years of trusted insights - The Conference Board · strengthen their performance and better serve...
Transcript of years of trusted insights - The Conference Board · strengthen their performance and better serve...
2006 annual report the conference board 3
annual essaySir Harold Evans on Innovation
annual report 2006
90years of trusted insights
The Conference Board creates and disseminates knowledgeabout management and the marketplace to help businessesstrengthen their performance and better serve society.
Working as a global, independent membership organization inthe public interest, we conduct research, convene conferences,make forecasts, assess trends, publish information and analysis,and bring executives together to learn from one another.
CHAIRMAN’S LETTER 03
PRESIDENT’S LETTER 04
BUSINESS REVIEW 07
HISTORICAL OVERVIEW 16
ANNUAL ESSAY 22
PRODUCTS & SERVICES 28
FINANCIALS 34
GLOBAL COUNSELLORS 36
TRUSTEES 38
2006 annual report the conference board 3
I congratulate The Conference Board on its 90th anniversary and our loyal members and talented staff for making its 90th year its best year!
Once again, The Conference Board’s research and learning has helped companies strengthen their performance and better contribute to society.
Seven of my Trustee colleagues conclude their service this year: Robert Benmosche, Erroll Davis, S. Dhanabalan, Niall FitzGerald KBE, Rijkman Groenink, Stephen Snyder, and Sir Martin Sorrell. We applaud their dedication and leadership, and acknowledge the contribution they have made to our strategy and governance.
Let me also salute Dick Cavanagh, our president and CEO, who has provided exemplary leadership since 1995, and who announced his plans to step aside earlier this year. During his tenure, The Conference Board renewed its reputation, extended its global reach, enjoyed unprecedented prosperity, and executed initiatives in corporate governance and workforce diversity that have changed the heart and soul of business practice.
Respectfully submitted,
Samuel A. DiPiazza, Jr.Chairman, The Conference Board, Inc.Chief Executive Officer, PricewaterhouseCoopers llp
Chairman’s Letter
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We are pleased that our 90th year was also ourbest year.
As is the case for any organization that createsintellectual capital, our key measurements of successinclude “impact and relevance.” In these realms,our work and our people were cited more than44,000 times in the media — generating 5.5 billionmedia impressions on subjects ranging from eco-nomic forecasts to advice on preparing for an avianflu pandemic. Our economic reports regularly movedthe markets, our work on corporate governance has improved the conduct in boardrooms aroundthe globe, and our research and outreach in work-force diversity has changed the face of managementin large-scale enterprises.
Beyond our ongoing research and learningopportunities to advance the free enterprise system,this year saw a number of new initiatives and somenew partnerships — and yielded record performance.
New Initiatives
We launched our China Center for Economics and Business this April in Beijing, dedicating ournew centrally located offices in the QijiayuanDiplomatic Compound. Ten multinational firms,headquartered in Asia, Europe, and North America,have committed substantial financial and intellectu-al resources for the three-year start-up phase. Oursenior advisory board, co-chaired by Paul Volckerand Chen Yuan (the governor of the ChinaDevelopment Bank), held its inaugural meeting at the Diao Yu Tai State Guesthouse. The Center will conduct research, both independently and withkey Chinese partners like the National Bureau ofStatistics, the Development Research Center, andthe Peoples’ Bank, on business cycles, productivity,and competitiveness.
We have been busy helping companies aroundthe world learn from one another to prepare for anavian flu pandemic. To this end, we conducted a500-company survey, generated a timely ExecutiveAction report, and hosted two sold-out (and brac-ing) webcasts.
Domestically, this year saw the advent of ourHelp-Wanted Online Data Series, a complement toour monthly compilation and analysis of newspaperclassified ads. This database covers all 50 states andthe top 52 U.S. metropolitan areas.
Strengthening Partnerships
Working with other like-minded organizations haslong been a fruitful way to leverage our resources,avoid duplication of effort, and deliver superiorvalue to our members. This year saw a renaissancein productive partnerships and joint ventures.
Building on the second year of our successfulcollaboration with the (U.S.) Business Council tosurvey and explain CEO sentiment about businessconditions, we extended the effort to Europe(France and Germany) and Asia (Hong Kong andSingapore). The aim is to create and distributetimely knowledge about the economic perceptions of CEOs worldwide.
In a similar vein, we joined forces with twoworld-class business schools in joint research(INSEAD) and seminars (London Business School).We also held an inaugural conference on leadershipwith the U.S. Naval Academy, complementing ourlongstanding program with West Point. And we havelaunched a research consortium with three leadinghuman resources associations to advance under-standing of workforce preparedness.
We joined with the National Safety Council insponsoring a global environmental health and safetyaward and were recognized by the Clinton GlobalInitiative for our joint corporate social responsibili-ty program with Harvard and the ShorensteinFoundation. And last but not least, we have beenfavored by generous support of our research on,and outreach to, the maturing workforce by TheAtlantic Philanthropies.
By no means new, the Ron Brown Award for Corporate Citizenship was presented to BayerCorporation, Johnson & Johnson, and S. C. Johnson& Son. This was the seventh White House Awardceremony for the award we administer to honorexemplary corporate behavior.
President’s Letter
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Record Performance
Last year, our talented and hard-working staff set10 all-time records in areas ranging from mem-bership subscriptions to staff productivity to capi-talizing on the Internet. This year, we surpassedthese same 10 records.
One reason for success is that our membersare exceedingly loyal — over 98 percent of ourkey customers chose to renew their membershipthis year. During the past year, we counted 19 of the 20 largest U.S. companies, 80 percent ofthe Fortune 100 companies, and all of the 20most respected companies in the world as members.Overall, we experienced 10 percent revenuegrowth, earned a better than expected surplus,and returned $785,000 to our reserves. We sawexceptional growth in Asia (52 percent), webcasts(62 percent), sponsored research (30 percent),and governance programs (26 percent).
Several of our researchers received importantrecognition. Two economists were lauded fortheir insights and prescience — Gail Fosler, by theWall Street Journal, and Ken Goldstein, by theInternational Herald Tribune. Judy Bannister, ournew global demographer, won the Klein Awardfrom the U.S. Bureau of Labor Statistics. AndLinda Barrington, Lorrie Foster, and Jeri Sedlarwere selected as delegates to the White House
Conference on Aging. Our own President’s Awardwas presented to Carolyn Brancato for her pioneer-ing work in corporate governance.
This annual letter is my eleventh and finalone. I have decided to follow my own advice toothers about the practice of stepping aside after a decade of leadership service. During that time,I have been blessed by wise Trustees, talentedcolleagues, and loyal and generous members whohave made my service a privilege, for whichI am grateful.
Respectfully submitted,
Richard E. CavanaghPresident and CEO, The Conference Board, Inc.
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Ian E. L. Davis Managing Director, McKinsey & Company (left), and Robert H. Benmosche retiredChairman and CEO, Metropolitan Life Insurance Co.,are Trustees of The Conference Board. Trustees represent15 nationalities and nearly half are CEOs of firms based outside of the United States.
Steve Kerr Managing Director andChief Learning Officer, Goldman Sachs& Co., participated in a panel at theSenior Human Resources Conferencethat examined today’s most criticalhuman resources issues.
Mukesh Ambani Chairman and ManagingDirector, Reliance Industries,at The Conference BoardDirectors’ Institute programhosted at Reliance Industries,Jamnagar.
Ann Henry Vice President, Global Operations,HP Financial Services, discussed the challengesof global redesign at The Conference BoardOrganizational Design and Renewal Conference.
Michael Christiansen Managing Director,The Royal Danish Theatre, addressed Trustees at the Royal Opera House in Copenhagen.
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Started in 1916 as an organization of leading U.S. manufactur-ers, The Conference Board continued to meet its mission of serving business worldwide in its 90th year. More execu-
tives than ever profited from the business knowledge provided by The Conference Board, which now serves companies in all industriesand in many countries around the world. The Conference Board hasalways specialized in providing business knowledge to top compa-nies, but now its wisdom is being spread globally. Extending its out-reach, the organization held an increasing number of economic andmanagement briefings this year. It also intensified its role as aleading shaper of business values, delivering a wide range of studiesand events focusing on citizenship, corporate governance, businessethics, diversity, economics, human resources management, and howcompanies are responding to natural disasters.
Investigating Changes in the Global Workforce
One of the fastest growing business issues in the country is theoncoming retirement of 64 million baby boomers from the U.S.
labor force by the end of this decade. To help management handlethis development, The Conference Board Research Working Groupon Managing Mature Workers produced Managing the MatureWorkforce, an in-depth study that pinpoints how organizationscan be strengthened by the right mature workers. In the comingyear, The Conference Board will embark on a study on increasingthe inclusion of older adults in the workforce that is being sup-ported by a $2-million grant from The Atlantic Philanthropies. TheConference Board also received a grant from Microsoft Corporationto support research on innovation that will draw on the econom-ic and management perspectives.
Mature workforce studies at The Conference Board are justone part of a larger management research program that also con-centrates on strategic workforce planning, talent management, andemployee engagement. Leadership Development in Asia-Pacific:Identifying and Developing Leaders for Growth, which was based onfindings from a research working group, provided a valuable primer
on leadership development practices and, more specifically,how multinational companies face the challenge of developinglocal leaders in Asia.
A State of Business Report: CEO Challenge 2006
In addition to bringing CEOs together, The Conference Board alsotook the pulse of their opinions on major business issues in thisyear’s edition of the annual CEO Challenge Survey. This was themost far-reaching survey yet, with responses from nearly 700 global CEOs from 40 countries. CEO Challenge 2006: Perspectivesand Analysis, an overview of the results, shows major differencesamong CEOs based in different parts of the world. For example,CEOs in Europe and Asia put equal emphasis on the challenges of sustained and steady top-line growth and profit growth, while U.S.CEOs are significantly more likely to rate sustained and steady top-line growth over profit growth. Sajjan Jindal, vice chairman andmanaging director of India’s JSW Steel, Ltd., echoes many CEOs in Asia when he explains that growth is significant because of its
importance to shareholders. “You have to have consistent growth,quarter to quarter,” he says, and that “can only happen if you havecustomer loyalty and innovation because, the way the world ismoving, it’s becoming imperative, very important, for everybody tostay on their toes and keep on changing.”
Fostering Corporate Citizenship and Sustainability
Continuing its long tradition of supporting research in the fields of social responsibility and corporate citizenship, The ConferenceBoard issued Philanthropy and Business: The Changing Agenda.The multinational survey finds that companies are increasinglyseeking to align their giving programs more closely to their busi-ness needs and improve their measurement of results and out-comes. This topic had particular relevance this year because ofcorporations’ desire to help people and communities damagedby hurricanes Katrina and Rita. The Conference Board also partnered with the World Bank Institute, the Kennedy School of
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the conference board Business Review 2005-2006
Global Growth and Global Impact
“The Conference Board has a world vision with a global network.”
Sir C.K. ChowCEO, MTR Corporation
Left to rightMartin Glynn President and CEO of HSBC Bank, USADonald Gogel President and CEO of Clayton, Dubilier & Rice, Inc.
At a meeting co-sponsored by The ConferenceBoard and The Week magazine at The Four Seasons restaurant in New York.
David Vidal Research Director, Global CorporateCitizenship, The Conference Board
Ron Brown Award ceremony The White House, Washington D.C.
Left to rightDana G. Mead Chairman, Massachusetts Institute of Technology, and Chairman of the Ron Brown Award Board of DirectorsCarlos M. Gutierrez U.S. Secretary of CommerceAlma Brown and Michael BrownCurt M. Selquist Company Group Chairman and Worldwide Franchise Chairman,Medical Devices & Diagnostics, Johnson & JohnsonDr. Attila Molnar President and Chief Executive Officer, Bayer CorporationH. Fisk Johnson Chairman and Chief Executive Officer, S.C. Johnson & Son, Inc.
