand, “Aiming for More Cash than Carry,” Financial Times, December 20, 2000. ———, “Metro Delivers the Message of the Moment,” Financial Times, February 26, 2003. Weber, Lauren, “When Refrigerators Talk,” Newsday, January 12, 2004. “What Can the Food Industry Do To Counter the Impact of Zero?” Grocer, May 24, 2003, p. 29. —Janet P. Stamatel

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Richard M. Kovacevich 1943– Chairman and chief executive officer, Wells Fargo & Company Nationality: American. Born: October 30, 1943, in Tacoma, Washington. Education: Stanford University, BS; MS; MBA. Career: General Mills, planner; GM, mergers and acquisitions; division manager; Citicorp Group, executive; Norwest, 1986–1989, vice chairman and head of banking group; 1986–1993, chief operations officer; 1989–1993, president; 1993–1998, chief executive officer; 1995–1998, chairman; Wells Fargo & Company, 1998–2001, president; 1998–, chief executive officer; 2001–, chairman. Awards: Best Manager, BusinessWeek, 2003, 2004. Address: Wells Fargo & Company, P.O. Box 63750, San Francisco, California 94163; http://www.wells fargo.com.

■ As of 2004 Richard M. Kovacevich was leading a $334 billion diversified financial services company that offered banking, insurance, investments, mortgages, and consumer finance services from its storefronts, on the Internet, and through other distribution channels. Although the headquarters were in San Francisco, Kovacevich’s approach was decentralization, each local store acting as a center for customers’ financial service needs. Wells Fargo was the leading mortgage originator in the United States and the second largest domestic service provider, having almost $400 billion in assets in 2004. In 2003 Wells Fargo was the fifth largest U.S. bank in assets. Forbes highlighted Wells Fargo as the 12th largest U.S. corporation in a composite ranking of revenue, profit, assets, and market value; among the top 50 in revenue among all companies in all industries; and among the 10 largest charitable givers in corporate America. Kovacevich wrote for the company Web site: “We learn from each other. That’s one of the advantages of being big.” In 2004 Wells Fargo assets reached $397 billion with a $96 billion market value of stock. The company ranked number one in the industry in the areas of retail banking, small

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Richard M. Kovacevich. Paul S. Howell/Getty Images.

business lending, agricultural lending, insurance brokerage, and equity lending.

WORKING WITH PEOPLE, NOT JUST NUMBERS Kovacevich summed up his managerial philosophy as follows on the company’s Web site: “Integrity is not a commodity. It’s the most rare and precious of personal attributes. It’s the core of a person’s—and a company’s—reputation.” Kovacevich emphasized the major factors behind Wells Fargo’s success: “What has made our company so successful for 151 years? I believe there are two important reasons. First and foremost, our people. We have the most committed, talented, experienced, innovative, and caring people in our industry. The second reason is that for 15 years we’ve demonstrated that our



business model—diversified financial services, not just banking—and earning all our customers’ business does work.” Kovacevich was a visible and accessible CEO, qualities that matched well with the company’s first product—service. Kovacevich’s name and face became almost as synonymous with the corporate image as the Wells Fargo stagecoach that had once securely delivered money. Kovacevich’s summary of the company’s vision and values on the Web site read: “Our product: Service. Our Value-Added: Financial Advice. Our competitive advantage: Our People.” Below this slogan was a friendly photo of a smiling Kovacevich with his suit coat slung over his shoulder. According to Kovacevich, customers were central to all company operations that aimed to provide “personal, hometown, responsive, friendly service.” In 2004 the Wells Fargo workforce reached 134,000. By calling employees “team members,” Kovacevich conveyed his vision that “Regardless of how big we are and how much territory we cover, we share certain values that hold us together wherever we are and whatever we do. It doesn’t matter what our responsibilities are, our levels or titles, what businesses we’re part of, or where we live and work. . . . We believe everyone on our team is important and deserves our respect. . . . We use, extensively, America’s most neglected resource— recognition.” Treating employees right was important to Kovacevich. On the Web site he wrote, “Our team members will say, ‘I chose the right company. I’m valued. I’m rewarded. I’m recognized. I can improve my professional skills here. I can reach my career goals. I enjoy my work’.” At the same time, Kovacevich expected Wells Fargo employees to care as much about the company as he did. He wrote, “In hiring people, we really don’t care how much a person knows until we know how much they care.” Kovacevich outlined his goals as the following components of the company’s platform: “We want to satisfy all of our customers’ financial needs, help them succeed financially, be the premier provider of financial services in every one of our markets, and be known as one of America’s great companies.” Kovacevich emphasized the last point several times in his writings, reaching back into Wells Fargo history. To further strengthen Wells Fargo’s reputation as a truly American company, Kovacevich made a priority of personalizing both employee relations and customer service.

A COMMUNITY BANKER Kovacevich took the American corporate image of Wells Fargo farther by emphasizing his pride in “competing in an industry that is central and indispensable to the growth of our national economy, and an industry where we can make a fair profit and do good for our customers and communities at the


same time.” It was important to Kovacevich that Wells Fargo maintain a presence in the national and local communities. He expected team members to be community leaders and to “promote the economic advancement of everyone in our communities including the less fortunate who have yet to share in the prosperity of our extraordinary country.” Kovacevich declared the company would be “known as an active community leader in economic development, services that promote economic self-sufficiency, education, social services, and the arts.” He encouraged Wells Fargo team members across the country to “roll up their sleeves” and participate in community fundraising campaigns, nonprofit leadership, and community events. This contribution of “financial, human, and social capital” was a cornerstone of the Wells Fargo community vision. Attention to community service, customer care, and national growth signified Kovacevich’s understanding of the place of Wells Fargo in the U.S. economy and society. For example, he facilitated and encouraged employees to own stock and stock options in the company through the “Partner Shares” program. He was also committed to helping his team members be “winners.” Kovacevich reiterated another distinctly American characteristic of the Wells Fargo company: accessibility. His “picture of success” was to be “known by our team members, known by our customers, known by our communities, and known by our shareholders.” He reached out to all types of customers—“consumers, small businesses, farmers and ranchers, non-profits, middle-market companies, real estate companies, and corporations.”

MORE PRODUCTS PER CUSTOMER Kovacevich’s basic focus was wholesale and retail banking and mortgage lending. His core strategy was to sell as many products as possible to each customer and create repeat customers rather than bringing in customers who would not be loyal. The result was that in 2003 the average Wells Fargo customer signed up for four products, double the industry average. Kovacevich’s strategy in response to slowdowns in mortgage originations was to bolster other business lines, such as commercial lending. A Fortune 500 company, Wells Fargo in 2004 was “the fourth largest financial institution for the market value of its stock in the world” and the 27th largest among all world companies. The company’s financial goals were to “lead the industry in return on equity, return on assets, and growth in revenue and profitability.” Kovacevich presented Wells Fargo as a diversified services company that provided “every product our customers need.” He wrote, “Our job is to provide sound financial advice for customers—and create new wealth for them—as they move from one financial product to another. . . . Customer-Centric, not Product-Centric.” Wells Fargo offered the following services: banking, home equity, home asset management, money

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market accounts, portfolio management (investments), insurance, consumer and commercial finance, venture capital, commercial real estate, and other business and personal services. To obtain profits and provide customer service in all these areas, Kovacevich promoted the philosophy of “cross-selling” or “needs-based selling.” The idea was that the more the company worked with customers, the more the company learned about their needs, and the easier it was to sell customers a broad offering of products so that they would turn to one brand with many services. Then the customers had to be impressed with excellent customer service. The Wells Fargo strategy as set out by Kovacevich took the form of 10 initiatives in 2004. Among these objectives were increasing banking earnings from investments, brokerage, trusts, and insurance; increasing the number of products chosen by current customers; continuing to work as customer advocates; increasing the number of customers who used both a Wells Fargo mortgage and banking service; increasing the number of choices for customers; and providing “informationbased marketing.” The last initiative fit with the CEO’s view that both employees and customers should have full access to all information that could benefit both them and the company. Wells Fargo’s product line was the most extensive in the industry and number one in many areas, such as mortgages and financial services distribution, Internet banking (3.5 million active Internet banking customers), commercial lending, and insurance brokerage. The company’s system of distribution was the largest in the industry as of 2004, Wells Fargo having the largest network of stores and 6,700 automated teller machines. Wrote Kovacevich, “Our business is service—personal service. We have one of the industry’s strongest sales and service cultures.” In 2004 Wells Fargo was selling at a 30 percent discount to the Standard & Poors 500, but Kovacevich was not content with this figure, saying, “That’s not good enough.” He wanted to raise the price/earnings ratio, the ratio of the company’s stock price to its earnings per share, to “at or above the average for all S & P 500 stocks.” The open-book CEO was not eager to have his private life accessible. Kovacevich was an avid golfer and carried a 10.2 handicap index. He belonged to the San Francisco Golf Club and the Burlingame Country Club in Hillsborough, California. When the U.S. Golf Association Web site began to publicize all memberships and golf scores, Kovacevich was not happy. “Why they need to be accessible by anyone, I don’t see

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what benefit that provides,” he told Carrick Mollenkamp of the Wall Street Journal, “At least someone should have told me” (April 19, 2004). This former pitcher turned down an offer from the New York Yankees to accept an athletic scholarship to Stanford University, where he earned bachelor’s and master’s degrees in industrial engineering. He later earned a master of business administration degree from Stanford. Kovacevich was a member of the boards of directors of Cargill, Target Corporation, and the San Francisco Committee on Jobs. He was a member of the board of governors of the San Francisco Symphony and of the boards of trustees of the San Francisco Museum of Modern Art and the California Institute of Technology. He was chairman of the California Business Roundtable. BusinessWeek named Kovacevich best manager in 2003 and 2004, stating that he “set the standard for banking excellence.” BusinesWeek also recognized Wells Fargo as one of the top 25 American companies in all industries on the basis of sales, profit, and stockholder return and as one of its Web Smart 50 for customization.

See also entry on Wells Fargo & Company in International Directory of Company Histories.


“Dick Kovacevich: Wells Fargo,” BusinessWeek Online, January 13, 2003, http://www.businessweek.com/@@ sYKAf4UQwWzZsRYA/magazine/content/03_02/ b3815629.htm. Kovacevich, Richard M., “The Vision & Values of Wells Fargo,” http://wellsfargo.com/invest_relations/vision_values/ ?_requestid=46889. Krampf, Allison, “Is All Well Now for Wells Fargo?” Barron’s Online, May 26, 2004. Mollenkamp, Carrick, “An Open Secret,” Wall Street Journal, April 19, 2004. “Repeat Performers: For This Exec A-Team, Another Ho-hum Year of Killer Profits, Enviable Margins,” BusinessWeek Online, January 12, 2004, http://www.businessweek.com/@ @i87dxYUQwmzZsRYA/magazine/content/04_02/ b3865721.htm. —Alison Lake


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Dennis Kozlowski 1946– Former president, chief executive officer, and chairman, Tyco International Nationality: American. Born: November 16, 1946, in Newark, New Jersey. Education: Seton Hall University, BS, 1968. Family: Son of Leo Kelly (investigator) and Agnes (Kozell; school crossing guard) Kozlowski; married Angeles Suarez (divorced); married Karen Lee Mayo (waitress), 2000; children: two (first marriage). Career: SCM Corporation, c.1970, auditor in mergers and acquisitions; Cabot Corporation, senior finance position; Nashua Corporation, director of audit and analysis; Tyco Laboratories (later Tyco International), 1976–1989, various positions, including president of Grinnell Fire Protection Systems division, vice president and chief financial officer of Ludlow Corporation division, and president and chief executive officer of Grinnell Corporation division; 1989–1992, chief operating officer and president; 1992–1993, chief executive officer and president; 1993–2002, chief executive officer, president, and chairman. Dennis Kozlowski. AP/Wide World Photos.

■ During the economic boom of the 1990s, L. Dennis Kozlowski was a high-profile hero on Wall Street and in the media. Between 1992 and 2002 he built Tyco—an obscure manufacturer of industrial parts with $3 billion in annual sales—into a global conglomerate with $36 billion in revenues from the sale of everything from diapers to fire alarms. Kozlowski made a business of fast and friendly acquisitions and mergers. He spent over $60 billion for 200 major corporations and hundreds of smaller companies, making countless millions for Tyco investors. He was known as being very aggressive and demanding and as being a drastic cost cutter. His management was completely decentralized. Provided that they met their profit goals, his executives ran their divisions as entrepreneurs. Although some analysts were skeptical, others called him a business genius and the best CEO in the country.

and Tyco came to symbolize personal and corporate greed in the early 21st century.

By 2003 Kozlowski was on trial for looting Tyco of $600 million and was also facing charges of tax evasion. Kozlowski

Kozlowski attended Seton Hall University, a Catholic school in South Orange, New Jersey. Living at home, he put


FROM THE INNER CITY TO THE TOP OF TYCO Raised in a tough Polish and Italian neighborhood in westcentral Newark, New Jersey—a neighborhood that was completely destroyed in the riots of 1967—Kozlowski identified his father as a Newark cop who rose to police detective. In fact, it was his mother who worked for the police department as a school crossing guard. Leo Kozlowski was an undercover investigator for the private predecessor of New Jersey Transit and occasionally worked for a county prosecutor’s office and for the Federal Bureau of Investigation. He was also a tireless Republican Party ward worker within the Polish community.

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himself through college by playing guitar in a wedding band and waiting tables. He quit one restaurant job because the staff pooled their tips. Marc Feigen, who knew Kozlowski at the time, told Time magazine in June 2002, “There seems to have been a fanaticism about getting every last nickel. That was his Achilles’ heel.”

He replaced Tyco’s managers with merger specialists who shared his attitudes about the business and maintained an everchanging list of about 30 acquisition candidates. He instituted very generous, performance-related pay schemes. His goal was to make every one of Tyco’s businesses first or second in its respective market.

About 1970 Kozlowski became an auditor in the mergers and acquisitions department of SCM Corporation, an oldstyle conglomerate. Subsequently he held senior finance positions at Cabot Corporation, a chemicals company, and became director of audit and analysis at Nashua Corporation, a photocopier manufacturer based in New Hampshire.

According to a February 9, 2004, story in Time magazine, Kozlowski became known as “Deal-a-Day Dennis.” Between 1994 and 1997 Tyco acquired 24 companies. At first Kozlowski looked for small, strong but underperforming companies that would provide Tyco with immediate profits. He also looked to diversify Tyco’s holdings. Then in 1997 he paid $850 million for AT&T’s undersea fiber-optic cable division. Kozlowski also bought AMP, the world’s largest maker of electronic components, and U.S. Surgical, a medical products manufacturer with a growing market. Between 1996 and 1999 Kozlowski spent $30 billion on acquisitions, all but $3 billion paid for with Tyco stock. Tyco’s debt tripled between 1997 and 1999. However, its profits continued to rise. During fiscal year 1999 Tyco earned $2.6 billion on sales of $22.5 billion.

In 1976 Joseph Gaziano of Tyco Laboratories hired Kozlowski for the finance department. At the time Tyco had annual sales of only $20 million; however, Gaziano was becoming famous for hostile takeovers. Kozlowski’s job was to fix up some of these floundering acquisitions. Determined to rise in Tyco, Kozlowski took a few evening classes at Rivier College in Nashua, New Hampshire, but never earned an MBA as he later claimed. When Gaziano died in 1982 and was replaced by John F. Fort III, Kozlowski began learning the new CEO’s profits-first management style.

ACQUIRED AND RAN GRINNELL CORPORATION Kozlowski was involved in Tyco’s decision to buy Grinnell Fire Protection Systems, a manufacturer of automated sprinklers. He became vice president of finance for the new division. When he became president of the division in 1984, it had zero profits on sales of about $185 million. Within a year Kozlowski could claim $15 million in profits on revenues of $255 million. He earned a reputation for turning around underperforming companies. Kozlowski convinced Tyco to buy out the remaining portions of the Grinnell Corporation, including a foundry and an industrial parts distributor. He set out to transform what was now Tyco’s largest division. He banished nearly all written reports; set low salaries with generous, performance-based bonuses; and fired all underperformers. In 1987 Kozlowski was named to Tyco’s board of directors. Between 1982 and 1992 Tyco’s sales increased from $550 million to $3.1 billion, and its share price increased by more than 800 percent. In 1989 Kozlowski became president and COO of Tyco, with responsibility for its business operations and corporate functions. He then made a quiet power play for Fort’s job, becoming CEO in 1992 and chairman of the board shortly thereafter.

Kozlowski’s acquisitions were quick and friendly, completed within a few weeks. In 1998 he told Forbes magazine why he opposed hostile takeovers: “In the hostile environment, you can never get to the important people [lower down] who are making things happen. Good people, because of the uncertainty of a hostile takeover, tend to leave. We want to keep employees who fit into our style of entrepreneurial management—no meetings, no corporate bureaucracy over the entrepreneur’s head, and focused on the bottom line” (June 15, 1998). Following an acquisition, Kozlowski moved quickly to cut costs and consolidate, laying off workers and closing factories. He fired top executives, replacing them with young middle managers who were willing to work long hours. All employees received generous severance packages. Some analysts believed that he overpaid for many of his acquisitions. Nevertheless, between July 1992 and its peak in December 2001, Tyco stock increased thirteenfold. MANAGEMENT STYLE

“DEAL-A-DAY DENNIS”

Kozlowski viewed his job as involving strategic planning, making acquisitions, and dealing with specific management problems. He believed that without meetings, memos, or the need to consult the boss, managers could make decisions very quickly. He provided little direction, and division managers’ strategic plans were not reviewed. Instead Kozlowski relied on performance-based compensation. All employees were eligible for generous incentive pay that, except for a few top corporate executives, was tied to the division’s or unit’s performance, not the company’s.

Kozlowski was determined that Tyco continue to grow, saying that he wanted it to become the next General Electric.

Tyco employed some 270,000 people in about two thousand locations around the world, and Kozlowski’s manage-

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ment practices never brought together the company’s diverse businesses for the benefit of the organization. Health care was lumped into the same division as plastics and adhesives. Kozlowski cared little for quality control or research and development, underinvested in information technology, and failed to train a new generation of executives. Well into 1997 the press lauded Tyco’s sparse staffing and bland headquarters as well as Kozlowski’s meager compensation. His $1 million salary remained unchanged for a four-year period, and his annual bonus was limited to an additional $1 million. Tyco offered him no stock options, although Kozlowski did receive performance-linked restricted shares. However, when Tyco merged with the security firm ADT in 1997, it adopted ADT’s stock option policy. Kozlowski did not receive such typical executive perks as financial planning, postretirement medical insurance, or club memberships. He was even known to fly his own airplane on business trips without reimbursement.

DENNIS THE MENACE By 1997 some analysts were beginning to view Kozlowski as one of the country’s most overcompensated CEOs. Between 1992 and 2001 Kozlowski’s legal compensation increased four times more than Tyco’s stock price. As the board raised his compensation from $8.8 million in 1996 to $52.8 million in 1997, Kozlowski began regularly to avail himself of company loans, borrowing hundreds of millions of dollars, most of which he repaid. In 1999, when his board-approved compensation was at $136.1 million, Kozlowski borrowed even more money from Tyco. He bought properties all over the country. His home in Boca Raton, Florida, cost $29.8 million. The company bought, renovated, and furnished his Manhattan apartment at a cost of $30.8 million. He owned motorcycles, airplanes, and a 130-foot classic sailboat that was said to have cost $20 million, plus $700,000 annually for maintenance and crew. Kozlowski billed Tyco $110,000 for 13 days at a London hotel. By pledging $4.5 million of Tyco’s money, he bought himself a seat on the board of the Whitney Museum in New York. In 2001 Tyco’s board approved a retention deal wherein, if he stayed with the company, Kozlowski would receive 100,000 shares of Tyco stock annually through 2008. Meanwhile Kozlowski continued to portray Tyco as an austere corporation. Its sparse, rustic headquarters on the outskirts of Exeter, New Hampshire, housed only about 150 employees—mostly lawyers, bankers, accountants, and top executives. Although Kozlowski moved the corporate headquarters to extravagant offices in Manhattan in 1995, he maintained the Exeter facility as Tyco’s humble facade. In 1997 Tyco merged with ADT, based in Bermuda. Kozlowski structured the deal as a reverse takeover, with ADT acquiring Tyco. Tyco’s headquarters—and its overseas profits—moved to Bermuda, saving


the company between $400 million and $800 million annually in U.S. income taxes. That same year Kozlowski established yet another lavish corporate headquarters in Boca Raton. According to the New Hampshire Business Review, Tyco’s home page quoted Kozlowski as saying that the company “is successful because we adhere to basic strategies. We keep our business simple, stay close to our markets and empower our employees for greater achievements” (November 17, 2000). However, nothing was simple about Tyco. Its hundreds of acquisitions made its accounting unfathomable. Although some analysts had always had doubts about Kozlowski’s management, aggressive maneuvering, and complicated accounting schemes, in late 1999 rumors began circulating that Tyco had inflated its growth and overstated the earnings of some of its slow-growing businesses with unorthodox accounting. Its market value fell 17 percent. Kozlowski denied the charges, and an investigation by the U.S. Securities and Exchange Commission (SEC) cleared the company in 2000. However, Tyco’s account books were filled with footnotes about thousands of offshore subsidiaries, scaring many shareholders. Tyco’s stock lost half of its value. Although profits and sales remained high, the stock did not fully recover.

KOZLOWSKI’S LAST STAND Kozlowski remained set on aggressive growth. In 2000 Tyco acquired 40 companies for $9 billion. In 2001, in what many analysts viewed as a serious miscalculation, Kozlowski acquired CIT, Tyco’s first commercial finance company. That spring Tyco was valued at $93 billion, and Business Week named Tyco its top performing company. In January 2002 New York state banking regulators notified the Manhattan district attorney of a suspicious wire transfer of nearly $4 million from a Tyco bank account to a New York art dealer, who then moved the money to an account in the Bahamas. Tyco also was under investigation by the U.S. Treasury Department for tax evasion and money laundering. At a January 22, 2002, shareholders’ meeting, Kozlowski announced that, to simplify accounting, he was going to divide Tyco into five pieces and sell off businesses, reducing the company’s size by about one-half. In February 2002 Tyco filings revealed that Kozlowski and his chief financial officer, Mark Swartz, while publicly declaring that they almost never sold Tyco shares, had actually sold a combined total of more than $500 million in stock back to the company since 1999. They were accused of falsely inflating Tyco’s stock before selling. Kozlowski alone made $280 million by selling 5.3 million shares of Tyco stock. Tyco also revealed that it had made about 700 acquisitions at a price of $8 billion over the past three years, without informing shareholders. In April 2002 Kozlowski announced that he would not break up Tyco, thereby destroying any remaining credibility.

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Between January and June 2002 Tyco’s share price fell 80 percent. The rating on the company’s $27 billion debt was downgraded.

“CORPORATE ROGUE OF THE YEAR” Kozlowski resigned from Tyco International in June 2002. The following day he was indicted on charges of evading more than $1 million in sales taxes on more than $13 million worth of art, including works by Renoir and Monet. His dealers, cooperating with the Manhattan district attorney, claimed that the works of art, or sometimes just empty boxes, were shipped to Tyco headquarters in New Hampshire to avoid New York sales tax and then immediately returned to Kozlowski’s apartment in New York. Kozlowski pleaded not guilty. In September 2002 a New York grand jury issued a 92-page indictment against Kozlowski and Swartz, charging that between 1995 and 2002 their racketeering schemes had earned them as much as $600 million in unauthorized bonuses and expense reports as well as fraudulent stock sales. The original 39 charges included grand larceny, conspiracy, securities fraud, and 14 charges of falsifying records. Several of the charges carried maximum penalties of 25 to 30 years in prison. After the indictment Tyco filed a report with federal regulators detailing the evidence of alleged fraud and abuse committed by Kozlowski and other Tyco executives. Kozlowski and Swartz pleaded not guilty and were released on bond. Kozlowski also faced an SEC criminal complaint and a civil suit brought by Tyco. Kozlowski’s friends and supporters were shocked. Kozlowski was a shy and unassuming man, they said, who not only moved in high society but also socialized with fishermen, small business owners, contractors, and gardeners. He always gave generously to charities and causes. However, Tyco charged that Kozlowski had loosened up the company’s corporate giving program, donating $106 million of stockholders’ money to charity and passing off $43 million in company money as personal donations. At the end of 2002 U.S. News & World Report picked Kozlowski as its corporate rogue of the year, choosing him over Enron and WorldCom executives involved in much more extensive corruption.

GUILTY OR JUST GREEDY? The trial in the New York State Supreme Court went on for almost six months. The prosecution relied on sensationalism. Kozlowski’s spending habits and lavish lifestyle— financed with company money—grabbed the attention of the press and the public. Kozlowski used Tyco money to furnish his New York apartment and $5 million Nantucket home with

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a $6,000 shower curtain, a $15,000 antique poodle umbrella stand, a $2,200 gilded wastebasket, and $2,900 in coat hangers. Above all, there was a videotape of Kozlowski’s weeklong party for his wife’s 40th birthday on the Mediterranean island of Sardinia. It cost $2.1 million, including $250,000 to Jimmy Buffett for a one-hour performance. A Tyco event planner— and former Kozlowski mistress—charged over $1 million of the tab to Tyco for a management meeting. Kozlowski’s former executive assistant testified that she had agreed to cover his personal expenses with company money while having an affair with him. When she ended the relationship and left Tyco, Kozlowski gave her a severance package that included four years’ salary and loan forgiveness on several residences. Kozlowski’s face appeared on the front page of the New York Post under a giant headline that read “Oink, Oink” (September 13, 2002). The defense did not so much deny the charges as argue that the board had approved—or at least overlooked—what Kozlowski and Swartz were doing. In March 2004 the judge threw out the most serious charge of enterprise corruption. On April 2, 2004, a week into jury deliberations, the judge declared a mistrial when a holdout juror was identified in the press and subsequently reported receiving a phone call and a threatening letter. Some jurors claimed that although they had been offended by the prosecution’s overkill and were unsure as to whether the prosecution had proved criminal intent, they nevertheless were very close to a consensus guilty verdict on some of the charges. A retrial was expected to begin later in 2004. Some analysts estimated that shareholder lawsuits against Tyco, for mismanagement under Kozlowski, could reach $10 billion or more.

See also entries on Cabot Corporation, Nashua Corporation, and Tyco International Ltd. in International Directory of Company Histories.


Bianco, Anthony, et al., “The Rise and Fall of Dennis Kozlowski: How Did He Become So Unhinged by Greed? A Revealing Look at the Man behind the Tyco Scandal,” BusinessWeek, December 23, 2002, pp. 64–66. Bourque, Ron, “The Lessons Learned from Tyco’s CEO: The Basics Still Apply,” New Hampshire Business Review, November 17, 2000, p. 12. “Business: The Case of the Hold-Out Granny; The Tyco Mistrial,” Economist (London), April 10, 2004, p. 58. Chakravarty, Subrata N., “Deal-a-Month Dennis,” Forbes, June 15, 1998, pp. 66–67. Eisenberg, Daniel, and Julie Rawe, “Dennis the Menace: Dennis Kozlowski Built Tyco into a Global Conglomerate


Dennis Kozlowski by Buying Everything in Sight. Now He’s the Latest CEO to Resign in Disgrace,” Time, June 17, 2002, pp. 46–49. Kaback, Hoffer, “Complacency Is Not an Option,” Directors & Boards, Spring 2000, p. 14. “Kozlowski’s Colours; Face Value,” Economist (U.S.), January 26, 2002. Symonds, William C., and Pamela L. Moore, “The Most Aggressive CEO,” BusinessWeek, May 28, 2001, pp. 68–70. Thottam, Jyoti, “Can This Man Save Tyco? Ed Breen Is Undoing the Scandalous Excesses of the Kozlowski Era to Give the Company a New Start. Now He Needs to Deliver Profits,” Time, February 9, 2004, pp. 48–50. Useem, Jerry, “The Biggest Show No One’s Watching: Mistresses in the Stand! Criminals in the Elevator! Piles and


Piles of Really Boring Documents! Here’s What the Trial of Former Tyco CEO Dennis Kozlowski—Now at Its Midpoint—Is Really Like,” Fortune, December 8, 2003, p. 156. Varchaver, Nicholas, “The Big Kozlowski: Tyco’s ex-CEO Lived Large on the Company Dime. Now the Party’s Over. Herewith, the (Pay) Raises and Fall of a Roman Emperor,” Fortune, November 18, 2002, p. 123. Warner, Melanie, “Exorcism at Tyco: CEO Ed Breen & Co. Aim to Run a Big, Solid, and, Yes, Boring Company. But First They Must Drive Out Dennis Kozlowski’s Ghost,” Fortune, April 28, 2003, p. 106.

—Margaret Alic

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Sallie Krawcheck 1965– Chief executive officer, Smith Barney Nationality: American. Born: 1965, in Charleston, South Carolina. Education: University of North Carolina at Chapel Hill, BA, 1987; Columbia University, MBA, 1992. Family: Daughter of Leonard Krawcheck (attorney); married Gary Appel (merchant banker); children: two. Career: Salomon Brothers, research analyst; Donaldson, Lufkin & Jenrette, corporate finance associate; Sanford C. Bernstein, 1994–1999, senior equity research analyst; 1999–2001, research director; 2001–2002, chief executive officer; Smith Barney, 2002–, chief executive officer. Awards: Honored by the Financial Women’s Association as Private Sector Woman of the Year, 2003. Address: Smith Barney, 388 Greenwich Street, New York, New York 10013; http://www.smithbarney.com.

■ As chief executive officer of Smith Barney, the retail brokerage and stock research unit of Citigroup, Sallie Krawcheck was accorded responsibility for restoring credibility to one of the largest retail stock brokerage firms in the United States. During the stock market boom of the 1990s, Krawcheck developed a reputation for outspoken honesty and integrity as a research analyst for Sanford C. Bernstein. That distinction garnered even greater respect when conflict-of-interest scandals over stock recommendations at some Wall Street firms were revealed in 2002. In the aftermath of fraud charges against employees of Salomon Smith Barney and its parent company, Citigroup, the chief executive, Sanford Weill, personally hired Krawcheck in October 2001 to restore investor trust at the newly separated Smith Barney.

A REPUTATION FOR INTEGRITY Krawcheck developed her capacity for self-possessed opinion at the family dinner table. While all topics were open for

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Sallie Krawcheck. © Mark Peterson/Corbis.

debate, her father, the attorney Leonard Krawcheck, held his children to rigorous standards of argumentation. Yet intellectual stimulation at home did not assure success in business. While attending a private college preparatory school, Krawcheck excelled in track and occupied herself with interests in boys and cheerleading. A counselor took note of Krawcheck’s test scores and encouraged her to fully utilize her intellectual abilities. For inspiration the counselor gave Krawcheck a picture of a princess standing over a slain dragon. Taking herself more seriously, Krawcheck earned a BA in journalism at the University of North Carolina at Chapel Hill. Krawcheck developed an interest in the financial world during an internship at an investment firm. After a short period of employment at Fortune magazine, she returned to college, obtaining an MBA from Columbia University in 1992. Afterward Krawcheck found employment at leading Wall


Sallie Krawcheck

Street brokerage houses, first as a research analyst at Salomon Brothers, and then as a corporate finance associate at Donaldson, Lufkin & Jenrette. In 1994 Krawcheck became an insurance industry analyst at Sanford C. Bernstein, a small, independent research firm. Krawcheck discovered her place in the financial world when she became an analyst of financial services companies. She developed a reputation for being honest, outspoken, and value-driven during the speculative stock boom of the late 1990s. From 1997 to 1999 Institutional Investor recognized Krawcheck for providing the best research and analysis on securities brokers. In 1999 she became director of research at Bernstein. After Alliance Capital acquired Bernstein in 2000, she persuaded the company to triple the research staff with a focus on small companies, a move that significantly increased revenue and profit at Bernstein as the decline in the stock market stimulated demand for independent research. When the Wall Street brokerage scandals—in which stockbrokers exchanged positive stock recommendations for clients’ investment banking business—became known, Bernstein stood out as a model of integrity, offering objective, in-depth research. A Fortune cover story on research analysts on June 10, 2002, pictured Krawcheck as “The Last Honest Analyst.” By this time Krawcheck had risen to the position of chief executive officer of Bernstein; however, in fall 2002 Sanford Weill hired her to oversee Smith Barney. Weill had some experience with Krawcheck’s outspoken honesty. In 1997, when Weill’s Travelers Group acquired Salomon Brothers, Krawcheck denounced the action as risky and downgraded the stock. After the conflict-of-interest scandal damaged Salomon Smith Barney’s reputation, Weill separated the investment banking business from the research and brokerage firm and created the Smith Barney unit, consisting of the Global Private Client Group and Global Equity Research.

tionally good economic times. Research had come to be considered a necessary expense on Wall Street, rather than a valuable asset, a mindset that led to a decline in its quality. The fees that clients had paid for research were reduced or eliminated, further diminishing perceived value. The challenge Krawcheck faced at Smith Barney involved reestablishing credibility with investors who had lost trust in research but were expected to pay more for it. She reviewed analysts’ reports herself, basing issues of quality on decisiveness and a willingness to take controversial stances rather than conform to the presumed consensus. To renew faith in Smith Barney as a source of unbiased, independent research, Krawcheck changed the basis for the analysts’ compensation from fees earned on investment banking to those earned from individual investors. Since investment banking no longer provided funds for research, previously at 40 percent of budget, the funds allocated for this purpose declined significantly. Sales of research reports and retail broker commissions now funded the service. Krawcheck set a goal of doubling assets under the company’s management within five years, assuming steady, modest growth in the stock market. In addition to having a reputation for integrity, Krawcheck brought intuition, intelligence, a sense of humor, and a teamoriented management style to Smith Barney. She made a point to meet with analysts and brokers worldwide to determine changes in strategy and structure. While Krawcheck changed the management staff, many analysts left due to the large pay reduction that occurred as a result of the elimination of investment banking commissions; other analysts were fired for not adhering to the new code of ethics. Some changes were basic, such as simplifying the language of stock ranking, from “outperform” and “market perform” to “add,” “hold,” and “reduce.” Ranking eventually changed to a range of “favorite” to “least favorite,” based on return on equity and other measurements. Brokers in offices worldwide had access to the information they needed through sophisticated information technology systems.