Carolyn Kay Brancato Director ofThe Conference Board Governance Center,was a moderator at the Corporate/Investor Summit.
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Government (Harvard University), Pfizer, the InternationalBusiness Leaders Forum, and the Global Alliance for ImprovedNutrition to hold four events as part of the Clinton GlobalInitiative. Themes ranged from responding to natural disasters to the public, private, and social sectors taking joint action on malnutrition.
Avian flu preparedness was also on the agenda. TheConference Board conducted a survey on the issue that garneredmore than 500 corporate responses. An Executive Action reportoutlined how this crisis differs from previous threats. “At the veryleast, companies ought to consider how to continue when workpractices must be altered to reflect the reality of a changed environ-ment,” the report says. “Meetings, travel, and office environmentscan spread infection through an extensive population.”
A Leader in Corporate Governance
During the last year, The Conference Board Governance Centerand Directors’ Institute elevated their reputations as go-to resourcesfor business leaders in the United States and their counterpartsaround the world. One of their reports — Revisiting Stock Market
Short-Termism — was based on a unique consensus achieved by leaders of major corporations and the investment communityat the June 2005 Corporate/Investor Summit convened by TheConference Board in London and moderated by Dr. Carolyn KayBrancato, director of The Conference Board Governance Centerand Directors’ Institute. The report warned about the dangers ofshort-term thinking in developing business strategy in the financialmarkets. It also called on companies, investors, financial analysts,and fund managers to shift their focus from quarterly earnings to long-term growth and profitability.
According to the report, the pressure to meet short-term quarterly earnings numbers can cause undue market volatility. Thismay, in turn, cause management to lose sight of its strategic busi-ness model, which would compromise its global competitivenessas well as its ability to make investments in such critical areas as research and development and environmental controls.
Working in collaboration with McKinsey & Company andKPMG’s Audit Committee Institute, The Conference Board also pub-lished The Role of U.S. Corporate Boards in Enterprise RiskManagement. Results from this study were announced during apress conference that was held in conjunction with a Directors’Institute seminar at The Harvard Club. The research, which includesa broad-based survey of U.S. boards, cites the financial servicesand insurance industries as models for well-developed risk-manage-ment programs.
Both the Governance Center and Directors’ Institute conductedprograms outside of the United States this year. Business and gov-ernment officials in China hosted the Governance Center at twomeetings in Beijing — one convened for the leaders of state-ownedenterprises and one held for the Banking Regulatory Agency. The Directors’ Institute held in-house educational programs forReliance Industries Limited in India and for the Egyptian Institute of Directors. These sessions featured a global perspective on cor-porate governance issues, fiduciary responsibilities of boarddirectors, and similarities and differences in motivations amongcountries for determining global best practices.
Tracking Shifts in Jobs,
Productivity, and the World Economy
The Conference Board increased its economic data and analysisof the employment market over the last year, including launching the monthly Help-Wanted OnLine Data Series. This new seriessheds light on business demand for labor and supplements thelong-standing Help-Wanted Advertising Index. The ConferenceBoard also produced webcasts and special reports on the chang-ing dynamics of the U.S. workforce, including a candid overviewpublished by the The Conference Board Consumer Research Centerof how workers view their jobs and how successful companies are seeking to reverse “a commitment crisis.” Research by TheConference Board on comparative productivity in countries aroundthe world was presented to central bank governors from some 20countries, including the European Central Bank President Jean-Claude Trichet and to the Keidanren (the Japanese Federation of
“The Conference Board has become the respected source for corporate governance.”
Douglas R. ConantPresident and CEO, Campbell Soup Company
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Economic Organizations). The results of this research found thatthe times of extraordinarily high U.S. labor productivity growthrates are over, at least for now, and that there has been sustainedproductivity acceleration in the emerging markets of Central andEastern Europe and Asia. In another new project with globalimpact, the Global Indicators Program launched initiatives todevelop leading economic indexes (LEIs) for the European Union and China. The LEI program currently produces monthly data forthe United States and eight other countries, which collectively represent almost two-thirds of the world economy.
Making Diversity a Corporate Reality
As part of a research project commissioned by the EuropeanCommission’s Directorate General for Employment, Social Affairs,and Equal Opportunities, The Conference Board and FocusConsultancy, a UK diversity consulting firm, produced a specialconference in Brussels on the business case for diversity. Thismeeting attracted 130 delegates from 25 countries, equally dividedamong executives, government officials, and leaders of social sector organizations. Companies presenting at the conference
included Adecco, Air Products, Bertelsmann, Cadbury Schweppes,Coco-Mat, Ford, IBM, Lufthansa, Randstad, TNT, and Unilever. A reportreleased at this event included responses from 900 executives andin-depth case studies of 19 pace-setting firms, including BT, Danfoss,Deutsche Bank, Deutsche Telecom, Shell, and Volvo.
Looking at other diversity events in Europe, “Profiting fromDiversity” was the theme this year of the annual European Work-Lifeand Diversity Conference in Paris. Keynote speakers included AlainRoberts, global head of key clients and member of the global man-agement board of UBS; David Cornick, vice president of IBM; andEllen Galinsky, president of the Families and Work Institute. TheU.S. Council on Work Force Diversity gathered in Prague to discussglobal diversity. Speaking about the council’s development,Deborah Dagit, executive director, diversity and work environment
initiatives for Merck & Co., Inc., says, “As one of the founding mem-bers of the Council on Work Force Diversity in 1993, I have wit-nessed The Conference Board transition from an organization thatwas learning about diversity and inclusion to one that considersthese concepts an integral part of their identity and brand.”
Expanding Our Global Reach
The Prague meeting of the Council on Work Force Diversity wasjust one of the ways The Conference Board has broadened its glob-al presence this year. In China, The Conference Board China Centerfor Economics and Business hosted seminars that showcased suchleading academics as Dale Jorgenson, the Samuel W. MorrisUniversity Professor at Harvard University, and Ren Rouen, BeihangUniversity. In addition to the initial meeting of the The ConferenceBoard Asia-Pacific Chief Financial Officers Council at the end of2005, The Conference Board supplemented its Asia-Pacific councilprogram with conferences, smaller forums, roundtables, and briefingson economic trends, outsourcing, and major challenges facing CEOs.
The Conference Board stepped up its activities in India thisyear. At a meeting of The Conference Board Human Resources
Council of India in Hyderabad, Ramalinga Raju, chairman of SatyamComputers, described his widely acclaimed model of businessleadership that relies on balancing good corporate citizenshippractices with corporate business priorities. In Mumbai, Nandan M. Nilekani, CEO, president, and managing director, InfosysTechnologies, and a Trustee of The Conference Board, addressedparticipants at the Global Leadership Conference. Adi Godrej,chairman of Godrej Industries, and other leading CEOs and speak-ers from India and other countries discussed the importance ofdeveloping a global mindset in benchmarking during panels at theforum.
“The Conference Board motivates me, inspires me, and encourages me
in ways that are beneficial to my whole life.”
May SnowdenVice President, Global Diversity, Starbucks
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Ted Childs Vice President,Global Workforce Diversity, IBM,and a member of the Council onWork Force Diversity, addressed The Conference Board Women inLeadership Conference.
Gail Fosler (right) Executive Vice President and Chief Economist,The Conference Board, delivered a global economic outlook at DowJones & Co. headquarters in New York. The meeting was covered by financial journalists and foreign correspondents.
Zhang Xin co-CEO ofSOHO China, who has beenglobally recognized as oneof China’s major businessentrepreneurs, spoke at ameeting on doing businessin China.
Women in Power: Views from the Top,” a panel co-sponsored by The Conference Board and The Week magazine.
Left to rightCarol Kovac General Manager of Healthcare and Life Sciences at IBMShelly Lazarus Chairman and CEO of Ogilvy & Mather WorldwideMaria Bartiromo Host and Managing Editor of The Wall Street JournalReport, a nationally syndicated television program Catherine Kinney President of The New York Stock ExchangeSuzy Welch co-author with her husband, Jack Welch, of the bestsellerWinning, and a former editor of Harvard Business Review
Stephen M. WardPresident and CEO ofLenovo
“
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Senior executives from The Conference Board Advisory Council on Human Resources Management and the Council of HumanResources Executives at the U.S. Military Academy at West Point.
Trustees meeting in Copenhagen
Left to rightMichael Lilius President and CEO,Fortum CorporationHutham S. Olayan President and CEO,Olayan America Corporation Alan M. Dachs President and CEO,Fremont Group, L.L.C. Nandan M. Nilekani CEO, President, andManaging Director, Infosys Technologies Ltd.
“Can Good Governance Stop the Scandals?” a panel co-hosted by The Conference Board and The Week magazine.
Left to rightSamuel A. DiPiazza Jr. CEO, PricewaterhouseCoopers llp,and Chairman, Board of Trustees, The Conference BoardJohn Bogle Founder and CEO of The Vanguard GroupJack Ehnes CEO of California State Teachers’ Retirement System
Left to rightJordi Gual Deputy Director General of La CaixaAntonio Garrido-Lestache Director of AssociateService for Spain and Portugal, The Conference BoardBart van Ark Director of International EconomicResearch, The Conference BoardLuis Lada President of Telefónica
At a meeting in Madrid on international productivity trends.
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A growing profile in Europe This year, The Conference Board created plans to expand itsEuropean operations, with the aim of bringing its franchise in the region up to the level of its U.S. operations. Executive vicepresident and chief economist Gail Fosler conducted a series ofeconomic briefings for senior business executives throughout theregion, including presentations in Brussels, Frankfurt, Helsinki,Madrid, Munich, and Stockholm. She also addressed the second-annual Sustainability Forum in Brussels on how global values willimpact business practices around the world.
In Paris, Fosler was part of an annual business briefing held by The Conference Board Europe at the Chamber of Commerceand Industry. At this event, she noted that the current investmentboom, especially in the United States, is not supported by a strongconsumer sector. The briefing also featured a presentation by U.S.Ambassador Craig Stapleton on American political priorities for2006. Others presenters included Daniel Dewavrin, chairman ofthe Union des Industries et Métiers de la Métallurgie, France, andEdmond Alphandéry, former minister and current chairman of thesupervisory board, CNP Assurances.
Finding Solutions Together:
The Unique Value of Research Working GroupsThe research working group program was also expanded andenhanced in the past year. In these groups, The Conference Boardworks with its members to develop relevant research that address-es their current business needs. The front-line executives in theseforums serve as research advisors to ensure actionable results, anapproach that distinguishes our working groups. Groups convened in the past year developed new strategies for employee engage-ment, offshoring risks, consumer-driven healthcare, strategic work-force planning, complying with Sarbanes-Oxley legislation, andhuman capital measurement.
The Conference Board also launched its first Europeanresearch working group, which will study corporate responses to humanitarian disasters and help companies learn how to become better partners with relief organizations. Corporate members
include Global Impact, Swiss Reinsurance Company, GlaxoSmith-Kline, The Coca-Cola Company, Philip Morris, and Shell.
Leadership Lessons from the Military
The Conference Board continued to increase and strengthen itsexperiential leadership programs for senior business executives.Designed for CEOs and other senior executives from leadingcompanies, these special offerings show how the strategies andtactics of generals in historic battles, including actions taken atNormandy, France, and Gettysburg, Pennsylvania, can be applied toachieving success in today’s business environment. At the fourth-annual Investment in America Forum at the U.S. Military Academyat West Point, which was co-hosted with the U.S. Army and theLeader to Leader Institute, executives from Credit Suisse, Skanska,HCA Corporation, Boston Consulting Group, and Texas Industriesdiscussed pressing business issues with senior-level Army officersand social sector CEOs.