CONTROVERSY AT SMITH BARNEY Despite Krawcheck’s unquestioned reputation for integrity, Weill’s choice of Krawcheck for CEO raised concern on Wall Street. First, Krawcheck’s two-year, $30 million contract was viewed as exorbitant, given the differences between Bernstein and Smith Barney. A boutique research firm, Bernstein staffed 400 employees and generated revenues of $295 million. In contrast, Smith Barney, the second-largest retail brokerage firm in the United States, staffed 23,000 employees worldwide, generated $5.7 billion in revenue, and managed a trillion dollars in assets. Also, Weill gave Krawcheck the freedom to recreate the research unit, and she reported directly to him. Krawcheck brought definite opinions and clear ideas to her position at Smith Barney. She attributed the problems on Wall Street less to corruption and more to sloppy work in excep-


Krawcheck faced irate investors and skeptical Wall Street insiders at Smith Barney, but many concerned parties looked to her to reestablish credibility for the securities market as a whole, as well as for Smith Barney.

See also entries on Donaldson, Lufkin & Jenrette, Inc. and Smith Barney Inc. in International Directory of Company Histories.


Engen, John, “Rank #1,” U.S. Banker, October 2003, p. 26.

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Sallie Krawcheck Rynecki, David, “The Bernstein Way: There Is a Firm That Does Research Right. Inside the Best Little Shop on Wall Street,” Fortune, June 10, 2002, p. 85. ———, “Can Sallie Save Citi, Restore Sandy’s Reputation, and Earn Her $30 Million Paycheck?” Fortune, June 9, 2003, p. 68. —Mary Tradii

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Ronald L. Kuehn Jr. 1935– Chairman, El Paso Corporation Nationality: American. Born: April 6, 1935, in New York City, New York.

After receiving his bachelor’s degree from Fordham in 1957, he left the area to briefly serve as a first lieutenant with the U.S. Army from 1958 to 1959. Upon discharge, he returned to Fordham and earned a law degree in 1964. For the next four years, he worked as an associate attorney with Hughes, Hubbard & Reed in New York City and then served as vice president and general counsel for Allied Artists Pictures, also in New York.

Education: Fordham University, BS, 1957; LLB, 1964. Family: Married Allison Spencer, 1986; children: seven. Career: Hughes, Hubbard & Reed, 1964–1968, associate attorney; Allied Artists Pictures, 1968–1970, executive vice president and general counsel; Southern Natural Resources, 1970–1979, vice president and general counsel; Sonat, 1980–1982, vice president and general counsel; 1982–1999, president and chief operating officer; 1983–1999, chief executive officer; 1986–1999, chairman; El Paso Corporation, 1999–, chairman of the board; 2003, interim CEO. Address: El Paso Corporation, 1001 Louisiana Street, Houston, Texas 77002-5089; http://www.elpaso.com.

■ The well-credentialed Ronald L. Kuehn Jr. was a veteran of the natural gas energy business, having led the transformation of Southern Natural Resources to its new identity as Sonat and on through the merger of Sonat with El Paso Corporation. To his misfortune, he hit a snag at El Paso, a company embroiled in scandal with its shareholders and the Securities Exchange Commission. He willingly stepped in the line of fire to serve as interim chief executive officer of El Paso while the company repositioned itself to meet its debt and resolve its controversies. EARLY EXPOSURE TO CONFLICT AND NEGOTIATION The son of a New York police officer, Kuehn was born in Brooklyn in 1935 and raised in Queens. Attending Fordham University on a basketball scholarship (where he played point guard), he began to develop negotiating skills as floor general for his teammates. By nature, Kuehn was soft-spoken—a skill not necessarily in demand on the basketball floor. He compensated by developing a persuasive manner to negotiate plays and positions for the team. Those skills were to become important in later life.


A MOVE INTO THE ENERGY INDUSTRY In 1970 Kuehn landed a job in the legal department of Southern Natural Resources of Birmingham, Alabama, a natural gas energy provider. Organized and disciplined, he became a rising star, particularly remembered for his low-key personality and nonthreatening manner in various legal negotiations. In 1981 Southern Natural was renamed Sonat, and within months Kuehn was named vice president and general counsel. The next year he was elected president, a position he held until the 1999 merger of Sonat with El Paso. Along the way, Kuehn also held concurrent positions as chief operating officer, chief executive officer (starting in 1983), and chairman (from 1986). At Sonat, Kuehn handled the many ups and downs peculiar to the energy business with characteristic reserve. He weathered low natural gas prices by stepping up exploration and production (E&P), which added to the company’s reserves and served the company well when gas prices again rose. The company struck out on a few E&P investments but also purchased Zilkha Energy in 1998 in an effort to boost its assets. Selim Zilkha would become both friend and foe to Kuehn in later years. In 1999 the El Paso Corporation, another energy provider, announced plans to acquire Sonat in a highly negotiated stockswapping measure intended to benefit both entities. The combined assets would mean control of 25 percent of all natural gas pipelines in the United States, making El Paso the largest natural gas pipeline company in the country. Although Kuehn officially retired at the time of the merger, the deal also established that he would serve as the nonexecutive chairman of El Paso until December 2000. In 2001 Kuehn, then semiretired, stayed on as lead director for El Paso.

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Ronald L. Kuehn Jr.

TROUBLE BREWS With the purchase of Sonat, El Paso had entered the E&P area of the industry, and its E&P holdings were significantly enhanced when it acquired yet another company, Coastal Corporation, in 2001. When Enron crumbled in December 2001 (a company that El Paso had tried to emulate), the tides turned. In 2002 the California Public Utility Commission charged El Paso with intentionally holding back capacity on four pipelines from November 2000 to March 2001, contributing to an energy crisis and artificial rise in electricity prices that cost California residents an extra $3.3 billion. Soon the U.S. Attorney’s office in Houston served subpoenas on El Paso and several other energy traders in an investigation of what is known as round-trip trades, swaps between two energy companies (e.g., electricity and natural gas) for the purpose of artificially manipulating price or inflating/deflating volume. By mid-2003 El Paso’s stock had fallen from around $70 a share (in early 2001) to a shocking $9.64 per share. Significant shareholder Zilkha (whose company Kuehn had bought just months before the Sonat–El Paso merger) accused Kuehn and others of mismanagement and started a shareholder uprising in June 2003 to overthrow El Paso’s entire board of directors. At that time El Paso’s chief executive officer resigned amid controversy, and the company announced that Kuehn would act as its interim chief “to provide strong leadership and stability.” With characteristic coolness and calm, Kuehn was able to diffuse the proxy contest with Zilkha by incorporating several of the recommendations voiced by the dissidents. The power struggle failed, but Kuehn began selling assets, cutting expenses, and paying off debt to maintain shareholder confidence. A permanent CEO, Douglas Foshee, took over in September 2003, but Kuehn remained as lead director on the board.

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In February 2004, based on the findings of an independent review, El Paso announced that it had overestimated by 41 percent its gas reserves and would have to revise corporate financial statements from 1999 to 2003. Company stock fell to $7 a share. Although neither Kuehn nor other then-current senior executives were implicated in any wrongdoing, others were. Nonetheless, in April 2004 a class action lawsuit against El Paso was filed in a Texas federal court, naming Kuehn and several others as defendants. On behalf of shareholders, the suit charged (among other things) that Kuehn and others knowingly or recklessly had participated in grossly overstating in the company’s oil-and-gas reserves, costing shareholders millions of dollars in lost revenues from falling stock prices.

See also entry on Sonat, Inc. in International Directory of Company Histories.


Carroll, Chris, “El Paso Energy–Sonat Deal Forms Pipeline Giant,” Houston Business Journal, March 19, 1999. Davis, Melissa, “El Paso Takes Aim at Past Abuses,” TheStreet.com, May 3, 2004, http://www.thestreet.com/ stocks/melissadavid/10157983.html. “El Paso Corporation Board Names Ronald L. Kuehn, Jr. CEO and Chairman; CEO Search Continues,” March 12, 2003, http://www.elpaso.com/press/newsquery.asp?sId=4117. Schlegel, Darrin, “Accidental CEO Places Himself in Line of Fire,” Houston Chronicle, May 31, 2003.

—Lauri R. Harding


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Ken Kutaragi 1950– Chief executive officer and president, Sony Computer Entertainment Nationality: Japanese. Born: August 2, 1950, in Tokyo, Japan. Education: Denki Tsushin University, degree in electrical engineering, 1975. Family: Son of the owners of family printing business (names unknown). Career: Sony Corporation, 1975–1991, researcher; 1991–1993, manager of PlayStation Project and Video Disc Player Group; Sony Computer Entertainment, 1993–1999, director and general manager of R&D; 1996–1997, executive vice president of R&D; 1997–1999, executive vice president and co-COO; 1997–, chairman and CEO of American operations; 1999–2001, executive president; 1999–, CEO and president; Sony Corporation, 2003–, executive deputy president for Game Business Group and Broadband Network Company. Awards: Best Managers, BusinessWeek, 2002. Address: Sony Computer Entertainment, 2-6-21, MinamiAoyama, Minato-ku, Tokyo, 107-0062 Japan; http:// www.scei.co.jp.

■ Ken Kutaragi was an engineer at Sony when he created the PlayStation video-game console and pushed the company to build it. Once dismissed by Sony executives as a mere toy, PlayStation became Sony’s cash cow, contributing 60 percent of the company’s operating profits in 2003. Kutaragi was rewarded for PlayStation’s success with the presidency of Sony Computer Entertainment (SCE) and a seat on Sony’s corporate board. A business visionary who combined technical and marketing expertise, he was described as brash and outspoken and was considered a maverick among more traditional Japanese executives. As of 2004 he was widely regarded as a potential successor to the Sony Chairman Nobuyuki Idei. International Directory of Business Biographies

Ken Kutaragi. AP/Wide World Photos.

CREATIVE ENGINEER Growing up in Tokyo, Ken Kutaragi was a straight-A student who worked after school in his family’s printing business and enjoyed tinkering, building things like amplifiers and gocarts. After earning an engineering degree, he joined Sony because, as he told BusinessWeek, “it was the best in terms of encouraging creativity and offering researchers freedom” (June 14, 1999). He worked on a variety of cutting-edge projects, including an early liquid-crystal display screen and a diskstorage camera.

THE TOY THAT SAVED SONY In 1989 Sony gave the go-ahead to a project Kutaragi had proposed: a joint venture with Nintendo to develop a nextgeneration game console with superior sound and graphics ca-

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pabilities. After Nintendo pulled out of the partnership in 1991, Kutaragi convinced Sony to continue, reportedly threatening to quit if the project was canceled. The acuity of his judgment was confirmed when the PlayStation, introduced in 1994, met with immediate success, rapidly becoming the bestselling game console on the market. Over the next six years the proportion of Sony’s revenue that came from PlayStation sales steadily increased, as did Kutaragi’s influence within the company. In 1999 he was named president and CEO of Sony Computer Entertainment, the subsidiary responsible for the PlayStation. PlayStation 2, introduced in 2000, was similarly successful, selling 40 million units in the first 30 months and confirming Kutaragi’s significance to Sony. BusinessWeek called him “Sony’s indispensable samurai” (March 20, 2000). Kutaragi, with typical disregard for Japanese-style deference, told CNN that Sony Computer Entertainment was “the driver for the rest of the company” and “the clear leading power for the network, for the next generation” (September 2000). In October 2000 Sony gave Kutaragi a seat on the parent company’s board.

Kutaragi’s plan was to use the PlayStation to introduce customers to a broadband environment where a Sony console would deliver games, music, online shopping, and interactive services. He announced plans to produce the PlayStation Portable, or PSP, a handheld gaming system designed to compete with Nintendo’s market-leading Game Boy. Though Kutaragi called it “the Walkman of the 21st century,” its release was delayed from the 2004 holiday season until 2005. In a joint venture Sony partnered with Toshiba Corporation and IBM to develop CELL, a high-powered chip. Kutaragi described a vision of “digital convergence” that would put the CELL chip in a centralized, networked appliance, integrating entertainment hardware and software under the Sony brand. The word most often used to describe Kutaragi was “brash.” Kelly Flock, the CEO of Sony Online Entertainment, called him “the most animated and passionate person I’ve ever known” (Li, September 1, 2000). Sony was long considered unusually liberal and entrepreneurial by the conservative standards of corporate Japan, and Ken Kutaragi in particular was far more outspoken and open to innovation than traditional Japanese executives. As of 2004 he was well positioned to become Sony’s next leader.

THE NEXT BIG THING? As the 21st century began, Sony’s dominance of the home electronics industry was waning, and hardware margins were shrinking thanks to pressure from low-cost producers in Korea and Taiwan. In 2003 Sony initiated Transformation 60, a plan to restore both the company’s bottom line and its reputation as an innovator by its 60th anniversary in 2006. Sony reorganized into seven business entities: four Network Companies (Home, Broadband, IT and Mobile Solutions, and Micro Systems) and three Business Groups (Game, Entertainment, and Personal Solutions), and announced plans to lay off 20,000 workers, or 17 percent of worldwide staff. While Sony Corporation president Kunitake Ando spearheaded efforts to cut billions in expenses and improve operating margins, Ken Kutaragi was placed in charge of developing the next generation of products. In April 2003 Kutaragi was named executive deputy president in charge of the Game Business Group and the Broadband Network Company.

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See also entry on Sony Corporation in International Directory of Company Histories.


Frederick, Jim, “Playing His Way to the Next Level,” Time, December 1, 2003, p. 84. “Is Sony’s Future in His Hands?” BusinessWeek, June 14, 1999, p. 85. Li, Kenneth, “Meet the Man behind Sony’s PlayStation,” CNN.com, September 1, 2000, www.cnn.com/2000/TECH/ computing/09/01/meet.ken.kutaragi.idg/. “Sony’s Indispensable Samurai,” BusinessWeek, March 20, 2000, p. 58. —Sandra Larkin


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Alan J. Lacy 1953– Chief executive officer, Sears, Roebuck, and Company Nationality: American. Born: October 19, 1953, in Cleveland, Tennessee. Education: Georgia Institute of Technology, BS, 1975; Emory University, MBA, 1977. Family: Son of W. Jasper Lacy (business executive) and Mary Lou Leigh (homemaker); married Caron (maiden name unknown). Career: Holiday Inns, 1977–1979, financial analyst; Dart and Kraft, 1980–1988, director of corporation finances; Minnetonka Corporation, 1988–1989, vice president; Kraft General Foods, 1989–1993, chief financial officer; Philip Morris, 1993–1994, chief financial officer; Sears, Roebuck, and Company, 1994–1995, senior vice president of finance; 1995–1997, chief financial officer; 1997–1998, president of credit; 1998–1999, chief financial officer; 1999–2000, president of services; 2000–, chief executive officer. Address: Sears, Roebuck, and Company, 3333 Beverly Road, Hoffman Estates, Illinois 60179; http:// www.sears.com.

Alan J. Lacy. © Henry A. Koshollek/Capital Times/Corbis.

EARLY YEARS SPENT IN THE SOUTH

■ Alan J. Lacy climbed the ranks at Sears, Roebuck, and Company in six years to become the chief executive officer (CEO) in 2000. During the late 1990s Sears began to struggle to maintain its hold in the world of department stores, fighting a troubled economy and negative press regarding its customer practices. Lacy’s reputation within the company and industry were established with the growth of Sears’s credit services while he served as the chief financial officer. Even though analysts noted his youth and lack of retail experience upon his appointment as CEO, Lacy soon established himself as a leader who made major changes, such as lowering costs by slashing jobs and eliminating unprofitable categories. Establishing a new brand for Sears eliminated at least eight apparel suppliers and purchasing the prestigious Lands’ End clothing line brought a more affluent type of customer to Sears. International Directory of Business Biographies

Lacy was born in Cleveland, Tennessee, a small city set against the backdrop of the foothills of the Smokey Mountains. His childhood in Cleveland gave him the background necessary to work long hours and succeed in business. His father was a vice president of finance at a local department store, and Lacy credited his father’s and the town’s beliefs in hard work and strong family values as major influences on his career. After graduating from Cleveland High School in 1971, he went to Atlanta to study at the Georgia Institute of Technology. He hoped to become a chemical engineer, but he soon realized he leaned more toward business than a chemistry lab. In 1975 he earned a bachelor’s degree in Industrial Management. He continued with graduate studies at Emory University,

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earning an MBA in 1977. His first job upon graduation was as a financial analyst with Holiday Inns in Memphis, Tennessee. He spent the next 17 years moving around the country serving in various financial positions with companies such as Kraft Foods and Phillip Morris before joining Sears in 1994 as the senior vice president of finance.

most recognizable in the United States. Hal Reiter of Herbert Mines Associates, an executive search firm, said Lacy’s lack of retail experience did not mean the apparel part of the business would suffer. “It’s pretty clear that Lacy was the leading internal candidate,” he told Women’s Wear Daily (September 12, 2000). “But all signs indicate that he’s a very capable leader and general manager, the traits necessary for any senior executive, particularly one with a huge company.”

ESTABLISHES FINANCIAL SUCCESS AT SEARS

Reiter concluded that experience in running a store was not necessarily needed. Others agreed with him, noting that Martinez had a similar background in finance and operations rather than merchandising. Many watched carefully, however, as Lacy made his first moves as CEO. The apparel line at Sears had been revamped under Martinez in the 1990s, with questionable success. Lacy said that turning around that section of the company would lead his list of priorities. He announced that he would work to improve the quality of apparel while reducing the number of suppliers. He also emphasized his commitment to Sears.com, which had become one of the most successful Web sites run by a traditional retailer.

Lacy was named chief financial officer in 1995. Shortly thereafter the CEO of Sears, Arthur Martinez, called on Lacy to help solve a problem. According to Martinez’s book The Hard Road to the Softer Side, a Sears customer testified in a Boston federal court in 1997 that he was having difficulty making payments after filing bankruptcy. The judge told him that by filing bankruptcy he had discharged his debts, but the customer said he had an agreement with Sears to pay them back in monthly installments. The judge chastised Sears in court, and Martinez and his top advisors, including Lacy, agreed to a $273 million settlement agreement with the 190,000 Sears credit-card holders who had been forced to repay their creditcard debt after declaring bankruptcy. In 1997 Lacy was appointed to head of the credit division as Sears struggled with the losses associated with the lawsuit. In 1999 he was named president of services, including home services, direct responses, and e-commerce. By the time of his appointment as CEO in 2000, Lacy had made each of these divisions a profitable part of the Sears’s team.

TENURE AS CEO After Lacy’s appointment as CEO, industry observers noted that he had always had the inside track for the top job because of his success in turning the credit department at Sears into the leading profit department within the company. Steven Kernkraut, a retail analyst at Bear Stearns, told Women’s Wear Daily that Lacy’s appointment was “a positive step. The appointment provides a follow-through with someone who has worked in the trenches and who has earned it” (September 12, 2000). Martinez claimed that after his retirement only Lacy and one other Sears employee were even considered for the position. The company did a nationwide search, but Lacy remained as the top selection. Insiders noted Lacy’s relatively young age (46) but admitted that he had proven himself as a leader. They praised his expertise as a troubleshooter in the credit department, but noted that he did not have experience in merchandising. Some in the industry wondered if Lacy would be able to handle the rigors of running a $50 billion company—the third largest retailer in the United States by 2000, behind only WalMart and Home Depot. In addition, Sears reigned as the leader in appliance sales, with its Kenmore brand as one of the

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STRATEGIC CHANGES AS CEO Lacy announced that he would streamline the company while boosting revenues. Sears’s stock in 2000 needed help; it had fallen from $60 a share in 1998 to $35 a share. Lacy said that the key to success for Sears lay in doing “fewer things better.” He stated that Sears would begin strengthening its customer relationships by learning more about who bought from Sears. He wanted the rest of the company to follow the example set by the appliance division, which had a 38 percent market share and $5 billion in sales in 2000. The strongest operation within Sears when Lacy became CEO was the credit division, which accounted for half of Sears’s profit in 2000. He grew this department through the issuance of credit cards that offered bonuses to frequent Sears shoppers. He also offered credit cards to customers who purchased big-ticket items but had not used a Sears credit card in the past. Analysts were generally pleased with Lacy’s early performance, and they appreciated that he recognized that Sears’s biggest challenge centered on its customers and understanding their needs.

TAKING THE BEST OF THE OLD After spending a year assessing the company and making only minor changes, in October 2001 Lacy met in Chicago with Wall Street analysts to unveil his major plans. The plans, which did not garner much excitement, involved making Sears more like a discount store than the traditional department store it had been for over one hundred years. Lacy explained that he intended to keep the strengths of the company intact,


Alan J. Lacy

emphasizing appliance and tool sales and selling these items on credit. Within one year Sears began to resemble major discounters such as Target and Kohl’s by centralizing cash registers in all of its 860 full-line stores. The checkouts did not resemble those found in stores such as Wal-Mart or Target with multilane exit cash registers. Within the self-service departments, registers were placed in the middle of the main aisle, rather than near the aisle as previously situated, giving customers a way to pay in a convenient, central location. Each of the self-service departments had its own full-service checkout, known in the industry as a cashwrap. Lacy also introduced a new look for Sears with simplified fixtures and signage. As Lacy began to make changes, rumors surfaced that he was planning to eliminate apparel completely. Late in 2001 he announced the introduction of a casual brand of clothing for women, men, and children. One analyst told Chain Store Age that the new line resembled “yuppie weekend clothes” (December 2001). The Covington brand replaced eight brands previously sold by Sears, and it signaled Lacy’s determination to introduce improved products into a customer-friendly shopping experience, which included widening the aisles. The plans called for the new brand to take over the space vacated by cosmetic counters, whose contracts all ended in 2002. Convenient shopping ruled Lacy’s decisions to increase profits for Sears. He announced in 2001 Sears’s intention to keep departments with large merchandise, such as appliances and home electronics, fully staffed to help customers make their choices, while cutting service within the less complicated departments such as shoes and apparel. Industry analysts wondered if customers would be content with self-service and the lack of sales personnel. Lacy chose to concentrate on direct marketing, allowing Sears the ability to determine exactly who their customers were and to attract new consumers. He noted that while placing television and newspaper circulars appealed to existing customers, such advertisements did not provide the company with specific marketing information. Even as these changes went into effect, analysts admitted that Sears defied definition within the context of the traditional retail world. Offering appliances and hardware alongside apparel left the store in a category by itself.

MANAGEMENT STYLE AND STRATEGIES Cost consciousness ruled many of the decisions made by Lacy at Sears, and Wall Street analysts felt comfortable with the strategies he employed. By the last quarter of 2001 profits began showing gains. Lacy’s moves to turn Sears into more of a discount store began with lowering operating costs and developing more self-help departments, thus reducing sales personnel. Associates were stationed at cash registers rather than working on the floor helping customers find their purchases. Lacy terminated several efforts begun under Martinez. He quit expanding home services and closed all of Sears’s Ho-


meLife stores by 2001. In addition, he closed eighty-nine Sears-operated National Tire & Battery stores during his first year as CEO, and he announced the end of Sears’s involvement with cosmetics. He also sold a pest-control business operated by Sears and scaled back on expansion within the Great Indoors stores, a Sears’s home decorating superstore chain developed by Martinez. Lacy eliminated 4,900 jobs, or 22 percent of Sears’s salaried staff, over an 18-month period in 2001 and 2002, and he hoped to cut $600 million off of Sears’s annual expenses by 2004. Even as analysts noted the measures to cut costs, they predicted that Lacy would need to do something to regain the market share Sears was losing as a result of the cutbacks.

NEW ACQUISITIONS AND STRATEGIES Lacy had made decisions previously that signaled a change to a discount store in order to remain competitive with Kohl’s and Target, two of the fastest growing discount stores in the industry. However, he announced in 2001 that he wanted Sears to be neither a department store nor a discount store but rather in a category by itself. By 2002 Lacy’s changes had begun to show evidence in increased profits, and he announced that Sears had purchased the online and catalog apparel retailer Lands’ End for $1.9 billion. Lands’ End was noted for its upscale customer base, and the purchase signaled an attempt to bring a new type of customer into the newly revamped stores. Analysts worried that the cash purchase might negatively affect Sears’s stock, but this fear did not last long as the stock price rose to $59 a share, the highest price since 1998. When Sears increased the amount of money set aside to counter unpaid credit card charges in October 2002, the concern again came to the surface. The increase in the reserves gave investors cause to worry because it signaled higher than anticipated charge card write offs. Crain’s Chicago Business reported that changes in executives, a rewriting of account statements, and the large amount of credit card debts sent stock plummeting below $20, the lowest point in a decade (December 16, 2002). Lacy reacted by putting a new management team in charge of the retail portion of Sears and hiring executives to run store operations so he could concentrate on the department he had once before saved. In October 2002 Lacy fired Kevin Keleghan, president of credit and financial products, and the following month Keleghan sued Sears and Lacy for defamation. The lawsuit claimed that Lacy made public false statements about Keleghan, blaming him for the credit-card division’s problems. Lacy startled industry insiders when he sold the credit-card business in 2003, which meant that the retail part of the business would now have to stand alone in increasing profits for Sears.

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STRATEGIES PUT TO THE TEST In 2002 Lacy told DSN Retailing Today that Sears was a “broadline retailer with outstanding credit and service capabilities.” By the end of 2003, however, the bold strategies employed by Lacy had failed to meet expectations for earnings, and he was rebuked by Sears’s board of directors, who slashed his bonus by 50 percent and voted not to give him a raise. According to Women’s Wear Daily, “Lacy’s 2003 target bonus was based on two factors: a pre-approved target level of improvement in the company’s earnings per share and achievement of key strategic initiatives” (March 23, 2004). The article stated that although he had achieved the strategies established by the board, he had not met a pre-established and undisclosed target for earnings per share.

See also entry on Sears, Roebuck, and Co. in International Directory of Company Histories.


Baeb, Eddie, “Sears’ New Chief Says, ‘Charge It,’” Crain’s Chicago Business, September 18, 2000, p. 1. Clark, Ken, “A Softer, Slimmer Side of Sears: Will Layoffs Pay Off? Lacy Says, ‘Yes,’” Chain Store Age, December 2001, pp. 76–77.

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Flessner, Dave, “Lacy Embraces Change for Sears,” Chattanooga Times Free Press, May 25, 2003. Gallanis, Peter, “New CEO Outlines Lacy Side of Sears,” DSN Retailing Today, November 20, 2000. Heller, Laura, “Sears’ Lacy Reaffirms Repositioning Strategy,” DSN Retailing Today, May 20, 2002, p. 5. Jones, Sandra, “2002 Year in Review: Management of Sears, Roebuck and Co.,” Crain’s Chicago Business, December 16, 2002, p. 22. Karr, Arnold J., Thomas J. Ryan, and Vicki M. Young, “Wall St. Gives Nod to Sears’ Lacy,” Women’s Wear Daily, September 12, 2000, p. 2. Martinez, Arthur C., The Hard Road to the Softer Side, New York: Random House, 2001. “No Increase for Lacy,” Women’s Wear Daily, March 23, 2004, p. 2. Ryan, Thomas J., “Lacy: 2001 A Transition Year for Sears,” Women’s Wear Daily, November 9, 2000, p. 9. “What We Want Is To Be Sears,” MMR, November 12, 2001, p. 46.

—Patricia C. Behnke


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A. G. Lafley 1947– President, chief executive officer, and chairman, Procter & Gamble Nationality: American. Born: June 13, 1947, in Keene, New Hampshire. Education: Hamilton College, BA, 1969; Harvard Business School, MBA, 1977. Family: Married Margaret (maiden name unknown); children: two. Career: Procter & Gamble (P&G), 1977–1978, brand assistant for Joy; 1978–1980, assistant brand manager for Tide; 1980–1981, brand manager for Dawn and Ivory Snow; 1981–1982, brand manager on special assignment and for Ivory Snow; 1982–1983, brand manager for Cheer; 1983–1986, associate advertising manager for PS&D Division; 1986–1988, advertising manager for PS&D Division; 1988–1991, general manager of laundry products for PS&D Division; 1991–1992, vice president for laundry and cleaning products; 1992–1994, group vice president for P&G and president of laundry and cleaning products; 1994–1995, group vice president and president of P&G Asia; 1995–1998, executive vice president of P&G and president of P&G Asia; 1998–1999, executive vice president of P&G and president of P&G North America; 1999–2000, president of Global Beauty Care and P&G North America; 2000–2002, president and chief executive officer; 2002–, president, chief executive officer, and chairman. Awards: Public Service Award, Advertising Council of New York, 2003. Address: Procter & Gamble Company, 1 Procter and Gamble Plaza, Cincinnati, Ohio 45202–3315; http:// www.pg.com.

A. G. Lafley. AP/Wide World Photos.

He was heir apparent to CEO Durk Jager, whose tenure as company head lasted only 17 months. Jager’s shake-up of the huge, stodgy conglomerate had alienated employees and led to falling profits and share price. As CEO, Lafley revolutionized P&G to a much greater extent than Jager had intended. Lafley restored the company’s financial health by means of his simple, back-to-basics management.

LEARNED MARKETING IN THE NAVY

■ Few observers were surprised when Alan G. Lafley— known as “A.G.”–was named president and chief executive officer of the Procter & Gamble Company (P&G) in June 2000. Like most P&G executives, Lafley had spent his entire career working his way up the corporate ladder at the largest household- and consumer-products company in the United States. International Directory of Business Biographies

Alan George Lafley was born on June 13, 1947, in Keene, New Hampshire, where his French-Canadian ancestors had settled in the mid-nineteenth century. Lafley’s father was a human resources manager at General Electric and Chase Manhattan Bank. His mother was a housewife devoted to raising Lafley and his three sisters. Lafley graduated from Hamilton

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A. G. Lafley

College, in upstate New York, in 1969, after having spent his junior year at the Sorbonne in Paris. He began doctoral work in medieval and Renaissance history at the University of Virginia, leaving after only one semester to join the U.S. Navy in order to avoid being drafted into the army. Between 1970 and 1975 Lafley worked as a naval-supply officer, running a department store for military personnel in Japan during the Vietnam War. He later credited his navy experience with teaching him that no matter how complex a business appeared to be, it had a core unit that was responsible for most of the cash and most of the profits. Following his discharge, Lafley earned an MBA at Harvard Business School.

JOINED P&G When Lafley entered marketing at P&G in 1977 as a brand assistant for Joy dishwashing liquid, he was worried. An ambitious man, he hoped to make it to the top of the company, but he was starting at an older age than most of his colleagues. P&G—founded in 1837 by William Procter, a candle maker, and James Gamble, a soap maker—was an integral part of American culture. In the 1880s it was the first company to advertise nationwide. In the 1930s P&G invented the radio soap opera as an advertising vehicle. The company produced a multitude of consumer goods, from beauty and personal care products to household cleansers and food. It had a brandname management structure, with teams representing each brand competing against one another. Headquartered in the relatively small city of Cincinnati, P&G had a closed and insular corporate structure that always promoted from within the company. Most “proctoids” spent their entire careers with P&G.

While living in Japan, Lafley came to realize that P&G truly was insulated and out of touch with its global markets. He told Forbes (July 8, 2002): “Executives in the U.S. were buried under consumer research data. . . . I don’t think the answers are just in numbers. You have to get out and look.” Since there was almost no reliable Japanese market research, Lafley began visiting stores and homes. He discovered that Japanese women hated P&G’s Max Factor brand, finding it foreign and brash. So he refocused P&G’s Japanese business on cosmetics and turned SK-II, a $150 skin-care cream, into Japan’s number-one brand. When Lafley returned to Cincinnati in 1999 as president of Global Beauty Care and of P&G’s North American marketing organization, many observers believed that he was being groomed for the top job. Lafley laid down a new strategy for building the global beauty business. Under his direction the North American business achieved record net sales.

BACK TO BASICS Until the 1990s P&G had doubled in size every decade. However, it took $400 million in new sales to grow a $40 billion company by just 1 percent. P&G brands were losing market share, and the company’s stock dropped sharply. When the tough and aggressive Jager became CEO in 1998, he had orders to turn the company around. The speed with which he tried to implement change worsened the situation. Profits and employee morale plummeted. The board quickly replaced Jager with Lafley.

MADE HIS NAME WITH LIQUID TIDE

For years Lafley had been thinking about how to fix P&G. He had worked closely with Jager to refashion the company, and he continued to implement many of the major changes that Jager had initiated. To a large extent, the difference was one of personal style. Conceding that they had moved too fast under Jager, Lafley’s first priority was to restore morale and put an end to the internal chaos. He told Katrina Brooker of Fortune (September 16, 2002): “I had to come up with something quickly to get people focused. I didn’t want everyone sitting around worrying that our stock price had dropped in half.”

Lafley’s successful launch of Liquid Tide and Tide with Bleach, which became two of P&G’s biggest products, enabled him to deliver record sales and profits. He also oversaw the failed launch of Physique, an expensive shampoo. During the 1990s Lafley headed P&G’s Asian operations. It was a period of major currency and economic upheaval in the region. Nevertheless, Lafley increased P&G’s Chinese business from $90 million to almost $1 billion and revived its Japanese cosmetics market. Some observers viewed his actions in the wake of the 1994 Kobe earthquake as near-heroic.

Lafley’s amazingly simple plan was ready in just days. P&G would return to what it had always done best: sell more of its popular brands, like Tide and Pampers disposable diapers. This contrasted with the turn-of-the-century corporate world’s focus on new products, acquisitions, and mergers. P&G’s 10 best-selling products became Lafley’s priority. Individually, these products accounted for over $1 billion in annual sales, and collectively they represented more than half of P&G’s total revenues.

Although Lafley earned steady promotions, as did his coworkers, he eventually wanted to run a company. During the 1980s Lafley quit P&G twice in one year, only to be talked into coming back. According to a BusinessWeek story (July 7, 2003), on the second occasion Lafley had accepted a consulting job in Connecticut. John Smale, then CEO of P&G, made no promises but told Lafley that “we thought there was no limit on where he was going to go.”

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A. G. Lafley

FOCUSED ON MARKETING

BOUGHT INNOVATION

P&G had been thinking up new ways to sell Tide since 1946. Lafley promoted successful “new and improved” versions of classic P&G brands, including Tide, Charmin toilet paper, and Folgers coffee. Product packaging changed dramatically. Lafley worked closely with large chains, such as WalMart, on eye-catching store displays.

Lafley cut Jager’s list of products under development from more than 50 to 12. He wanted to find and push the few products that would become best sellers. In the past P&G had always developed its own products. In 2004 Lafley increased outside product innovation from 10 to 35 percent. He reacted to Kimberly-Clark’s introduction of moist toilet paper by buying a company that produced a similar product. Lafley told Patricia Sellers at Fortune (May 31, 2004): “Inventors are evenly distributed in the population, and we’re as likely to find invention in a garage as in our labs.”

Lafley told managers in the struggling hair-care products division to concentrate on Pantene, P&G’s major shampoo brand. The types of shampoo were redirected toward the appearance of hair, such as curly or straight, rather than oily, normal, or dry hair. The bottle’s shape and cap changed, and each formulation got its own bottle color. P&G persuaded retailers to group the shampoos together, and new marketing materials were added to store shelves. Pantene’s sales increased by 8 percent in the fiscal year ending June 2002. P&G marketers distributed to sweating commuters in subway stations, airports, and other venues free samples of Olay Daily Facial cleansing cloths. The cosmetics division introduced Tiny Tries, small samples that cost teenagers just over $1. The company set up bone-density screenings in chain stores to market Actonel, a prescription medicine for osteoporosis. Lafley promoted brand-name extensions, including Pampers baby clothes and Old Spice body spray. By reducing test-marketing, Lafley cut the average time from laboratory to market from three years to 18 months. He also lowered the price of some name-brand products. Within one year P&G was hit with four false-advertising complaints from competitors. It was sued by Georgia-Pacific (G-P) for unfair comparisons between P&G’s Bounty and G-P’s Brawny paper towels. A U.S. District Court in New York ordered P&G to modify its advertisements for Prilosec, its over-the-counter (OTC) heartburn medication. Many analysts believed that Lafley’s ethnographic approach to market research was a major factor in his success. Borrowing anthropological techniques, his researchers conducted on-site interviews with consumers and spent hours observing how P&G products were used. The 2002 Forbes story described Lafley’s home visits, in which he introduced himself as Alan George and said he worked for a product-research company. He sometimes stayed for hours, making friendly conversation and asking consumers where they shopped and what they bought. Lafley told Forbes: “Too much time was being spent inside Procter & Gamble and not enough outside. . . . I am a broken record when it comes to saying, ‘We have to focus on the consumer.’” Such methods began to change P&G’s image from insular and arrogant to responsive to consumers’ needs.


Lafley took on P&G’s competitors, including Clorox, Kimberly-Clark, Gillette, and Colgate-Palmolive. Crest oral hygiene products and Iams pet foods joined P&G’s billion-dollar list. Four inventors at a small Cleveland-area company developed a battery-operated toothbrush that could be sold at a profit for $6 at a time when most electric toothbrushes cost at least $50. Lafley bought the company for $1.5 million. The new Crest Spinbrush generated $200 million in annual sales. The introduction of teeth-brightening Whitestrips also proved a great success for Crest. Lafley decided to introduce a less expensive Crest toothpaste formula for sale in China. Lafley moved Iams, previously sold only in pet food stores and through veterinarians, into 25,000 mass-retail outlets in one night, increasing its distribution by almost 50 percent. Subsequently, the company developed numerous new Iams products, all aimed at increasing pets’ life spans. Iams became the number-one brand of pet food and moved into magnetic resonance imaging (MRI) for pets as well as pet health insurance.

MOVED INTO BEAUTY PRODUCTS AND PHARMACEUTICALS Lafley moved P&G into the high-margin—but risky— beauty products and pharmaceutical businesses. Although some analysts were skeptical, others approved, since these markets grew at a much faster rate than such commodities as diapers or laundry detergent. Olay cleansing cloths and Regenerist antiaging creams turned the brand into a billion-dollar business. Within a year of its introduction, Olay Regenerist was the number-one antiaging moisturizer in the country. The U.S. introduction of SK-II, sold exclusively at Saks department stores, moved P&G into high-end cosmetics. Lafley paid $5 billion for Clairol’s hair-care business, with its huge global teenage market for hair coloring. Representing P&G’s largest acquisition, in March 2003 Lafley bought Wella—a rapidly growing German hair-care and beauty products company—for $6.9 billion, with plans to market its products globally.

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Some analysts believed that Lafley’s entrance into the pharmaceutical market—with a relatively small, billion-dollar business—was risky, since the product cycles for drugs were very different from consumer-product cycles. They believed that Lafley should have stuck with OTC remedies and helped bigger pharmaceutical companies launch OTC versions of their drugs, as he had done with Astra Zeneca’s Prilosec. However, other analysts estimated that by 2010 health care and beauty products might account for 40 percent of P&G’s annual sales.

COST-CUTTING AND RESTRUCTURING Lafley turned P&G into a much more flexible company. He licensed out some of its technological innovations and formed a partnership with Clorox—the first time that P&G had ever worked with a competitor. Under Jager, costs at P&G had spun out of control. Lafley eliminated 9,600 jobs, shut down unpromising projects, and pulled failures from the market. He sold off Jif peanut butter and Crisco shortening. These measures saved P&G $2 billion. He also cut capital and R&D spending back to the levels of P&G’s competitors. Lafley outsourced $1 billion a year in services. In April 2003 he outsourced all bar soap production—including Ivory, P&G’s longest-surviving brand—to a Canadian contractor. In May 2003 he outsourced P&G’s information-technology operations to Hewlett-Packard. The majority of outsourced P&G employees moved to the new contractors. Lafley accelerated the corporate restructuring begun under Jager. P&G was reconfigured from a country- and region-based organization into five global product divisions: fabric and home care; baby, feminine, and family care; health care; food and beverage; and beauty products. Lafley told BusinessWeek (July 7, 2003): “I am worried that I will ask the organization to change ahead of its understanding, capability, and commitment.” Although he retained P&G’s promote-from-within policy, many of Lafley’s new managers came from overseas units. He moved women into top positions, passing over men with more seniority. He fired underperformers, turning over almost half of P&G’s top management in his first two years. Lafley also was the first P&G CEO to grant access to the press.

tively, and he stuck to his decisions once he had made them. Where Jager had bullied, Lafley was soothing and persuasive. He was a hands-on manager who walked the aisles of superstores, studying the shelves and asking detailed questions. He was approachable, giving everyone a fair hearing, and not averse to receiving bad news. Fortune (September 16, 2002) characterized Lafley as “UnCEO”-like—at least for the turn of the 21st century. He did not present visions or promise more than he could deliver. He thought of himself as a company employee. Katrina Brooker wrote in Fortune: “He’s the type of guy who gets excited in the mop aisle of a grocery store.” Patricia Sellers, also writing in Fortune (May 31, 2004), called him “a low-key guy with a Mister Rogers demeanor.” Lafley had a long-standing reputation for delegating responsibility. In the past, every move by a P&G manager had to be described in a one-page memo. According to BusinessWeek, (July 7, 2002), Lafley preferred slogans such as “the consumer is boss.” “The first moment of truth” occurred when the consumer saw the product on the store shelf. “The second moment of truth” occurred when the consumer used the product at home. Lafley told BusinessWeek: “A lot of what we have done is make things simple because the difficulty is making sure everybody knows what the goal is and how to get there.” Lafley told Sellers at Fortune: “There is a lot of jargon. But we have to find things that are simple for 100,000 people to understand. And more than half my organization doesn’t have English as a first language. So it’s intentional.” Lafley was known as a consensus builder. When P&G began considering outsourcing, Lafley had various teams come before the board to vigorously debate the issue. Some company insiders said that Lafley created a team culture at a company known for executive rivalry, while others maintained that for the first time he fostered competition within P&G’s staid corporate culture. At quarterly meetings, called the Global Leadership Council, Lafley revealed the financial results of each senior manager to everyone present. He told Fortune (September 16, 2002): “In the Navy they compete on everything. They’d make you do push-ups and rank you by who did the most. It’s very effective: They always pushed you to do better. . . . It motivates people who are performance-oriented. For the few people that it doesn’t motivate, we are probably not the right place.” Lafley spent most Sunday evenings with the head of human resources, analyzing managerial performance, and he was known for nurturing talented executives.

MANAGEMENT STYLE Lafley claimed that P&G’s over 100,000 employees in more than 80 countries accepted his changes because the company was in a crisis. Others credited Lafley’s personality for his success. He was soft-spoken, easygoing, and down-to-earth. He was calm and quiet, direct, decisive, and tough. Lafley made decisions by asking lots of questions and listening atten-

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RENOVATED CORPORATE HEADQUARTERS Lafley’s decision to renovate P&G’s executive offices came to symbolize the company’s transformation. The oak-paneled walls and executive dining room were removed; the 19thcentury oil paintings were donated to Cincinnati’s art muse-


A. G. Lafley

um. He sent 11 division heads back to their teams. Half of the floor was turned into open office space for Lafley and his top executives. The remainder became a leadership-training center for P&G managers from around the world. In the midst of a worldwide economic slowdown and after a $320-million loss in the fiscal year ending June 2001, Lafley turned P&G around. Between 2002 and 2004, in an industry in which half of all new products failed within a year, P&G increased its hit rate for new products (those with returns greater than capital costs) from 70 to 90 percent. By 2004 P&G was experiencing its largest net-profit growth in years. Net earnings were up almost 52 percent over the previous year. P&G’s stock price and dividends also were up. His successes earned Lafley directorships at General Motors and General Electric. Lafley told Brooker at Fortune: “What I’m trying to build into this organization is something that will last long after I’m gone. This is a company that aspires to be around for 1,000 years.”


“A. G. Lafley,” Newsmakers, issue 4, Detroit: Gale Group, 2003. Berner, Robert, “P&G New and Improved; How A. G. Lafley Is Revolutionizing a Bastion of Corporate Conservatism,” BusinessWeek, July 7, 2003, p. 52. Brooker, Katrina, and Julie Schlosser, “The Un-CEO: A. G. Lafley Doesn’t Overpromise. He Doesn’t Believe in the Vision Thing. All He’s Done Is Turn Around P&G in 27 Months,” Fortune, September 16, 2002, p. 88. Eisenberg, Daniel, “A Healthy Gamble: How Did A. G. Lafley Turn Procter & Gamble’s Old Brands into Hot Items? Here’s the Beauty of It,” Time, September 16, 2002, p. 46. Kroll, Luisa, “A Fresh Face,” Forbes, July 8, 2002. “Mr. Lafley’s Makeover: Consumer Goods,” Economist, March 22, 2003. Neff, Jack, “P&G Profits by Paradox: Seemingly Contradictory Moves by CEO Lafley Have Restored the Giant Marketer’s Leadership Status,” Advertising Age, February 23, 2004, p. 18. Sellers, Patricia, “P&G: Teaching an Old Dog New Tricks,” Fortune, May 31, 2004, pp. 166–172.

See also entry on Proctor & Gamble Company in International Directory of Company Histories.


—Margaret Alic

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Igor Landau 1944– Board member, Sanofi-Aventis Nationality: French. Born: July 13, 1944, in Saint-Flour-Cantal, France. Education: Hautes Études Commerciales, MSc, 1968; INSEAD, MBA, 1971. Career: La Compagnie du Roneo, 1968–1970, president; McKinsey & Company, 1971–1975, consultant; RhônePoulenc Group, 1975–1977, deputy to the president in health division; 1977–1980, executive vice president in health division; 1980–1992, president of health division; 1992–1998, president; Aventis, 1998–2002, president of pharmaceutical division, board member; 2002–2004, chairman and CEO; Sanofi-Aventis, 2004–, board member. Address: Espace Européen de l’Entreprise, 16 avenue de l’Europe, Strausberg, 67917, France; http://www. aventis.com.

■ Although in 2004 he lost the helm of Aventis during the shockingly American-style hostile takeover by SanofiSynthélabo, Igor Landau remained a major figure in the European pharmaceutical industry. He played a central role in the evolution of the French pharmaceutical group that after the takeover was called Sandofi-Aventis and was the third-biggest drugmaker in the world, behind Pfizer and GlaxoSmithKline. The savvy executive Landau, who was known by his peers as a politically clever man with a knack for getting what he wanted, ultimately could not fend off the Sanofi takeover bid, but did receive a golden parachute of $31 million and a position on the newly formed company board.

RISING THROUGH THE RANKS OF RHÔNE-POULENC GROUP After a short stint with the German subsidiary of La Compagnie du Roneo, the French furniture company, Landau worked as a consultant in the Paris office of McKinsey & Company, a global management consulting firm that provided

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advice on strategy, operations, and organization for CEOs of large corporations. In 1977 Landau joined Rhône-Poulenc, a major European pharmaceutical company, starting out as the deputy to the president of the health division. He subsequently received promotions to executive vice president and then to president of the health division; he was elected a member of the executive committee and appointed president of the company in 1998. Landau was passionate about his commitment to pharmaceutical development and very vocal about his desire to create drugs to treat the world’s worst diseases. In 1998 Rhône-Poulenc merged with Germany’s Hoechst, and Landau was tapped to head the pharmaceutical business of the combined company, Aventis. His primary functions were to streamline and focus research-and-development efforts as well as to overcome the cross-cultural challenges involved in merging French and German companies. Such skills would continue to be an important part of his job in 2002, when he was named chief executive of Aventis. The appointment was the result of the unexpected exits of two of Aventis’s top executives: Jean-René Fourtou went to Vivendi Universal, the European biotechnology company, and Jürgen Dormann went to ABB, Europe’s biggest electrical-engineering group. Upon taking the helm, Landau further streamlined Aventis’s focus, divesting the company of its interests in drug discovery in all but a few key areas: oncology, diabetes, respiratory, central nervous system, cardiovascular disease, and vaccines. He also channeled funds into the fastest-growing new drugs, such as a long-acting insulin. At the end of 2003 Aventis had approximately 75,000 employees and revenues of about $21 million. Investors remained cool, however; they were wary of Aventis’s lack of a strong track record in the drug-discovery arena and knew that generic versions of two of Aventis’ bestselling drugs were looming on the horizon.

ROCKY WATERS AND AN AUDACIOUS TAKEOVER BID Landau’s tenure as the head of Aventis did not prove productive for the bottom line, with the company’s stock falling by nearly half in the year after he took control. The price rebounded briefly, but a further dip in the share price in late 2003 made the company more and more attractive as a takeover target. In January 2004 Sanofi, through its chief executive Jean-François Dehecq, made a bid of $60 billion despite


Igor Landau

being approximately half the size of Aventis. Aventis and Landau steadfastly rejected the offer, stating that the company was being severely undervalued. Landau approached Novartis, the Swiss pharmaceutical company, hoping it would act as a “white knight” and counter with a more favorable offer. In a move portrayed by critics as nationalistic, individualistic, and egotistical, the French government stepped in, in the person of the French finance minister Nicholas Sarkozy. He reportedly told Dehecq to raise the offer and Landau to accept it. Each executive had little choice but to respect the wishes of one of their biggest customers, the French government. An offer 14 percent higher than the first was accepted; Novartis backed off without tendering a formal bid.

THE FUTURE AT SANOFI-AVENTIS Although Landau’s future at the newly named SanofiAventis would be one in which he would report to Dehecq—as a member of the company board—his skills in navigating through rocky waters would potentially prove central to the success of the French pharmaceutical giant. Analysts believed that no one at Sanofi had the experience necessary to run the 100,000-person company. Management support would be


crucial in avoiding employment problems, and Landau continued to garner the support of the Aventis employee base. The combined company would likely face significant difficulties in fighting manufacturers of generic versions of three important products: Plavix (clopidogrel), Allegra (fexofenadine), and Lovenox (low-molecular-weight heparin). No stranger to such issues, Landau would likely play an important role in shaping the future of the Sanofi-Aventis pharmaceutical group.


Jacobs, Caroline, “New Sanofi-Aventis Faces Challenges— Aventis CEO,” Reuters Company News, June 11, 2004, http://biz.yahoo.com/rc/040611/ health_aventus_agm_1.html.. Timmons, Heather, “Aventis Chief to Take Case Into the Open,” New York Times, February 4, 2004. ———, “Drug Maker Aventis Accepts $65.5 Billion Takeover Offer,” New York Times, April 26, 2004. Ward, Mike, “European Megapharma: Big Thinkers IV,” BioCentury, December 14, 1998, p. A23. —Michelle L. Johnson

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Robert W. Lane 1949– Chairman, president, and chief executive officer, Deere & Company Nationality: American. Born: November 14, 1949, in Washington, D.C. Education: Wheaton College, BBA, 1972; University of Chicago, MBA, 1974. Career: First National Bank of Chicago, ?–1982, vice president and branch manager; Deere & Company, 1982–1996, various positions; 1996–1998, senior vice president and chief financial officer; 1998–1999, senior vice president and managing director of operations in Europe, Africa, the Middle East, India, and the countries of the former Soviet Union; 1999–2000, president and chief operating officer of Deere Credit, then president of the Worldwide Agricultural Equipment Division; 2000–, chairman, president, and chief executive officer. Address: Deere & Company, One John Deere Place, Moline, Illinois 61265-8098; http://deere.com.

■ Robert W. Lane was named chief executive officer of Deere & Company in 2000, after a long and varied career with the company. During his many years with Deere, Lane had been responsible for directing nearly all of the company’s operating divisions around the world. He became CEO at a critical time in Deere’s evolution as one of world’s largest manufacturers of heavy equipment for the agricultural, forestry, and construction industries. Economic downturns in the early months of his tenure prompted Lane to take aggressive, innovative actions to protect the company’s bottom line.

RISING THROUGH THE RANKS AT DEERE Lane came to Deere & Company in 1982 from a commercial banking career with First National Bank of Chicago. He held the position of vice president and branch manager for First National’s Frankfurt, Germany, unit. In his first position with Deere, Lane was responsible for managing U.S. govern-

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ment and national account sales. Lane subsequently moved through progressively more responsible positions within the company. In 1996 Lane became senior vice president and chief financial officer of Deere, and in 1998 he was named senior vice president and managing director of Deere’s operations in Europe, Africa, the Middle East, India, and the countries of the former Soviet Union. Lane’s next move, in 1999, was to become president and chief operating officer of Deere Credit. This was quickly followed by a shift to the position of president of Deere’s Worldwide Agricultural Equipment Division. In May 2000 Lane was named president and CEO of Deere & Company, and he was elected chairman of the board the following August.

GROWTH IN A CHALLENGING ECONOMY When Lane stepped in, the positions of president and CEO had been vacant for more than four years. Economic conditions had not been good during those years, and Deere was attempting to turn around a yearlong decline in sales of agricultural equipment. The breadth and depth of Lane’s experience managing Deere’s various operating units, together with his previous career in commercial banking, equipped him to build and protect the company’s standing in global markets. With little choice other than to take immediate aggressive action, Lane implemented reductions and cost-cutting measures designed to preserve the company’s bottom line. Within his first year leading the company, Deere reported a profitable income significantly higher than the previous fiscal year. Despite a struggling economy, Deere was able to regain income stability. Sales were projected to continue rising in the coming years. Lane’s goals for the company’s continued growth were considered ambitious in a sluggish economy. His plans focused on increasing the technological sophistication and diversity of Deere’s product line. Research and development efforts were devoted to producing machinery that was able to gather, process, and use information while on the job. Designs were also developed specifically to appeal to the European markets, where customers often wanted features in different combinations than buyers in the United States. The company also began investigating possible acquisitions that would help expand its market share and global presence.


Robert W. Lane

Increasing efficiency and productivity in the manufacturing process was also part of Lane’s ongoing plan to position Deere for success. Deere began to produce equipment in a modular fashion, which allowed for a greater range of customized products and special orders. While still working to successfully contain costs, Deere was able to reduce order-fulfillment time by several weeks. Once Deere’s costs and expenses were under control, and technical advances were underway, Lane turned his focus to customer service and satisfaction. By measuring against benchmarks from companies like Microsoft, Xerox, and Nike, Deere was able to substantially improve its efforts to increase customer goodwill.

Away from his position as an industry leader, Lane was a private man. He served on the board of directors for Verizon and was a trustee for the Committee for Economic Development. He was also a member of the Business Roundtable and the Business Council. He served on the board of directors for Deerfoot Lodge Wilderness Camp in New York and cochaired the Capital Campaign Committee for the Davenport Museum of Art Foundation in Iowa. He was also a board member for the Lincoln Park Zoo and the Lyric Opera of Chicago.

See also entry on Deere & Company in International Directory of Company Histories.

MANAGEMENT PHILOSOPHY SOURCES FOR FURTHER INFORMATION

Lane’s leadership philosophy and management style were described as innovative and experimental. Even in unfavorable economic conditions when the company was faced with declining sales, Lane pushed for change and new development as the best path to revenue stability. In a mature and often predictable manufacturing sector, he encouraged constant research and development. Lane recognized the potential for innovation in every facet of the company’s operations and encouraged employees to look for opportunities to change, improve, and grow. Lane told the Financial Times, “We should not just be looking to do things a little bit differently but be prepared to change completely the way we do business” (March 9, 1999).


Arndt, Michael, “Robert Lane: Digging Out Deere,” BusinessWeek, December 8, 2003, p. 46. “A Deere Heart for Ingersoll,” BusinessWeek, February 19, 2001, p. 107. “Deere Names Ag Leader as Company President,” Feedstuffs, January 24, 2000, p. 8. Marsh, Peter, “Difficult Furrow to Plough,” Financial Times, March 9, 1999.

—Peggy K. Daniels

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Sherry Lansing 1944– Chairman, Paramount Motion Pictures Group Nationality: American. Born: July 31, 1944, in Chicago, Illinois. Education: Northwestern University, BS, 1966. Family: Daughter of Norton and Margo L. Heimann; married William Friedkin (film director), 1991; children: two. Career: Los Angeles Unified School District, 1966–1969, teacher; 1970–1973, worked variously as an actor, model, and script reader; MGM, 1973–1975, story editor; 1975–1977, chief story editor; 1977, vice president for creative affairs; Columbia Pictures, 1977–1980, senior vice president of production; 20th Century Fox Productions, 1980–1982, president; JaffeLansing Productions, 1983–1992, producer; Paramount Communications, 1990–, president; Paramount Motion Pictures Group, 1992–, chairman. Awards: Milestone Award, Producers Guild of America, 2000; All-America Advertising Award, Parade, 2003. Address: Paramount Pictures Corporation, 5555 Melrose Avenue, Los Angeles, California 90038-3197; http:// www.paramount.com.

■ Sherry Lansing was one of the most financially successful, most enduring, and well-liked executives in Hollywood. She was hired in 1980 as the first woman president of a major U.S. film studio. Her intelligence, toughness, graciousness, and creative instincts propelled her to success as the chairman at Paramount Pictures. The Los Angeles Business Journal described Lansing as not “just the most powerful woman in Hollywood—she’s the most powerful woman in the history of the entertainment industry” (July 19, 1999).

THE ROAD TO HOLLYWOOD Lansing, a self-described “nice Jewish girl,” fell in love with the movies while growing up in Chicago. After earning a de-

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Sherry Lansing. AP/Wide World Photos/Fashion Wire Daily.

gree in speech and theater from Northwestern University in 1966, she set out for Hollywood. Lansing spent three years as a high school teacher in the tough Watts district of Los Angeles and worked as a bit-part actress and commercial model before finding her niche in the entertainment industry. Discovering that her talents would be better used behind the scenes, Lansing got a job reading movie scripts for $5 per script. In 1972 Lansing landed her first full-time movie job as a story editor.

CAREER BEFORE PARAMOUNT Lansing started her career at the bottom of the movie studio system, but she quickly advanced through the ranks. In 1975 she became chief story editor at MGM and in 1977 was promoted to vice president of creative affairs at MGM. Lansing then moved to Columbia Pictures, where she was the se-


Sherry Lansing

nior vice president of production. In 1980 in a controversial move 20th Century Fox hired Lansing, at age 35, to be the head of production. In this role instead of producing films Lansing watched over all the films produced by Fox and helped determine whether a proposal was worthy of financial backing. In the three years she stayed at Fox, Lansing released only two hit films, Porky’s, and The Verdict. Lansing reportedly believed her superiors too often overrode her decisions and undermined her authority. In 1983 Lansing resigned her position at Fox and returned to producing films in an independent production company, Jaffe-Lansing Productions, formed with Stanley R. Jaffe, the producer of Kramer vs. Kramer. Lansing enjoyed the return to hands-on work, telling California Business magazine, “I enjoyed the time at Fox, but I was too removed from moviemaking by administrative duties” (March 1987). Until 1992 Lansing produced with Jaffe and on her own films such as Fatal Attraction and The Accused. Successful and happy, Lansing eschewed taking another executive position. In 1991 she married William Friedkin, the director of The Exorcist, and family life made supervising film shoots all over the world less appealing. When Paramount Pictures, with which Jaffe-Lansing Productions had had long-term financing and distribution deals, in 1992 offered her the position of chairman, Lansing accepted.

PARAMOUNT As of 2004 Lansing was the most senior head of a major studio. Her longevity was credited to her ability to provide Paramount’s parent company, Viacom, with consistent annual profits, which she had done from the beginning of her tenure. As chairman of Paramount Motion Pictures Group, Lansing reported until mid-2004 to the chairman of Viacom Entertainment Group, Jonathan Dolgen. Dolgen emphasized fiscal conservatism and profitability, which influenced Lansing to manage Paramount somewhat differently from other major studios. Whereas most studios were focusing on increasing market share, Lansing said her performance was judged on the profitability of that year’s slate of movies. She was careful to match the appropriate budget to each script, which Lansing vigorously reviewed and edited before approving a project. Lansing and Dolgen actively pursued “flexible financing.” Paramount often shared costs with other studios or partners, such as the actors involved, to minimize its cost. In the case of Titanic, Paramount capped its spending at $65 million and left Fox to fund the budget overruns. Critics contended that Paramount was too conservative, hierarchical, and profit driven. They said Lansing’s leadership produced bland, safe, formulaic movies and pointed to the studio’s lack of Academy Awards in the late 1990s and early 2000s. Lansing argued that she backed several movies with unusual concepts that were highly successful. Films like Forrest


Gump, Braveheart, and The Truman Show were such hits that people did not remember what a risk they had been to produce. In early 2004, however, Lansing admitted that the Paramount business model needed to change and shifted to one that embraced more risk. Lansing increased film budgets and focused on attracting new directors and stars for high-profile films. In June 2004 Dolgen resigned from his position.

MANAGEMENT STYLE In a business legendary for big egos and high tempers, Sherry Lansing was called the “Queen of Cool.” She was known for her graciousness and courtesy, for returning every phone call, and for calling everyone “honey.” She was praised for her people skills—for her abilities both to reject projects graciously and to work with difficult bosses and coworkers. Said one producer who worked with Paramount, “People almost like getting a no from Sherry just to study her process” (January 27, 2003). Lansing also was tough when required, dressing down directors and anyone else who needed it.

BREAKING THE GLASS CEILING Much of the attention Lansing received, at least early in her career, was due to the newsworthiness of a woman’s making it in a man’s world. She first experienced discrimination when she was promoted to the head of her department in 1975. Lansing was not paid as much as men in similar positions and was told she could not have a raise because she was single with no family to support. Even when she had worked her way up the ladder and was appointed the head of Fox in 1980, many in Hollywood regarded the move as a frivolous, “figurehead” one. As Lansing stated in 2002, “The New York Times front-page headline was ‘Ex-Model Becomes Head of Fox’. They discounted that I had spent 15 years in the business” (July 15, 2002). Lansing proved her worth by succeeding in her position as a woman and not by fitting in to the male paradigm regarding her interactions or decisions. “Sherry’s the first executive who succeeded by being a woman, not trying to be a guy,” said one of Hollywood’s top filmmakers in Variety. “She can be maternal, she can be sexy, she can use her femininity to be manipulative, but she’s always, brilliantly, a woman” (November 8, 1999). Lansing admitted that being a woman affected the kind of movies she made. She was one of the first executives in decades to make movies with strong woman characters, such as those in Fatal Attraction and The Accused. At Paramount, Lansing continued to support films with woman-oriented story lines and appeal, such as The First Wives Club and Double Jeopardy. Lansing’s success in reaching not only audiences of women but also general audiences with films such as Mission: Impossible opened the door for other women executives, such as Amy Pas-

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cal, the chairman of Columbia Pictures, and Stacey Snider, the chairman of Universal Studios.

———, “There’s Something about Sherry,” Variety, November 8, 1999. Bloom, David, “Solid as a Rock: Emphasis on Stability, Profitability, the Studio Mantra,” Variety July 15, 2002.

See also entries on Columbia Pictures Entertainment, Inc., Paramount Pictures Corporation, and Twentieth Century Fox Film Corporation in International Directory of Company Histories.

Goff, T. J., “Racing with the Moon: Hollywood Prodigy Sherry Lansing Now Plies a Quieter Trade on Paramount’s Back Lot,” California Business, March 1987, pp. 11–12.


Waxman, Sharon, “A Studio Shifts from B Movies to A-List Talent (and Budgets),” New York Times, March 31, 2004.

Bart, Peter, “Hollywood Overwhelmed by Gossip Glut: Rumors Often Target Teflon Warriors, Who Steadfastly Rise above It All,” Daily Variety, January 27, 2003.

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Swertlow, Frank, “From ‘Nice Jewish Girl’ to Hollywood Power Player,” Los Angeles Business Journal, July 19, 1999, p. 48.

—DeAnne L. Luck


■■■

Jean Laurent 1944– Chief executive officer, Crédit Agricole Nationality: French. Born: 1944, in France. Education: École Nationale Supérieure de l’Aéronautique; Wichita State University, MS. Career: Toulouse Regional Bank, 1970–1981, head of information systems and organization department, then deputy director of credit; Loiret Regional Bank, 1981–1984, director of rural development; Île de France Regional Bank, 1984–1993, department chief executive in charge of operations; Caisses Nationale de Crédit Agricole, 1993–1994, head of development and markets division; 1994–1999, department CEO; 1999–2001, CEO; Crédit Agricole, 2001–, CEO. Address: Crédit Agricole, 91-93 Boulevard Pasteur, 75710, Paris, France; http://www.credit-agricole.fr.

■ As chief executive officer of Crédit Agricole in 2003 Jean Laurent oversaw the acquisition of the rival French banker Crédit Lyonnais. The merger masterminded by Laurent made the combined firm one of the largest banks in Europe. Prior to the merger Crédit Agricole had been the world’s 15thlargest bank; after the two firms combined, they accounted for nearly a quarter of all French lending business and posed a formidable challenge to France’s largest bank, BNP Paribas. In Banker Leslie de Quillacq declared, “One out of three Frenchmen has an account at Crédit Agricole” (January 1995). In order to achieve the merger Laurent had been obligated to deal with the challenges posed by Crédit Agricole’s complicated history. The organization as a whole had previously been officially called Caisses Nationale de Crédit Agricole; the briefer title Crédit Agricole was officially adopted in 2001. The company began and remained a mutual: rather than paying out dividends, it reinvested its profits in the business. Owned and operated jointly by all members, the business worked to provide services rather than profits to its sponsoring organizations.


RISE THROUGH A LABYRINTHINE STRUCTURE Chartered, and until the onset of the 20th century funded by the French government, Crédit Agricole historically responded more to changes in French politics than to changes in national financial markets. Even after the French National Assembly authorized the privatization of Crédit Agricole, challenges to management remained. Most of the central organization’s assets were distributed to its regional member banks in a complicated ownership structure spread over nearly three thousand local agricultural cooperatives. The company’s structure made decision making an agonizingly long process but also made Crédit Agricole virtually unstoppable once a decision was made. Quillacq noted, “Its productivity ratio is the best of the major French banks” (January 1995).

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Laurent began his career in the regional banks, starting out in 1970 as a manager in a branch in Toulouse. During the 1980s he became the head of two different area banks, in Loiret and then in the Île de France. In 1993 he moved to the central coordinating office of Crédit Agricole, the Caisses Nationale de Crédit Agricole, where he first served as head of marketing and development. By the end of the decade Laurent had been named chief executive officer of the entire firm.