Councils Link the Best in Business
The thriving council program attracted senior executives from virtually every function and business area. Over 200 council eventswere held, which drew more than 2,500 executives. There wereseveral innovations to councils this year. The Contributions Councilinstituted a website to record companies’ responses to the damagecaused by hurricanes Katrina and Rita. The Global PerformanceExcellence Council, with membership equally divided between theUnited States and Europe, initiated a series of web briefings toenable council members to exchange information without meetingin person. The European Council on Purchasing and EuropeanCouncil on e-Procurement held a joint meeting in India that gaveexecutives from member companies an opportunity to visit rapidlygrowing Indian information technology firms.
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“The Conference Board has saved us many millions of dollars. I would certainly
recommend it.”
John FitzgeraldDirector of Human Resources and Benefits, Sequa Corporation
The Conference Board Webcast Advantage
After a highly successful first year, The Conference Board webcastprogram exceeded expectations in its second year, delivering timely,interactive online meetings on economic and management topics.Compliance and ethics programs, outsourcing, Sarbanes-Oxley,human capital metrics, the economics of disasters, corporate security, and managing a mature workforce were just a few of themajor corporate concerns covered. The Conference Board alsolaunched a new webcast series in Europe, providing exclusiveresearch findings on how companies are identifying and trying to eliminate microinequities, building leadership competencies andmodels, managing change, profiting from shared services manage-ment, and executing effective humanitarian relief programs in thewake of natural disasters.
Conferences and Special Events
Provided Unique Access to Insights
Conferences, which bring together leaders from throughout theworld to exchange ideas and experiences, were the first benefit
The Conference Board offered members in 1916. In 2005-2006,the conference program had a number of important new offerings,including its first corporate real estate conference, which exploredthe relationship between global commerce and the growing move-ment toward sustainable real estate practices. By popular demand,The Conference Board’s annual business ethics conference went bi-coastal this year: The New York conference featured AndrewLiveris, chairman and CEO of Dow Chemical, while Jim McNerney,CEO of Boeing, addressed the La Jolla conference. The annualDiversity Conferences held in New York and Chicago continued to be trailblazing events. More than 270 top diversity and humanresources executives attended these programs. One of the most
successful conferences this year was the Employee Health CareConference, which was held in both New York and San Diego.These meetings emphasized the importance of building a culture of health at organizations while juggling benefit costs and talentmanagement issues, and featured top executives from Aetna, Inc.,BellSouth Corporation, DHL Express, and Gap Inc.
Co-chaired by Paul A. Volcker, former chairman of the Board ofGovernors of the Federal Reserve System, and François Cornélis,vice chairman of the Executive Committee of Total, The ConferenceBoard Trustees’ and Global Advisory Council meeting inCopenhagen included dialogues by world business leaders on“What Constitutes a Market Economy?” and “Does Russia Meet theTest?” Discussions also covered energy security and the globaleconomic outlook. At the Trustees’ and Members’ dinner, keynotespeaker Ulrik Federspiel, the Secretary of State for Foreign Affairs of Denmark, examined the changing business environment in aworld that is rapidly being globalized.
Paul Volcker was also the featured speaker at The ConferenceBoard Annual Meeting and dinner in New York City. Reflecting on
his experiences as chairman of the United Nations inquiry into theIraqi Oil for Food Program, Volcker said that the time was ripe toreform the United Nations and that solving the world’s problemsrequires a multilateral approach.
As these offerings demonstrate, The Conference Board ispoised to continue an unmatched variety of quality programs forexecutives around the world as it heads toward its centennial.
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“I can’t think of another international business organization that has the unique
nonpartisan ability to look at issues the way they really are.”
Nandan NilekaniCEO, President, and Managing Director, Infosys
Susanne Lyons Executive Vice President andChief Marketing Officer, Visa USA, providedinsights on building and sustaining a world-classbrand to participants at The Conference BoardMarketing Conference.
Paul Volcker was the keynote speaker atThe Conference Board 2005 Annual Meeting. Volcker is the former Chairman of the Board of Governors of the Federal Reserve System and Chairman of the United Nations inquiry into the Iraqi Oil for Food Program.
Andrew Liveris Chairman, President, and CEO,The Dow Chemical Company, was a keynote speaker at The Conference Board Ethics andCompliance Conference.
Trustees meeting in Copenhagen
Left to rightSamuel C. Scott III Chairman, President, and CEO, Corn ProductsInternational, Inc. Douglas R. Conant President and CEO, Campbell Soup Company,and Vice Chairman of the Board of Trustees, The Conference BoardWashington SyCip Founder, The SGV Group
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An Organization Born of Crisis
The Conference Board is an unlikely success story. Established during a prolonged period of economic turmoil, The Conference Board beganlife as a grand idea, not an institution. Prior to its founding, three trag-ic events had led to widespread public condemnation of business:1910 A dynamite bomb rips through the Los Angeles Times’ plant,
killing 20 workers and injuring many more.1911 A fire at the Triangle Shirtwaist Company in New York City
kills 146 workers, mostly young women. 1914 In Colorado, a long-running strike and nonstop violence
between armed miners and militia hired by the Colorado Fuel and Iron Company leads to “The Ludlow Massacre,”during which more than 25 people die.
One of the business leaders most concerned about theseevents was Magnus Alexander, a prominent executive at GeneralElectric. Alexander and Frederick Fish, a Boston attorney who had been president of AT&T, began bringing together business and tradeassociation leaders to discuss the strained business climate andwhat might be done to alleviate frictions. As economic tensionssurged, Alexander and Fish convened a series of crisis meetings in 1915 and 1916. At these gatherings, Alexander called for greater
cooperation and knowledge sharing among businesses, which hadbeen notoriously secretive about even their most routine businesspractices. On May 5, 1916, in the Hotel Gramatan in Bronxville, NewYork, the National Industrial Conference Board (which changed itsname to The Conference Board in 1970) became an official entity,with Alexander acting as its managing director (and later its firstpresident) and Fish as the organization’s first chairman.
1916 Starting Fresh in BostonWith an initial budget of $100,000 and a small office in Boston,The Conference Board was finally open for business. One of thenewly minted organization’s first research projects focused on work-ers’ compensation laws and their impact on business, employeecompensation, and labor strikes and boycotts. Just before the UnitedStates entered World War I in 1917, President Woodrow Wilsonorganized a War Labor Board. As part of its efforts, the War LaborBoard asked The Conference Board to bring together business leaders to examine America’s ability to manufacture essential goodsand services during the war. Among the major recommendations from this group was a call for a special board — with equal representation from employers, employees, and the government —
the conference board Historical Overview
90 Years of Commitment
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1910
Period of increasing business regulation and rising labor unrest.
1919 Establishes the
U.S. Cost of Living Index
World War I 1914-1918
1924Incorporates as a private,
nonprofit institution
Businesses flourish and create an unprecedented consumer market.
1910 Los Angeles Times plant bombing kills 20 workers
1911 Triangle Shirtwaist Company fire kills 146 workers
1914 Establishment of the Federal Trade Commission
1916 The Conference Boardis established
1917 Publishes first report,Workmen’s Compensation Acts
1920
1923Attracts 282 delegates
to a National Immigration
Conference
1924Congress passes the National
Immigration Act, which
severely limits immigration1913 Passage of the Federal Reserve Act
1915 First transcontinental telephone call
1918 Conducts research on working women and safety in the workplace
When The Conference Board was initially formed in 1916, MagnusAlexander described the new organization’s role as being that of both “a clearing house for information [and] a forum for constructive discussion” on the vital business issues of his day. During the last 90 years, we have expanded our programs to meet, or even anticipate, the needs of a rapidly changing and increasingly globalized business environment. By doing so, we have helped our members find better solutions for their individual needs and better serve the societies in which they operate.
1920 Conducts research
on eight-hour workday
1919 First transatlantic flight
1920 First meeting of League of Nations
1916 Passage of theRural Credits Act, whichprovides aid to farmers
U.S. Supreme Court orders breakup of Standard Oil
The Ludlow Massacre
19th Amendment giveswomen the right to vote
The Conference Board Milestones
2006 annual report the conference board 17
to resolve labor disputes. The War Labor Board eventually agreed toall of the recommendations. In 1918, The Conference Board createdthe first U.S. Cost of Living Index, which corporations instantlybegan using in planning and strategy sessions.
1920s The Conference Board Moves to New YorkSeeking a broader platform and a greater role on the national stage,The Conference Board moved from Boston to New York City in 1920.In that year, it also became an incorporated, not-for-profit organiza-tion. Over the course of the decade, The Conference Board produceda series of major studies on America’s deteriorating agricultural conditions, the cost of government, and the fiscal health of stategovernments. At the request of its members, the organization also created special studies that focused on labor and managementdifferences in France, Italy, Great Britain, and, later, Germany.
1930s Surviving during the Great DepressionThe stock market collapse of 1929, which soon triggered a globaldepression, hit The Conference Board almost immediately. Staffand salaries were reduced, as were working hours for those who
remained. When Alexander died in 1932, Virgil Jordan, a noted economist and a prolific writer and public speaker, was appointedhis successor. At the time, many business leaders were questioningwhether the economic analyses being used by the government werecredible. To ensure a steady supply of accurate economic data,Jordan established a Bureau of Economic Audit and Control, whichproduced a wide range of studies on unemployment, pension plans,corporate healthcare policies, and other issues during the 1930s.
1940s Helping the War EffortDuring World War II, The Conference Board focused on what companieswere doing, or could do, to aid the war effort. An ongoing series ofmeetings were held between business leaders and high-level U.S. gov-ernment officials, with discussions covering everything from theproduction of goods and services and wartime pricing policies to con-tract negotiations between business and government. In1944, aDivision of Business Practices was created to oversee all research intomanagement practices and policies. Jordan resigned as president in1948, although he continued to be an advisor to The Conference Boarduntil 1963. John Sinclair, the former president and deputy governor ofthe Federal Reserve Bank of Philadelphia, became president in 1949.
1930
Great Depression
1926 Establishes the
Advisory Council of Human
Resources Executives, the
first council
1929 Stock market crashes
over six days in October
and November
1933 Initiates Foreign Affairs,
a series on the worldwide
effects of the depression
1934 Congress creates
the Securities and Exchange
Commission
1936 Admits Amalgamated
Clothing Workers of America,
its first labor union member
1937 Publishes first comprehensive
study of Personnel Practices Governing
Factory and Office Administration
1938 Congress passes
the Fair Labor Standards
Act, establishing a
national minimum wage
and codifying the eight-
hour workday
WW II
begins
Conducts over 187 studies on topics ranging from immigration to the conservation of natural resources.
President Roosevelt inaugurates the “New Deal” to provide relief from the effects of the Great Depression.
1928 Amelia Earhart is
first woman to fly across
the Atlantic1925 Broadcast of
first television picture
Research focuses on the downward spiral of internationaltrade and the precarious position of financial institutions.
1932 Establishes group to
study business recovery
1933 Roosevelt declares
four-day bank holiday
1935 Creates Bureau of
Economic Audit and Control
1935 Social Security
Act becomes law
1938 Inauguration of
the Economic Advisory
Council
1928 Opens conferences
to the public
18 the conference board 2006 annual report
1950s Reaching Out to EuropeWhen The Conference Board celebrated its 35th birthday in 1951,its annual revenue topped $1 million for the first time and it movedinto a larger office to accommodate its more than 200 employees.With the United States facing a war in Korea, The Conference BoardCouncil on Mobilization Planning began producing studies, reports,and surveys on critical business issues during wartime. It alsoissued a study on how business and government could protect confi-dential data in the event of a nuclear war. Throughout the decade,The Conference Board began sponsoring major events outside of theUnited States. In 1954, The Conference Board inaugurated an officein Montreal, which today is an independent but affiliated organizationbased in Ottawa. In 1959, the first CEO-level meeting held outsidethe United States was convened in Torquay, England. Some 40 chiefexecutives and company presidents from the United States, theUnited Kingdom, and Canada met to examine economic prospects.It was an instant success, spawning a similar meeting in Versailles,which linked business leaders from Belgium, Canada, France, theNetherlands, Sweden, Switzerland, the United States, and WestGermany.