RURAL ASSISTANCE THROUGH MANY AGENCIES The challenges Laurent faced during his tenure resulted in large part from Crédit Agricole’s history as a lending organization directed to help small farmers and from its complicated relationship with the French government. Crédit Agricole was chartered by the French National Assembly in 1894. It was intended to be a cooperative association between a collection of farmers’ loan companies, which in 1899 were recharted into regional banks. As recently as the 1950s the majority of France’s population remained rural, living either in the countryside or in small towns or villages away from large metropolitan areas. Until the creation of Crédit Agricole farmers had had few ways to get the kind of credit and terms they needed to buy equipment and to protect themselves and their families against crop failures and other disasters. In order to kickstart the lending process the National Assembly voted to award the regional banks 40 million francs and to supply them with a further annual subsidy of 2 million francs. The government’s 1899 restructuring of Crédit Agricole created a new agency, the Caisses Régionales de Crédit Agricole. The new institution brought existing regional banks together under a single agency and provided for the creation of new regional banks. In the early 20th century Crédit Agricole developed a need for another central agency to oversee all of its constituent parts, monitoring and coordinating financial activities. That institution was founded in 1920 as the Office Nationale du Crédit Agricole, which became the Caisse Nationale de Crédit Agricole (CNCA) in 1926. Through the 1920s Crédit Agricole expanded its loan base, offering credit to rural tradesmen and small artisan businesses in addition to farmers. In 1923 the bank also began financing local government programs to bring electricity to rural areas. By the time France fell to the Nazis in 1940, Crédit Agricole had become a vital part of France’s rural economy. In 1942 farmers who were unable to invest their surpluses from crop sales in normal ways because of World War II began using the five-year note, a perpetual savings plan developed by CNCA. At the close of the war Crédit Agricole, in need of a body to represent its interests to the national government that had chartered and funded it, authorized the formation of Fédération Nationale du Crédit Agricole.

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CLIENTELE BROADENED Crédit Agricole took a major step away from its farming roots in 1959 when a decree allowed the institution to award mortgages to residents in towns with populations of two thousand or fewer. This capability was extended into the 1960s; in 1966 CNCA became financially independent from the federal government when for the first time in its 82-year history deposits covered the loans it had already made. The following year CNCA’s first subsidiary, the Union d’Études et d’Investissements, was formed to help fund agribusinesses that were not part of existing cooperatives. Throughout the 1970s the corporation continued to expand its customer base as the concept of “rurality”—applied to communites that met the criteria to become Crédit Agricole’s clientele—grew to include all metropolitan areas with populations under 12,000; the financial company originally created to meet the needs of farmers had received authorization to work with over half the French population. During the 1980s the French government’s policy of privatization allowed Crédit Agricole to expand its customer base even more and to diversify outside its traditional banking focus. By 1981 the company had lost its monopoly on loans to the agricultural sector; its loss of control over that market, however, had been more than compensated for by the authorization to make loans to individuals throughout France, whether or not they were living in rural areas or were associated with farming or other rural industries. In 1986 the corporation created Predica, which grew over the next decade to become the second-largest life-insurance company in France. Finally in 1988 CNCA itself was privatized, its capital distributed to the individual banks that made up Crédit Agricole in proportion to their assets.

GROWTH SPURTS The 1990s saw Crédit Agricole continue the privatization trend that had begun in the previous decade. In the early 1990s the company consisted of about 85 regional banks with around 8,400 local branches—it was already one of France’s biggest banking institutions. The corporation continued its growth through further diversification (Pacifica, a casualtyinsurance subsidiary, opened in 1990) and acquisitions (in 1996 Crédit Agricole bought Banque Indosuez, entering the international-banking market for the first time). In 1996 the stockbrokerage subsidiary Crédit Agricole Indosuez Cheuvreux opened its doors. In 1999 Crédit Agricole acquired Sofinco, which specialized in consumer credit, and acquired a 10 percent interest in one of its competitors, Crédit Lyonnais. By that time Crédit Agricole had also obtained controlling interests in other major banks worldwide, including Ambroveneto and Gruppo Intesa BCI in Italy; Banco Espíritu Santo in Portugal; and Banco


Jean Laurent

Bisel in Argentina. The company that had been chartered to assist small French farmers had over the course of a hundred years become a major player in the world’s financial markets.

PROLONGED POLITICKING Yet at the beginning of its second century of existence Crédit Agricole continued to suffer from a reputation derived from its rural origins. The Euroweek contributor Ian Kerr explained that “the bank’s farming traditions are not far below the surface” (January 9, 2004). To be taken seriously as a major player in the European banking industry, Laurent and his colleagues needed to overcome that purported liability. Laurent saw an opportunity when Crédit Lyonnais—an important French bank in which Crédit Agricole by then owned almost one-fifth of the stock—was put up for sale. Crédit Lyonnais had been publicly funded through the French government; weakened by decades of exclusively governmental support and by a poor 1991 investment in a California firm— Executive Life Insurance Company—Crédit Lyonnais was privatized in 1999. Soon afterward, thanks to an influx of private cash, the former “state-owned basket case,” as put by Carol Matlack and David Fairlamb (June 24, 2002), was thriving. Although the government retained 10 percent of Crédit Lyonnais’s stock, another third of the company was put on the market. Purchasers included the German company Allianz as well as Crédit Agricole. As part of the agreement in which the French allowed private companies to buy Crédit Lyonnais’s assets, however, the government prohibited any of the owners from making a takeover bid for the remaining Crédit Lyonnais stock until after July 2003. In spite of the eight months that remained before the possible sale date, in December 2002 Laurent announced that Crédit Agricole would be willing to pay $16 billion in cash and stock for the 82 percent of Crédit Lyonnais that it did not already own. He raised the necessary funds by putting about 30 percent of Caisse Nationale de Crédit Agricole’s shares up for sale on the French stock exchange. The most immediate problem faced by Laurent would not be the amount of money involved or the complications related to integrating Crédit Lyonnais into the Crédit Agricole system; rather he would be confounded by rapid shifts in French politics. In order to win government backing for Crédit Agricole’s upcoming bid for Crédit Lyonnais, Laurent worked quietly behind the scenes to win the support of the Finance Minister Laurent Fabius. Fabius reportedly favored Crédit Agricole’s proposed acquisition of its sister bank in part to discourage potential takeovers by foreign investors like Allianz. But the Socialist government that Fabius represented fell from power in April 2002. Elections later that spring brought in a new right-of-center government whose finance minister, Francis Mer, had to be wooed and placated in his turn. Lau-


rent faced resistance from Crédit Lyonnais stockholders who opposed the merger, wanting to keep their bank independent, as well as from some of his own corporation’s stockholders, who feared that bringing Lyonnais’s assets into Crédit Agricole would reduce their influence in the organization. Indeed the acquisition of Crédit Lyonnais would reduce the regional banks’ power in the combined corporation from 70 percent to about 50 percent. The proposed acquisition of Crédit Lyonnais also reignited a prior debate among Crédit Agricole’s owner banks. Many asked whether Crédit Agricole should continue to move away from its roots as an agricultural mutual or become a publicly traded bank on a par with other major French banks such as BNP Paribas and Société Général. Laurent would need to convince the conservatively minded owners of Crédit Agricole of the necessity to expand through the purchase of Crédit Lyonnais, which proved to be a long, drawn-out process—taking almost two and a half years. Earning approval for the initial public offering as well took Laurent and the chairman Marc Bue two years. The cumbersome management structure— which was left over from the company’s days as a federally funded mutual—remained a drag on Laurent’s ability to respond quickly to changes in the fast-moving world of modern financial markets. In recognition of his leadership abilities, Laurent was made chairman of Crédit Lyonnais after the merger was finally completed.

EXPENSIVE CHALLENGES ABROAD Following the Crédit Lyonnais merger Laurent’s talents were further tested in international venues. One of the biggest of these challenges was the fallout from Crédit Lyonnais’s convoluted involvement in U.S. financial markets. In the early 1990s Crédit Lyonnais made a number of loans to the California-based Executive Life Insurance Company. Executive Life had traded in junk bonds and collapsed in 1991; Crédit Lyonnais approached the state with a plan to rescue the insurer from bankruptcy. When Executive Life’s portfolio unexpectedly recovered, Crédit Lyonnais reaped a profit of some $872 million. Yet U.S. law did not allow insurers to be owned by banks; the violation resulted in fines totaling about $770 million— which was believed to be the largest settlement of a criminal case in U.S. history. In December 2003 the U.S. Federal Reserve levied an additional fine of $100 million on Crédit Lyonnais for its role in the Executive Life affair. As the owner of Crédit Lyonnais, Crédit Agricole was responsible for paying the fine. Furthermore the Federal Reserve and the New York State Banking Department accused Crédit Agricole of failing to comply with a November 2000 agreement in which the French company had agreed to tighten the management oversight of its New York subsidiary, Crédit Agricole Indosuez New York. U.S.

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oversight agencies felt that Crédit Agricole had failed to comply with the terms of the agreement and levied further fines totaling $13 million on the bank—$5 million from the Reserve, $5 million from the New York State Banking Department, and $3 million for the corporation’s failure to resolve issues surrounding its violations of the U.S. Bank Holding Company Act. The agencies required Crédit Agricole to submit future reorganization plans for review—including those for incorporating Crédit Lyonnais into its business—and to make changes to internal auditing and other controls. Laurent complied with the fines, and in fact Crédit Agricole’s 2003 gross operating income was so great that in spite of the fines the company’s business grew by nearly 30 percent for the year. Laurent’s success in managing one of Europe’s largest banking institutions made him a major player in worldwide financial markets.

See also entry on Crédit Agricole in International Directory of Company Histories.


“Farmers’ Folly: French Banking,” Economist, December 21, 2002. “The History of Crédit Agricole,” Crédit Agricole http:// www.credit-agricole.fr/legroupe/uk/history.shtml. Humphreys, Gary, “Crédit Agricole: A Break with the Past,” Euromoney, September 1992, p. 271. “Jean Laurent, Chief Executive Officer, Crédit Agricole S. A.,” Crédit Agricole http://www.credit-agricole.fr/legroupe/uk/ credit-agricole-sa.shtml. Kerr, Ian, “Stuck in the Merde,” Euroweek, January 9, 2004, p. 1. Matlack, Carol, “The Humbling of a Tycoon: The Executive Life Scandal Casts a Pall on François Pinault’s Fortune,” BusinessWeek, December 8, 2003, p. 22. Matlack, Carol, and David Fairlamb, “Europe’s Most Frustrated Banker: Will Crédit Agricole’s Laurent Fulfill His Big Ambitions?” BusinessWeek, June 24, 2002, p. 52. “Moves in Brief,” Euroweek, October 10, 2003, p. 1. “People,” Project Finance, October 2003, p. 1. de Quillacq, Leslie, “Bigger Than a Backyard,” Banker, January 1995, p. 21.

“Beast of the Field,” Economist, June 21, 1997, p. 72.

“The Slumbering Giant Is Up—and Hungry,” BusinessWeek, July 23, 2001, p. 26.

Boyce, Caroline, “Consolidation Poses Questions,” Trade Finance, April 2003, p. 1.

Tagliabue, John, “Two Big Banks in France Join Forces,” New York Times, December 17, 2002.

“Business Brief—Crédit Agricole: Regulators Are Seen Seeking Only Minor Changes in Deal,” Wall Street Journal, March 13, 2003.

“U.S. Fed Fines Crédit Agricole $13M for Failings in Risk Controls as Bank Reports Strong Results,” Euroweek, March 12, 2004, p. 1.

“CA Continues French Trend of Management Reshuffles,” Euroweek, June 13, 2003, p. 1.

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INDEPENDENT BEGINNINGS

Kase L. Lawal

Growing up in Nigeria, Lawal knew at an early age that he would run a business, but he remained uncertain about his choice of enterprise. Lawal’s decision to immigrate to the United States was an easier one even though he had adamant opposition from his father. The senior Lawal feared for his son’s safety and doubted his ability to adjust to the American way of education. Eager to be part of the civil rights struggle, Lawal ignored his father’s objections and arrived in the United States in the early 1970s. He moved to Houston in 1972 to attend Texas Southern University. On leaving college Lawal worked in the oil industry as an engineer and chemist.

1954– Chairman and chief executive officer, CAMAC Holdings; vice chairman, Port of Houston Authority Commission Nationality: American. Born: 1954, in Ibadan, Nigeria. Education: Texas Southern University, BS, 1976; Prairie View A&M, MBA, 1978. Family: Married Eileen (maiden name unknown; co-owner, CAMAC); children: three. Career: Shell Oil Refining Company, 1975–1977, process engineer; Dresser Industries, 1977–1979, research chemist; Suncrest Investment Corporation, 1980–1982, vice president; Baker Investments, 1982–1986, president; CAMAC Holdings, 1986–, chief executive officer and president; Port of Houston Authority Board of Commissioners, 1999–2000, commissioner; 2000–, vice chairman; Allied Energy Corporation, 1991–, chairman. Awards: USAfrica Business Person of the Year, USAfrica The Newspaper, 1997. Address: CAMAC Holdings, 4669 Southwest Freeway, Suite 600, Houston, Texas 77027; http:// www.camacholdings.com.

■ Kase Lukman Lawal quietly developed one of the largest African American–owned businesses in the United States by exploiting the oil riches of Africa. The company Lawal founded and led was CAMAC Holdings, an international oil exploration, refining, and trading company with more than one thousand employees in the United States and the Republic of South Africa. In 2002 CAMAC was named the largest African American–owned company on the Black Enterprise 100s list. Analysts described Lawal as a politically well-connected risk taker who aimed to promote black empowerment around the globe. International Directory of Business Biographies

EXPANDING INTO OIL When Lawal began CAMAC (which stands for CameroonAmerican) in 1986, the small company traded agricultural commodities such as sugar, tobacco, and rice. Befitting the firm’s humble beginnings 80 percent of the company was owned by Lawal, his wife, and three children, the remainder being divided among Lawal’s brothers and sisters. CAMAC moved into the oil business in 1989 after Rilwanu Lukman, at the time the president of the Organization of Petroleum Exporting Countries, urged Lawal to change focus from agriculture to oil exploration, which was much more lucrative. The encounter was a demonstration of Lawal’s excellent political contacts in oil-rich Nigeria. To obtain funds for oil exploration, CAMAC went into partnership with the giant Houston-based oil company Conoco in 1991. While Conoco had money, CAMAC owned the rights to blocks of land in Africa where exploration would take place. In 2002 the partnership was producing more than 20,000 barrels of oil per day. Despite this success Lawal decided to move away from exploration. “We used to produce oil and rely on someone to sell it,” said Lawal in 2002. “We decided that we could get contracts and assemble a risk management team that could deal with the volatility of selling oil and gas,” he added (Hughes, June 2002). Exploration and production were the main sources of CAMAC’s income, but trading provided the most revenue. As a result of changing in 1998 to an integrated business that provided both upstream and downstream services, CAMAC achieved impressive revenue growth. The company posted rev-

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enues of $114.26 million in 1999, $571.54 million in 2000, and $979.5 million in 2001. Upstream services included the exploration and production of oil and gas; downstream services involved the trading and refining of products. The oil business in the United States faced expensive environmental upgrades to reduce the amount of sulfur in the fuel produced. To avoid this expense, CAMAC in 2002 moved equipment from its Blue Island Refinery in Illinois for reassembly at a newly developed refinery complex in Cape Province (Cape of Good Hope), Republic of South Africa. The object was to refine 13,000 barrels a day. George Beranek, the manager of market analysis at the Petroleum Finance Company, said that the move made good business sense because the equipment could be run where specifications were not as stringent. Lawal denied that CAMAC’s standards would be compromised and defended the move as encouraging more blacks to “get involved in the oil industry as entrepreneurs” (Hughes, June 2002).

ACTIVE IN INTERNATIONAL POLITICS Lawal was highly visible in the Houston community and dedicated approximately 60 percent of his time to public service. As a member of the Port of Houston Authority Commission, Lawal helped to establish the port’s Small Business Development Program to award contracts to Houston-area businesses and developed memorandum of friendship agreements with 20 ports, mostly in South Africa and other coun-

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tries in Africa. By providing management consulting and technical assistance to foreign ports, Lawal helped Houston to maintain its international presence and its flourishing importexport trade. As of 2004 the port of Houston was first in the United States in foreign tonnage and included the nation’s largest petrochemical complex. “He’s very behind the scenes— he doesn’t do things for a lot of fanfare,” observed Houston City Council member Carol Alvarado in 2002 (Anderson, August 9, 2002). Lawal was a director of the Cullen Engineering Research Foundation; a member of the United States Trade Advisory Committee on Africa; a member of the boards of directors of Cape Investment Holdings, the Greater Houston Partnership, and the Houston Airport System Development Corporation; and chairman of the Houston Mayoral Advisory Board on International Affairs and Development.


Anderson, Lauren Bayne, “Black Entrepreneur Takes Top Honors Only Reluctantly,” Houston Chronicle, August 9, 2002. Hensel, Bill, Jr., “Commissioner Wins Reappointment,” Houston Chronicle, June 14, 2003. Hughes, Alan, “A New Leader Emerges,” Black Enterprise 32, no. 11 (June 2002), p. 127.

—Caryn E. Neumann


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Rob Lawes 1967– Chief executive officer, HIT Entertainment Nationality: British. Born: 1967, in Kent, England. Family: Married; children: one. Career: Video Arts Television, 1986–1989, runner, chief accountant; HIT Entertainment, 1989–, various positions, including director of finance, director of corporate development, commercial director, and chief executive officer. Address: HIT Entertainment, Maple House, 149 Tottenham Court Road, London, W1T 7NF, England; http:// www.hitentertainment.biz/hit/index.jsp.

■ In 2001 Robert Lawes became chief executive officer (CEO) of the British media company HIT Entertainment, producer of popular children’s programs. As CEO he oversaw several strategic acquisitions, increasing HIT’s programming holdings to include children’s favorites such as Thomas the Tank Engine and Barney & Friends. Lawes also helped the company evolve from a purely distribution-driven enterprise into one of the leading children’s programming producers in the world. A YOUNG START Rob Lawes grew up in Kent, England. Admittedly a dreamer, he skipped college and instead took a job working in the office of Video Arts Television, the production company partly owned by the comedian John Cleese. When the company began to expand rapidly, Lawes offered to take over as the company’s chief accountant. “My biggest altitude sickness came when I went from office junior to chief accountant at age 18,” he recalled to License! Europe.

HIT IS BORN In 1989 Lawes received a call from Peter Orton, formerly of the Jim Henson Company. Orton was developing a new


television distribution company called Henson International Television (HIT), and he asked Lawes if he would like to be part of the organization. Lawes agreed and took on the dual roles of financial controller and company secretary. Over the next few years he held several positions within HIT, including director of finance, director of corporate development, and commercial director. As HIT grew, the number of television-content providers diminished, hitting HIT’s distribution business hard. So Lawes began to push his company into the creative arena. He oversaw the development of HIT’s in-house animation studio, HOT Animation. He helped negotiate some of the company’s most popular and profitable program acquisitions, including the cartoon show Angelina Ballerina, and he helped HIT get the financial backing it needed from the investment community. At the end of 2000 HIT entered into a deal with the Dallasbased Lyrick Studios, producer of the popular children’s show Barney & Friends, to distribute HIT programs in the United States. A few months later Lawes traveled to the United States to oversee the $275 million acquisition of Lyrick. Lawes used the Lyrick acquisition to bring the HIT show Bob the Builder to kids in America. He also purchased Pingu the Penguin that year to add to HIT’s rapidly growing array of children’s characters. In June 2001 the then 34-year-old Lawes took over as CEO when HIT’s founder, Peter Orton, promoted himself to nonexecutive chairman. Lawes, an admittedly young CEO, avoided criticism concerning his age because of his longevity with the company. The following year Lawes created one of the world’s biggest television empires when he bought rival Gullane Entertainment, creator of the popular Thomas the Tank Engine series, for $210 million. In 2003 HIT added the Rubberdubbers, an animated show about bathroom toys, to its lineup. Bob the Builder continued its strong run, broadcasting to millions of viewers in 140 countries. With its shows gaining popularity in the United States and abroad, HIT’s profits and stock prices rose sharply. Lawes forged ahead, committed to transforming HIT from a small distributor into a premiere producer of children’s programming. He also focused more attention on merchandising the company’s consumer products. Character-based books, videos, and other products would eventually account for more

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than 90 percent of the company’s annual sales. Lawes kept a close watch on the performance of all HIT shows. When Barney & Friends saw a drop in its audience share and merchandise sales, Lawes launched an aggressive advertising campaign to bring the giant purple dinosaur back to life.

PLANNING FOR THE FUTURE HIT began 2004 on a down note, with sluggish sales and lower stock prices, which Lawes blamed on a weak dollar and a lackluster response to Bob the Builder and Barney & Friends in the United States. But Lawes had several plans up his sleeve. He planned to re-energize the Bob the Builder brand through toy franchise partnerships, new products, and innovative story lines. He began to develop a new business model to increase HIT’s efficiency, segmenting the organization into individual divisions by brand, and a new children’s network to rival those owned by Disney, Viacom, and Time Warner.

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See also entry on HIT Entertainment PLC in International Directory of Company Histories.


Eisenberg, Daniel, “2002 Global Influentials: Rob Lawes, CEO of HIT Entertainment,” Time, http://www.time.com/time/ 2002/globalinfluentials/gbilawes.html. Freedman, Michael, “Child’s Play?” Forbes, December 22, 2003, p. 210. Phillips, Sam, “Rob Lawes,” License! Europe, January 5, 2003, http://www.license-europe.com/licenseeurope/article/ articleDetail.jsp?id=58838&pageID=1.

—Stephanie Watson


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Ken Lay 1942– Former chief executive officer and chairman, Enron Corporation Nationality: American. Born: April 15, 1942, in Tyrone, Missouri. Education: University of Missouri, BA, 1964; MA, 1965; University of Houston, PhD, 1970. Family: Son of Omer Lay (a store owner, salesman, and lay minister) and Ruth Reese (a farmer); married Judith Diane Ayers, 1966 (divorced 1982); married Linda Ann Herrold (a legal secretary), 1982; children (first marriage): two. Career: Humble Oil, 1965–1968, economist and speech writer; U.S. Navy, 1968–1969, supply officer; George Washington University, 1969–1973, lecturer and assistant professor; Federal Power Commission, 1971–1972, commissioner’s assistant; U.S. Department of the Interior, 1972–1974, deputy undersecretary for energy; Florida Gas Company, 1974–1976, vice president; 1976–1979, president; The Continental Group, 1979–1981, executive vice president; Transco Energy Company, 1981–1984, president and COO; Houston Natural Gas Corporation, 1984–1985, CEO and chairman; HNG/InterNorth, 1985–1986, chairman and CEO; Enron, 1986–2002, chairman and CEO; 1997, president. Awards: Leadership Award, Private Sector Council, 1997; Business Hall of Fame, Texas, 1997; Horatio Alger Award, Horatio Alger Association of Distinguished Americans, 1998.

■ Kenneth L. Lay’s life began in poverty, but his stature rose so high that he once turned down an offer to join the elder George Bush’s cabinet because he deemed the position of Secretary of Commerce to be beneath his dignity. In business he became a role model for chief executives, and his opinions on the future world economy and world politics were widely sought. Although his achievements were envied by many, he was such a nice man that few resented him. In the early 2000s he fell from admired leader to despised failure: he looted billions of dollars for the sake of self-aggrandizement and self-


Ken Lay. AP/Wide World Photos.

indulgence, bringing about catastrophe for tens of thousands of victims and misery for millions more.

FROM RAGS Ken Lay’s parents owned a feed store that went out of business; the Lays eventually moved in with relatives on a farm. Not until he was 11 years old did Kenneth Lay live in a house with indoor plumbing. His childhood was one of adult responsibilities, as he had to work driving tractors and plowing fields, during which time he would daydream about becoming rich in commerce. A good student, Lay earned a scholarship to the University of Missouri, but since all his expenses would not be paid for he took out loans and worked painting houses. A basic eco-

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nomics class taught by Pinkney Walker caught his imagination, and he decided to major in the subject. Walker persuaded Lay to stay in school to earn a master’s degree, which would increase his chances for advancement in business. After graduation, for a couple of years Lay worked for Humble Oil, which would soon become Exxon, meanwhile taking part-time courses to work on his doctorate. In 1968 he enlisted in the Navy; Walker used his connections to get Lay a position in Washington, D.C., where he worked on navy procurement. He found work teaching night school at George Washington University after his enlistment expired, and he finished earning his PhD. During this period he married his college sweetheart Judith Diane Ayers and had two children, Mark in 1968 and Elizabeth in 1971.

GOVERNMENT WORK In 1971 Walker was appointed to the Federal Power Commission, and he made Lay his chief assistant. Lay’s work impressed many people, resulting in his being appointed deputy undersecretary for energy in October 1972, answering to the Secretary of the Interior Rogers Morton. In a time of power outages and oil embargoes there was much for Lay to work on, but he saw the energy crises of the 1970s as opportunities for business and thus applied for a job at Florida Gas in September 1973. The chief executive officer W. J. Bowen hired Lay as vice president in charge of corporate planning in 1974.

BUILDING A BUSINESS CAREER Lay quickly rose to corporate president in 1976. In 1979 he moved on to a bigger company and a higher salary at The Continental Group. In 1980 he asked his wife for a separation; he was having an affair with his secretary Linda Ann Herrold. The divorce was a bitter one, with custody of the children hotly contested and Judith suffering a nervous breakdown that required hospitalization. But Lay’s winning personality made people love being around him, and within a few years after 1982—when the divorce became final and Lay married his lover—Judith and the children mingled with Lay and his new wife for Christmases in Aspen. By 1980 Lay seemed to have all he wanted. He was paid almost $400,000 per year; he owned expensive homes and could afford most of life’s luxuries; but he was obsessed with earning ever more money and buying ever more luxuries. When he went to Houston Natural Gas (HNG) in 1984, he helped engineer the acquisition of his former company, Florida Gas, expanding HNG’s pipelines through much of the southeastern United States. It was in 1985, after he became CEO, that Lay seized his biggest opportunity. In Omaha, Nebraska, Samuel F. Segnar, the CEO of the pipeline company InterNorth, and other company officers

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were distressed by the venture capitalist Irwin Jacobs, who had bought about one-third of their company’s shares. They feared that Jacobs would take over the company. Thus, they looked for a way to turn InterNorth into a poisoned pill. They found at HNG a friendly, folksy CEO who was willing to cut a deal: InterNorth would purchase Houston Natural Gas for so much money that the newly merged company would have $5 billion in outstanding debt. Segnar and his co-workers made an astonishing blunder, however: as part of their agreement with Houston Natural Gas they gave former HNG officers more seats on the new board of directors than were given to former InterNorth officers. The new company, dubbed HNG/InterNorth, bought out Jacobs’s shares for $357 million, of which $230 million was taken from employees’ retirement funds. In November 1985 the new company’s board of directors fired Segnar and appointed Lay CEO. The entire turn of events became ironic when Jacobs said that he had never intended to take over InterNorth; he had just invested in what he regarded as a growth stock. HNG/InterNorth was then paying over $50 million per month on its outstanding debt, which stood at three-quarters of the company’s equity. In 1986 Lay began selling some of the company’s holdings, including its chemical business, the sale of which garnered $634 million. In 1986 Lay was given $731,000 in cash compensation, making him one of America’s highest paid executives.

ENRON In 1986, after senior executives debated new name possibilities, HNG/InterNorth became Enron, and Lay found another avenue to greater wealth: deregulation of the natural-gas industry. He used his Washington connections and had Enron make political donations in order to influence Congress to make natural gas an unregulated, tradeable commodity. In January 1987 a bank contacted Enron, warning that the division in charge of managing the company’s crude-oil business had opened an account with a suspicious amount of activity. Oddly, Lay seemed unconcerned. The employees who owned the account, Louis Borget and Thomas Mastroeni, were given a clean bill of ethical health by Enron’s board of directors. In fact, Borget and Mastroeni were running a scam to make profits look bigger than they actually were by creating trades with dummy corporations, enriching themselves in the process through their mysterious account. In October 1987 Enron lost $150 million as a result of the scam. Although Lay had brought Enron’s indebtedness down to $3.5 billion, that loss in addition to a precipitous decline in the value of Enron’s shares put the company in danger of not being able to meet its payroll. Yet, New York banks bailed Enron out with new loans. In 1990 Borget and Mastroeni pleaded guilty to charges of fraud.


Ken Lay

In 1989, as natural gas was deregulated, Lay created the Gas Bank. The idea was to form a bridge between producer and consumer. Natural gas had been subject to large increases and drops in prices, and producers were reluctant to sign longterm contracts for fear that they would miss out on the next big upward spike in prices. The Gas Bank was intended to guarantee consumers long-term supplies at set rates while stockpiling reserves of natural gas bought from producers. While the Gas Bank never made much of a profit, as producers were suspicious of its potential for dampening prices, it set the stage for Enron’s worst years. In 1990 Lay was given $1.5 million in cash compensation along with millions of shares of Enron stock. He was becoming an important Houston civic leader by investing in charities. It was in that year that he hired Jeffrey K. Skilling; as a condition of employment, Skilling insisted that any project he worked on use mark-to-marking accounting, meaning that whatever profit a deal was expected to make would be counted when the deal was first closed, not when the money actually came in. As such, while deals might take several years to actually earn money, their projected profits would be immediately counted against Enron’s bottom line—showing profits where they had yet to be made. In 1991 President Bush offered Lay the cabinet position of Secretary of Commerce, but Walker told Lay that the position was not important enough for someone of his stature; Lay declined. Meanwhile, Enron’s chief financial officer Andrew Fastow found a new use for the Gas Bank: he created Cactus, the first of what would eventually amount to 3,500 dummy companies created by Enron. Enron would make phony deals with the Gas Bank and assume, as a supposedly separate and independent company, any debts the Gas Bank incurred. By keeping Cactus off the books, Enron’s actual indebtedness would be hidden. Thanks to Cactus and other dummy companies created by Fastow, none of Enron’s earning’s reports would be accurate, but to unsuspecting observers Enron seemed to do very well. In 1993 Enron reported $387 million in profits; in 1994 profits totaled $453 million; in 1995, they totaled $520 million. These gains drew investors, and Enron’s stock value climbed. In May 1995 James Alexander, an executive in Enron’s Global Power & Pipelines division, warned Lay of suspicious accounting of the division’s finances. Lay seemed not to have acted on the warning. Enron’s corporate culture changed radically during the mid 1990s. Lay was an affable, relaxed man who had run Enron like a club of old friends; with the arrival of Skilling the corporate climate became cutthroat. Bonuses and salaries became dependent on the closing of deals—any kind of deals—and employees stopped working together, instead battling each other for the rights to each deal made. Furthermore, the chief operating officer Skilling adopted the practice of semiannually


firing the employees rated in the bottom 20 percent at the company; ratings were based primarily on the number of deals closed. In 1996 Skilling turned his attention to electricity, and Lay pushed for electricity deregulation. This proved to be a hard sell, but Enron invested millions of dollars promoting the idea, winning its biggest victory in California, which opened both electricity and natural gas to the whims of the marketplace. Lay argued that electricity prices were kept artificially high by greedy public utilities and regulators who represented the utilities more than they did the public. In 1997 Lay served briefly as president of Enron after the previous president left for better opportunities. He campaigned for the use of natural gas for generating power, noting that it was cleaner and cheaper than other fuels. Within Enron he broke down corporate divisions into small units dedicated to finding and making deals quickly, hoping this would inspire an entrepreneurial spirit in the company. He seemed unaware of how profoundly cutthroat competition among his employees had become. Lay and Skilling decided that Enron’s core business should be energy trading and that assets such as power plants and pipelines were of secondary importance. That year, Fortune magazine named Enron the most innovative company in America. On November 5, 1997, Enron’s board approved the creation of Chewco, an off-the-books dummy company created by Fastow. Chewco hid $2.6 billion in debt while inflating profits by $405 million. In 1998 Lay helped set up a subsidiary of Enron named Azurix, which was created for his protégée Rebecca Mark. Azurix traded in water the way Enron traded in energy and fuels, and Mark lived as Lay did. Enron had a fleet of jets that flew Lay and his family wherever they wanted to go; he owned over 20 houses and estates in Texas and Colorado, all of which were lavishly decorated with antiques by his wife. Mark, too, tried to live large, but Azurix was a start-up and could not support her the way Enron had; thus, she drove Azurix into debt that was hidden by a dummy corporate partner. That year Enron would try to create a trading market for broadband, which seemed like the next big commodity, but lost $1.2 billion in the effort because there was insufficient demand for broadband services. One of Enron’s weirdest moments occurred in 1998 when Lay and other corporate bigwigs led Wall Street analysts through the trading floor of the Enron Energy Services divisions, which was abuzz with employees cutting deals and making trades. It was impressive; it was also fake. The floor had previously been vacant and had been filled with employees told to look as though they were doing something simply to impress the visitors. This episode suggested that Lay was at ease with Enron’s duplicitous practices.

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In 1999 Lay received a salary of $1.3 million and a bonus of $3.9 million, plus a $1.2 million cash reward for Enron’s rising stock price, which would peak at $90 per share. These numbers did not tell the whole story; investigation after Enron’s collapse showed that Lay was compensated over $200 million for the years 1999 through 2001. In addition, he had numerous services paid for by Enron, from vacations to meals. In June 1999 Enron’s board of directors allowed Fastow to serve as manager for Enron’s dummy companies even while he continued to serve as Enron’s chief financial officer. This meant that he could pay himself with fake deals between Enron and his fake companies. The most notorious of these companies were the Raptors, which bought and sold Enron stock, inflating the stock price. The Raptors alone cost Enron about $700 million. In 2000 California learned what Enron had wanted from a deregulated marketplace. For years afterward Enron employees would insist that the catastrophe was California’s fault and that Enron had done nothing wrong; Lay himself said California had deregulated stupidly instead of intelligently. Government investigators discovered that Enron’s dummy companies had traded natural gas and electricity among themselves, with each trade increasing the price, until the commodities were sold to California for several times their actual market value. This practice bankrupted businesses and households, made people homeless, and devastated lives; Enron claimed earnings of $101 billion for the year. In January 2001 Enron stock was valued at $80 per share. In February Skilling replaced Lay as CEO, with Lay remaining chairman of the board. In May the vice chairman of the board J. Clifford Baxter warned Lay and the board that he had found accounting irregularities; his warnings were not acted upon. In August Skilling resigned from Enron, claiming personal reasons; accounts of his behavior suggest that he had a nervous breakdown and passionately wanted to spend more time with his family, having missed his children’s growing up while giving his life to Enron. After Skilling’s departure Lay was reappointed CEO by the board of directors. On August 15, 2001, the Enron accountant Sherron Watkins gave Lay a memo detailing the crimes of corporate officers, hoping he would fix the problems. He promised to protect her and actually did when Fastow tried to seize her computer and fire her. Even so, Watkins feared for her life and consulted Enron’s security department for help. Lay had security concerns of his own; he skipped a scheduled speech in Los Angeles because California’s senate had charged him with contempt, such that he might have been arrested. Lay’s son Mark had a three-year, million-dollar contract with Enron, but he quit in 2001 to attend a Baptist seminary. Lay was selling his stock rapidly, perhaps to feed his appetite for luxuries, perhaps to escape Enron’s impending doom; but in September 2001 he urged employees to buy more Enron stock and to urge their

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families and friends to do so. In October he admitted publicly that Enron was “missing” $1.2 billion. On October 30, 2001, Watkins again warned Lay about malfeasance in Enron’s finances, and so Lay promised to fire those responsible. Instead, on October 31 he created an investigative committee from the board of directors. In 2002 the committee would deliver a scathing report on Enron’s disastrous financial schemes, but by then Enron’s criminal activities had become public. On December 2, 2001, Enron declared bankruptcy. Ranked seventh on the Fortune 500 list, the $70 billion company could not pay its bills and was over $30 billion in debt, $17 billion of which was accounted for by phony partnerships. Enron’s investors lost $67 billion. All of the company’s 21,000 employees worldwide lost their pensions, which were invested in Enron stock; in addition, most lost their life savings, which had also been tied up in shares in Enron. After trying to hang on during the crisis, Lay found he had no support among his employees; on January 23, 2002, he resigned as CEO and chairman of the board, briefly remaining as a board member until he was forced to leave. He turned down his $60 million in severance pay after much hue and cry about the possibility of his taking it after leading Enron into historic disaster. On January 28 Lay’s wife Linda appeared on the Today talk show, declaring that she and her husband were broke and that her husband had not known about the crimes of his subordinates. That month Lay put his numerous homes and estates up for sale, though he kept his $8 million high-rise condominium in Houston. Late in January the vice chairman Baxter was found dead from a gunshot wound to the head in his locked automobile; it was declared a suicide, although the circumstances were suspicious and traces of Baxter’s blood found outside the locked car went unexplained. In February 2002 Watkins told a Congressional committee that Lay had been duped by Fastow and others and had not participated in the duplicitous bookkeeping. Linda Lay opened a shop in a building she owned near upscale River Oaks in Houston; she called it Jus’ Stuff and sold the furnishings and knickknacks with which she had filled her numerous homes. An Enron employee remarked that the store was filled with just stuff bought with stolen money. Enron stock dropped to $0.26 per share. Although some businessmen despised him, Lay remained a member of Houston’s social elite, and people still listened to what he had to say. After all, he had saved the Houston Astros from leaving by leading the drive to build the team a new stadium, and he had helped charities such as the YMCA and various museums—though the Enron Boys & Girls Club removed Enron from its name because it had never received promised money. In November 2003 Lay helped his son Mark start up EnviroFuels LP, a business selling a lubricant that made internal combustion engines produce less pollution.


Ken Lay

In July 2004 Lay was indicted by a federal grand jury on 11 counts including wire fraud, securities fraud, and making false statements to banks.

See also entry on Enron Corporation in International Directory of Company Histories.


Barnes, Julian E., et al., “How a Titan Came Undone,” U.S. News & World Report, March 18, 2002, pp. 26–36.


Cruver, Brian, Anatomy of Greed: The Unshredded Truth from an Enron Insider, New York, N.Y.: Carroll & Graf Publishers, 2002. McLean, Bethany, and Peter Elkind, The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, New York, N.Y.: Portfolio, 2003. Thomas, Evan, and Andrew Murr, “The Gambler Who Blew It All: The Bland Smile Concealed an Epic Arrogance,” Newsweek, February 4, 2002, pp. 18–24.

—Kirk H. Beetz

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Shelly Lazarus 1947– Chairwoman and chief executive officer, Ogilvy & Mather Worldwide

Stewardship program. While she attributed much of her success to O&M as a meritocracy that rewards creativity and excellence, observers noted her personable style as an important factor in her achievement. Throughout her career Lazarus balanced her personal and professional lives, and she provided flexibility for her employees to create that balance as well.

Nationality: American. Born: September 1, 1947. Education: Smith College, BA, 1968; Columbia University, MBA, 1970. Family: Daughter of Lewis Braff (a certified public accountant) and Sylvia; married George Lazarus (pediatrician), 1970; children: three. Career: Clairol, 1970–1971, assistant product manager; Ogilvy & Mather, 1971–1974, account executive; 1974–1976, department store buyer; Ogilvy & Mather, 1976–1987, management supervisor; O&M Direct, 1987–1989, general manager; O&M Direct, 1989–1991, president; O&M New York, 1991–1994, president; O&M North America, 1994–1996, president; Ogilvy & Mather Worldwide, 1996–, chief executive officer; 1997–, chairwoman. Awards: Named Advertising Woman of the Year by the Advertising Women of New York, 1994; honored with Matrix Award from Women in Communications, 1995; named Businesswoman of the Year by New York City Partnership, 1996; honored with Distinguished Leadership Award, Columbia Business School, 2003. Address: Ogilvy & Mather Worldwide, Worldwide Plaza 309 W. 49th Street, New York, New York 10019; http:// www.ogilvy.com.

■ Rochelle (Shelly) Lazarus spent nearly her entire career at Ogilvy & Mather Worldwide (O&M), progressively developing new skills and meeting larger challenges as O&M provided opportunities. As chairman and chief executive officer, with more than 25 years at O&M, Lazarus exemplified the company culture of dedication to brand image, originated by the company’s founder, David Ogilvy. Through her experiences in both general advertising and direct marketing, Lazarus expanded the company’s practice of brand building by encouraging a cross-disciplinary approach to public communications, particularly through development of the 360 Degree Brand

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EDUCATION AND EXPERIENCE LEAD TO SUCCESS Lazarus decided to enter the field of advertising during her senior year at Smith College, when she attended a career seminar hosted by the Advertising Women of New York. Lazarus found that she had a natural inclination toward advertising, and her education in psychology fit the profession well. Also, she was motivated by the practical need to work while her fiancé attended medical school. After a summer internship at General Foods, she studied marketing at Columbia University’s Graduate School of Business. She earned her MBA in 1970 and married George Lazarus the same year. Lazarus began her career as an assistant product manager at Clairol, where she stayed for less than two years. At the urging of friends, she sought employment at O&M and obtained a junior account executive position specializing in hair-care products for such companies as Lever Brothers. Frequently, Lazarus found herself speaking for all women as the only representative of the gender at client meetings. While her husband fulfilled a two-year military obligation in Dayton, Ohio, Lazarus worked as a department store buyer. She returned to O&M in 1976 as a management supervisor, overseeing accounts for Avon, Campbell Soup, Ralston Purina, and Clairol. As the account supervisor for American Express from 1980 to 1987, Lazarus demonstrated her ability to sustain client satisfaction over the long term. O&M promoted Lazarus to general manager (1987) and then to president (1989) of its direct marketing branch. Lazarus carried a brand-building attitude from general advertising, which looked to the client’s overall business and image, to direct marketing, which tended to focus on a specific offer for client customers. At O&M Direct she learned about the sales consciousness of direct marketing as it related to stimulating an immediate response from potential customers. In turn she taught account executives at O&M Direct the benefits of getting into the heart of a company’s business and image, rather


Shelly Lazarus

than focusing strictly on the immediate product offer. In particular this cross-disciplinary approach positively affected the “membership has its privileges” campaign for American Express. Through her experiences at O&M Direct, Lazarus developed an integrated marketing and advertising strategy to convey brand image throughout every aspect of a company’s public communications. Lazarus carried this strategy back to general advertising when O&M promoted her to president of O&M/New York, the company’s advertising headquarters, in 1991.

SUCCESS AT HIGHER LEVELS As president of O&M/New York Lazarus attended to the company’s most important clients, such as Kraft, Duracell International, Kimberly Clark, Kodak, and Unilever. Shortly after taking the position in 1991, Lazarus faced the biggest challenge of her career when the company lost a 30-year, $60 million account with American Express. Lazarus supervised the campaign to regain the account. She instigated new research and infused the project with fresh creative energy supported by comprehensive attention to detail. Within the year American Express returned to O&M. Lazarus’s success with American Express contributed to her obtaining a $500 million global account with IBM in 1994. Her association with Abby Kohnstamm and Lou Gerstner at American Express transferred with the two executives when they took positions at IBM. After several formal and informal conversations with Lazarus, Kohnstamm decided to consolidate all of IBM’s advertising activities at O&M. The deal required O&M to relinquish contracts with Microsoft, Compaq in Europe, and AT&T, drawing criticism from some in the advertising industry, but Lazarus felt that stalled growth with those companies justified the trade. The account presented O&M with one of its greatest challenges, that of handling IBM’s first global campaign at a time when Big Blue’s identity was in transition. Lazarus’s achievements led to further promotions, first to president of O&M North America in 1994, then to president and chief operating officer of O&M Worldwide in 1995, chief executive officer in 1996, and the additional position of chair-


woman in 1997. As the successor to Charlotte Beers, Lazarus took charge of the sixth-largest advertising agency in the world, with $7.6 billion in annual revenues and 272 offices in 64 countries. The choice of Lazarus for the position was no surprise, as coworkers and clients considered her likable and trustworthy. To clients she offered attention and care toward the best outcomes, and to employees she provided an environment that both nurtured and challenged them to fully utilize their talent. As chief executive officer Lazarus contended with both practical and creative issues. She addressed the need to improve profit margins by pooling talent regardless of location. Her “long hallways” approach removed operational barriers across the company’s 35 offices in the United States, creating a single, more efficient profit center. Creatively, Lazarus continued to emphasize the integration of marketing and advertising, combining brand image with a strong sales orientation in a manner that related to a client’s overall strategy. O&M Worldwide developed its 360 Degree Brand Stewardship program based on the idea that all points of contact build the brand. This approach incorporated brand identity into advertisements, promotions, and signage at local, national, and international levels. The success of the program—applied to campaigns for high-profile clients such as Kodak, Unilever, DuPont, and Motorola—led Advertising Age to recognize O&M with its 2002 Agency of the Year Award.


“Creating an Environment Where People Can Do Great Work: Shelly Lazarus Talks About the Challenges and Satisfactions of Her Role as CEO of Ogilvy & Mather,” Advertising Age, September 21, 1998, p. 14C. Farrell, Greg, “Full Plate,” ADWEEK Eastern Edition, January 16, 1995, p. 20. Much, Marilyn, and Toni Apgar, “Direct from O&M New York,” Direct, September 1991, p. 16. Tylee, John, “O&M Chooses Chief with True International Vision,” Campaign, August 16, 1996, p. 13. —Mary Tradii

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Terry Leahy 1956– Chief executive officer, Tesco Nationality: British. Born: February 28, 1956, in Liverpool, England. Education: University of Manchester Institute of Science and Technology, BS. Family: Married Alison (maiden name unknown); children: three. Career: Tesco, 1979–1984, trainee, marketing executive; 1984–1992, marketing director; 1992–1995, boardlevel marketing director; 1995–1997, deputy managing director; 1997–, chief executive officer. Awards: Grocer Cup for Outstanding Achievement, IGD Food Industry, 1999; Most Admired Leader, Management Today, 2003; International Retailer of the Year, MMR, 2003. Address: Tesco, Tesco House, PO Box 18, Cheshunt, Hertfordshire, EN8 9SL, England; http://www.tesco. com.

■ Sir Terence Patrick (Terry) Leahy became highly regarded in retail for successfully leading the transformation of Tesco from an ordinary supermarket chain into a diversified retail brand that appealed to British middle-class concerns for product selection, price, quality, and convenience. Leahy’s focus on the customer helped Tesco become the top grocer in the United Kingdom in 1996 and one of the largest retailers worldwide in 2001. Considered brilliant, studious, and youthful, Leahy was also considered somewhat dull, as he preferred to talk about Tesco with associates and acquaintances rather than other topics.

LIVERPOOL INFLUENCES Leahy’s Liverpool roots factored greatly into his ability to market groceries and household goods to the common British shopper. His father was a carpenter and greyhound trainer, and the Leahys lived in prefabricated housing in the Scouse

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Terry Leahy. AP/Wide World Photos.

area of Liverpool, an area known to foster good communicators. A down-to-earth upbringing, along with disciplined study at St. Edwards College and an honors education at the University of Manchester Institute of Science and Technology, contributed to Leahy’s success in business, which led to his becoming chief executive officer of Tesco. Reserved about his personal life, he dismissed the idea of his being a rags-to-riches story. He was not ambitious; he simply did the work others asked him to do. However, Leahy acknowledged that his background had been integral to his success, saying, “I’ve been fortunate enough to see all layers of British life. I feel I know personally all of our customer groups” (Economist, U.S. edition, August 11, 2001). While Leahy brought a detail-oriented, analytical approach to his work, he relied less on raw data and more on conversations with staff and customers to determine the path of Tesco’s growth.


Terry Leahy

MARKETING CAREER AT TESCO Aside from employment at Tesco as a shelf-stacker while a teenager, Leahy began his career with the company as a marketing trainee in 1979, when Tesco was in the process of upgrading its image, revamping the store atmosphere, and expanding its product offerings in new superstores. Leahy became a marketing director in 1984, as Tesco established a stronger brand position in the United Kingdom’s grocery market, and handled marketing of fresh foods in 1986. Tesco formed a board-level position in marketing in 1992 and promoted Leahy to that position. Under Leahy’s leadership Tesco adopted two new store formats during the early 1990s, Tesco Metro and Tesco Express. The Metro small-store concept, with locations on busy streets and in urban neighborhoods, emphasized fresh and prepared foods in about 10-thousand square feet of retail space. Tesco Express provided gasoline and convenience. In leading Tesco’s marketing strategy, Leahy emphasized serving the company’s customers. In 1992 Tesco initiated the “one-in-front” program, in which a new checkout line opened when another line had more than two customers waiting. Labor costs increased significantly, but the service pleased customers. Tesco launched its “value” brand of products to accommodate customer price concerns. The “Would I buy it?” program was designed to ensure product quality. Leahy received much of the credit for the success of Tesco’s loyalty-card program for frequent customers, launched in 1995 and a first in grocery retailing. Clubcard members accumulated points that could be applied to future purchases through vouchers; Tesco sent members quarterly statements along with the vouchers. The program expanded to allow members to accumulate points through more than five thousand venues in the United Kingdom, as well as to transfer vouchers for travel through Airmiles Travel Company. Tesco counted more than 10 million Clubcard members by 2001.

EXPANDING TESCO’S BREADTH AND DEPTH Leahy became deputy managing director of Tesco in 1995, in preparation for promotion to the position of chief executive officer in 1997, after which he made his greatest impact on Tesco. He made striking changes in the company through his “four pillars” of expansion: to build on the strengths of the home market, to sell nonfood items, to offer banking and financial services, and to expand internationally. These key points impacted each other synergistically. In building on the home market, Leahy sharpened and diversified the Tesco brand. In 1997 Tesco introduced a new store format with the opening of its first hypermarket, Tesco Extra, an 87,000-square-foot store that offered customers a wide selection of goods, including nonfood items such as


health and beauty products. Tesco sold big-screen televisions, computers, and other choice goods that could be offered at competitive prices by leveraging Tesco’s volume-purchase capacity. Clothing, under the Tesco, Florence and Fred, and Cherokee (licensed from Target Corporation) brands, sold exceedingly well. Tesco introduced two new grocery brands, Finest and Tesco, but maintained a strong inventory of popular national brand products. Between 1997 and 2003 Tesco opened 80 Extra hypermarkets throughout the United Kingdom. Building the home market involved expansion of and improvements to Tesco’s three existing store formats. Tesco remodeled four hundred stores and opened several conventional supermarkets, Metro stores, and Express stores. In 2003 Tesco acquired the T&S chain of 910 convenience stores and converted 138 units to the Tesco Express brand; the company planned ultimately to convert more than 400 units. Overall, Leahy expanded the Tesco chain of food stores from 568 units in 1997 to 1,878 units in 2004. Tesco introduced new financial services in 1997, with the introduction of Tesco bank accounts and a Tesco Visa credit card through a joint venture with the Royal Bank of Scotland. Tesco offered the option of making check deposits at the grocery checkout. Tesco’s banking services raised questions about their impact on banks, particularly as they became available geographically along with Tesco’s store expansion. Offering more than 15 products and services, Tesco Personal Finance carried more than four-million customer accounts by the end of 2003. Tesco introduced catalog and online shopping during the late 1990s, including Tesco Direct and Tesco Direct Baby, introduced in 1997. Supported by Tesco’s excellent supplychain systems, tesco.com offered online grocery shopping that allowed customers to choose merchandise from specific stores, rather than a general catalog. One of the few profitable online groceries, tesco.com became the largest in the world, with service in Ireland and South Korea. After a successful 2001 market test in San Francisco in partnership with Safeway, Tesco expanded the service to other U.S. markets. Tesco’s international operations, initiated in 1993, expanded after Leahy became chief executive. To supermarket chains in Poland, Hungary, the Czech Republic, Slovakia, and France, Leahy added the HIT chain of 13 hypermarkets in Poland and new stores in Thailand, Taiwan, Malaysia, and South Korea. In 2003 Tesco acquired the C Two-Network chain of 78 small grocers in Tokyo, and a five-store chain in Turkey. After selling operations in France, in 2004 Tesco operated more than 440 stores in Europe and Asia, for a total of more than 2,300 stores worldwide. Under Leahy, Tesco’s sales more than doubled between 1997 and 2004 to £33.5 million (more than $60 million).

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Terry Leahy

See also entry on Tesco PLC in International Directory of Company Histories.


“Leahy’s Lead; Tesco,” Economist, U.S. edition, August 11, 2001.

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“MMR Honors Tesco CEO Leahy,” MMR, January 12, 2004, p. 1. “The MT Interview: Sir Terry Leahy,” Management Today, February 5, 2004, p. 34.

—Mary Tradii


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Lee Yong-kyung 1943– President and chief executive officer, KT Corporation Nationality: South Korean. Born: June 11, 1943, in Anyang, South Korea. Education: Seoul National University, BS, 1964; University of Oklahoma, MS, 1969; University of California, Berkeley, PhD, 1975. Family: Married (wife’s name unknown); children: two. Career: University of Illinois at Chicago, 1975–1977, assistant professor; Exxon Enterprises, 1977–1979, senior researcher; AT&T Bell Labs, 1979–1991, senior researcher; Korea Telecom, 1991–1994, chief, Line Research Center; 1993–1994, head of R&D team; 1995–1996, head, Wireless Communication Development Team; 1996–2000, director, R&D Group HQ; KT Freetel, 2000–2002, chief executive officer; KT Corporation, 2002–, chief executive officer. Awards: Honored as a distinguished engineering alumnus, University of California, Berkeley, 2003; participant on future of communications panel, World Economic Forum, Davos, Switzerland, 2004. Address: 206 Jungja-dong, Bundang-gu Songnam, Kyonggi 463-711, South Korea

■ Ken Lee, as Lee Yong-kyung is known to his American friends and colleagues, spent some 24 years in the United States as a student and research scientist. He returned to Korea in 1991 to join Korea Telecom, where he oversaw the stateowned company’s research and development (R&D) program. He was head of R&D for another nine years before becoming CEO of KT Freetel (KTF), a wireless subsidiary of the KT Corporation.

KT CORPORATION Korea Telecom, spun off from the government in 1981, was a state-owned monopoly that controlled the country’s fixed-line telephone and broadband services. The Korean gov-


Lee Yong-kyung. Chung Sung-Jun/Getty Images.

ernment began privatizing Korea Telecom in 1993, and by August 2002, after a protracted denationalization procedure, KT emerged as a fully private telecommunications behemoth. That same year Ken Lee was designated to be Lee Sang-chul’s successor after the latter was named as South Korea’s information and communication minister. Ken Lee was later confirmed as president and CEO of KT for a fixed, three-year term at an August shareholders’ meeting. In 2004 KT Corporation was Korea’s largest telecommunications service provider with more than 22 million subscribers. It accounted for 97 percent of the fixed-line telephone market and carried 48.6 percent of the nation’s broadband Internet traffic. Its closest broadband rival, Hanaro, had a market share of 26.5 percent. Korea had the world’s highest broadband Internet penetration in 2004, with up to 75 percent of households using the high-speed, always-on Internet access. In com-

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parison, the United States had a broadband penetration of only 13 percent of total households, and service was several times slower.

SEEING THE FUTURE FROM THE FIBERS: AN EDUCATION IN RESEARCH Ken Lee spent most of his career as a research scientist. At AT&T Bell Labs he conducted studies on semiconductor lasers and optical communications. His other areas of research, pursued while at both Exxon Enterprises and Bell Labs, included thin-film and fiber optics, semiconductor laser and optical interconnections, R&D management and planning of telecommunications technologies (network planning and operation management), high-speed transmission, access networks, various multimedia services, and wireless communications. Lee’s background as a scientist at the cutting edge of a number of exploding and converging fields made him uniquely placed to understand and exploit new research advances at a time when electrical engineering was undergoing one of the most revolutionary periods in its history. In fact, his career mirrors many of the historical developments that occurred with the introduction of satellite telecommunications in the 1970s and the World Wide Web in the 1990s: a progression from fixed-line to broadband to wireless and then, after market saturation, to their integration to create new value and new markets. The best word to describe Lee’s career was “network,” a term taken from the technological and conceptual advances that created a new science at the turn of the 20th century. His entire career was devoted to elucidating the mechanical and technological principles of networks and the efficient and economical implementation of those principles for financial and ultimately social benefit.

KTF: KOREA UNWIRED While Lee had ample experience managing research projects, researchers, and research departments, it was at KTF where he learned the most about managing a company, including both technical and nontechnical personnel, and developing a market strategy. Lee was appointed to be CEO of Freetel in the year 2000 in a move that reflected a shift in emphasis from the bottom line to next-generation technologies. The highly competitive and swiftly moving mobile phone market required an agile, forward-thinking CEO who could anticipate what the next “big thing” would be. To profit from this product, however, it had to be conceived of and produced in-house. As a researcher who understood the technology well and who appreciated both what it could and could not do, Lee was an ideal candidate for the post. Capitalizing on his habit of al-

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ways thinking ahead, Lee established teams for new product development and research standardization. These groups were devoted to developing next-generation technologies and new applications for existing technologies. KTF adopted the phrase “Mobile Life Partner” as its company slogan after its merger with Hansol M.com. This marketing ploy demonstrated that Lee understood the consumer’s perspective; moreover, Mobile Life Partner neatly complemented the company name, Freetel, the provider of a liberating technological convenience for the individual customer. The merger with Hansol M.com was the largest in the history of the domestic securities market. It also made KTF the second-largest domestic mobile phone provider, with some 8.7 million subscribers and a market share of 32.6 percent. ThenKT chairman, Lee Sang-chul, pointed out that the merger was in keeping with the trend toward larger companies as a step toward integrating worldwide communication service providers. Shortly after the deal was completed, Ken Lee announced his ambition to propel KTF into the global top 10 by 2005 in terms of number of subscribers and turnover. Consistent with his earlier ambition at KTF, Ken Lee’s principal goal during his tenure as CEO was to transform the KT group into one of the world’s top 10 “telcos” and to establish a lasting foundation for the company that would guarantee its survival into the 21st century. To achieve that goal, he instituted a number of both hard and soft measures aimed at restructuring and reforming the formerly state-owned institution’s heavily bureaucratic organization. Hard measures involved reducing costs by cutting jobs from a peak of 60,000 employees in 1996 to 38,000 in 2003. Soft measures included reforming KT’s governance structure to make it the best and most transparent in Asia. When Lee took office as the CEO of KT Corporation in August 2002, he told IT Korea Journal that his motto for the company was “the only way to survive is to change” (February 2004). Lee set three targets for KT’s new strategy: the creation of new business models, a change to custom-oriented management, and implementation of the Six-Sigma program. The Six-Sigma program was developed in the United States to provide a scientific and statistical basis for measuring company and employee performance and customer satisfaction. Lee was the first Korean CEO to introduce the Six-Sigma approach in that country and referred to his version of the program as “value management.” Value management depended on the “performance index.” The concept of the performance index, as he explained in IT Korea Journal, reflected Lee’s belief that “no measurement means no improvement” (February 2004). The index gauged performance in terms of profitability, customer satisfaction, stock value, and employee capability. To implement the index, Lee replaced the seniority-based compensation and personnel


Lee Yong-kyung

management system that existed at the time with an abilityand performance-based system. In IT Korea Journal Lee explained that “Anybody with no ability will die out” (February 2004). Lee’s reforms of KT’s management structures included the introduction of a cumulative voting system to protect minority stockholders and the reinforcement of the role of outside directors in order to promote managerial transparency. KT under Lee had more outside directors than did any other Korean company. As part of his downsizing plan, Lee proposed to reduce the board of directors from 15 to 12 by cutting inside directors from six to four and outside directors from nine to eight. He also raised the bar on foreign investment from 37.2 percent of outstanding KT shares to 49 percent, but he pledged to defend the management of the company from chaebol (state-organized privately run conglomerates) and foreign investors. A stock-swapping agreement, for example, was reached with KT’s archrival, SK Telecom, to defend the company against SK control.

INVENTING VALUE: INTEGRATING THE NETWORKS Market saturation in 2004 obliged Lee to slash KT’s earnings target for 2005 from his original number of 14.7 trillion won to 12.4 trillion won. In response to the slump Lee instituted a market strategy he dubbed “value networking.” This strategy was the creation of added value by combining and integrating existing products. Home networking, Lee foresaw, was the next “big thing” in information technology. Home networking linked mobile wireless resources to Internet broadband and fixed-line services, thus creating a single interface between appliances and other utilities. In anticipation of home networking, Lee steered KT into providing high-speed digital subscriber lines (DSL) and very high digital subscriber lines (VDSL) Internet broadband services while developing its own satellite-based mobile broadcasting system. Lee explained in the International Herald Tribune, “the killer application of the Internet has been speed” (May 6, 2003). Accordingly, KT targeted specific markets, such as new apartment complexes where competition was particularly keen and the demand for bandwidth exceptionally high, with VDSL. KT and other telecommunications carriers thus began working closely with construction companies to build condominiums that fully exploited the Internet, and in 2006 KT planned to launch its own commercial satellite. Lee summarized the new developments and future of the markets in a keynote speech at the Global Information Summit in 2003. He detailed how information technology (IT) was being increasingly combined with other technical develop-


ments to create new business models. In addition to alliances with construction companies, Lee noted that home appliance makers and automakers were developing mobile offices and predicted that the crossover between IT and other technologies would lead to the creation of a totally new social structure and culture. He used the phenomenon of “Net citizens” supporting presidential candidates over the Internet as an example.

JUMPING UP AND INTO THE FUTURE Some analysts interpreted Lee’s 2002 to 2005 mandate at KT as a stopgap measure while the chairman, Lee Sang-chul, was away serving in the South Korean government. Lee’s ambitions for KT and his 100-year vision for the company might support that view. His accomplishments were nothing but impressive for such a short reign, the work of a man who knew he had much to do and little time to do it. Undoubtedly, Ken Lee made an enduring mark on KT and the Korean telecommunications industry. He transformed an ailing and ossified, state-run company into a lithe and agile industry leader. He set a policy for KT of growth through emerging markets rather than through corporate mergers; a policy of ethical capitalism through corporate transparency and responsibility to stockholders; and a policy of corporate-driven public and social welfare projects to bridge the digital divide and social inequality. In July 2003 the company launched a social service organization called “Jump Up” to get the poor and handicapped online and pledged to transform itself into an environmentally friendly corporation by funding a number of projects such as the Evergreen KT Campaign. Ken Lee’s legacy could thus be described as the creation of a network of technologies, businesses, and social projects. In 2004 Lee was named as the 20th most influential CEO in Korea.

See also entry on AT&T Bell Laboratories, Inc. in International Directory of Company Histories.


“Interview with Lee Yong-kyung,” IT Korea Journal, February 2004. Lee Yong-kyung and Ken Belson, “The Broadband Age Makes Speed the ‘Killer App,’” International Herald Tribune, May 6, 2003. —John Herrick

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David J. Lesar 1954– Chairman of the board, president, and chief executive officer, Halliburton Company Nationality: American. Born: 1954. Education: University of Wisconsin, BS, 1975, MBA, 1978. Career: Arthur Andersen Company, 1978–1993, commercial group director and partner; Halliburton Energy Services, 1993–1995, executive vice president of finance and administration; Halliburton Company, 1995–1996, executive vice president and chief financial officer; Brown and Root, 1996–1997, president and chief executive officer; Halliburton Company, 1997–2000, president and chief operating officer; 2000–, chairman of the board, president, and chief executive officer. Address: Halliburton Company, 5 Houston Center, 1401 McKinney Street, Suite 2400, Houston, Texas 77020; http://www.halliburton.com.

erations, and railroad construction. It also provides products, services, maintenance, and engineering to the energy, construction, and government sectors. It receives about 70 percent of its revenues outside the United States, with 70 to 75 percent of its business being related to energy. The company, with about $16.2 billion in total sales in 2003, conducts business through its two main groups: Halliburton Energy Services Group and Halliburton Kellogg Brown and Root (KBR Engineering and Construction). In March 2002 Lesar separated these two groups into two wholly owned operating subsidiaries. The Energy Services Group (with about 55 percent of Halliburton’s revenues and more than 80 percent of its operating income) provides a wide diversity of products and services to gas and oil customers worldwide, such as pressure pumping services, drill-bit and other down-hole and completion tool manufacturing, undersea engineering, oil and gas equipment, production enhancement, and logging and testing. Halliburton KBR works on both energy-related and civil infrastructure facilities, such refining and processing plants, liquefied natural gas plants, pipelines, and production facilities, both offshore and onshore. Its nonenergy business provides the engineering and construction needs of government and civil infrastructure customers. KBR supplies operations and maintenance for a wide variety of facilities, such as prisons, highways, and stadiums, and offers planning and management support for the U.S. military.

■ Lesar joined Houston-based Halliburton, the world’s largest diversified energy services, engineering, and construction company, in 1993. In August 2000 he was named chairman of the board of directors, president, and chief executive officer. Lesar succeeded Richard B. Cheney, who left when he accepted the Republican presidential candidate George W. Bush’s offer to become his vice presidential running mate. Cheney stated in a PR Newswire article, “Having worked closely with Dave Lesar and the Halliburton management team over the past five years, I have great confidence for the future success of Halliburton” (July 25, 2000).

HALLIBURTON Halliburton operates in over one hundred countries, with more than 83,000 employees working worldwide in diverse areas, such as deepwater drilling, remotely operated vehicle op-

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ADVANCING WITHIN HALLIBURTON After 16 years of employment at Arthur Andersen in Dallas, Texas, last serving as a commercial group director and partner in charge of the oil and gas, manufacturing, telecommunications, and retail sectors, Lesar joined Halliburton. For two years (from 1993 to 1995) he was executive vice president of finance and administration of Halliburton Energy, and the next year he served as executive vice president and chief financial officer of Halliburton Energy Services, a Halliburton business unit. From June 1996 through June 1997 he was president and chief executive officer of Brown & Root, the Halliburton business unit that provides engineering and construction services in the petroleum, forest products, civil, environmental, manufacturing, maintenance, and government markets. From June 1997 to August 2000 Lesar was president and chief operating officer of Halliburton. In August 2000


David J. Lesar

Lesar assumed the position of chairman, president, and CEO of Halliburton.

IMPACT ON COMPANY STRATEGY Halliburton’s strategy essentially did not change when Lesar took over from Cheney. For several years Lesar had already been actively running the company, with Cheney responsible for interacting with customers. In fact, during the years before becoming chief executive officer, Lesar was critical in the company’s transition from market-share mining (which involved concentrating solely in mining) to a more diversified position involving the entire spectrum of oil and gas products and services. Lesar helped Halliburton executives recognize that the industry was preparing to outsource more technologies to service companies—services that Lesar wanted Halliburton to be able to provide throughout the industry. As a result of the outsourcing trend, Lesar led Halliburton in a series of acquisitions, which allowed the company to obtain the skills and tools it needed to offer services in such areas as directional logging, liquefied gas products, drilling, and reservoir integration. He found that Halliburton was able to provide these services to a wide range of companies, from large integrated oil companies to small independent companies. In addition, Lesar played an important part in developing Halliburton’s investment in research and development, which reduced costs, increased safety, and decreased environmental impacts. From 1997 to 2001 Lesar oversaw Halliburton’s billiondollar investment in developing technologies. These technologies created products that solved problems, enhanced assets, and delivered long-term value for customers and shareholders. By 2001, 20 percent of Halliburton’s total revenues were in new technology accounts.