1960s Creating Jobs, Encouraging Social Responsibility, and Building a Stronger EconomySinclair stepped down as president in 1962. His successor was H. Bruce Palmer, the president of Mutual Benefit Life InsuranceCompany. A founding member of several nonprofit organizations,Palmer was a leading advocate of “social responsibility” and quicklyincreased The Conference Board’s involvement in the public affairsarena. The Ford Foundation gave The Conference Board a grant to produce a major study on company experiences in hiring African-American workers, which suggested a more determined effort by companies was needed if more minorities were to find jobs. TheConference Board also began publishing its Help-Wanted AdvertisingIndex, which continues to be an effective barometer of job demand in 52 major cities in the United States. In 1965, The Conference Boardwas commissioned by the U.S. Treasury Department to study the country’s controversial business depreciation guidelines. After pro-ducing a study pinpointing strengths and weaknesses in the guide-lines, President Lyndon Johnson addressed a meeting held by The Conference Board in Washington, D.C., announcing that the studyhad persuaded him to make major changes in the nation’s businessdepreciation policies. As the 1960s came to a close, The Conference
1940
World War II 1939-45
1959First major meeting
outside U.S. in Torquay, UK
1941 The U.S.
enters WW II
1943 Brings consulting groups
together as the Advisory Council on
Defense and Reconstruction
1947 Marshall Plan
1945 First report in Studies in Business
Economics, a series on the restoration of
the economic system
1948 Publishes The Social Security
Almanac, which covers the U.S. and
other countries
1950
1951 The Conference Board
Help-Wanted Advertising Index
is launched
1954 Opens Montreal office
and begins enrolling associates
from outside the U.S.
Creates advisory councils to foster the exchange of information between businesses with defense contracts and government agencies.
1944 Passage of
GI Bill of Rights Act
1949 Creation of NATO
1950-1951 Introduction of
first commercial mainframe
computers
1954 Foundation
of SEATO
1955 Formation
of the AFL-CIO
America’s entry into WWII leads to the near elimination of unemployment and opens new opportunities for women in the workplace
Postwar, the U.S. enters a period of prosperity and experiences a sea change in living standardsand the consumption of consumer goods
Research focuses on the impact of the consumer economy on price trends, buying behavior, and the television industry.
1948 GATT agreement
is signed by 23 countries
1957 Launch of
the Sputnik satellite
1944 Publishes Employment
of Handicapped Persons
First transistor
First report on
data processing
1940 Begins tracking directors’
compensation and corporate
contributions
2006 annual report the conference board 19
Board, with financial support from Life magazine, began producing AGraphic Guide to Consumer Markets, an annual chartbook on consumerspending trends.
1970s Forging Bonds between Business and GovernmentPalmer, who resigned from The Conference Board in 1970, was succeeded by Alexander B. Trowbridge, former U.S. Secretary ofCommerce under President Johnson and, before that, a senior execu-tive with Esso Standard Oil. Trowbridge built strong relationshipswith noted business and government leaders and The ConferenceBoard soon began producing studies that helped companies under-stand and deal with a rising tide of environmental legislation. WithThe Conference Board gaining stature for its expertise in this area,the National Commission on Water Quality soon asked the organiza-tion to convene a meeting of business and government leaders toexplore the pros and cons of water quality laws across America.President Gerald Ford addressed members of The Conference Board at a meeting in Washington in 1976, stressing the need for a strongdefense and encouraged the bolstering of relationships betweenbusiness and the government. The Conference Board established anoffice in Brussels in 1977, and a growing number of councils were
formed in the region, bringing together leading European executives on a regular basis to share ideas and insights. (Today, The ConferenceBoard Europe oversees a network of councils in Europe, India,and the Middle East.) Trowbridge stepped aside as president ofThe Conference Board in 1976. Kenneth A. Randall, a former head of the Federal Deposit Insurance Corporation and chairman of the boardand CEO of Virginia Bankshares Inc., was named the new president.
1980s Restructuring, Downsizing, and Another Market CrashIn 1981, James T. Mills, president and CEO of the Sperry HutchinsonCompany, took over as president of The Conference Board and setout to upgrade its technological infrastructure and make its extensiveresearch program more responsive to the needs of its corporatemembers. Significant research was published on businesses’ growingpublic-affairs activities, shifts in monetary policy, and best practices in marketing, finance, and research and development. As corporaterestructuring, cost-cutting, and mergers and acquisitions sweptthrough the business world in the mid-1980s, The Conference Boardbegan issuing a series of reports on the processes companies wereemploying to become more competitive.
1960
1961 President Kennedy
addresses a special meeting
1960 Publishes A Graphic
Guide to Consumer Markets,
in collaboration with Life
magazine
1972 The results of a survey conducted
by The Conference Board on industry
expenditures for water pollution abatement
are included in an EPA report
1970 The first Earth Day is celebrated
and the U.S. Environmental Protection
Agency (EPA) is founded
1976 Establishes The Conference
Board CEO Confidence Index
1977 Opens
Brussels office
1973 An embargo on oil shipments to
the U.S. and Western Europe creates
gasoline shortages and doubles prices
1970
1965 Based on The Conference Board research, President
Johnson announces major changes in the nation’s depreciation
practices
1964 The Civil Rights Act becomes law
1966 Study on companies’ efforts to increase
their employment of African-Americans
1967 Creates The Conference Board
Consumer Confidence Index
1976 Grameen Bank
established
Increasing inflation, urban strife, rising unemployment, and the Vietnam War place pressures on the world economies.
Extension of public affairs research on corporate contributions, business and government relations,and community affairs.
Economies are wracked by stagflation, recessions,rising unemployment, and a series of energy crises.
In addition to added management and marketing programs, there are new forums for business and government exchanges.
1960 First working laser
1961 Construction
of the Berlin Wall
1963 Martin Luther
King, Jr., addresses the
March on Washington 1969 First man on moon
Introduction of Personal Computer
Woodstock
First successful heart transplant
20 the conference board 2006 annual report
When Mills stepped down in 1988, Preston Townley, dean ofthe Carlson School of Management at the University of Minnesotaand a former top manager at General Mills, was appointed his succes-sor. Townley speedily moved to identify critical business issues andput experienced specialists in place at The Conference Board tostudy and report on them. He also oversaw the reorganization of TheConference Board around six major themes: business and educa-tion, corporate business practices, economics, managing for global growth, quality, and workforce management.
1990s Total Quality, Stability, and an Economic CoupTownley broadened the offerings of The Conference Board, includingmaking it a major player in the drive for total quality management(TQM). Building on its Quality Council — a group of executives incharge of their companies’ TQM programs — The Conference Boardbegan holding annual quality conferences. The success of theQuality Council was also reflective of the growing importance ofthe overall council program, which had become the fastest-growingcomponent of the organization in both the United States and Europe.The conference program was also enlivened and expanded, withmore events being sponsored by notable outside organizations.Townley also added more research staff to provide what he called“more market-driven” reports, surveys, and meetings.
When Townley died of a heart attack in 1994, Jack V. Wirtsbecame acting president and CEO of The Conference Board. Duringthe next year, the organization stepped up its activities in Europeand Asia. It also signed its first working agreement in China afterWirts met with leading Chinese government and business leaders.Other joint ventures in Australia, Hong Kong, Europe, and Mexico followed, as well as alliances in India and Taiwan. In an unprecedenteddevelopment, the U.S. Department of Commerce selected TheConference Board to produce and distribute the U.S. leading eco-nomic indicator series. This was the first time a U.S. Governmentagency entrusted a major economic series to a private organization.(Today, The Conference Board produces indicators for eight othernations as well.) In October 1995, The Conference Board namedRichard E. Cavanagh, a seasoned executive with broad business,government, and academic credentials, as its ninth president. Beforebeing executive dean of Harvard’s John F. Kennedy School ofGovernment for nine years, Cavanagh was a partner with McKinseyand Company.
2000s Going Global and Restoring TrustOne of Cavanagh’s early strategic thrusts was to continue expandingthe globalization of not only the organization’s research and meetingprograms, but its governing body as well. In 2000, Lord Marshall of Knightsbridge, chairman of British Airways, became chairman of
World War I 1914-1918
1980
1993The Conference
Board Governance
Center established
1985 In the largest corporate
merger at that time, GE acquires
the RCA Corporation
1987 On “Black Monday,” the
NY Stock Exchange experiences
a record one-day decline
1980 Launches research on the
practices of boards of directors
1990 1994The North American
Free Trade Agreement
(NAFTA) goes into effect
1988 First annual Business
Ethics Conference
1989 President George Bush
writes The Conference Board
that its pursuit of excellence in
education “has earned the
gratitude of all Americans”
1990 The Conference Board
Total Quality Management Center
established
Studies the growth of businessand education partnerships.
Restructures activities around business practices, economics, education, global growth (now having associate members from over 50 countries), management, and quality.
U.S. economic growth begins to pick up again, during a decade characterized by restructurings, cost cutting, and high-profile mergers.
1981 Launch of space
shuttle Columbia
1986 Article in Across
The Board on eldercare
receives national attention
1984 AT&T operations split
into seven independent companies
1988 Fall of the Berlin Wall
S & L Crisis Rise of the Internet
Nabisco merges with
Standard Brands
Drexel Burnham Lambert
pays $650 million penalty for
insider trading
2006 annual report the conference board 21
the Board of Trustees at The Conference Board, the first chairman ofthe organization based outside the United States. The ConferenceBoard economics program produced an expanded series of econom-ic studies and forecasts and held a rising number of briefings aroundthe world. It also launched a rich mix of new economic barometers,including an ongoing series to determine how satisfied consumersare with their Internet experiences, and initiated a monthly measureof new jobs being offered online in the United States. To honor com-panies for outstanding citizenship, The Conference Board designedthe Ron Brown Award for Corporate Leadership, the only presidentialaward recognizing extraordinary leadership programs. The first win-ners, IBM and Levi Strauss, were announced by President BillClinton in 1998 at the White House.
In the summer of 2002, after an epidemic of business scandals,Cavanagh convened The Conference Board Commission on PublicTrust and Private Enterprise, a blue-ribbon panel of respected leadersfrom both the private and public sector. Many of the Commission’srecommendations have been voluntarily adopted by leading compa-nies and are considered best practices in corporate governancetoday. The Conference Board has also established a strong andgrowing presence in China and India, and now provides councils,briefings, and conferences to over 100 members in the Asia-Pacificregion. The Conference Board China Center for Economics andBusiness has the support of major multinational firms throughout
the world and is fast becoming a major resource on the Chineseeconomy. The Conference Board Middle East Business LeadersCouncil, launched in 1999, now brings together top executives fromthis area to meet with peers based in other regions.
The Future
The Conference Board’s impressive legacy as one of the world’sforemost research and business membership organizations hasgiven it a strong position for future growth. Its global reputation ineconomic forecasting, productivity, and job creation; its widelywatched economic barometers, which often move financial markets;and its ever-expanding reports on timely economic issues havemade it a leader in the field. Moreover, its pathfinding role in theareas of governance and compliance, diversity, leadership develop-ment, and managing a fast-changing workforce ensure that it willstay out in front on these vital business issues, both in the UnitedStates and in countries around the world. New strategic programs in China and India, as well as an expanding role in Europe, are just afew of the ways that The Conference Board is extending its globalreach. While circumstances and needs will certainly change in thenext 90 years, The Conference Board will continue to anticipatemajor economic and business shifts.
20001995 The World Trade
Organization is established
1996 Assumes control
of the U.S. Leading
Economic Indicators
2002 Sarbanes-Oxley Act passed
2001 Co-sponsors
the Sino-U.S. Economic
Forum
2002 The Conference Board
Commission on Public Trust and
Private Enterprise established
1995 NAFTA
Conference in
Mexico
1998 Hong Kong office opens
1997 Creates Ron Brown Award
for Corporate Leadership
1999 Designs business cycle
indicators for 8 nations that account
for two-thirds of global GDP
2003 The Conference Board
Directors’ Institute founded
2005 Creates The Conference
Board China Center for Economics
and Business, based in Beijing
and New York
The information technology revolution ushersin the “New Economy,” causing rapid growth inWestern stock markets.
Takes the lead in corporate governance and diversity, while the economics program begins a series of innovative measures of online activities.
Dot-com bubble bursts and, starting with Enron, there are a series of business scandals.
Forms partnership with Groningen
Growth and Development Centre
The Conference Board Consumer
Internet Barometer launched
The euro becomes legal tender in
12 European countries, creating the
largest monetary union in history
When I recently conducted a Google searchfor “American chief executives and innova-tion,” I received 9,850,000 entries in just
40 seconds. By now, it may be up to 10 million ormore. Obviously, no such search was possible whenThe Conference Board was established in 1916. Backthen, I would have had to dedicate the rest of my lifeto discovering a fraction of what is now instantly onoffer via the Internet, which is just one of the innova-tions undreamt of then that are now in the tissue ofour everyday lives. Others include e-mail, antibiotics,television, statewide banking, FM radio, personalcomputers, the uplift brassiere, helicopters, instantcameras, cell phones, synthetic fibers, radio tuners,MRI scanners, scheduled airmail, transatlanticflights, fish fingers, microwave ovens, transistorizedhearing aids, artificial insulin, lasers, jet planes — not to mention the introduction of container shippingthat effectively initiated globalization.
Another Google search indicates that there hasalso been a subtle shift in American business thinking.When “innovation” is replaced with “efficiency” in the search string, only half as many entries appear.Efficiency, once the be-all and end-all, is no longerconsidered enough for survival in the world economy.F. Mark Gumz, CEO of Olympus America, keepstelling all of his staff (and not just the top managers),“Innovate or die.” To be sure, efficiency is essential,but, in a global marketplace, efficiency — and the cost-cutting associated with it — may not be enough. Soour future will more likely depend on groundbreakinginnovation. Yes, we must implement and develop efficiency, but without forgetting the animating visionthat created the initial innovation. The mountainranges of innovation are littered with the skeletonsof the great corporations that lost sight of the sum-mit they set out to conquer. Jack Welch’s law applies— when the rate of change in a company becomesslower than the rate of change outside, the end is insight.
Federal Express is one of the organizations thathas managed to keep its focus. For three decades,Fred Smith has inspired his organization with his
passion to make sure, absolutely positively sure,that the parcels are truly delivered overnight. As Smithsays, “You’re delivering someone’s pacemaker,chemotherapy treatment for cancer drugs, the partthat keeps the F-18s flying, or the legal brief thatdecides the case.”1 His efficiency drives have notbeen allowed to obscure the founding vision.
The Potential Downside of a
Concentration on Efficiency
Michael Dell, who conceived of mass customization of personal computers through direct selling to con-sumers — especially businesses and just-in-timemanufacturing — has been every bit as innovative asFred Smith. Because of the company’s consumerfocus, Dell’s customers have felt they have an almostpersonal relationship with him. This relationship washurt, however, when the company hired cheaper tem-porary workers for its five call centers rather thancontinuing with full-time staff imbued with the founder’ssense of mission. Ro Parra, a senior vice president at Dell, identified call-center turnover rates as high as300 percent as one cause behind flattening sales.He told the Wall Street Journal, “We were very efficientand we made those decisions that work with theshort term, but they were really damaging to us overthe long term.”2 Such openness and contrition indicates that Dell will soon regain its momentum.
Not all businesses are able to regroup aftersuch an event. Tony Ridder, for example, is no longerrunning Knight Ridder, an organization whose commit-ment to editorial excellence and innovations in news-paper technology helped it become America’ssecond-largest newspaper group. When Ridder toldthe editorial staffs his highest priority was increasingthe profit margins from 19 percent to 21 percent, hewas viewed as introducing a morale-lowering change in the corporate culture at the expense of a commit-ment to quality journalism. This perception was nodoubt unfair, given his need to reconcile costs withthe downturn in newspaper advertising. In any event,setting financial targets invited a financial judgment,
Sir Harold Evans is the author of
They Made America: From the Steam
Engine to the Search Engine: Two
Centuries of Innovators (Little, Brown)
and editor of the WGBH television
series of the same title. He was editor
of The Sunday Times of London and
The Times, and chairman of the
Sunday Times executive; in the United
States, he was editorial director of
U.S. News and World Report, founder
of Condé Nast Traveler magazine, and
president and publisher of Random
House. He is a contributing editor of
U.S. News and World Report and editor
at large of The Week magazine. In
2004, he was knighted by Queen
Elizabeth for his services to journalism.
The Annual EssayEach year, The Conference Board
publishes in its Annual Report an
original and timely commentary by
a leading economic or management
thought leader. Past essayists have
included Nobel prize winner Douglass
C. North, Warren Bennis, Jim Collins,
Peter Drucker, Dale Jorgenson, and
Paul Volcker.
“Innovate or Die”Lessons from the Groundbreakers Who Changed America
b y s i r h a r o l d e va n s
22 the conference board 2006 annual report
1 Harold Evans, with Gail Buckland and David Lefer, They MadeAmerica: From the Steam Engine to the Search Engine: TwoCenturies of Innovators, (New York: Little Brown, 2004), p. 643.
2 Christopher Lawton, “Consumer Demand, Laptop Growth LeaveDell Behind,” Wall Street Journal, August 30, 2006.
the conference board Annual Essay
and shareholder pressure led to Knight Ridder’s sale to the McClatchy Company.
Defining the Values of Innovators
In writing my recent book They Made America,I spent five years trying to identify and describe thegreat change-makers in the business history ofthe United States. As a result of my research, itbecame clear that America’s progress over the pasttwo centuries — from the steam engine to the searchengine — has been very much related to the values of the innovators. Wealth was not at the center oftheir lives. To be sure, none of them sought penury in the service of the public, but immersion in theirlives suggests that making money was not a sustain-ing motivation. Something else drove them — intellectu-
al curiosity, vanity, genuine altruism — and then themoney followed. I see these primary innovators as democratizers: Henry Ford, Amadeo Giannini,George Eastman, and Pierre Omidyar come to mind,but there are lesser-known people like RaymondSmith (founder of the first family of gambling inNevada and the F.W. Woolworth of chance) andMartha Matilda Harper (creator of retail franchising)who deserve to be better known.
As the preceding list suggests, the individualdominates the story of American innovation. Theresearch departments of major corporations (e.g.,Bell Labs and Dupont) have not been unproductive,but can anyone have had more impact on our worldthan Malcom McLean? In 1937, McLean was a 23-year-old trucker who became frustrated after spend-ing a day waiting on a noisy pier in Hoboken, NewJersey, to have his cotton bales unloaded from histruck, loaded onto a cargo ship, and then unloadedand loaded again at the other end. Recalling that frustrating experience, McLean said, “The thought
occurred to me.… Wouldn’t it be great if my trailercould simply be lifted up and placed on the ship with-out its contents being touched?”3 It took 20 years for McLean to move from this initial inspiration toorganizing the voyage of Ideal X, his first containership, from Port Newark, New Jersey, on April 26, 1956.
Why didn’t anyone else see what McLean saw?Here is a hallmark of innovation – the imaginativeassociation of ideas previously considered separate:the cell phone that takes stills and video and playsmusic. Auctions and yard sales had been around along time when Pierre Omidyar put them togetheron the web to create eBay. Jean Nidetch stitchedtogether the communal support idea of AlcoholicsAnonymous with a diet invented by the New York CityDepartment of Health to create Weight Watchers.
Ida Rosenthal did not invent the brassiere or eventhe famous Maidenform “I dreamed” campaign, butshe put all the pieces together in production andmarketing so that her husband’s invention reachedmillions of women. Henry Ford summed up thisaspect of innovation with admirable candor when hesaid, “I invented nothing new. I simply assembledinto a car the discoveries of other men behind whomwere centuries of work.”
Business and Innovation:
A Sometimes Uneasy RelationshipA quick survey of those Google hits reveals that thereis some confusion about the true definition of innova-tion. Much of what are described as innovations arereally techniques of managing an existing business orimproving it at the margins. These may be very useful,but they have nothing to do with innovation or change.Instead of parsing how the concept of innovation haschanged from its initial conception in the 17th centuryto the refinements of modern commentators like
2006 annual report the conference board 23
3 Evans et al., They Made America, p. 482.
Wealth was not at the center of innovators’ lives. To be sure, none
of them sought penury in the service of the public, but immersion in their
lives suggests that making money was not a sustaining motivation.
Something else drove them — intellectual curiosity, vanity, genuine altruism.
24 the conference board 2006 annual report
Peter Drucker, Clayton Christiansen, and Eric vonHippel, I would argue we should reserve the terms“innovation” and “innovators” for real change and not confuse it with different functions. While there isa fairly common acceptance of Joseph Schumpeter’sdefinition of innovation as entrepreneurship, the real-ity is that entrepreneurship, the assumption of risk,may not be innovative at all. You assume risk if youopen a new auto dealership, but you are not innova-tive unless you are the first.
Some entrepreneurs have even been the enemyof innovation. General David Sarnoff, the black-beltbureaucrat who was the head of RCA and was heavilyinvested in making AM radios, was a classic entrepre-neur, but he was also the relentless and unscrupulousfoe of the introduction of the innovation of FM radio.Even though he had the right of first refusal of EdwinHoward Armstrong’s invention, he did his best tosabotage Armstrong’s efforts to broadcast in thisnew medium. As a result, Armstrong, the inventorof so much in the technology of transmitting sound,was forced to start his own company and beganbroadcasting music flawlessly from WQXR in NewYork on July 18, 1939. (Interestingly, the 425-footradio tower he built in Alpine, New Jersey, for WQXRwas the salvation of NBC, and many others, whenthe antenna on top of the World Trade Center wasdestroyed in the September 11 attacks.)
Sarnoff also sought to stymie Philo T.Farnsworth’s attempts to make the most of his inven-tion of electronic television, although, in the end, he had to pay Farnsworth for his groundbreaking patent.Later on, Sarnoff did become a genuine promoter ofinnovation, pioneering a system of colorTVs compati-ble with black and white that defeated the non-com-patible electromechanical system pushed by Bill Paleyof CBS. But he was also a promoter of a number ofmyths about himself, including claiming credit as“the father” of television. When innovators such as Armstrong or Farnsworth are overlooked or theirinnovations misrepresented, it is more than a personalinjustice; it is also a distortion of the essence of inno-vation and the essential qualities of the innovator.
Change Doesn’t Always
Come from the Laboratory
As we try to understand what true innovation is, wemust not misunderstand a figure like Bill Gates. Heis not an inventor. BusinessWeek has referred to himas the “software whiz kid” and People magazine haslikened him to Thomas Alva Edison, whose photo-
graph Gates keeps in his office. Gates is brilliant allright, but not at all in the way that Edison was bril-liant. The criteria that elevate Bill Gates into the ranksof innovators are not in the realm of science andtechnology but in his genius for business organizationand developing from scratch a standard-setting massmarket company. He did not invent the operatingsystem he licensed to IBM for its personal computer— he bought it from another company.