REVERSING LOSING PROJECTS In the first few years of the 2000s Halliburton lost money on several large international engineering, procurement, installation, and construction (EPIC) projects. The EPIC projects were formerly run as lump-sum payments—single payments made at the beginning of a contract, and in which Halliburton paid all unexpected costs during the contract period; however, since actual costs were often higher than estimates, losses occurred. Lesar saw, for instance, that in 2002 Halliburton lost $119 million on a joint venture to develop 55 deepwater oil wells off Brazil’s coast, and another $33 million on an offshore Philippine oil platform project. As a result, KBR’s operating profit margins were only 2.1 percent in 2002, below its predicted 3.0 percent. Lesar declared that Halliburton would no longer bid for lump-sum payments on international EPIC projects.


LOGCAP By 2004 the U.S. military relied greatly on private military companies (PMCs) to support its operations in many countries, such as Iraq. In fact, civilian contractors handled as much as 20 to 30 percent of critical military support services in Iraq. Lesar made sure that KBR was the best-equipped service company to assume those jobs. In the early 2000s the company housed, fed, and maintained (with such functions as mail delivery, laundry facilities and operations, and heavy equipment use) American fighting troops in some of the world’s most remote and dangerous locations. Based partly on KBR’s past performance in supporting U.S. forces, Lesar secured, in December 2001, a 10-year project from the U.S. Pentagon known as the Logistics Civil Augmentation Program (LOGCAP)—a U.S. Army plan that hires civilian contractors to support U.S. forces in Department of Defense missions. The cost-plus contract, a pricing system that calculates the price of a product by adding a specified percentage as profit to the contract—thus guaranteeing the company a small profit—was open-ended and thus gave KBR the budgetary freedom to send its employees anywhere in the world to run military operations. Lesar secured KBR’s first LOGCAP contract in June 2002, during the “war on terrorism.” It was awarded a $22 million contract to operate support services at Camp Stronghold Freedom, which is located at the Khanabad Air Base in central Uzbekistan. KBR supplied products and services to Khanabad— one of the primary U.S. bases in the Afghanistan war that housed approximately one thousand U.S. soldiers. Later, in November 2002, Lesar secured a one-year contract, estimated at $42.5 million, to make available laundry services, showers, mess halls, and heating equipment services for troops at bases in Bagram and Khandahar, in Afghanistan. KBR also received contracts to help run Incirlik Air Base and other U.S. military facilities in Turkey.

E-VENTURES Lesar pursued Internet-type electronic ventures (eventures) in order to integrate other leading companies into one group. One of Lesar’s initiatives was his 2000 agreement to partially acquire Petroleum Place, a leading Internet company that focuses on improving how procedures are conducted with respect to buying and selling within the global oil and gas market. In partnership with Halliburton’s wholly owned subsidiary Landmark Graphics Corporation, Petroleum Place offers online access to Landmark software for use with buying and selling of company products and services. In addition, in 2004 the alliance was planning to develop software for evauating prospective oil and gas fields and other such properties. Lesar stated that such a project would enable Halliburton to better assist oil companies with the management of their oil and gas reservoirs. Though acquisitions and divestitures are

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generally inefficient in discovering new properties and evaluating existing properties, Lesar believed that the Petroleum Place alliance, with its use of Internet-based data analysis, would reduce the time needed for analysis reviews and lower costs of materials and labor.

CRITICISM Halliburton and its subsidiaries were widely condemned in the early 2000s for their contracts in various countries where environmental problems and human rights violations are widespread (including Algeria, Bolivia, Bosnia, Brazil, Haiti, Iran, Iraq, Libya, Somalia, and Indonesia). The company’s associations with past and present U.S. administrations, including its relationship with Vice President Dick Cheney, who served as Halliburton’s chief executive officer between 1995 and 2000, were also problematic. Lesar and Halliburton were criticized about accounting procedures as well. In the late 1990s Halliburton transferred from cost-plus contracts to more fixed-price contracts. The new contracts required the company to finish jobs for a fixed fee and then to attempt to negotiate payments of cost overruns and changes in orders. Although resolving such disputes can take months or even years, Halliburton financial officials decided it was “reasonable” to identify, for tax purposes, at least part of the revenue from the claims during the time they were in dispute. The U.S. Securities and Exchange Commission investigated whether this accounting practice was intended to defraud. Lesar also contended with asbestos litigation, which was initiated when the company acquired Dressor Industries in 1998 for $7.7 billion. A Dressor subsidiary had once used a carcinogen in its pipe coatings and bricks. Lesar initiated a bold plan to settle asbestos-related lawsuits by instituting a “contained” bankruptcy of KBR, a plan that would keep most of Halliburton out of bankruptcy.

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FUTURE PROSPECTS Lesar hoped that Halliburton would continue to be a leading—if not the leading—player in the multibillion-dollar rebuilding of postwar Iraq, particularly the rebuilding of the country’s oil wells. But along with the increase of government contracts awarded to Halliburton came accusations that the company was receiving favoritism from politically prominent employees and former employees. Lesar rejected such talk by pointing to the company’s long history as a government contractor. He continued to insist that he was very proud of the Halliburton organization and especially of its support of the U.S. military and the savings it had provided to the military’s overseas activities. In any case, the bottom line for Halliburton was that its future, especially with Lesar at the helm, looked promising and profitable.

See also entries on Arthur Andersen & Company, Société Coopérative, and Halliburton Company in International Directory of Company Histories.


“David Lesar, of Halliburton Company, Elected to Lyondell Board of Directors,” PR Newswire, July 31, 2000, http:// www.findarticles.com/cf_0/m4PRN/2000_July_31/ 63765363/p1/article.jhtml. “Halliburton Company,” Disinfopedia, http:// www.disinfopedia.org/wiki.phtml?title=Halliburton. “Lesar to Succeed Cheney as Halliburton Chairman and CEO,” PR Newswire, July 25, 2000, http://www.findarticles.com/ cf_0/m4PRN/2000_July_25/63671917/p1/article.jhtml. —William Arthur Atkins


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R. Steve Letbetter ca. 1959– Former chief executive officer, president, and chairman, Reliant Resources Nationality: American. Born: ca. 1959, in San Saba, Texas. Education: Texas A&M University, BA, 1970. Career: Haskins & Sells, ?–1977, certified public accountant; Houston Light & Power, 1974–1977, assistant secretary and assistant treasurer; 1977–1978, assistant comptroller; 1978–1983, comptroller; 1981–1983, vice president; 1983–1988, vice president, regulatory relations; 1988–1993, group vice president, finance and regulatory relations; 1993–1997, president and chief executive officer; Houston Industries, 1997–2000, president and chief operating officer; Reliant Energy, 1999–2000, president; 2000–2002, chairman, president, and chief executive officer; Reliant Resources, 2002–2003, chairman and chief executive officer. Awards: Outstanding Alumnus Award, Lowry Mays College and Graduate School of Business, Texas A&M University, 1998.

■ R. Steve Letbetter helped Houston Light & Power and its parent company, Houston Industries, move from a local energy company to the international energy supplier and provider of energy services and marketing known as Reliant Energy. However, he resigned as CEO from Reliant Resources (an entity that had split from Reliant Energy to handle unregulated energy business) as the company’s stock prices fell and several scandals ensued. Letbetter was a leader in his company and was known for helping the company develop a strategy that contributed to its successful expansion. He also helped change the overall approach of the energy business. A native of San Saba, Texas, Letbetter earned a BA in accounting from Texas A&M University in 1970. He began his professional career as a certified public accountant and worked at Haskins & Sells, a Houston-based accounting firm. Letbetter joined Houston Light & Power in 1974 as assistant secre-


tary and assistant treasurer. He moved through the ranks, holding a number of management and executive positions in the 1970s, 1980s, and 1990s.

PREPARED FOR DEREGULATION Though as a company Houston Light & Power was opposed to the federal deregulation of the energy industry until the legislation was passed in 1992, Letbetter soon saw the potential benefits. By the early 1990s Letbetter was serving as group vice president of financial and regulatory relations before being promoted to president and chief operating officer in 1993. He anticipated that the electric utility industry would be deregulated, and he positioned his company accordingly by emphasizing the diversity of its interests. Letbetter recommended buying up megawatts of generating assets in other states and finding ways to sell them. He also built a strategy for doing business in Europe and Latin America. In the mid-1990s Letbetter expanded Houston Light & Power’s operations by retailing the company’s electric product nationally. To facilitate this move, he organized the company into two units, one of which produced energy and the other of which delivered it, in addition to providing customer service and engineering. His success with Houston Light & Power led to his promotion to president and chief operating officer of Houston Industries (HI), Houston Light & Power’s parent company. At the time of Letbetter’s promotion, Houston Industries was completing a merger with NorAm Energy Corporation to become the third-largest gas and electric utility company combination in the world. Letbetter headed the merger and oversaw the operations of the three new divisions created within the company: HI Power Generation, HI Retail Energy Group, and HI Trading and Transportation Group. Letbetter continued to create new divisions, such as HIPG Development in 1998, to increase and commercialize assets that could generate power and profits.

BECAME CEO OF RELIANT ENERGY In 1999 Houston Industries was renamed Reliant Energy, and that spring it was announced that Letbetter would become chief executive officer of the company in 2000 while remain-

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ing president. He added chairman of the board to his titles later in 2000. In October of that year, Reliant was separated into two companies that would be functionally separate and that would eventually be traded separately. This move divided the regulated energy business of Reliant from the unregulated and allowed for different financial goals. The decision was made because the State of Texas was going to allow deregulation of its electric industry by 2002 but required that regulated and unregulated business be separate. Letbetter was put in charge of the unregulated arm, which was eventually called Reliant Resources, and was also the nonexecutive chairman of the regulated business. Unregulated businesses included commercial services, marketing and trading of wholesale energy, power generation, and retail customer services as well as a Houstonbased telecommunications business.

FACED CRITICISM By the time of Reliant Resources’ initial public offering in 2001, it had $20 billion in annual revenue. Yet Letbetter and Reliant Energy were facing criticism in California, where the company did some of its business. California was embroiled in an energy crisis, which state officials believed had been caused by Reliant and other energy companies. Letbetter was personally accused of contributing to the crisis. His company was cited for contempt by a California senate committee that was investigating claims of price gouging for electricity. Letbetter faced more criticism in 2002, when it was revealed that Reliant had participated in the shady business practice called “round-trip energy trades” between 1999 and 2002. (Round-trip energy trading involved simultaneously buying and selling the same amount of energy. Such deals were used by certain traders at Reliant to pump up trading volumes and revenues artificially.) Though these trades boosted the company’s revenues by 10 percent, the company had to cut revenue reports by almost $8 million in that time period. Because the shareholders were upset about this situation, Letbetter responded by putting procedures in place to make sure that it would not happen again. Despite Letbetter’s promises, Reliant Resources was investigated by the Securities and Exchange Commission, and some executives resigned. Calls for Letbetter to leave the company became stronger when Reliant Energy’s stock price began to fall drastically after the scandal involving Enron, another energy company based in Houston, and general investor distrust of energy trading companies. Stock prices for Reliant Resources went from $30

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per share in May 2001 to $8.73 per share in early June 2002, with Reliant Energy stock falling from $42.75 to $17.11 within the same year. By June 2002 these problems had prompted shareholders of Reliant Energy (later named CenterPoint Energy) to call for Letbetter’s resignation. They believed that the company had failed while Letbetter was in charge. They also had a problem with the $1.7 million bonus that he received in 2001. Letbetter tried to reassure shareholders that Reliant Resources could grow, deal with any regulatory issues, and be profitable as it finished becoming a completely separate entity from Reliant Energy. He was able to refinance the company’s debt when it nearly went bankrupt.

RESIGNED AS CEO Reliant and Letbetter faced more problems in March 2003, when the Federal Energy Regulatory Commission accused the company of having manipulated the price of power during the energy crisis in California. Though Letbetter promised that Reliant would leave the speculative energy trading business, the pressure on him increased, and he finally resigned in April 2003. The controversy surrounding Letbetter continued when he received a severance package worth $7.6 million, further inflaming some shareholders. As part of the deal, he remained a consultant to the company for a year after his departure.

See also entries on Houston Industries Incorporated and Reliant Energy Inc. in International Directory of Company Histories.


Goldberg, Laura, “Ex-Reliant CEO Rakes It In; Letbetter to Get $7.6 Million as Part of Severance Deal,” Houston Chronicle, May 2, 2003. ———, “Reliant Chief Stresses ‘the Right Way’; Company Takes Steps to Ensure Honesty,” Houston Chronicle, June 6, 2002. Hays, Kristen, “Reliant Resources Chairman, CEO Joins Executive Exodus,” Associated Press, April 15, 2003. “Steve Letbetter; Chairman, President & CEO, Reliant Energy,” Utility Business, June 1, 2001, p. 69. —A. Petruso


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Gerald Levin 1939– Retired chairman and chief executive officer, AOL Time Warner Nationality: American. Born: May 1939, in Philadelphia, Pennsylvania. Education: Haverford College, BA, 1960; University of Pennsylvania, LLB, 1963. Family: Son of a butter-and-egg businessman and a piano teacher. Married Carol Needelman (divorced); married Barbara J. Riley, 1970; children: five. Career: Simpson Thacher & Bartlett, 1963–1967, corporate lawyer; Development and Resources Corporation, 1967–1969, unknown position; 1969–1971, general manager and CEO; International Basic Economy Corporation, 1971–1972, representative in Iran; Time, 1972–1973, vice president of programming for Home Box Office; 1973–1975, president and CEO of HBO; 1975–1976, vice president; 1976–1979; chairman of HBO; 1979–1984, group vice president for video; 1984–1990, executive vice president; Time Warner, 1990–1991, vice chairman; 1991–1992, COO; 1992–2000, president and co-CEO; AOL Time Warner, 2000–2001, CEO.

■ Gerald Levin is likely to be remembered as the executive who drove Time Warner to near failure. American Online’s purchase of Time Warner in 2000 for $165 billion was the biggest merger to date and the best evidence of the convergence between old and new media, but it was also a financial disaster. In the 2002 fiscal year the company’s stock price dropped to about $9 per share—a record low—and the price of its bonds plummeted to the levels of junk. Throughout his career, Levin deliberately refused to play the part of “media mogul.” Yet while he was being underestimated and misunderstood, this shrewd corporate politician built a career whose highlights included orchestrating three corporate mergers, ousting several of his would-be rivals, and clinging to power despite steady Wall Street criticism of his leadership style. A resolutely bland executive who preferred discussing books to International Directory of Business Biographies

Gerald Levin. AP/Wide World Photos.

balance sheets, the final chapter of his corporate career was ultimately shaped by the murder of his son and a publicly failed merger. Upon his retirement, Levin, who once wanted to become an English teacher and a novelist, cited his desired to “bring the poetry back into his life.”

AN EARLY ACHIEVER PUTS HIS VALUES FIRST The grandchild of Holocaust survivors from Eastern Europe, Gerald Levin went to sleepover camp when he was just five years old. Before he was 10, he knew enough Hebrew to conduct a service at the local synagogue when the cantor failed to show up one Saturday. It has been widely reported that Levin was a biblical studies major at Haverford College and that Haverford caused Levin to question his strict Jewish upbringing. While he was valedictorian and won honors for his

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thesis, on principle he rejected the honors and burned all of his papers to make a philosophical statement that the work counted more. As he told Michael Oneal in BusinessWeek: ”My thesis was on the continuity between the Judaic and Christian traditions. I made a complete transformation through college, coming out very spiritual, but a-religious” (December 11, 1995). AN EARLY CAREER START IN CABLE HELPS AN INDUSTRY MATURE After law school, Levin became a corporate lawyer with the firm of Simpson Thacher & Bartlett (1963–1967) and was affiliated with the Development and Resources Corporation, an international investment and management company. In 1969 he became the general manager and CEO. After his company was acquired by International Basic Economy Corporation (IBEC) in 1971, Levin served as IBEC representative in Iran for a year. He joined Time in 1972, as vice president of programming for Home Box Office (HBO). He was named president and CEO of HBO in 1973. Levin advised Time to put HBO on a satellite and beam it across the country. HBO became the first national cable network and remains one of the industry’s most profitable. Levin’s move revolutionized cable network distribution. It also assured HBO’s survival and earned Levin the in-house nickname “resident genius.” In 1976 Levin was named chairman of HBO and a vice president of Time and was appointed group vice president for video, overseeing operations at American Television and Communications Corporation as well as HBO, Time-Life Films, and other video interests. MINOR SETBACKS LEAD TO GREAT SUCCESS By 1984 Levin had become Time’s top corporate strategist, with a mandate to think broadly about the company’s future. Still, during the 1980s several high-profile, Levin-sponsored projects bombed, including Teletext, a service designed to deliver on-demand news to TV via cable, which cost $35 million before Time ended it. Subscription TV lost as much as $100 million. Worse was a movie-development deal with Tri-Star Pictures that left the amount of Time investment in the films uncapped. No matter how much a film ran over budget, Time wound up paying a third of the cost. Levin was elected to the Time board in 1988, and it was on Levin’s recommendation that the company agreed to merge with Warner Communications in 1989. After Paramount Communications tried to sabotage the deal, Levin and his colleagues were forced to revamp their merger as a $14 billion acquisition of Warner. Time prevailed, but the legacy was a suffocating debt load that the company struggled to overcome. Moreover, the companies also proved to be culturally mismatched. It appeared that Time’s staid executives could not mesh with their free-spending Warner colleagues.

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A TOP EXECUTIVE BECOMES A RELUCTANT MOGUL Gerald Levin became vice chairman of Time Warner upon the merger of Time and Warner Brothers in 1990. Melding the East Coast Time and the West Coast Warner Communications challenged Levin’s will to survive. He plunged into Warner with abandon, befriending influential executives and acting as head cheerleader for the merged companies. He also cultivated what was to become a pivotal alliance with Warner’s charismatic chairman, Steven J. Ross. After Ross died from cancer, Levin engineered the stunning ouster of his own archrival at Time, Nicholas J. Nicholas. Levin told Nina Munk, a Vanity Fair contributing editor, in her book, Fools Rush In: Steve Case, Jerry Levin, and the Fall of AOL Time Warner: “It’s absolutely true that I plotted the departure of Nick Nicholas after working with him for 20 years. And I don’t have justifications for it other than that I’m a strange person. Sometimes we impute meaning and purpose to things that are totally adventitious or accidental.” Levin served as COO of Time Warner from 1991 to 1992 and was named president and co-CEO in 1992. A hallmark of Levin’s enigmatic nature was his firm notion that he need not be eccentric or charismatic to lead a media company. One Time Warner director, Lawrence B. Buttenwieser, said at that time: “He hasn’t said he’s going to start wearing lifts in his shoes or get a nose job. He’s not fabulously attractive to the press. But that, in the final analysis, is not what counts” (BusinessWeek, December 11, 1995).

HANGING ON DESPITE CRITICISM In the mid-1990s Levin spent heavily on cable, even as the industry languished and investors complained. At the time, the stock crept along at a compounded annual growth rate of 3.8 percent—compared with 10.5 percent for the Standard & Poor’s 500-stock index. Said Travelers Group senior vice president for Investments Harvey P. Eisen: “It’s obscene. I’m a simple guy. I want the stock to go up” (BusinessWeek, December 11, 1995). The company was lambasted for distributing violent music, and Levin, claiming that the company was simply spreading proactive ideas, was ridiculed for its self-righteousness. Then Levin personally pushed Time Warner to invest $100 million in the Full Service Network, launched in December 1994 in Orlando, Florida. The interactive television demo was designed to deliver video-on-demand, online shopping, games, and other interactive services. Levin later acknowledged its collapse, saying: “And then there was the famous Vietnam failure of interactive television in Orlando, where I learned most of what I now know” (Multichannel News, April 22, 2002). When Levin pushed Time Warner to acquire Turner Broadcasting System in 1996, outsiders assumed that he was


Gerald Levin

on his way out. But Ted Turner’s empire largely removed him from the day-to-day operations of successor entities, and Levin’s survival was ensured by the bull market. An economic boom lifted movie ticket revenues, sales of Time Warner recording artists, and magazine publishing revenues. This caused Time Warner’s stock to rebound. Analysts rallied around Time Warner stock, saying Levin’s daring acquisition of Turner Broadcasting System had steadied his foothold at the helm of the media empire. “For many years, the proper word to describe his situation was embattled,” said Harold Vogel, a media analyst at Cowen & Company. “But he was coming out of a difficult period and looking much stronger” (New York Times, June 5, 1997). Levin’s management style was to use his impressive mastery of facts to sway the Time Warner board on his controversial acquisitions and strategies. His unrelenting appetite for information and fierce personal drive were legendary. Each morning, after a jog at dawn, Levin read five newspapers, various media and entertainment journals, and the wires. He saw every movie that Warner produced, not to mention most of its TV shows. It was not unusual for him and his wife, Barbara, to spend the entire weekend watching movies. He slept a mere four to five hours a night.

DEATH OF A SON BECOMES A DEFINING MOMENT In 1997 Levin’s 31-year-old son, Jonathan, a popular English teacher at a high school in the Bronx, New York, was murdered by a former student. The loss devastated the Levin family. The funeral service brought two worlds together and was attended by Jonathan Levin’s students as well as some of the country’s most prominent media executives, including Ted Turner; Viacom’s chairman, Sumner Redstone; and USA Networks’ chairman, Barry Diller. In one eulogy a rabbi recounted that Gerald Levin had said that his son’s teaching was more important than what Gerald had done with his own life. Fay Vincent, a director of Time Warner and a friend of Levin’s, recalled, “I don’t think I ever saw a guy so devastated. He couldn’t walk at the funeral. It was a defining moment” (New Yorker, October 29, 2001). For the first two months following his loss, Levin stayed clear of the office and even contemplated quitting, but he had something of an epiphany. “I thought at the time I wasn’t going to return to the company. And then I decided, ‘Let’s see if I can make happen through my position some pretty important things, and carry on in that way.’ Maybe that’s why nothing can affect me. So I’m more fearless, more of a missionary” (New Yorker, October 29, 2001). His son’s death also appears to have softened his personality. Levin was touched when Warner Brothers, a division of AOL Time Warner, released Pay It Forward, a movie about how a boy tries to make the world a better place. Levin said the movie’s message was personally important to him.


A MEGAMERGER PRODUCES AN EMBATTLED KING Levin’s resolute belief in his own ideas manifested in a history-making merger. In January of 2000 the announcement of a merger between AOL and Time Warner made headlines. With the specter of the 1999 failure of a similar proposed merger between USA Networks and Lycos hanging over them, AOL and Time Warner worked diligently to reassure investors that their combination made strategic sense. They met with top shareholders, extolled the virtues of the deal to the press and promised to come forward with more details about linkups between the two companies. Levin—the man who did not wear a tie to the two companies’ historic press conference—became “the single most powerful person in media and communications,” said Barry Diller (New Yorker, October 29, 2001). The merged company surpassed all other communications firms in its reach and vast holdings. America Online brought its flagship online service, Netscape, and several interactive services to the merger. Those operations were combined with traditional media outlets spanning film and TV, music, cable, publishing, and professional sports and included such brands as Warner Brothers, Time Warner Cable, and Warner Music. Levin called the AOL service the new company’s “crown jewel” and the key to expanding internationally. Levin, along with the company’s chairman, Steve Case, made clear their mission to make AOL Time Warner the premier growth company. Success was measured in growth and profit, and each division’s quarterly performance was monitored at the twice-monthly CEO meetings. Commenting on his company’s financial focus, Levin said: “I’m a hawk on margins” (New Yorker, October 29, 2001). Still, Levin’s future seemed uncertain. One camp believed that AOL Time Warner would ultimately belong to Case and Robert Pittman, who became the co-COO of AOL Time Warner, and that Levin would cash out after a few years as CEO. But considering Levin’s history of outlasting his rivals, another camp thought that he was there to stay. In June of 2001 he hinted that he would remain beyond December 2003, when his contract was set to expire. “At some point, I’m going to retire,” Levin told CNN’s Larry King. “But not in the near future. I love what I do” (USA Today, December 6, 2001). Levin placed enormous pressure on himself immediately after the merger, pledging to produce 2001 revenues of $40 billion and cash flow of $11 billion. His timing for making aggressive promises could not have been worse. With the media industry hurting from a slump in advertising spending, AOL Time Warner suffered financially after the terrorist attacks of September 11, 2001. He spent most of the rest of that year convincing Wall Street that the company could meet its lofty targets but finally conceded that the weak advertising market and economic climate would prevent the company from

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achieving its goals. In December 2001 he abruptly retired, exercising an option he had put in his contract after his son’s death that allowed him to leave with six months’ notice. With the newly merged company still unformed, why did Levin leave? Some executives privately speculated that Levin had lost a battle to extend his contract past 2003. And others wondered whether karma had simply crept up on Levin, who had engineered the ouster of many of his former coworkers. Said one high-ranking executive, who spoke anonymously: “I don’t believe in a million years he left voluntarily. Why would a guy who is this young, who has the job running the world’s largest and most powerful media conglomerate, just walk away?” (Los Angeles Times, December 6, 2001). For his part Levin said he was delivering on a pledge that he had made to his family and himself to focus more on the right side of his brain: “One can write novels. One can do something with movies. I’m viewed as a corporate suit and have been for many years. There’s a personal identity here that rises above all that” (USA Today, December 6, 2001). In May of 2002 Levin exited, leaving behind angry investors. In a short address Levin thanked his family, board members, executives past and present, and the company’s employees. “It’s a sad ending,” said Jessica Reif Cohen, a media analyst at Merrill Lynch, “But this is the worst acquisition in media history, given the decline in market value of AOL” (Los Angeles Times, May 17, 2002).

A HISTORY STILL BEING WRITTEN Levin’s corporate legacy has yet to be determined. In hindsight, AOL’s interest in teaming up with Time Warner is understandable, but the question that is more difficult to answer is why Levin would sell his company to what amounted to an Internet service provider that was about to be eclipsed by faster services, including Time Warner’s own cable systems. Some critics might make the case that the elder Levin failed to understand and accurately analyze media run by executives 25 years his junior. Others argue that Levin, suffering from prolonged depression related to the loss of his son, used faulty judgment. Only time will tell. Levin himself has speculated that a reason for the failed merger was ineffective leadership after the merger. He told Jill Goldsmith in Daily Variety: “There was a lack of moral and spiritual leadership. Put aside synergies, all of the investment banking cliches. It’s all about what’s the meaning, what’s the meaning and purpose of that company? And who represents that? Who provides the moral leadership?... And that’s what I think we were missing at the time” (February 18, 2004). In 2002 Robert Hughes, Time magazine’s own art critic, confronted Levin in an e-mail message later published in a London newspaper. “How can I convey to you the disgust

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which your name awakens in me? How can you face yourself knowing how much history, value and savings you have thrown away on your mad, ignorant attempt to merge with a wretched dial-up I.S.P.?” (October 14, 2002). At least three books have tried to answer that question, and a fourth was on the way to being published at the beginning of 2004. In Fools Rush In, Munk makes a convincing case that Levin destroyed the legacy of Henry Luce, Time’s founder. A symbolic sign of Levin’s failed merger came in September 2002 when AOL Time Warner’s directors voted to rename the company Time Warner. But Levin appeared to remain above the fray. He told Leslie Cauley in the New York Times: “I put a lot of things on hold in my life for the sake of being a high-performing executive. It’s been wonderful to discover that I really can have a life outside of Time Warner. Now I’m on a spiritual journey, and it’s one that I intend to savor every step of the way. I want to be known as a social activist in education and mental health and, eventually, a writer” (February 2, 2003).

See also entries on Time Warner Inc. and AOL Time Warner Inc. in International Directory of Company Histories.


Auletta, Ken, “Leviathan; How Much Bigger Can AOL Time Warner Get?” New Yorker, October 29, 2001, p. 50. Cauley, Leslie, “After a Tense Exit, Levin Tells His Side,” New York Times, February 2, 2003. Farrell, Mike, “Levin Stresses Integrity in Business,”Multichannel News, April 22, 2002, p. 8. Goldsmith, Jill, “Inside Moves,” Daily Variety, February 18, 2004. Hofmeister, Sallie, “Angry Investors Say Goodbye to AOL Chief,” Los Angeles Times, May 17, 2002. Hofmeister, Sallie, and Edmund Sanders, “AOL Chief Announces Retirement; Media: Gerald Levin’s Plan to Leave Company Catches Even Some of His Own Executives Off Guard. Longtime Deputy Richard Parsons Is Named Successor,” Los Angeles Times, December 6, 2001. Hughes, Robert, “Time’s Art Critic Critiques Case and Levin’s Handiwork,” Online Reporter, October 14, 2002. Landler, Mark, “A Father with Power in the Media World and Pride in His Son,” New York Times, June 5, 1997. Lieberman, David, “AOL Time Warner Chief to Step Down as of May,” USA Today, December 6, 2001. Liptak, Adam, “You’ve Got Travail,” New York Times, January 18, 2004. Munk, Nina, Fools Rush In: Steve Case, Jerry Levin, and the Fall of AOL Time Warner, New York: HarperBusiness, 2004.


Gerald Levin Oneal, Michael, “The Unlikely Mogul” BusinessWeek, December 11, 1995, p. 86. Smith, Liz, Newsday, October 7, 2002. —Tim Halpern


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Arthur Levinson 1950– President and chief executive officer, Genentech Nationality: American. Born: March 31, 1950, in Seattle, Washington. Education: University of Washington, BS, 1972; Princeton University, PhD, 1977. Family: Son of Sol and Malvina Levinson; married Rita May Liff, December 17, 1978; children: two. Career: Genentech, 1980–1987, senior research scientist; 1987–1989, director of Cell Genetics Department; 1989–1990, vice president of research technology; 1990–1993, vice president of research; 1993–1995, senior vice president; 1995–, president and CEO. Awards: Corporate Leadership Award in Science, Irvington Institute, 1999; Corporate Leadership Award, National Breast Cancer Coalition, 1999; named one of the Best Managers of 2003, BusinessWeek. Address: Genentech, 1 DNA Way, South San Francisco, California 94080-4990; http://www.gene.com.

■ Arthur Levinson, a molecular biologist turned CEO, joined Genentech, a research-oriented biotechnology company, just before the company went public in 1980. He rapidly rose through the ranks to become president and CEO by 1995. His commitment to basic research and his motivation to create a company that was also able to turn a profit made Genentech a model company for the biotechnology industry and a recognized leader in selected pharmaceutical markets. Levinson relied on his scientific instincts as he manipulated Genentech, a relatively small company, to a leadership position among the highly competitive pharmaceutical giants.

A SCIENTIST FROM THE START Beginning in childhood, Levinson was motivated by the thrill of discovering how things work. An early influence was Carl Sagan’s book Intelligent Life in the Universe, especially the

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last third of the volume, which covers the requirements for life at a molecular level. At the University of Washington Levinson took genetics and biochemistry courses. One course, in particular, excited him. In an interview published in Perspectives, a newsletter of the University of Washington College of Arts and Sciences (Autumn 2003), he said that at that point he knew that he would “be a scientist . . . [in] genetics and molecular biology.” In an individually tailored undergraduate research program, he began studying the difference between cancerous cells and normal cells. By the early 2000s cancer research was one of the key focuses at Genentech, where blockbuster drugs to treat it were being developed. After receiving a BS in molecular biology from the University of Washington in 1972, Levinson went to Princeton University, where he earned a PhD in biochemistry in 1977. He then took a postdoctoral position (1977–1980) at the Microbiology Department of the University of California at San Francisco (UCSF) to work in the lab of J. Michael Bishop and Harold Varmus, winners of the 1989 Nobel Prize in physiology or medicine for their discovery of certain viruses involved in converting normal genes into cancer-causing genes. In an article in BusinessWeek, Arlene Weintraub quotes Varmus, who describes Levinson as “an imaginative thinker with very broad technical interests.”

LEVINSON JOINS GENENTECH AS A RESEARCH SCIENTIST In 1980 Herbert W. Boyer, a professor at UCSF and cofounder of Genentech, recruited Levinson to join the start-up company. Genentech, the world’s only biotech company when it was formed in 1976, was dedicated to basic research. Levinson’s original intent was to stay at Genentech just long enough to gain unique laboratory experiences and then return to academia. While remaining committed to molecular biology research throughout his graduate education, Levinson taught himself about the stock market and dabbled in stocks to supplement his meager income as a college student, and his coworkers at Genentech considered him a financial whiz. When the company went public in October 1980, employees were offered a chance to buy two hundred shares each at a 15 percent discount. Levinson was the only researcher in the lab who had any experience with stocks, so he advised his coworkers to each


Arthur Levinson

buy all two hundred shares. When the stock immediately soared, Levinson advised them to sell, as he did. One scientist kept his stock but later lamented doing so, since Levinson clearly knew what he was talking about. Levinson thrived in the work-hard and play-hard atmosphere of the research labs at Genentech. Soon after joining the company, he found a better way to manufacture biotech drugs, but the accountants said his way was too costly. Convinced that he was right, Levinson went to higher management, who saw the merits of his discovery and told him to forge ahead. Levinson’s method subsequently became the standard for the industry.

QUICK SHIFT FROM LAB TO MANAGEMENT Although Levinson was described as “somewhat quirky” (in Weintraub’s article in BusinessWeek) and as “an appealing mix of “nerdiness, candor, and jocularity” (in an article by David Stipp in Fortune), he fit well into the Genentech culture, and top management saw his lab experience and infectious enthusiasm for research as the attributes needed to lead a growing biotechnology company. He was promoted steadily through the ranks. One Genentech board member Franz B. Humer, described Levinson to Arlene Weintraub as understanding “the heart of this business.” Under Levinson’s leadership, Genentech began examining research projects in detail to rate them based on scientific feasibility, medical need, market potential, market protection (that is, how many competing drugs were in the market), and manufacturing economy. His approach to directing the company did not shackle research or reduce its value to the company; rather, it targeted R&D based on criteria that gauged the potential for success. Levinson gave priority to developing new treatments in three areas: immunology, cancer, and vascular biology (blood vessels and their role in disease). Genentech distinguished itself from the competition by its science and its focused management.


CALCULATED RISKS Levinson was able to lead Genentech through challenges in drug development that most CEOs with less of a science background would not have attempted. When a potential breast cancer drug, Avastin, did not meet expectations, Levinson looked at the test results and saw that the drug was successful in treating colon cancer. One disappointment would normally have shelved the drug, but his scientific training prompted Levinson to invest more research dollars on the drug as a potential treatment for colon cancer. His controversial gamble proved to be sound. Although the drug had not yet received Food and Drug Administration approval by early 2004, many observers expected it to gain approval and become another blockbuster for the company. Under Levinson’s leadership, Genentech competed with the international pharmaceutical giants in selected markets and showed that good science can be profitable. Genentech revenues climbed by almost 30 percent in nine months in 2003, to $2.4 billion.

See also entry on Genentech Inc. in International Directory of Company Histories.


“Arthur Levinson, Genentech,” BusinessWeek, January 12, 2003. “Leading Biotechnology into the 21st Century,” A&S Perspectives (Summer 2000), http:// www.artsci.washington.edu/newsletter/Summer00/ Levinson.htm. Levinson, Arthur D., “For Success, Focus Your Strengths,” Nature Biotechnology, 16 (May 1998), p. S45–46. Stipp, David, “Biotech: How Genentech Got It,” Fortune, May 27, 2003. Weintraub, Arlene, “Genentech’s Medicine Man,” BusinessWeek, October 6, 2003. —Miriam C. Nagel

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Kenneth D. Lewis 1947– Chief executive officer, Bank of America Corporation Nationality: American. Born: April 9, 1947, in Meridian, Mississippi. Education: Georgia State University, BS, 1969; Stanford University, graduate of Executive Program. Family: Son of Brydine Lewis (nurse; maiden name unknown); married (divorced, 1978); married Donna (maiden name unknown), 1980; children: one. Career: North Carolina National Bank, 1969–1977, credit analyst; NCNB International Banking Corporation, 1977–1979, manager; NCNB U.S. Department, 1979–1983, senior vice president; NCNB and NationsBank, 1983–1990, president of various divisions; 1990–1993, president of Consumer and Commercial Banking; NationsBank, 1993–1999, president; Bank of America, 1999–2001, chief operating officer; 2001–, chief executive officer. Awards: Named Banker of the Year, American Banker newspaper, 2002; named Top Chief Executive Officer, U.S. Banker magazine, 2002. Address: Bank of America Corporation, Bank of America Corporation Center, 100 North Tyron Street, Charlotte, North Carolina 28255; http://www.bankofamerica.com.

■ Kenneth D. Lewis began his career in 1969 and continued with the same company as it became one of the largest banks in the United States. As North Carolina National Bank (NCNB) became NationsBank and eventually Bank of America, Lewis moved up the ranks making his mark as an astute manager who concentrated on efficiency and profit. His innovative ideas in specific areas of the company became standards within the whole corporation. He was named chief executive officer (CEO) in 2001. As CEO he continued his focused style while remaining close to day-to-day operations. Despite investigations into Wall Street trading improprieties by some bank executives, Lewis continued to expand Bank of America.

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Kenneth D. Lewis. AP/Wide World Photos.

“YOU CAN BE PRESIDENT” Lewis said he came to NCNB in 1969 with one goal. He wanted to be president of the banking corporation because that is what his mother always said he should be. When he told his mother 30 years later that he had indeed been named president, she told him that at the time she had not known about the position of chief executive officer and that perhaps he should aim even higher. Lewis’s parents divorced when he was seven. After the divorce, Brydine Lewis and her son moved from Meridian, Mississippi, to Columbus, Georgia, where Brydine worked as a nurse. Her son also helped bring income into the household. He told BusinessWeek in 2002 that he delivered newspapers, bagged groceries, and sold Christmas cards to neighbors. As a teenager he sold women’s shoes, which he said ended up being his hardest job. “I made a six percent commission and


Kenneth D. Lewis

the most expensive shoes were $5.99,” he said. “You quickly learn how good a salesman you are” (November 11, 2002). After graduating from Georgia State University with a business degree, Lewis received job offers from Wachovia Corporation, an established and respected banking institution, and NCNB. He chose the latter because they were the underdogs, which appealed to Lewis because he viewed himself in the same manner.

A CAREER DEVELOPED IN ONE CORPORATION He began at NCNB, the predecessor of NationsBank and Bank of America, as a credit analyst in Charlotte. He worked in many parts of the corporation as it went through major growth to become the Bank of America in the late 1990s. Lewis managed the international department in New York before heading up the operations in several states as the bank continued its expansion. In Texas he introduced innovative programs that established his reputation as a focused and careful banker. In Florida he oversaw the acquisition of Barnett Banks, which many industry insiders viewed as a disaster because of the volume of mergers occurring within the bank at the time. Lewis attempted to cut costs and standardize operations.

INNOVATIVE IDEAS BRING PRESIDENCY As the president of NationsBank’s retail division in 1993, Lewis introduced an innovative program known as Vision ‘95. This program took on the difficult task of unifying a bank that had grown enormously. Between 1988 and 1993 NationsBank, under CEO Hugh L. McColl Jr., acquired 25 financial institutions. The result was a patchwork of disparate companies under one name. It became Lewis’s job to pull the rapidly growing company together. He told reporters in 1993 that Vision ‘95, if successful, would make NationsBank the best consumer bank in the United States, which was his vision for the company. By that time, industry insiders had begun speculating that Lewis would succeed McColl as CEO. Vision ’95 consisted of several components; Project ‘95, which Lewis had begun in Texas in 1991, was the most prominent of them. Due to its success, all regions adopted Project ’95 by 1993. This project centered on hiring more part-time employees to work during lunchtime, Fridays, and payroll days. In Texas the number of part-time tellers increased from 35 to 50 percent of the total work force, lowering the number of full-time employees. Since part-time employees are paid lower wages than full-time ones and do not receive benefits, Lewis saved 12 to 15 percent on branch staffing in the state in 1992. What most pleased Lewis, however, was the increased customer service; customers spent less time waiting in line for tellers. Lewis told Kenneth Cline of American Banker that


“We’re very pleased to show it’s not necessarily a contradiction to be both more efficient and more effective” (February 9, 1993). The plans for revamping NationsBank included more longterm projects, such as unifying the bank’s computer software, simplifying language in promotional materials, and consolidating many of the options available to customers. Lewis predicted that the high cost of his plans would be offset within a few years, allowing the company to continue expanding. By the end of 1993 Lewis’s efforts on cost cutting in the retail division paid off in his being named president of the company.

STANDARDIZATION AND SIMPLICITY BECOME HALLMARKS Lewis’s appointment as president signaled that he would be the logical choice to replace McColl and that NationsBank was serious about cutting expenses. Analysts said the decision to put Lewis in the center of power for NationsBank confirmed the corporation’s dedication to controlling expenses, since Lewis was known as an efficient cost-cutter prior to his appointment as president. When the announcement of Lewis’s presidency was made, industry insiders credited Lewis with an increase of loans within the branches, which had been under Lewis’s control and which showed higher growth than other banks in the quarter immediately preceding his selection as president. In addition, Lewis received credit for the decrease in expenses, since most of Bank of America’s costs came directly from its branches. Lewis was assigned the task of keeping McColl’s bank in top working order, not always an easy task. NationsBank had grown from a company with $29 billion in assets in 1988 to $170 billion in assets by the end of 1993, making it the thirdlargest bank in the United States. Lewis announced two programs aimed at standardizing and simplifying operations within NationsBank. The Model Banking Center program sought to standardize the technology, products, and services used in all 1,900 branches in nine states, and the Freedom to Act program attempted to cut the bureaucracy within the corporation while allowing employees at each branch to make empowering decisions. Lewis feared that too many layers of management within the company would not allow branch managers the ability to act in individual customer situations. The Freedom to Act program gave those employees at the customer-contact level the freedom to use their best judgment to make decisions in order to best serve the consumer. The plans followed the same pattern as Vision ‘95 in that Lewis sought to cut costs but not the quality of service to customers. He began implementing these projects by learning more about the customers who banked with NationsBank. He told American Banker in 1994 that customers used branch offices 50 percent of the time, rather than using a phone or ATM

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Kenneth D. Lewis

machine. He predicted that branch usage would decline by 15 percent within five years as ATM and phone usage increased, and he wanted to be prepared for the change in level of service. He began authorizing plans to develop the technologies necessary for the coming dependence on computer banking. Lewis also turned his attention to the corporate level as he implemented plans for developing the company’s investment banking, syndication, and foreign exchange businesses, which offered higher potential profits than did retail banking. Much of Lewis’s vision was put on hold, however, as McColl continued making acquisitions a priority for the company. In 1996 NationsBank acquired Boatmen’s Bancshares of St. Louis, with $41 billion in assets, and in 1997 Barnett Banks of Florida, with $44 billion in assets. Even though McColl set the agenda of growth, details of the Barnett acquisition fell under the domain of Lewis, which brought a great challenge to both Lewis and the corporation. Lewis told US Banker that the acquisitions of both Bancshares and Barnett created two years of transition for Bank of America. He said, “It was a transition unlike any company has ever seen, at least in the banking industry” (April 2001). The next few years were spent in transition as the company attempted to absorb its new banks. Analysts said the Barnett deal was a disaster. They said that McColl had bought too many companies, including Barnett, too quickly and for too much money. As a result, 200 branches had to be closed in Florida to cut costs. Credit problems resulting from bad loans to companies such as Sunbeam and Finova hurt some of Lewis’s plans to increase profits.

THE REVITALIZATION OF AN INSTITUTION In 1998 NationsBank joined with BankAmerica to become Bank of America, a merger overseen by McColl. The merger hurt many of Lewis’s efforts to bring the differing branches into a standardized whole. In 1999 Lewis’s job title expanded to include chief operating officer. In early 2001 McColl announced that he would retire by the end of April. As Lewis stood poised to take over the top position at Bank of America, the company faced falling profits of 27 percent because of loan problems and mounting complaints from customers regarding service. Before his appointment as CEO, Lewis told reporters that the bank had to let customers know that service, not acquisitions, was its top priority. By the time of his appointment, Bank of America had $642 billion in assets, and analysts and investors were dismayed that it was not yielding the results expected of such a large corporation. Lewis told US Banker that 2001 would be “the year of no excuses and the year of execution” (April 2001). Lewis approached his new position with a different attitude than his predecessor. On the day of his appointment he an-

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nounced that Bank of America was on the path of building up shareholder profits after two decades of solid acquisitions. He did not, however, rule out future acquisitions. American Banker reported that McColl told shareholders in his farewell speech that Lewis “is a better businessman than I am; he is young, tough, and, in the tradition of the company’s leadership, eminently fair” (April 26, 2001). Analysts agreed with this assessment even though Lewis had been a member of the McColl’s inner circle. He brought a youthful perspective and had shown initiative by hiring key executives from outside the company even before his appointment as CEO. As industry insiders watched Lewis take over the largest consumer bank in the United States, and the 13th-biggest U.S. corporation, many thought the opportunity afforded Lewis the chance to create enormous wealth for Bank of America. First, however, he had to deal with problems that had grown steadily over the previous five years. He began by selling more services to the same customers and encouraging customers to consolidate their banking by moving their portfolios from big firms such as Fidelity and Merrill Lynch. This effort to lure lucrative clients brought Bank of America into the new area of asset management. By the end of 2001 Lewis had shrunk Bank of America to bring more profits from under-performing franchise operations. Specifically, he got rid of low-profit-margin businesses while increasing customer service in branches, and he brought in new managers who could implement his goals. Lewis let go of some lagging businesses, added to customer service, and hired new managers. He also raised Bank of America’s dividend by 7 percent. Wall Street watched carefully as stock increased by 37 percent from the beginning of 2001 to $61.95 per share by the end of the year. At the end of the first quarter of 2002, profits soared to $2.18 billion, the biggest ever for Bank of America. In early November the stock price rose to $70. In less than three years Lewis had driven stocks up 40 percent. He improved customer service by increasing teller training and organizing services around customer categories rather than product type.

MANAGEMENT STYLE Comparisons between the styles of McColl and Lewis began almost as soon as the ascension of Lewis became clear. McColl’s acquisition-based management style accompanied his larger-than-life personality. Lewis, on the other hand, had a quieter style that emphasized internal growth. Industry insiders said that even though Lewis seemed calmer than his predecessor, he matched McColl in enthusiasm. When Lewis was president of the retail division, the media began referring to him as unflappable, wry, and cool. As calm and quiet as he appeared on the surface, however, his reputation as an efficient, demanding manager grew along with the corporation. He told


Kenneth D. Lewis

Kenneth Cline, “I take great pride in being able to improve things and get things more profitable because at the end of the day, that’s what you’re going to have to do” (American Banker, October 26, 1994). Lewis was demanding of his employees and himself, but colleagues praised his focus and clarity in thinking about issues and problems, saying his style was systematic rather than rigid. Fortune magazine reported in 2001 that Lewis’s management style was reflected in his personal life. On Friday nights he drove to his weekend house in the Blue Ridge Mountains, stopping along the way for ribs and fries. On Saturdays he played golf. The reporter said this pattern of always doing the same thing in a simple, uncomplicated way showed Lewis’s style of planning carefully and following that plan, rather than showing the qualities of a gambler. Lewis hired many people from outside the company, which differed from McColl’s style. While he brought in new blood, however, observers remarked that he took care not to alienate those already on the inside track of Bank of America. One analyst said Lewis was a hands-on CEO who pulled things together at Bank of America through his own hard work. A former executive at Bank of America told BusinessWeek that Lewis “is the most dispassionate man I’ve ever met. He has ice water in his veins” (November 11, 2002). Another employee disagreed, stating that Lewis spent much of his time meeting with employees to solve problems. Either way, he still called the shots as he saw them. Industry insiders were surprised to hear Lewis speak disparagingly to his own bankers at a conference in 2000 regarding a mismanaged loan to a large company. One member of the audience told BusinessWeek, “To hear him [Lewis] call his own bankers sniveling wimps was pretty stunning,” said Thomas K. Brown of Second Curve Capital LLC (November 11, 2002).

Employees at Bank of America’s headquarters were upset at the rigorous way in which Lewis pursued the move into money management. In addition, clients whose assets were managed by Bank of America began complaining in 2003 that brokers with the bank had lost money for them. Despite all of these troubles, the company stressed its dedication to the asset-management part of the business. Lewis quickly fired employees who came under scrutiny by the SEC. First to go was Sihpol, but Lewis also terminated Robert H. Gordon, who ran the mutual funds division for the bank. This division had been implicated by the New York Attorney General’s office for mutual fund trading abuses. In 2004 Lewis announced that he was canceling his employment agreement with Bank of America. He asked that his pay correspond to the company’s performance. Previously, Lewis’s contract provided him with agreements concerning performance bonuses and severance packages. Lewis surprised many with a $48 billion bid to take over FleetBoston Financial in 2004. Investors had been lulled into thinking that Lewis was growing the company from within and would not make such big moves. See also entry on Bank of America Corporation in International Directory of Company Histories.


Boraks, David, “Hugh L. McColl Resigns Chairman and Chief Executive Officer Positions at Bank of America Corp.,” American Banker, April 26, 2001. Cline, Kenneth, “NationsBank’s Lewis Puts His Retail Vision To a Test,” American Banker, February 9, 1993. ———, “Taming the Beast at NationsBank,” American Banker, October 26, 1994.

BUMPS IN THE ROAD The praise heaped on Lewis for his management style and leadership initiative began to lessen in 2003. His plans to attract investors and business from Fidelity and Merrill Lynch hit a rough spot when one of his former employees faced criminal charges and Bank of America became the focus of an investigation by the Securities and Exchange Commission (SEC). Theodore C. Sihpol III, a broker for Bank of America, sold shares at closing prices after the market had closed for the day. He plead not guilty to the charges, however, and his lawyer said he did not have criminal intent.


Foust, Dan, and David Fairlamb, “Boffo At BofA; CEO Ken Lewis’ Hard-Nosed Approach Is Paying Off,” BusinessWeek November 11, 2002, p. 124. Stewart, Thomas A., “Where the Money Is: Bank of America’s Ken Lewis Has a Chance To Create More Wealth Than Any Other Freshman CEO,” Fortune, September 3, 2001, pp. 153–155. “Year of No Excuses,” US Banker, April 2001, p. 34. —Patricia C. Behnke

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Victor Li 1964– Chairman, Cheung Kong Infrastructure Holdings Limited Nationality: Chinese. Born: 1964, in Hong Kong, China. Education: Stanford University, BS; MS, 1985. Family: Son of Li Ka-shing; married; children: three. Career: Husky Energy Incorporated, 1987–2001, director; 2001–, cochairman; Hopewell Holdings, 1991–2002, director; Cheung Kong Infrastructure Holdings, Limited, 1996–, chairman; Cheung Kong Life Sciences International, 1996– chairman; Hutchison Whampoa Limited, 1995–, executive director; 1999–, deputy chairman and director. Address: Cheung Kong Infrastructure Holdings Limited, 12/F Cheung Kong Centre, 2 Queen’s Road Central, Hong Kong; http://www.cki.com.hk.

■ As the eldest son of the Li family, Victor Tzar Kuoi Li— also known simply as Victor Li—was perhaps destined to run Cheung Kong Infrastructure Holdings (CKI). Li’s father, Li Ka-Shing, was one of the wealthiest men in the world. Displaying true business acumen, Li Ka-Shing started with a company that made plastic flowers and built it from a small firm into a huge conglomerate worth billions of dollars. Victor Li began his career by working on smaller projects with his father. He eventually become the chair of one of CKI’s most profitable divisions, Cheung Kong Life Sciences International, and then became chairman of CKI.

EARLY CAREER Li attended college in the United States, earning both his bachelor’s and master’s degrees at Stanford University in California. Throughout the 1980s he worked in Canada, assisting his father with various real estate projects in Vancouver. In 1990 Li returned to Hong Kong to work for his father at Cheung Kong’s central office. On May 23, 1996, Li was kid-

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Victor Li. © AFP/Corbis.

napped on his way home from work by a notorious Chinese thug named Cheung Tze-keung, who was nicknamed “Big Spender” because of his flamboyant lifestyle. Li’s father reportedly paid a ransom of over $100 million to free his son. Li KaShing, however, never publicly acknowledged that the kidnapping even took place, although the press published reports of his face-to-face meetings with Cheung Tze-keung. It was never known how the money was given to the criminal. Not happy that his country would look like a dangerous place for wealthy people or businessmen, the President of China, Jiang Zemin, ensured that “Big Spender” was found, tried, and executed. After the kidnapping, however, Victor Li was always accompanied by bodyguards. Li began his career with a Canadian subsidiary of Cheung Kong, Husky Energy Incorporated. He started as a director on the board in 1987. The company performed poorly for several


Victor Li

years in the early 1990s. After the mid-1990s, however, its performance improved. In 2001 Li was promoted to cochairman of Husky Energy. The company made a profit of $804 million in 2003. Husky Energy’s economic success also helped Li with Husky Energy’s main investor, Hutchison Whampoa, another Li family business. Starting in 1995, Li was an executive director at Hutchison Whampoa, then was named deputy chairman in 1999. As profits increased at Husky, so did the returns to Hutchison Whampoa. Li also served as the director of Hopewell Holdings from 1991 to 2002. Hopewell was a Hong Kong-based company in which Cheung Kong held a minority interest, although its interest was reduced as the years went by. Following a public squabble between the chairman of Hopewell Holdings and Li’s father over a proposed project, however, Li resigned as Hopewell’s director.

BECOMES CHAIRMAN OF CKI Resigning from Hopewell was hardly a setback, however, as Li had been groomed from the beginning to succeed his father in running CKI’s various divisions. In 1996 Li was made chairman of Cheung Kong Life Sciences, the pharmaceutical arm of CKI. The life sciences company enjoyed modest growth, releasing such products as VitaGain, a drink designed to strengthen the body’s immune system. VitaGain’s successful launch was assisted by the SARS outbreak in Asia in the spring of 2003. Cheung Kong Life Sciences had a large research and development capacity with a production capacity to match. In 1996 Li was named chairman of CKI, the family’s core business. CKI is a huge infrastructure conglomerate with holdings in Canada, Australia, Philippines, and the United Kingdom as well as in China and Hong Kong. In the early 2000s the company owned quarries, tunnels, bridges, highways, electric utilities, water utilities, and cement companies. It also owned large quantities of real estate. In addition to these investments, CKI had moved into acquiring wireless network infrastructure in the third-generation wireless networks of Europe.

the company was entertaining an offer from another group, Cerberus Capital Management, Li almost withdrew his offer through his group, which was called Trinity Time Investments. He referred to Cerberus’s competing offer as “improper interference.” Li’s company won the bid, however, and a Canadian judge approved it in January 2004. Many observers regarded Li as the bankrupt airline’s savior. The deal began to unravel, however, over a pensions disagreement. The various unions representing Air Canada’s employees wanted a defined benefit plan while Li desired a defined contributions plan. The defined contributions plan would have been cheaper and easier for the company to administer. Already having agreed to several reductions in pay and benefits, the unions would have nothing to do with the proposed change. Analysts noted that Li could not give in to the union demands without looking weak. Li had won the bid but decided to change the rules. Trinity Time Investments and Air Canada had to complete the deal by April 30, 2004, but had not reached an agreement by the time the deadline expired. Li then walked away from the deal. In terms of Li’s management style, one reporter wrote that Li “... has gained a reputation as a solid manager with an eye for detail” (Asia Inc., May 2004). Li lived with his wife and three children on one floor of his house with his father living on another. Li’s younger brother Richard was also an acute businessman, having made a number of shrewd business investments that paid off handsomely over time.

See also entries on Air Canada, Cheung Kong (Holdings) Limited, Husky Energy Inc., and Hutchison Whampoa Limited in International Directory of Company Histories.


Gray, John, “Air Canada Stand-Off Tests Victor Li,” Asia Africa Intelligence Wire, March 24, 2004. Ng, Isabella, and Maureen Tkacik, “The Son also Rises,” Time International, March 13, 2000, p. 16. Schuman, Michael, “Can He Follow the $7.8 Billion Man?” Time, December 1, 2003, p. 79.

ATTEMPTING TO RESCUE AIR CANADA Because Li held Canadian as well as Chinese citizenship, he made a move in 2003 to save the bankrupt airline, Air Canada—an event that gained the attention of the North American business press. Li offered the airline $495 million in return for a 31-percent stake in the company. When he discovered that


Wai-Sum, Agnes Cheung, “Exit Big Spender,” AsiaWeek, August 14, 1998. “Who’s Hot in Asia,” Asia Inc., May 2004. —Deborah Kondek

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Li Ka-shing 1928– Chairman, Cheung Kong Holdings; chairman, Hutchison Whampoa Nationality: Chinese. Born: June 13, 1928, in Chaozhou, Guangdong, China. Family: Son of Li Yunjing (primary school head); married Amy Li Ching Yuiet-ming (founding director of Cheung Kong Holdings; deceased 1990); children: two. Career: 1944–1949, plastic-goods salesman; Cheung Kong Industries, 1950–1971, chairman; Cheung Kong Holdings, 1971–, chairman; Hutchinson Whampoa, 1979–, chairman. Awards: Grand Officer of the Order Vasco Nuñez de Balboa, Panama, 1982; Commander in the Leopold Order, Belgium, 1986; Knight of the British Empire, United Kingdom, 2000; Grand Bauhinia Medal, Hong Kong, 2001; honorary Doctorates, University of Cambridge, University of Calgary, Beijing University, and five universities in Hong Kong. Address: Cheung Kong Holdings, Cheung Kong Center, 7th Floor, 2 Queen’s Road, Central Hong Kong; Hutchison Whampoa, Hutchison House, 22nd Floor, 10 Harcourt Road, Hong Kong; http://www.ckh.com.hk; http:// www.hutchison-whampoa.com.

■ The wealthiest man in Asia, Li Ka-shing was nicknamed “Superman” in Hong Kong, where his global empire was based. His political and financial influence, as derived from his diverse holdings, which included real estate, ports, telecommunications, finance, infrastructure, and biotechnology, led AsiaWeek to call him “the most powerful man in Asia” in 2000. Born in mainland China, Li came to Hong Kong as a poor immigrant in 1940 and launched his career making and exporting plastic flowers. He lived a relatively modest lifestyle and contributed millions of dollars to various philanthropic interests.

POVERTY AND AMBITION Although his father was the head of a primary school in Guangdong province, Li had little opportunity for formal edu-

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cation. He was 12 years old in 1940 when his family fled the Japanese invasion of China. Within three years of their arrival in Hong Kong, his father had died, and the teenage Li was helping to support the family by selling plastic watchbands and belts. Li proved to be a capable salesman and started his own plastics factory in Hong Kong in 1950. By 1958 he had a flourishing business manufacturing plastic flowers and was ready to expand. He named the firm Cheung Kong Industries, after the Cheung Kong River—also known as the Yangtze—the longest river in China. The name was reportedly an allusion to both the river’s many tributaries and the need for business alliances.

FROM PLASTIC TO PROPERTY TO CONGLOMERATE By 1958, when his landlord raised its rent, Li had enough cash to purchase his factory. This would be the first of many investments in real estate; by the 1960s Cheung Kong had transformed into a property development and management company. Li’s strategy was to avoid debt by raising capital before building, both through the formation of joint ventures with landowners and by preselling apartments to friends and colleagues. As such Cheung Kong could incur fewer risks while still earning profits for both Li and his co-investors, fueling rapid growth. The company, renamed Cheung Kong Holdings in 1971, had its initial public offering in 1972. By 1979 Li was Hong Kong’s largest private landlord. Once again success led Li to expand his corporate efforts in a new direction, this time through the acquisition of one of the oldest British “hongs,” or trading companies. Hutchison Whampoa had been created in 1977 by a merger between the financially troubled Hutchison International, founded in 1880, and Hongkong and Whampoa Dock, which had been the first registered company in Hong Kong when it was founded in 1861. In 1979 Li bought 23 percent of Hutchison Whampoa from Hongkong & Shanghai Bank, becoming the first Chinese to control one of the old British companies that had long dominated Hong Kong’s economy. Over the years Li gradually increased his equity—to 49.9 percent by 2004—and used Hutchison Whampoa to move into a variety of other businesses, demonstrating a talent for deal making that earned him the nickname “Superman.” During the 1980s Hutchison Whampoa expanded its container


Li Ka-shing

ports and in 1985 bought 33 percent of Hongkong Electric Holdings. Li next began to extend his empire outside of Asia, starting in Canada, where his two sons were educated, with investments in the Canadian Imperial Bank of Commerce and Husky Oil. Hutchison Telecommunications, a Hong Kong mobile-phone service launched in 1985, became a major player in telecommunications in the 1990s, building the Orange PCS mobile network in Europe, which Li sold to Mannesmann in 1999 for $14.6 billion in cash and equity. Li’s two primary corporate entities, Cheung Kong and Hutchison Whampoa, were intertwined: Cheung Kong Holdings owned 49.9 percent of Hutchison Whampoa, and Hutchison Whampoa owned 85 percent of Cheung Kong Infrastructure. Cheung Kong, with 175,000 employees worldwide and operations in 39 countries, eventually moved into biotechnology and internet services. By early 2004 the various Cheung Kong companies represented 11.5 percent of the total market capitalization of Hong Kong’s stock exchange. Hutchison Whampoa was the world’s largest port operator as of 2004; meanwhile its retail and manufacturing segments accounted for more than 40 percent of company sales, with thousands of retail outlets selling wide varieties of products across Europe and Asia.

BRIDGES TO BEIJING Decades after his family’s escape from political turmoil in China, Li built strong political and economic ties to mainland China. According to ChinaOnline.com, he “advised the late Deng Xiaoping during the Sino-British talks, which led to the 1984 Joint Declaration on Hong Kong’s future”; he also served on the committee that drafted Hong Kong’s constitution. AsiaWeek noted that he was “known to talk directly with President Jiang Zemin and Premier Zhu Rongji” (May 2000). He invested billions of dollars in ports, infrastructure, and realestate development projects in China; he founded Shantou University near his hometown in Guangdong in 1981, donating an estimated $150 million to build its campus. Li’s links to Beijing made American politicians uneasy in the late 1990s, when some feared that his control of ports at both ends of the Panama Canal represented a potential security threat. Li’s Beijing connections proved useful when his older son was kidnapped in 1996. Rather than getting the Hong Kong


police involved, Li paid $125 million in ransom and also reportedly asked the mainland government for help; in 1998 the kidnapper was captured and executed.

A TRADITIONAL DYNASTY Most accounts described Li as personally unpretentious and frugal, leading a modest lifestyle that reflected his respect for traditional Chinese values. His philanthropy was well known throughout Asia, where his Li Ka-shing Foundation, created in 1981, contributed about $500 million in the fields of health and education. While Li remained actively in control of his empire into the early years of the 21st century, his two sons had begun to play prominent roles in the international business world. Richard Li, the younger and more flamboyant of the two, had his own firm, Pacific Century CyberWorks, which invested in various internet start-ups and in 2000 acquired Hong Kong Cable & Wireless. Victor Li, the elder brother, remained at his father’s side, running the day-to-day operations of Cheung Kong as vice chairman; as of 2004 most observers believed Victor Li would inherit control of the Li empire.

See also entries on Cheung Kong (Holdings) Limited and Hutchison Whampoa Limited in International Directory of Company Histories.


Cheng, Allen T., and Yulanda Chung, “Up, Up and Away,” AsiaWeek, May 2000. Kraar, Louis, “A Billionaire’s Global Strategy,” Fortune, July 13, 1992, p. 106. “Li Ka-shing, Hong Kong Entrepreneur, Founder of Cheung Kong and Chairman of Whampoa, Hutchison,” http:// chinaonline.com/refer/biographies/secure/c00121166.asp. Spaeth, Anthony, “Clans on the Run,” Time, April 19, 2004.

—Sandra M. Larkin

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Alfred C. Liggins III 1965– President and chief executive officer, Radio One Nationality: American. Born: 1965, in Omaha, Nebraska. Education: Attended University of California, Los Angeles, and University of the District of Columbia; University of Pennsylvania, MBA, 1995. Family: Son of Alfred Liggins Jr. and Catherine Liggins Hughes (radio station executive). Career: Light Records, 1984, sales executive; CBS Records, 1984–1985, production assistant, Radio One, 1985–1987, account manager; 1987, general sales manager; 1988, general manager of Washington, D.C., operations; 1989–1995, president, treasurer, and director; 1995–, president and chief executive officer. Awards: Entrepreneur of the Year, Ernst and Young, 2003. Address: Radio One, 5900 Princess Garden Parkway, 7th Floor, Landham, Maryland 20706; http://www.radioone.com. Alfred C. Liggins III. Steven Henry/Getty Images.

■ As chairman and CEO of Radio One, Alfred Liggins headed the leading urban market radio company in the United States. As of 2004 Radio One had become the seventh largest radio company in the nation. Building on the success of his mother, the Radio One founder Catherine Hughes, Liggins developed the company into a major media force by focusing on African American listeners, whom he correctly recognized as a lucrative and underserved demographic. Liggins capitalized on the homogenizing, and exclusionary, effect of radio consolidation during the 1990s. He transformed small local radio properties into popular stations aimed at African Americans and demonstrated the vast untapped potential of ignored urban minority audiences.

EARLY LIFE AND FORMATIVE EXPERIENCE Liggins was born in Omaha, Nebraska, and reared by his mother. Hughes was 17 at the time of Liggins’s birth and a

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single parent after her two-year marriage to his father failed. In 1969 Liggins, an only child, moved with his mother to Washington, D.C. In Washington, Hughes worked at Howard University’s radio station as a station manager and respected on-air host. Liggins was immersed in the radio business from an early age, accompanying his mother to work and often doing homework and having meals at the station. Although he grew up amid the drugs and fast money of Washington’s crime-ridden inner city, Liggins was deeply influenced by his mother’s work ethic and self-discipline. By middle school Liggins was earning $100 a week doing odd jobs. When she spotted her 13-yearold son wearing expensive designer-label jeans, Hughes began charging Liggins rent, explaining that he should help her build her business rather than wasting money promoting someone else’s.


Alfred C. Liggins III

In 1979 Hughes purchased her first radio station, WOLAM in Washington. The following year she founded Radio One. The $1 million price tag strained the family’s finances, and after Hughes sold her house and car to finance the venture, mother and son lived for a time in the station’s trailer studio. When he graduated from Woodrow Wilson High School in 1983, Liggins sold shoes and worked at a friend’s pet store before heading to Los Angeles to enter the recording industry. He landed a job as a sales executive with Light Records, a gospel label, then worked as a production assistant for CBS Records while taking classes at the University of California, Los Angeles.