The true Edison of software is unquestionablyGary Kildall, who, entirely out of his own head andwithout the backing of a research lab or anyone,wrote the first language for a microcomputer operatingsystem and the first floppy disk operating system.Kildall did it, moreover, in such a manner that program-mers were no longer restricted by hardware compati-bility. In Kildall’s system, anybody’s application couldrun on anybody else’s software. It was the genesis of the third-party software industry.
But, while the breakthrough was Kildall’s, Gateswas able to see more sharply how a deal with IBMcould be the foundation of a whole new industry. Heunderstood better than IBM the importance of own-ing its PC operating system. He also figured out howto set up a tollbooth to computer technology, collect-ing half of every dollar generated by the PC industry.In all these respects, the proper parallel for Gates isnot Edison but John D. Rockefeller, who controlled90 percent of the nation’s oil refining capacity by1879, just as Microsoft Windows controls 90 percentof all personal computers.
The Entrepreneur as Innovator
Innovation in these areas of organization does nothave the drama of Edison watching a filament fight for its life or Edwin Land finding himself split in twoin the Polaroid color prints from his first experi-ments with the SX-70. Like Bill Gates, Juan Trippe,chairman of Pan American, was not an inventor. In the early 1950s, the activities in Pan Am’s ParkAvenue offices may have seemed boring when com-pared with the struggle of Pratt & Whitney engineersto secretly create the monster J75 jet engine for theU.S. Air Force. But appearances can be deceiving. ForTrippe was determined to make cheap mass air travel a reality and was ultimately responsible for introduc-ing nonstop jet flights that carried hundreds of passen-gers from New York to Europe, first with the 707 andthen the 747. At the time, the common presumptionwas that international air travel was the privilege of the rich and, moreover, the leaders of the airline
industry considered jets too noisy, heavy on mainte-nance (a fallacy), too big for most airports, and tooexpensive. Cyrus Smith, the tough Texan who ranAmerican Airlines, expressed the attitude of all airlineswhen he said, “We can’t go backward to the jet.”
But Trippe could not have reached first base with this idea without persuading Pratt & Whitney tolet him order J75 engines. At a lunch in 1955 withthem, he put $40 million on the table, when he hadno airframe and, indeed, did not have the $40 million.How he raised the money and induced both Douglasand Boeing to build the airframes exemplifies thecourage — and the cunning — of the innovator in action,willing to risk all on something nobody had conceivedof before. Trippe has yet to receive the recognition hedeserves. The most recent portrayal of him in MartinScorsese’s otherwise fine film The Aviator represents
him as standing in the way of progress in the form of Howard Hughes and TWA. Hughes was no meaninnovator himself when it came to airplanes, but hedid not have Trippe’s early democratizing vision of thefuture of commercial aviation.
A Good Invention Is Not Enough
Another important confusion about innovation stemsfrom regarding it as synonymous with invention anddiscovery. An invention/discovery does not becomean innovation until it is put to use. This is not todevalue inventiveness.4 Juice, a recent study ofinventors by Evan I. Schwarz, vividly highlights howsome inventions have scaled upwards, “spawningcontinuous and endless improvement.”5
The millions of patents that currently exist arehallmarks of invention, crucial in some industries andnot in others, but they are not a reliable index ofinnovation. Less than 10 percent of patents turn out
to have commercial importance, according to a studyfor the Lemelson-MIT Program, and less than 1 per-cent have the seminal importance of, say, DouglasEngelbart’s 1970 patent for the computer mouse orJohn Vaught’s inkjet for Hewlett Packard in 1975.
Those who come up with the best ideas fornew companies were not always ready to run them.As Georges Doriot, leader of the first venture capital company on the New York Stock Exchange,observed, “There have been many fine scientists desperately trying to become poor businessmen.”6
For others, bringing their invention to market was not their primary motivation. Leo Hendrik Baekeland,the inventor of Bakelite (the first true plastic), had no wish to develop his discovery. He was repelled bythe idea that it would mean becoming “one of thoseslave millionaires in Wall Street.”7 It was only when
the licensees failed to manufacture his revolutionarysynthetic properly that he felt he had no choice but tolead his own manufacturing and distribution corpora-tion. Theodore Maiman, having invented the first work-ing laser on May 16, 1960, described it as “a solutionlooking for a problem” because so few appreciatedits manifold possibilities. He too ended up foundinghis own company. He was first an inventor, then aninnovator.
Other inventors have even walked away fromthe innovative potential of their achievements. Theworld would not be connected by telephone if it hadbeen left to the inventive Alexander Graham Bell.Bell’s 1876 discovery of how sound waves could beconverted into undulating electric current was criti-cal, but his telephone was useful only if you had agood pair of lungs. It was Thomas Alva Edison (withCharles Batchelor) who invented the carbon buttontransmitter to solve the problem of indistinct and
2006 annual report the conference board 25
When innovators are overlooked or their innovations misrepresented,
it is more than a personal injustice; it is also a distortion of the essence
of innovation and the essential qualities of the innovator.
6 Evans et al., They Made America, p. 372.7 Evans et al., They Made America, p. 217.
4 The Ewing Marion Kauffman foundation is sponsoring a national week of invention and entrepreneurship for young people from February 24 to March 2, 2007. Their website(www.EntrepreneurshipWeekUSA.com) already teems with stories of achievement.
5 Evan I. Schwartz, Juice: The Creative Fuel That Drives World-Class Inventors, (Boston: Harvard Business School Press, 2004)
26 the conference board 2006 annual report
muffled sound in Bell’s phone. But it was TheodoreVail, an early supporter of The Conference Board and the organizational genius behind the formationof AT&T, who spearheaded the true innovation ofestablishing a private enterprise, integrated nationaltelephone service. In doing so, Vail confronted a myr-iad of technical, political, and bureaucratic obstacles,including the threat of nationalization.
Innovation Cannot Be Accomplished Alone
Schumpeter tells us that invention + capital = innova-tion, but this neat formula rather understates justwhat is needed for an idea to proceed from a brainwave into the bustle of the marketplace. As well asmoney, my case studies suggest the importance ofthe innovator having a clear vision to communicate to others and a reservoir of patience few of us have.Success is more likely if one has an aptitude to lead a creative team in different disciplines. And let’s notforget the largely silent craftspeople who love andunderstand machines and systems and, by constantimprovements in their operations, make innovationscheaper and faster. These qualities of leadership aremanifest in Dean Kamen’s long development of theIBOT, a self-propelled chair on wheels that can navigaterough ground using gyroscopes and microproces-sors. This is just the latest in a series of inventionsassociated with Kamen that, in the words of one profile, were initiated because “he decided [they]ought to exist.”8 Again, here is an innovator inspired by moral values.
The richly varied demands on an inventor whoaspires to innovation is the reason we see manyinnovators flourishing in partnerships of complemen-tary skills or, as Pete Peterson, the chairman ofSony United States, calls them, a marriage of “inter-locking neuroses.” In the early 1970s, Herbert Boyerwas a brilliant molecular biologist happiest in his labtrying to induce E. coli bacteria to reproduce humanDNA. Robert Swanson, part of a new breed of ven-ture capitalists, was happiest reading balance sheets.With his heart set on building a practical business in the infant science of bioengineering, Swansonstarted cold-calling scientists who had written pieces in technical journals.
When Swanson dropped in on Boyer’s lab at the University of California-San Francisco in 1976,the distance then between biology and business was immense. One scientist remembers, “We were
all standing in the hallway laughing at this guy in the three-piece suit. We just didn’t get people likethat visiting us.”9 Swanson asked for 10 minutes to pitch Boyer on the idea of making a commercialapplication of his discoveries. It was convincingenough for the two young men to walk to Churchill’s,a local hangout for molecular biologists, for a beer.They wound up talking for a couple of hours and putdown $500 each to start a pharmaceutical company to explore the proteins that bacteria could be inducedto make. They called their putative company Genentech,the forerunner of a rollercoaster $430-billion industrythat has saved and improved so many lives.
The Grand Legacy of Thomas Edison
The truly great innovators go beyond bringing a sin-gle product or service to the marketplace. They arenotable systemizers who set the stage for an efflo-rescence of new products and whole industries; arti-ficial insulin and then biotechnology; electric powerand then cheap and universal electricity; the elevatorand then the skyscraper; the transistor and thencomputers and software.
The invention of the incandescent light bulb thatilluminates Edison’s name for posterity is not reallyhis signal achievement. The innovative genius ofEdison was to build out from the bulb to the creationof the electrical industry. He had to conceive a sys-tem down to its very last detail – and then manufac-ture everything in it. To give some idea of theenormity of the task, he had to:
• design and support a factory that would mass produce delicate filaments and preserve a vacuum in thousands of bulbs a day;
• build a central power station;• design and manufacture his own
original dynamos;• ensure an even flow of current;• connect a 14-mile network of
underground wiring, insulating the wiring against damaging moisture and the accidental discharge ofelectricity;
• install safety devices against fire;• design commercially efficient motors
to use electricity in daylight hours forelevators, printing presses, lathes, etc.;
8 Scott Kirsner, “Breakout Artist,” Wired, September 2000. 9 Evans et al., They Made America, p. 568.
2006 annual report the conference board 27
• design and install meters to measure individual consumption;
• invent and manufacture a plethora of switches, sockets, fuses, distributing boxes, and lamp holders;
• convince New York’s Democratic aldermen of its utility against the sabotage of the gas companies; and
• raise much of the initial capital.
Now there’s innovation!
Yet, while Edison introduced electricity intocities, it was his immigrant clerk Samuel Insull whofound a way to make cheap power available to everyone. And Insull, in turn, depended on the brilliantGeorge Westinghouse’s innovation of alternating
current. As this chain shows, an innovator is both anexplorer and a legatee, and we still have much tolearn from them.
Protecting America’s Heritage of Innovation
One of the curious features of a country supposedlydedicated to business, and certainly one enriched bybusiness innovation, is that political innovations andpersonalities are endlessly studied and rightly exalt-ed, but, by comparison, the workshop and office rev-olutionaries are taken for granted in the boardroomsand neglected in the classrooms. Few innovatorshave touched so many areas of modern life or leftsuch a stunningly complete record of their workas Edison. Today, a team of researchers at RutgersUniversity is seeking to make an immeasurably richarchive of Edison’s writings accessible to all throughbooks, microfilm, and the Internet.10 Considering
how many thriving businesses owe their prosperity to Edison — from the production and consumption of electricity to records and movies — it is hard tobelieve that this American treasure lacks properfunding. It should be supported — financially and not with words – by all who care not just aboutAmerica’s heritage but its future, too.
By the same token, companies new and oldwould do well to cherish their archives. One of thesurprises of the research for They Made Americawas how few bother to do it really well. UnitedTechnologies, which has taken meticulous care topreserve documents about the origins of its Otis elevators, is one of the few that does. It also kept the diaries of Elisha Otis. A sentence in one of his
entries is suggestive of a major truth about Americaand innovation: “Machines [are] the tools of liberty.”
America’s business success in promoting innovation is related to the idea of America itself.Without the ideals that have animated this country,the innovations born here would never have so swiftly reached fruition. As society has progressed or retreated in achieving its ideals, and in resolving tensions between capitalism and liberal democracy,innovation has also progressed or regressed.America’s emergence as a preeminent economicpower can never be explained by the access to physical resources or a large population, since Russia,China, Australia, Canada, Brazil, the Argentine, andSouth Africa were similarly well-endowed.
Freedom remains our most precious resource.
10 For more information on the Edison Papers Project,visit edison.rutgers.edu.
My case studies suggest the importance of the innovator having
a clear vision to communicate to others and a reservoir of patience
few of us have. Success is more likely if one has an aptitude to
lead a creative team in different disciplines.