JOINS RADIO ONE Although he had begun to establish himself in the recording industry, Liggins returned to Washington in 1985 to work as an account manager at his mother’s floundering radio station. Liggins insisted that his mother focus on programming and her talk show, leaving sales and promotion to him. Trading on his mother’s reputation as the firebrand voice of Washington’s African American community, Liggins soon began reeling in quality advertisers, and the station flourished. Liggins also took night classes at the University of the District of Columbia but dropped out to concentrate on his work at the station. In 1987 Hughes purchased a second station, WMMJ-FM in Washington, for $7.5 million and replaced the station’s light rock programming with a rhythm-and-blues format that appealed to adult African American listeners. This strategy— purchasing inexpensive, underperforming low-wattage metropolitan stations and converting their programs into African American–friendly formats—became the key to Radio One’s success. Liggins was promoted to general manager of WOLAM and WMMJ-FM and by age 23 was earning more than $100,000 as the stations under his supervision turned profitable.

LEADS RADIO ONE’S ASCENDANCE In 1989 Liggins was promoted to president, director, and treasurer of Radio One, while Hughes remained CEO. During the early 1990s, when Federal Communications Commission rules concerning media ownership were relaxed, Radio One purchased additional stations in Baltimore and Washington. In 1995 Liggins earned an MBA from the University of Pennsylvania’s top-ranked Wharton School, an unusual accomplishment because he never completed an undergraduate degree. Hughes, however, had stipulated that she would not turn the company over to Liggins unless he earned a degree. She kept her promise, and Liggins took over as CEO in 1997. With the passage of the Telecommunications Act of 1996, which further deregulated the media industry, Liggins initiated


an aggressive expansion plan that included the purchase of 18 new stations in a 20-month period. In 1999 Liggins took Radio One public on the stock market, a move that raised much-needed capital and made Hughes the first African American woman with a NASDAQ-listed company. Also in 1999 Liggins brokered a $1.3 billion deal with Clear Channel, the nation’s largest radio company. The deal added 12 stations to Radio One’s roster and took the company into major markets in Houston, Dallas, Miami, and Los Angeles. In 2001 Radio One became the largest urban market radio company when it bought out its competitor Blue Chip Broadcasting. The $200 million acquisition netted another 15 stations. By 2003 Radio One controlled 66 radio stations in 22 metropolitan markets and had approximately 18 million mostly African American listeners nationwide.

COMMITMENT TO AFRICAN AMERICAN AUDIENCES In 2003 Liggins made news with the development of TV One, a cable television network aimed at African American audiences and inspired by the success of Univision’s multichannel Hispanic programming. Launched in collaboration with Comcast, the leading cable company in the United States, TV One was perceived as a direct challenge to Black Entertainment Television, the only African American–centered cable network at the time. Liggins dismissed any rivalry, noting that TV One would merely cultivate a neglected and undervalued minority audience ripe for growth. Expressing a desire to appeal to African Americans of all ages, Liggins implemented a media strategy that involved the purchase of at least two radio stations in each city, one labeled “urban” that played rap, hip-hop, and other youth-based music and another that catered to older listeners with smooth jazz, soul, and classic rhythm and blues. Liggins admitted that unlike his socially conscious mother, he was more concerned with corporate balance sheets than local politics or activism. However, Liggins’s commitment to African American audiences contributed to the elevation of urban minorities as desirable consumers. This form of economic legitimization benefited other historically marginalized populations, such as women, gays and lesbians, and Hispanics.


Alexander, Keith L., “Radio One’s Mom-and-Son Team Deliver Urban Appeal,” USA Today, October 3, 2000. Jones, Joyce, “Not Missing a Beat,” Black Enterprise, June 2001, p. 48. Milloy, Courtland, “15 Years Later: More Successful, No Less Driven,” Washington Post, January 26, 2003. ———, “Making It—Legitimately,” Washington Post, April 26, 1988.

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Alfred C. Liggins III “Mother/Son Makes Radio One,” Broadcasting and Cable, August 30, 1999, p. 14. Simon, Clea, “Mining an Untapped Market, Radio One Becomes a Force,” New York Times, December 25, 2000. —Josh Lauer

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Liu Chuanzhi 1944– Chairman, Lenovo Group Nationality: Chinese. Born: April 29, 1944, in Shanghai, China. Education: Xian Military Communication Engineering College, 1966. Family: Married; children: three. Career: Chinese Academy of Sciences, 1966–1968, researcher; state-owned rice farm, 1968–1970, laborer; Chinese Academy of Sciences, 1970–1984, engineer-administrator; 1984–2004, Legend Group Holdings Company, chairman; 1984–, Chinese Academy of Sciences, Computer Technology Research Institute, director; 2004–, Lenovo Group, chairman. Awards: Model of the National Work Force, government of China, 1995; Man of Reform in China, government of China, 1995; named one of the Ten Most Influential Men of the Commercial Sector in China, government of China, 1996; named Asia’s Businessman of the Year, Forbes, 2000; listed as one of the Stars of Asia, BusinessWeek, 2000; listed as one of the Twenty-five Most Influential Global Executives, Time, 2001. Liu Chuanzhi. © Reuters NewMeida Inc./Corbis.

Address: Lenovo Group, 20th Floor, Somerset House, Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong; http://www.legendgrp.com.

■ Liu Chuanzhi built Lenovo Group from an enterprise operating through a $24,000 loan from the Chinese government in 1984 into one of China’s most important companies in less than 20 years. Two years after graduating from the Xian Institute of Military Communication Engineering, Liu was forced to perform manual labor on a state-owned rice farm. He rejoined his previous employer, the Chinese Academy of Sciences (CAS), in 1970 and worked as an engineer-administrator for the next 14 years until he had the opportunity to begin work with Legend. The company began producing its own personal computers (PCs) in the early 1990s; by 1996 it had surpassed IBM as the largest seller of PCs in China. Liu received numerous awards from the Chinese government and from major Western publications. International Directory of Business Biographies

EARLY HARDSHIPS Liu grew up during a turbulent period in China’s history. His father had served as an executive with the Bank of China in Shanghai and worked secretly with the Chinese Communists before the party took control of the city in 1949. Liu enrolled at the Xian Military Communication Engineering College in 1961. He graduated in 1966 after specializing in radar systems. He earned a job as a researcher at the Chinese Academy of Sciences after graduation. China entered upon its Cultural Revolution during the 1960s, during which time its schools and universities were closed by order of Mao Zedong, the chairman of the Chinese Communist Party. Liu was forced to work as a laborer on a state-owned rice farm from 1968 through 1970. It was not uncommon at this time for young adults from the cities to be sent to the countryside to work with and learn from the peasants.

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Nevertheless, these policies led to the virtual collapse of the Chinese economy by the end of the 1960s. The Chinese Academy of Sciences had reopened by 1970, when Liu returned to work at the institution as an engineer-administrator.

STARTING A COMPUTER COMPANY Although Mao’s successor, Deng Xiaoping, established various economic reforms during the early 1980s, Chinese entrepreneurs found it difficult to establish companies in their homeland. Nevertheless, the Chinese Academy of Sciences ran low on funds, and Liu came up with the idea of starting a computer company. Liu’s superior at the academy gave him and 10 other staff members a loan of 200,000 yuan (about $24,000 in U.S. currency) to start the enterprise in 1984. “It wasn’t easy,” Liu told a reporter from Asiaweek. “The lowest thing you could do in the early ‘80s, as a scientist, was to go into business. China had a strict planned economy and there was barely room for a freewheeling company like ours” (June 13, 1997). The company that Liu formed, which was originally named Legend Group, began in a small room in Beijing that barely covered 20 square yards. The low-level beginnings of Liu’s company were often compared to the origins of Apple Computer in Steve Jobs’s garage in California in the 1970s. Legend’s first tasks involved research into magnetic storage technology for computers, with the goal of finding commercial applications for these discoveries. The Chinese language was difficult to translate on a keyboard, owing to the vast number of characters. Legend developed a Chinese character set for computers in 1985, and, when the company began to produce PCs in 1990, it also began to develop technology that provided character recognition of the Chinese language. By the late 1990s Legend had produced a Chinese character recognizer for the PC, which allowed users to write Chinese characters on a digital pad and translate the characters onto a computer screen. Legend’s business grew slowly at first. For example, the company failed in its attempt to sell an electronic watch during its early years. In an interview given in 1997, Liu acknowledged that the company had confronted difficulties. “Our management team often differed on which commercial road to travel,” he said. “This led to big discussions, especially between the engineering chief and myself. He felt that if the quality of the product was good, then it would sell itself. But I knew this was not true, that marketing and other factors were part of the eventual success of a product” (June 13, 1997).

ride for Liu and others involved. “We were mainly scientists and didn’t understand the market,” Liu said. “We just learned by trial-and-error, which was very interesting—but also very dangerous” (June 13, 1997). Liu learned business on the job by studying the management structure and techniques of such companies as Hewlett-Packard and IBM. Legend grew by distributing foreign-made computers and peripherals through the end of the 1980s. By 1990, however, the Chinese government had given Legend permission to brand and sell its own PCs. During the same year, however, China reduced its tariffs and opened the doors for foreign computer makers to enter the Chinese market. Legend had to compete with some of the same companies that Liu had studied. Legend had some competitive advantages, however. It owned the Chinese character set that it had developed in 1985, and it could take advantage of lower Chinese wage levels and the lack of tariff charges, shipping charges, and other taxes on computer-related products that its foreign competitors had to pay.

KEEPING A COMPETITIVE EDGE By 1996 Legend had surpassed IBM for China’s market share in computer sales and retained that lead even at the start of the new century. Liu ensured that his company would remain on top of the market by introducing innovations. Legend was one of the first Chinese companies to offer its employees stock options, and Liu promoted talented young people to higher-level staff positions. By the late 1990s many of Legend’s managers were quite young and infused the company with their “strong entrepreneurial spirit” (March 9, 1998). Liu intended Legend to remain on the cutting edge of computer technology. Legend beat its competitors in introducing such innovations to China as the Pentium II processor during the late 1990s. In addition, the company took advantage of the Internet to boost its sales. Legend also began to focus its attention on marketing computer services as well as equipment, much like the plan that IBM had followed during the 1980s when competitors cut into its market share.

STUDYING AMERICAN COMPANIES

By 2004 Legend remained China’s largest maker of personal computers. The company announced in March 2004 that it would become the first Chinese company to join the sponsorship program for the Olympic Games, beginning with the 2006 Winter Olympics in Turin, Italy. Shortly after the announcement, Legend officially changed its English name to the Lenovo Group. The move was prompted by the company’s first attempts to sell its computers in Europe, where the word “legend” had already been trademarked in the United Kingdom and Germany for the products of its competitors.

Legend’s staff was not comprised of experienced businessmen, which made the firm’s early years a somewhat bumpy

Liu, who once described himself as “a very authoritarian manager,” won numerous awards for his leadership of Lenovo

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over the course of its first two decades. He was honored by the Chinese government as the Model of the National Work Force in 1995 and the Man of Reform in China, also in 1995. In 1996 the government honored him as one of the ten most influential men of the commercial sector in China. He was named Asia’s Businessman of the Year by Forbes in 2000; listed as one of the “Stars of Asia” by Business Week in 2000; and listed as one of the twenty-five most influential global executives by Time in 2001.


“A Computer Legend in the Making,” McKinsey Quarterly, July 14, 2001, http://att.com.com/2009-1017-269929.html. Doebele, Justin, “Who Needs an M.B.A.?” Forbes, January 24, 2000, p. 80.

June 13, 1997, http://www.asiaweek.com/asiaweek/97/0613/ biz1.html. “Legend in the Making,” Economist, September 15, 2001, p. 74. Naham, Anne, “The Scientist Who Could: State-Owned Enterprises Should Follow Us,” AsiaWeek, June 13, 1997, http://www.asiaweek.com/asiaweek/97/0613/biz2.html. Paul, Anthony, “Liu Chuanzhi, CEO; Legend Group,” Fortune, January 24, 2000, p. 59. Powell, Bill, “The Legend of Legend,” Fortune Asia, September 16, 2002, pp. 34–37. “The Stuff of Legend,” South China Morning Post, December 11, 1994.

Erickson, Jim, “Making of a Legend: Beijing’s Top PC Maker is Going Abroad, but China is Still the Key,” AsiaWeek,



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J. Bruce Llewellyn 1927– Chairman and chief executive officer, Philadelphia Coca-Cola Bottling Company Nationality: American. Born: July 16, 1927, in New York, New York. Education: City University of New York, BS; New York Law School, JD, 1960; Columbia University, MBA; New York University, MPA. Family: Son of Charles (linotype operator and restaurant owner) and Vanessa; married Shahara Ahmad; children: three. Career: Harlem liquor store, 1952–1956, proprietor; New York County district-attorney’s office, 1958–1960, student assistant; Evans, Berger, & Llewellyn, 1962–1965; Housing and Redevelopment Board of New York City, 1964–1965; Small Business Development Corporation, 1965–1967, regional director; New York City Housing and Development Administration, 1967–1969, deputy commissioner of housing; Fedco Food Stores, 1969–1984, president; Dickstein, Shapiro, & Marin, 1982–?, partner; Philadelphia Coca-Cola Bottling Company, 1985–, chairman and chief executive officer; WKBW-TV, 1986–, chairman. Awards: Among Black Enterprise magazine’s top black business owners, 2001; inducted into the National African-American Business Hall of Fame, 2003; President’s Medal of Honor, New York University, 2004; recipient of more than ten honorary doctorate degrees. Address: Philadelphia Coca-Cola Bottling Company, 725 East Erie Avenue, Philadelphia, Pennsylvania 19134; http://www.phillycoke.com.

■ J. (James) Bruce Llewellyn distinguished himself not only as chairman and chief executive officer (CEO) of the Philadelphia Coca-Cola Bottling Company, but also as one of the nation’s leading African-American entrepreneurs. Llewellyn was ambitious from a very young age, earning four college degrees and owning several successful business ventures, including a

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J. Bruce Llewellyn. Ted Thai/Getty Images.

highly profitable supermarket chain in New York. Just two years after purchasing the Philadelphia Coca-Cola Bottling Company, Llewellyn had increased business by 300 percent and grown it into the third-largest African American–owned business in the United States. “There is no short road to success,” he told the Black Collegian in 1997. “It emanates from long, hard years of concentrated effort, from going the extra mile and doing what others will rarely do.”

THE EARLY YEARS Llewellyn was born in Harlem to immigrant parents who came from Jamaica for a better life. His father opened a restaurant in White Plains, New York, where Llewellyn worked when he was young. “Owning a restaurant is the most difficult business there is,” he told Newsday in 1994.


J. Bruce Llewellyn

When World War II began, he enlisted in the U.S. Army and was made a first lieutenant within five years. After leaving the service at age 21, Llewellyn returned to Harlem to open his own liquor store. He simultaneously attended the City University of New York and earned a bachelor’s degree. Not content with just one degree, Llewellyn completed graduate programs at Columbia University, New York University, and New York Law School. In the early 1960s his extensive education earned him a job with the New York County districtattorney’s office. At the time there were not many corporate positions open to African Americans, but there were opportunities in civil service. He then took a position with the New York City Housing and Redevelopment Board. In 1965 he became a regional director of the United States Small Business Administration, and in 1967 he was appointed deputy commissioner of housing for New York City.

BEGINNINGS OF A RETAIL CAREER Llewellyn grew tired of public service. In 1969 he mortgaged his home and sold virtually all of his assets to purchase Fedco Foods Corporation, a chain of ten supermarkets in the Bronx. He kept most of the original staff but began to expand the business. When he finally sold Fedco in 1984, it was the largest minority-owned retail store in the country, with 29 stores, 900 employees, and annual sales of $100 million. In the late 1970s President Jimmy Carter appointed Llewellyn president of the Overseas Private Investment Corporation, a government insurance agency that underwrites American business projects in developing countries. He kept that position until Carter lost the election to Ronald Reagan. In 1982 Llewellyn was made a partner in the Washington, D.C., law firm of Dickstein, Shapiro, & Marin. Llewellyn’s career was on solid ground, but he had another, as yet unrealized, dream. He had long wanted to own a softdrink bottling company and had previously discussed the idea with both Coca-Cola and Pepsi. In 1983 Llewellyn and a small group of investors, including former basketball star Julius Erving and the comedian Bill Cosby, bought a share of the CocaCola Bottling Company in New York. Llewellyn was named a board member and made chairman of its subsidiary, the Philadelphia Coca-Cola Bottling Company. In 1985 Llewellyn and Erving purchased the Philadelphia Coca-Cola Bottling Company. In 1988 Llewellyn bought the Coca-Cola bottling operation in Wilmington, Delaware, and became that company’s chairman and majority stockholder.


Llewellyn expanded the Philadelphia company’s product line and increased its presence on supermarket shelves. He eventually grew it into the sixth-largest Coca-Cola bottling operation and the third-largest African American–owned business in the United States, with $400 million in annual sales.

OTHER BUSINESS VENTURES In the 1980s and early 1990s Llewellyn added two media chairmanships to his long list of titles. He became chairman of Queen City Broadcasting, which operates the ABCtelevision network affiliate in Buffalo, New York, and chairman of Garden State Cablevision, one of the largest cabletelevision systems in New Jersey. In the late 1990s Llewellyn launched a bid to buy the Minnesota Vikings football team. The purchase would have made Llewellyn the first African American to own a controlling interest in an NFL team, but he was forced to drop out of the bidding due to health problems. Though an avid businessman, Llewellyn never forgot his roots and was a staunch supporter of community and educational programs. In 1998 his company introduced a $2.5 million program to support local youth organizations. Llewellyn has also funded a $250,000 doctoral scholarship at the City University of New York. In 1994 President Bill Clinton named Llewellyn to his Advisory Committee for Trade Policy and Negotiation, the Board of the Fund for Large Enterprises in Russia, and the U.S. Small Business Administration Advisory Council on Small Business. Llewellyn served on the boards of directors of Essence Communications, Coors Brewing Company, and Teleport Communications Group. He served on the boards of a number of cultural and educational organizations, including the Museum of Television and Radio, CUNY Graduate School and University Center, and the United Negro College Fund.


Kimbro, Dr. Dennis, “Defining Success,” Black Collegian, February 1, 1997. Taylor, B. Kimberly, “A Piece of the Pie: What Do These Millionaires Have in Common? They All Found Work with Equal Opportunity Employers Themselves,” Newsday, February 1, 1994. —Stephanie Watson

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Lu Weiding President and chief executive officer, Wanxiang Group Corporation Nationality: Chinese. Born: In Xiaoshan, Zhejiang, China. Education: Attended school in Singapore. Family: Son of Lu Guanqiu. Career: Wanxiang Group Corporation, 2003–, president. Address: Ninwei Town, Xiaoshan, Zhejiang, China 311215; http://www.wanxiang.com/group.html.

■ Lu Weiding grew up in the shadow of his father, Lu Guanqiu. Lu Guanqiu was the son of a farmer, but he rose from owning a bicycle repair shop to starting and building Wanxiang Group Corporation, the largest and most successful automobile parts supply company in China and one of the strongest in the world. After a stint of rebellion, Lu Weiding turned himself around and, in 2003, became president of Wanxiang after his father stepped down from the position. Time and CNN named Lu Weiding one of the top 20 most influential figures in global business in 2003. Lu had a not too surprising childhood for someone whose father was a self-proclaimed workaholic. The son of a farmer who started Wanxiang from nothing and became a millionaire, Lu spent his youth in the rather large shadow of his father. As the heir of a millionaire, Lu was brought into the family business very early. He had other ideas, however. As a rebellious teenager, Lu turned his back on his filial obligations and raced jeeps and motorcycles on the back roads of rural China. After Lu smashed into the back of a dump truck, his father sent him to school in Singapore. Lu admitted this move saved him from becoming a disappointment and failure.

such as universal joints, bearings, and constant velocity (CV) joints to customers in more than 40 countries, including Visteon Corporation and Delphi Corporation in the United States. The company was also involved in agriculture, aquaculture, and financial products. The large company needed a clear-cut plan for growth, and as Lu learned the ropes, Lu Guanqiu contemplated the succession of his business. As reported by James Harding of the Finanical Times Lu Guanqiu said, “While I am alive the business has brought some fame and fortune, but to keep that reputation it has to operate after I am gone. I have to select some worthy successors” (January 27, 1998). Lu Weiding’s turnaround and hard work paid off, because in 2003 he succeeded his father as the president and CEO of Wangxiang Group. It was believed Lu might take over as chairman of the board, but as of 2004 Lu Guanqiu had not retired. If Lu were to take over as chair, it would be the first dynastic succession of a major company in China. Just before he became president of Wangxiang Group, Lu was listed by Time and CNN as one of the top 20 influential figures in global business in 2003. This list had a reputation for identifying the best contenders to take over the operations of their companies. Also in 2003 Lu was named to the Central Committee of the Communist Youth League. Only 129 persons from private industry were named alternate members of this group. It was a privilege and an honor far from Lu’s rebellious days of racing motorcycles across the countryside.

LOOKING INTO THE FUTURE

TURNING HIS LIFE AROUND

In 2003, the year Lu took over the presidency, Wanxiang exported $380 million in goods. Said to control 2 percent of the world’s automobile joints industry, in three years Wanxiang increased its sales in the United States 78 percent to $98 million, and Lu expected this figure to double. It looked as if Lu would meet his goal, because in 2003 Wanxiang was in the process of making a deal with Visteon, a company that worked closely with Ford Motor Company. The two companies began talks about having Wanxiang supply Visteon with perfect parts—a promise of zero defects in a million parts—a characteristic for which Wanxiang was well known.

Lu worked hard at school and returned to work alongside his father. An International Organization for Standardization (ISO) 9002–certified manufacturer, Wanxiang supplied parts

In 2004 Wanxiang Group Corporation was one of the top 500 companies in China. The company was considering buying two U.S. firms and up to four firms in China. The corpo-

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Lu Weiding

rate headquarters were located in Xiaoshan, China, but Wanxiang also had offices in the Untied States, Australia, Latin America, and Europe. Lu had a large empire, and the world was watching to see how he would move forward.


Bao, Guoji Jinrong, “Summary of China Press,” China Business News, December 5, 2003. Dolan, Kerry A., and Quentin Hardy, “The Challenge from China,” Forbes, May 13, 2002. Forney, Matthew, “Talking about a Chinese Dynasty: Lu Weiding Wanxiang Group,” Time, December 1, 2003, p. 69.


Harding, James, “Asia-Pacific: Wanxiang Chief Plays the Generation Game—Former Cycle Repair Shop Looks to the Future,” Financial Times, January 27, 1998. “Stepping out of the Shadows,” Australasian Business Intelligence, November 26, 2003. Taiwan Security Research, http://taiwansecurity.org/News/2003/ FEER-082803.htm. “Time and CNN Name 20 of the Most Influential Figures in Global Business for 2003,” November 24, 2003, http:// www.na-europe.com/en/story.htx?nr=300001839.


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Iain Lumsden 1946– Former chief executive officer, Standard Life Assurance Company Nationality: British. Born: June 6, 1946, in Kirkcaldy, Scotland. Education: Oxford University, BA, 1967. Family: Son of John Alexander Lumsden (insurance broker) and Helen (maiden name unknown); married Rosemary Hoey, 1970; children: two. Career: Standard Life Assurance Company, 1967–2004, began as assistant actuary, became actuarial general manager (1984), group finance director (1990); 2002–2004, CEO. Awards: Chief Executive of the Year, Financial Advisor, 2003.

■ Iain Lumsden joined the British insurance provider Standard Life Assurance Company as an assistant actuary in 1967 and over the course of 35 years worked his way to the company’s top rank of chief executive. Known for his calm and open management style, Lumsden urged policyholders to remain composed during the downturn in the market in the early 2000s. Throughout his 22-month tenure he believed that the best course of action for Standard Life was to maintain its mutual status and avoid changing over from a policyholder company into a stock company. When Standard Life announced that it was ready to abandon its mutual status in early 2004 after a period of heavy losses, Lumsden retired two years ahead of schedule.

RISE TO INFLUENCE AT STANDARD LIFE Lumsden grew up in Liverpool and, as he told London’s Times, aspired to be “the world’s greatest mathematician” (September 27, 2002). After earning a mathematics degree from Oxford University, however, he instead chose to pursue a job as an assistant actuary at Standard Life Assurance Company, the largest mutual-insurance company in Britain, where his father had worked briefly following World War II.

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Lumsden steadily ascended through the ranks at Standard Life, earning appointments to the positions of chief actuary (or actuarial general manager) and finance director. During this period Lumsden also pursued his professional interest in the Institute of Financial Accountants—or as it was known in Scotland, the Faculty of Actuaries—becoming a fellow in 1971, sitting on the institute’s examination board from 1978 to 1986, and serving as the chairperson of the U.K. actuarial profession’s Life Assurance Joint Committee from 1987 to 1991. As he took on positions of increasing responsibility at Standard Life, Lumsden became known as a calm and levelheaded leader and an open communicator who later led an initiative by the Association of British Insurers to encourage forprofit insurance companies to be more transparent with regard to their business practices. Seen as part of an insider group of actuaries who ran Standard Life, Lumsden was appointed to the key role of group finance director in 1990.

TENURE AS CHIEF EXECUTIVE When Scott Bell retired as the managing director of Standard Life in 2001, Lumsden was appointed chief executive. There was some speculation that he would be less committed than his predecessor to the mutual status that Standard Life had held since 1925—especially since there was pressure on the company to demutualize, which would result in large windfall payments to policyholders. Lumsden retained his predecessor’s policy of mutuality as a practical strategy, however, saying that while he had no religious commitment to the company’s mutual status, it was the best business decision for remaining competitive, minimizing taxation, and providing consistent returns to policyholders. Maintaining his commitment to mutuality throughout the downturn in the market that began in 2001, Lumsden urged policyholders not to overreact—although he was criticized for overinvesting in equities while Standard Life was losing billions of dollars in shares. In January 2004, after two years of heavy losses, Standard Life announced that it was reconsidering its mutual status. Amidst the controversy surrounding the public statement, Lumsden announced that he would retire two years ahead of schedule, saying that he would not be able to see the review of the company’s status through because of his planned retirement date. Sandy Crombie, Lumsden’s deputy chief executive, assumed the post, and Lumsden left the company immediate-


Iain Lumsden

ly. He was later criticized in the British media and by policyholders at Standard Life’s annual general meeting for receiving sizeable performance-bonus and pension awards based on his brief 22-month stint as chief executive.

LEADERSHIP STYLE Reflecting on his career in an interview conducted in May 2004, Lumsden characterized his management style as “consensual, logical, well researched, and fact based.” As the reporter Andrew Cave commented in his Daily Telegraph profile of Lumsden, “‘Balanced’ sums up Lumsden. He is painstakingly rational and patient” (June 29, 2002). Lumsden remained committed to rationality in leadership style and openness in communication throughout his career, although his reputation among policyholders and in the press suffered nonetheless during the final period of his tenure as chief executive. Lumsden held a number of other important insuranceindustry roles, such as the chairperson of the Finance, Regulation, and Taxation Committee for the Association of British Insurers. An avid golfer, Lumsden’s also enjoyed traveling and spending time with his family. At the beginning of his retirement period Lumsden had begun some charitable work and


also became the chairman of the board of trustees of the Scottish Enterprise Pension and Life Assurance Scheme, a government organization encouraging small businesses.

See also entry on Standard Life Assurance Company in International Directory of Company Histories.


Ashworth, Anne, “Unruffled Air of a Leader Determined to Stay With It for the Long Term,” Times (London), September 27, 2002. Cave, Andrew, “Here Is the Real ‘Safe Pair of Hands,’” Daily Telegraph (London), June 29, 2002. Flanagan, Martin, “Standard Life Prepares for Quiet Revolutionary,” Scotsman (Edinburgh), July 6, 2001. Lumsden, Iain, interview by Scott Trudell, May 2004. “Standard Life Sells Hammerson Stake as Lumsden Quits,” Euroweek, January 16, 2004, p. 31. —Scott Trudell

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Terry J. Lundgren 1952– Chairman, president, and CEO, Federated Department Stores Nationality: American. Born: 1952. Education: University of Arizona, BA, 1974. Family: Married Nancy Lundgren (divorced); children: two. Career: Federated Department Stores, Bullock’s division, 1975–1987; Bullocks Wilshire, 1987, president; Neiman Marcus, 1988–1994, chairman and CEO; Federated Merchandising Group, 1994–1996, head; 1997–2001, chief merchandising officer; 1997–, president; 2002, COO; 2003–, CEO; 2004–, chairman. Address: Federated Department Stores, 151 West 34th Street, New York, New York 10001; http:// www.federated-fds.com.

■ In early 2004 Lundgren became the first executive in the 75-year history of Federated Department Stores to simultaneously hold the titles of chairman, president, and CEO. Previously, all three positions were held by separate people. Lundgren earned a reputation as a visionary; he was one of the first executives in the business to call attention to the department store industry’s dated image, citing change as a paramount strategy necessary for survival. In each of his positions he made an immediate impact, surprising industry insiders. By early 2004 he oversaw a $15.4 billion company that operated 460 stores in 34 states, Guam, and Puerto Rico. The fast-track executive, with his model good looks, was in over his head.

Terry J. Lundgren. AP/Wide World Photos.

for tuition. The New York Times reported that his father said, “Your life is in your hands. It’s entirely up to you and you’ll figure it out” (December 14, 2003). After some initial sulking, Lundgren found employment cracking oysters and peeling shrimp at a local Tucson restaurant. He was eventually promoted to waiter, then headwaiter, and then head manager of the restaurant. He was proud of having paid his way through college and graduating without any debt. “That’s when I figured out what my parents were telling me, and appreciated the life lesson.”

LEARNING THE VALUE OF HARD WORK Tough breaks forced maturity upon Lundgren during his formative years. He was the only child out of six to attend college, mostly because his parents did not have the money. He joined a fraternity at University of Arizona and became president of his pledge class. But his grades were not good, and one day his father called with news that he would no longer pay

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ON THE FAST TRACK Most of Lundgren’s career was tied to Federated Department Stores. He first joined the Bullock’s division in Los Angeles in 1975, rising to become president of the Bullocks Wil-


Terry J. Lundgren

shire specialty operations in 1987. When Macy’s purchased the Bullock’s division from Federated in 1988, Lundgren jumped to Neiman Marcus. The CEO of Neiman left for Federated a few years later, and Lundgren was thrust into the CEO position at age 37. It was an inopportune time to take over, as Lundgren was charged with the task of leading the high-end chain through a recession.

Tommy Hilfiger, which was sold only in Federated stores. He wanted to make shopping easier, so he borrowed the idea of shopping carts. The retail analyst Jeffrey Stein said in the Daily News that the idea “may work, it may not. You don’t know unless you try. Lundgren is trying to be proactive in turning around deficiencies. He’s more proactive than his competitors” (July 28, 2003).

DEFYING THE CRITICS

AS FEDERATED GOES, SO GOES THE INDUSTRY

Industry insiders wondered whether the young executive had the industry know-how and experience to succeed. Stanley Marcus, the merchant whose grandfather was one of the founders of Neiman Marcus, bet Lundgren $100 that he would miss sales targets. Marcus lost the bet. In fact, Neiman emerged from the recession stronger than many of its industry peers. The New York Times reported that Stanley Marcus said, “I had the feeling that he needed a few more years of seasoning because his only experience was at Bullock’s. I was wrong. He waded right in and didn’t miss a beat” (November 10, 1994).

A lot rested on Lundgren’s mission to rescue the department store. In 2003 big chains like Federated accounted for just 11 percent of the nation’s retail sales, down from about 20 percent in 1987. On Wall Street, the department-store sector hovered at the bottom of the retail pecking order, with companies such as Federated, Saks, and May Department Stores posting disappointing sales month after month. Lundgren understood the challenge and did not back down. He said in a Wall Street Journal report that “the problem isn’t that no one is in our stores. We have plenty of traffic. The key is having the right product at the right price point in an environment that’s different and easy” (July 8, 2003). While the outcome of Federated’s future rested clearly in Lundgren’s hands, rivals and skeptics understated him at their peril.

REINVENTING THE DEPARTMENT STORE When Lundgren left for Federated Merchandising in 1994, he once again shocked the industry by making an immediate mark on the business. Shaking up the company’s purchasing strategy, he shifted from central-buying teams, which controlled most of the company’s decisions about what was sold in stores, to a more autonomous approach in which regional teams could decide what was best for their customers. The goal was to improve merchandising that often seemed sorely out of sync with its customers. Lundgren observed, for example, that a china pattern that appealed to those in the Midwest would flop with those on the East Coast. Lundgren’s primary objective was to reinvent the department store, a business model that many saw as a dying breed. Key to this strategy was giving customers a product selection that they would not find anywhere else. In late 2003 only 23 percent of Federated’s inventory was proprietary, including private brands, joint ventures, and exclusives from vendors. Lundgren hoped to increase the percentage of merchandise unique to Federated stores to about 50 percent. He introduced “H,” an upscale line of men’s and women’s sportswear from


See also entry on Federated Department Stores Inc. in International Directory of Company Histories.


Branch, Shelly, “Forget ‘May I Help You?,’” Wall Street Journal, July 8, 2003. Dillon, Nancy, “Federated CEO Sees Success in New Ideas,” Daily News (New York). July 28, 2003. Lundgren, Terry, as told to Eve Tahmincioglu, “Executive Life: The Boss; A Career Conversation,” New York Times, December 14, 2003. Strom, Stephanie, “A Loner Is in Federated’s Hot Seat,” New York Times, November 10, 1994. —Tim Halpern

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International Directory of Business Biographies

International Directory of Business Biographies

International Directory of Business Biographies