28 the conference board 2006 annual report
CorporateCitizenship/Sustainability
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Expanding the InvestmentFrontier: Factoring Environmental,Social, and Governance Criteriainto Investment Analysis
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Universal Compliance: An Ethics and ComplianceBenchmarking Survey
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Corporate Contributions in 2004
Corporate Social Responsibilityin China: Can Voluntary CodesSucceed?
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research
Research Reports
Good Practice in WorkplaceDiversity: The Business Case for Diversity in an EnlargedEuropean Union(The Conference Board and Focus
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the conference board Products & Services
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2006 annual report the conference board 29
Consumer Internet Barometerquarterly
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30 the conference board 2006 annual report
Council on Corporate Governanceand Risk Management—India
Council of SeniorInternational Attorneys William D. Manson LubrizolCorporation
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Francis J. Hyatt Wausau InsuranceCompany
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the conference board Products & Services
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2006 annual report the conference board 31
Council on Employee Healthcare Tom Jecklin State Farm InsuranceCompanies
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Council on Executive Coaching William H. Hodgetts FidelityInvestments
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Employee Benefits Council Susan C. Bailey American GreetingsCorporation
Teri A. Ferguson The Dow ChemicalCompany
European Council onCompensation and Benefits Donald Watson Hydro Aluminum ASA
Clive Wright Mercer Human ResourceConsulting
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Executive CompensationManagement Council Wilma K. Schopp Monsanto Company
Marc L. Buchsbaum NCR Corporation
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David Kasiarz The Pepsi Bottling Group
Global Human Resources Council Shirley Gaufin Black & VeatchCorporation
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Human Resources Council—India Pradeep Mukerjee Citibank, N.A.
Human Resources Council—Mexico Joaquín J. Salazar GarcíaPricewaterhouseCoopers (Mexico), S.C.
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Christian Frener Swiss ReinsuranceCompany
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Research Council on Employee Benefits Ellen Collier Eaton Corporation
Work Life Leadership Council Sharon A. Wilkie GlaxoSmithKline
Maria S. Ferris IBM Corporation
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Developing Global Leaders:Enhancing Competencies andAccelerating the ExpatriateExperience
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Leadership Development in Asia-Pacific: Identifying and DevelopingLeaders for Growth
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Are You In or Out? In-House vs. Outside Counsel
Growing a Family Company: An Exercise in Patience
The Incredible ShrinkingCorporation
Keep It Simple: Getting YourArms Around Enterprise RiskManagement
Threat, Vulnerability, andConsequence: A Frameworkfor Managing
What Do We Really Know aboutEffective Leadership in ChangeManagement?
ON THE RECORD SERIES
Dr. Stephanie A. Burns of Dow Corning
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Leadership/Strategy
32 the conference board 2006 annual report
Succession ManagementSeminar New York, San Diego
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China: Creating an Unlikely Edge in the Global Market Share Battle
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The New Corporate Reality:External and Market Considerations
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Shared Services ConferenceChicago
Six Sigma Leadership ConferenceChicago
Spend Management ConferenceNew York
Strategic Alliances ConferenceChicago
Strategic OutsourcingConference New York
Supplier RelationshipManagement Conference Atlanta
Supply Chain Conference Chicago
Other face-to-face forums
Business Continuity, Security,and Crisis Management SeminarNew York (2), San Diego (2)
Offshoring and Outsourcing: A Framework for DecisionMakers Roundtable Hong Kong,
Singapore,Shanghai, Beijing, Sydney
Risk Management and SecurityRoundtable New York, Dallas, Chicago
the conference board Products & Services
Marketing/Communications
Operations/Business Processes
2006 annual report the conference board 33
Webcasts
Adopting a Global Privacy Policyfor the Transfer of Personal Data
The Business Case forCorporate Security
Business Continuity Planning:Strategies for Success
Defining Corporate Value in the Knowledge Economy (2)
Defining Corporate Value:Proposed Patent Reform—The Impact on Your Business
Managing Security in the 21st Century
Metrics and Corporate Security
Planning Wisely: OverseasSecurity and Preventive Aspects of Pandemic Readiness
Planning Your Response toPrivacy Breaches and OtherInformation Security Incidents
Thinking Ahead: Using Scenarios for PandemicPlanning and Preparedness
Thinking the Unthinkable:Corporate Readiness and thePandemic Threat
Travel Security—Risks andResponsibilities
Councils
Asia-Pacific CIO Council
Asia-Pacific Shared ServicesCouncil Vivienne MacCarthy CadburySchweppes Pty Ltd.
Ricardo Manotoc Henkel FinancialServices SEA Co. Ltd.
Arthur Skipitaris Australia Post
Andrew Crow Philips Electronics (S) Pte. Ltd.
Business Continuity and Crisis Management Council Frederick M. Spina Pitney Bowes Inc.
Business Performance Council Philip C. Forve Cargill
Sally J. Penley WeyerhaeuserStrategic Resources
Chief EH&S Officers’ Council IArthur J. Gibson Baxter HealthcareCorporation
LaRaye Osborne Cargill
Chief EH&S Officers’ Council II Scott Nadler Environmental ResourcesManagement Group
Richard H. Bennett UnitedTechnologies Corporation
Council for BusinessDevelopment and Integration Executives Randolph M. Croyle The Dow Chemical Company
Council of CIO Executives Brandt R. Allen University of Virginia
Council on Corporate Real Estate
Council of Corporate Security Executives Claus W. Bertram Deutsche Bank AG
Council on Corporate Travel ManagementStacey Taylor Tyco International
Council on Innovation Carol H. Pletcher Cargill
Council of Shared BusinessServices Executives Denise H. Kluthe Alcoa Inc.
Thomas McGlinn Unisys Corporation
Council of Shared BusinessServices Executives II Earl K. Moore BHP Billiton
Jonica Preite UNICCO Service Company
Council for Six Sigma Executives Steven K. Randol Office of the Chief ofStaff, Department of the Army
Council for Six Sigma Executives IILeslie Behnke CIGNA Corporation
Jeanne J. Kenney Entergy Corporation
Council ofTelecommunications Executives Thomas J. Marcin DuPont Company
Environment, Health and Safety Legal Council Peter Etienne Baxter International Inc.
European Council on e-ProcurementFloris Mokveld DSM Purchasing
European Council on Global Supply Chain Laurent FoetischLaboratoires Serono sa
Arne Schmidt Novozymes a/s
European Council on Health and Safety John Lyons O2 plc
European Council on Information TechnologyGovernance and Strategy Patrick Arlequeeuw Procter & Gamble Company
European Council on Innovation Henrik Dalboege Novozymes a/s
European Council on ITGovernance and Strategy
European Council on Purchasing Michael Hellemann Novo NordiskServicepartner a/s
European Council on Shared Services Michel de Zeeuw Philips International B.V.
Jos Verelst SKF European
European Council on Six Sigma
European Council on Strategic Manufacturing Jochen Jacobs Henkel KGaA
Global Business Excellence Council Paivi Suutari Stora Enso OYJ
Global Operations ExecutivesCouncil on Outsourcing andOffshoring
Information Research and Management Council Aletta Moore 3M Company
Learning and KnowledgeManagement Council James I. Mitnick Turner ConstructionCompany
Online Strategy Council Thomas Hoehn Eastman KodakCompany
David C. Lyons PSEG ServicesCorporation
Performance Excellence Council J. Michael Bealle Union PacificRailroad Company
Ellen J. Gaucher Wellmark Blue CrossBlue Shield of Iowa
Purchasing and SupplyLeadership Council Anthony S. Nieves Hilton HotelsCorporation
Purchasing and SupplyLeadership Council II John R. Gossmann Medtronic, Inc.
U.S. Quality Council Leroy Boatwright Corning Incorporated
Steven H. HoisingtonJohnson Controls, Inc.
Working Groups
Assessing Offshoring Risks
Maximizing RotationalAssignments in Asia-Pacific
AdditionalPublicationsMagazine
Across the Board/The Conference Board Reviewbimonthly
Newsletters
Board Asia quarterly
Board Europe bimonthly
Board India biannually
Board News quarterly
E-mail Express biweekly
Miscellaneous
China Center Report No.1: Results of Statistical Forum
Sustainability and the ChangingNotion of Fairness A speech by
Gail Fosler at The Conference Board Forum
on Sustainability in Brussels
34 the conference board 2006 annual report
Year ended June 30
2006 2005
Assets
Cash and cash equivalents $ 5,918 $ 6,803
Accrued interest receivable 166 116
Accounts receivable 6,279 5,445
Investments, at fair value 24,469 19,600
Securities purchased not yet settled — 2,145
Deferred charges and sundry assets 1,474 1,551
Pension asset 6,455 6,956
Furniture, equipment, software, and leasehold improvements—at cost, less depreciation and amortization 1,972 2,547
Total Assets $ 46,733 $ 45,163
Liabilities and Net Assets
Accounts payable and accrued liabilities $ 7,799 $ 7,597
Advance payments and deferred revenue 11,225 9,733
Deferred subscription revenue 9,502 8,588
Due to broker – 2,145
Post-retirement benefit obligation 3,524 3,203
Total Liabilities 32,050 31,266
Net Assets
Unrestricted 14,589 13,810
Temporarily restricted 94 87
Total Net Assets 14,683 13,897
Total Liabilities and Net Assets $ 46,733 $ 45,163
Note: The information on pages 34 and 35 was extracted from the Financial Statements audited by Ernst & Young llp. These statements are available to members of The Conference Board upon request.
the conference board Statements of Financial Position
in us$ thousands
2006 annual report the conference board 35
Year ended June 30
2006 2005
Operating Revenue
Subscriptions $ 16,989 $ 15,942
Conferences, councils, and meetings 32,194 29,550
Grants, contracts, and fee-based services 5,458 4,327
Sale of publications 470 391
Other income* 768 579
Total Operating Revenue 55,879 50,789
Operating Expenses
Compensation 26,543 24,021
Purchased services 10,442 9,032
Travel 1,858 1,775
Meeting location costs 6,641 6,095
Printing, postage, and supplies 4,681 4,232
Depreciation and amortization 686 771
Facilities 3,051 3,042
Other expenses 1,631 1,543
Total Operating Expenses 55,533 50,511
Excess of Revenue from Recurring Operations 346 278
Other Activities
Nonrecurring legal expenses – (579)
Interest, dividends, and other income 291 261
Realized gain on disposal of investments 393 396
Unrealized (loss) gain in the fair value of investments (267) 94
Effect of foreign currency translation 16 (35)
Transfer of temporarily restricted net assets to unrestricted net assets – 100
Change in unrestricted net assets 779 515
Change in temporarily restricted net assets 7 (91)
Change in net assets 786 424
Net assets as of the beginning of the year 13,897 13,473
Net Assets as of the End of the Year $ 14,683 $ 13,897
* Includes $501,000 and $298,000 in 2006 and 2005,respectively, of Operating Fund investment income.
the conference board Statements of Activites
in us$ thousands
36 the conference board 2006 annual report
asia/pacific
Australia
Linda Bardo NichollsRetired ChairmanAustralia Post
John B. Prescott, A.C.3
ChairmanAustralian SubmarineCorporation Pty Ltd
John B. Reid, A.O.3
Chairman EmeritusAustralian Graduate School of Management
University of New South Wales
Hong Kong
Andrew C.W. BrandlerGroup Managing Directorand CEO
CLP Holdings Ltd.
Sir C.K. Chow2
Chief Executive OfficerMass Transit Railway Corporation
Marjorie YangChairmanEsquel Group of Companies
India
Mukesh D. Ambani4
Chairman and Managing DirectorReliance Industries Ltd.
Nandan M. Nilekani4
Chief Executive Officer,President and Managing Director
Infosys Technologies Limited
Malaysia
Dato’ Tan Teong HeanChief Executive DirectorSouthern Bank Berhad
Philippines
Roberto F. De OcampoPresidentAsian Institute of Management
Oscar M. LopezChairman and Chief Executive Officer
First Philippine HoldingsCorporation
Washington Z. Sycip3 4
FounderThe SGV Group
Singapore
S. DhanabalanChairmanTemasek Holdings (Private) Ltd.
Koh Boon HweeChairmanDBS Bank
Lim Chee Onn4
Executive ChairmanKeppel Corporation Limited
middle east
Egypt
M. Shafik GabrChairman and Managing DirectorARTOC Group
Israel
Doron TamirChairmanRDT Investments
Kuwait
Hisham Abdulrazzak Al-RazzuqiChief Executive OfficerGulf Investment Corporation
Oman
Sayyid Khalid Bin HamadAl Bu Said
ChairmanSabco l.l.c.
United Arab Emirates
Khalid Kalban Chief Executive OfficerDubai Investments
europe
Belgium
François M. G. Cornélis4
Vice Chairman of the Executive Committee andExecutive Vice President
TOTAL sa
Viscount Etienne DavignonVice ChairmanSuez-Tractebel s.a.
Julien De WildeMember of the Board of DirectorsN.V. Bekaert s.a.
Thomas LeysenChief Executive OfficerUmicore
Anton van RossumMember of the Board of DirectorsCrédit Suisse Group
Karel VinckChairman of the BoardUmicore
Denmark
Mads ØvlisenChairman of the BoardLego a/s
Jess SøderbergPartner and CEOA.P. Møller - Maersk Group
Peter StraarupChairman of the Executive Boardand the Executive Committee
Danske Bank as
Finland
Jukka HärmäläPresident and CEOStora Enso
Ole JohanssonPresident and CEOWärtsilä Corporation
Mikael Lilius4
President and CEOFortum Corporation
France
Philippe CamusCo-Managing PartnerLagardère
Bertrand CollombChairman of the Group Chairman of the Board of Directors
LAFARGE
Denis Kessler2
Chairman and CEOSCOR Group
Jean-Louis Mathias Chief Operating OfficerEDF
Germany
Josef Ackermann4
Chairman of the ManagementBoard and the Group ExecutiveCommittee
Deutsche Bank ag
Roland BergerChairmanRoland Berger StrategyConsultants
Gerhard Cromme4
Chairman of the Supervisory Board
ThyssenKrupp ag
Michael Diekmann4
Chairman of the ManagementBoard and CEO
Allianz ag
Klaus KleinfeldPresident and CEOSiemens a.g.
Edward G. KrubasikPresidentORGALIME
Werner Wenning2
Chairman of the Board of Management
Bayer ag
Greece
Yannis S. CostopoulosChairman of the Board ofDirectors and CEO
Alpha Bank
Ireland
Brian J. Goggin2
Group Chief ExecutiveBank of Ireland
Liam O’MahonyGroup Chief ExecutiveCRH plc
Netherlands
Peter BakkerChief Executive OfficerTNT n.v.
Rijkman W. J. GroeninkChairman of the Managing BoardABN AMRO Bank n.v.
P. J. Kalff1 3
Former Member of theSupervisory Board
ABN AMRO Bank n.v.
Jonkheer Aarnout A. Loudon1 3
Chairman of the Supervisory Board
Akzo Nobel nv
Kees J. Storm1
Member of the Supervisory BoardAEGON n.v.
Morris Tabaksblat3 4
Retired Chairman and CEOUnilever n.v.
C. J. A. van LedeMember of the Supervisory BoardAkzo Nobel nv
G. J. (Hans) Wijers2
Chief Executive OfficerAkzo Nobel nv
the conference board Global Counsellors
2006 annual report the conference board 37
Norway
Johan H. Andresen, Jr.Owner and Chief Executive OfficerFerd Holding as
Poland
Maria WišniewskaVice PresidentPolish Confederation ofPrivate Employers
Spain
César Alierta Izuel4
Chairman and Chief Executive Officer
Telefónica s.a.
Isidro Fainé CasasPresident and CEOLa Caixa
Francisco González Rodríguez4
Chairman and CEOBBVA
Ignacio Sánchez Galán1
Vice Chairman and CEOIberdrola s.a.
José Luis Madariaga2
Executive ChairmanPricewaterhouseCoopers - Spain
Sweden
Tom JohnstonePresident and CEOSKF ab
Lars G. NordströmGroup Chief Executive OfficerNordea ab
Marcus Wallenberg4
Chairman of the BoardSEB
Switzerland
Fritz F. FahrniChairmanInnovation Management and Logistics
Institute of TechnologyManagement andEntrepreneurship
University of St. Gallen
Turkey
Bülent EczacibasiChairmanEczacibasi Holding a.s.
Güler SabanciChairmanHaci Ömer Sabanci Holding a.s.
United Kingdom
Sanjiv AhujaChief Executive OfficerOrange a.s.
Lord Browne of Madingley3
Group Chief ExecutiveBP p.l.c.
Patrick J. CescauGroup Chief ExecutiveUnilever plc
Harald EinsmannExecutive Chairman of the BoardFindus a.b.
Niall Fitzgerald kbe4
ChairmanReuters Group plc
Sir Bryan Nicholson, gbe1
Former ChairmanFinancial Reporting Council
Lord Marshall of Knightsbridge3
ChairmanPirelli UK plc
Sir Martin SorrellGroup Chief ExecutiveWPP Group plc
Peter D. Sutherland3
Chairman and Managing DirectorGoldman Sachs International
Andre Villeneuve1
ChairmanEuronext.liffe
americas
Mexico
Dionisio Garza MedinaChairman of the Board and CEOAlfa Corporativo, S.A. de C.V.
Tomás González SadaChairman of the Board,President, and CEO
Grupo Cydsa, S.A. de C.V.
Federico SadaChief Executive OfficerGrupo Vitro
Panama
Stanley A. MottaChairmanBanco Continental de Panama
United States
Paul M. AndersonChairmanDuke Energy Corporation
Alain J. P. Belda4
Chairman and CEOAlcoa Inc.
Robert H. Benmosche4
Retired Chairman and CEOMetropolitan Life Insurance Co.
Douglas R. Conant4
President and CEOCampbell Soup Company
Alan M. Dachs2 4
President and CEOFremont Group, l.l.c.
Alfred C. DeCrane, Jr.3
Retired Chairman and CEOTexaco Inc.
Robert E. Denham4
PartnerMunger, Tolles & Olson llp
Livio D. DeSimone1 3
Retired Chairman and CEO3M Company
Samuel A. DiPiazza, Jr.4
Chief Executive OfficerPricewaterhouseCoopers llp
Laurence D. Fink4
Chairman and CEOBlackRock, Inc.
Jacob A. Frenkel4
Vice ChairmanChairman, Global EconomicStrategies Group
American International Group, Inc.
Christina A. Gold3
President and CEOWestern Union Company
John W. Johnstone, Jr.1 3
Retired Chairman and CEOOlin Corporation
Harry P. Kamen3
Chairman of the Board and CEO (Retired)
Metropolitan Life InsuranceCompany
Harry M. J. Kraemer, Jr.4
Executive PartnerMadison Dearborn
H. William LichtenbergerChairmanNoveon
Ellen R. Marram3
AdvisorNorth Castle Partners, l.l.c
W. Craig McClelland3 4
Retired Chairman and CEOUnion Camp Corporation
Hutham S. Olayan4
President and CEOOlayan America Corporation
James W. Owens4
Chairman and CEOCaterpillar Inc.
Donald K. Peterson1
Chairman and CEOAvaya, Inc.
Jane Cahill Pfeiffer1 3
Management Consultant
Henry B. Schacht3
Managing Director and Senior Advisor
Warburg, Pincus & Co., Inc.
Anne M. Tatlock4
Chairman and CEOFiduciary Trust CompanyInternational
Paul A. Volcker4
Former Chairman ofthe Board of Governors
The Federal Reserve System
1Until November 16, 2006
2As of November 16, 2006
3Former Trustee
4Global Advisory Council Member
38 the conference board 2006 annual report
Josef AckermannChairman of theManagement Boardand the Group ExecutiveCommittee
Deutsche Bank ag
Samuel A. DiPiazza, Jr.Chief Executive OfficerPricewaterhouseCoopers
Anne M. TatlockChairman and CEOFiduciary Trust CompanyInternational
vice chairmenchairman
Douglas R. ConantPresident and CEOCampbell Soup Company
Harry M. JansenKraemer, Jr.
Executive PartnerMadison Dearborn
Nandan M. NilekaniChief Executive Officer,President and Managing Director
Infosys Technologies Ltd.
1Until November 16, 2006
2As of November 16, 2006
Herbert M. Allison, Jr.Chairman, President and CEOTIAA-CREF
Alain J. P. BeldaChairman and CEOAlcoa Inc.
Robert H. Benmosche1
Retired Chairman and CEOMetropolitan Life Insurance Co.
Stephanie A. BurnsPresident and CEODow Corning Corporation
Richard E. CavanaghPresident and CEOThe Conference Board, Inc.
Patrick CescauGroup Chief ExecutiveUnilever plc
Paul W. ChellgrenRetired Chairman ofthe Board and CEO
Ashland Inc.
Alan M. DachsPresident and CEOFremont Group, l.l.c.
Ian E. L. DavisWorldwide Managing DirectorMcKinsey & Company
S. Dhanabalan1
ChairmanTemasek Holdings (Pte) Ltd.
Niall FitzGerald kbe1
ChairmanReuters Group plc
Jeffrey E. GartenJuan Trippe Professor ofInternational Trade,Finance and Business
Yale School of Management
Anne GoldenPresident and CEOThe Conference Board of Canada
Francisco GonzálezRodríguez2
Chairman and Chief Executive Officer
BBVA
Rijkman W. J. Groenink1
Chairman of the Managing Board
ABN AMRO Bank n.v.
Klaus KleinfeldPresident and CEOSiemens ag
Lim Chee Onn2
Executive ChairmanKeppel Corporation Limited
Padraig McManus2
Chief Executive OfficerElectricity Supply Board
Linda Bardo NichollsRetired ChairmanAustralia Post
Hutham S. OlayanPresident and CEOOlayan America Corporation
Michael E. Roach2
President and Chief Executive Officer
CGI Group
Edward B. Rust, Jr.Chairman and CEOState Farm Insurance Companies
Mayo Schmidt2
President and Chief Executive Officer
Saskatchewan Wheat Pool
Samuel C. Scott IIIChairman, President and CEOCorn Products International, Inc.
Stephen G. Snyder1
President and CEOTransAlta Corporation
Sir Martin Sorrell1Group Chief ExecutiveWPP Group plc
Anton van RossumMember of the Board of Directors
Crédit Suisse Group
G.J. (Hans) Wijers2
Chairman, Board ofManagement
Akzo Nobel nv
Ronald A. WilliamsChairman of the Board, ChiefExecutive Officer and President
Aetna Inc.
Marjorie YangChairmanEsquel Group of Companies
Jaime A. Zobel de Ayala2
President and Co-Vice ChairmanAyala Corporation
members
the conference board Board of Trustees
Communications Randall Poe,Frank Tortorici, Carol Courter
Creative Peter Drubin
Project Editor Timothy Dennison
Editors Celia Colista, Erik Gopel,Marta Rodin
Production Margaret Cesario
Printing Thames Printing
The Conference Board is a not-for-profit organization and holds 501(c)(3) tax-exempt status in the United States.
© 2006 by The Conference Board, Inc. All rights reserved. Printed in the U.S.A. The Conference Board and torch logo are registered trademarks ofThe Conference Board, Inc.
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