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Agenda 2008

The next year-and the decade to come-promise to be full of challenges for the CEOs of Fortune 500 companies. So Chief Executive asked business leaders from a wide range of industries: What issues or challenges will be uppermost in your mind, for you, your industry and the economy in general, as you face the next 12 to 18 months?

Power Over Poverty

Hector Ruiz, chairman and CEO, AMD

“Global business has rarely had greater influence than it does today. As leaders of those businesses, CEOs have a special responsibility to ensure that influence is used not just to do well, but also to do good. Two of the great challenges of today’s generation of business leaders are how to use this influence both profitably and responsibly, while also creating a new template for the leaders of tomorrow.

As business leaders, we have great power at our disposal. There are a multitude of forces-the Internet, globalization and the spread of democracy among them-that have combined to allow businesses to extend the reach of our products and services. And with every advance in technology, we empower more people to participate in the global economy. Our success has turned global business into the most effective and efficient mechanism to reach people all around the world.

As leaders of these global businesses, we are in a rather unique position. We have a historic opportunity to take the remarkable influence business has and leverage it not just to fatten our balance sheets, but to end poverty. Educate a new generation. Bring affordable health care to millions. Slow global warming. Prevent cancer or eradicate disease. Solving these problems need not just be an act of good will. Successfully solving these problems can also be an act of good business built on sustainable business models. Through our 50×15 initiative, an ambitious effort to enable 50 percent of the world’s population with Internet access by the year 2015, AMD is but one example of an organization experimenting with the newfound power we have as a global company to attract business while addressing greater world challenges.

Twenty-first century CEOs will be judged not only by how well they changed their industries, but also how well they led their companies to have positive impacts on the world. In an economy that is as global and connected as it is today, we cannot be selective in our leadership. As CEOs and role models for tomorrow’s leaders, we bear a special burden to not only continually advance our role, but also to educate the market and media on how they should qualify and evaluate CEO performance.

The great changes taking place in our world present a unique road map for today’s CEO. It is a road map that demands greater responsibility but offers greater opportunity. It is a road map that offers CEOs the chance to do very well for investors and also the chance to do great good for the world. And by the time they are through, I believe their positive effect on society will far surpass their superior return to shareholders.” 

AMD is a $5.6 billion microprocessor supplier based in Sunnyvale, Calif. 

Pursuing Performance

Fernando Aguirre, chairman and CEO, Chiquita Brands International

One key challenge is to control costs while supporting innovation efforts. Cost savings programs have not been nearly enough to offset higher industry and other costs. Our costs for fuel, fruit, ship charters, paper and resin increased by more than $50 million in 2006 and have continued to accelerate in 2007. We expect to face similar trends in the next year. As a result, we are continuously evaluating how to make our business more efficient and drive synergies. We are reviewing every cost area with the goal of decreasing the total cost while delivering innovation.

The second challenge is to remain agile in a competitive, fast-paced marketplace that is characterized by growing consumer expectations. To strengthen our business and the power of our brand, we are developing strategies based on consumer trends for healthy, fresh foods and focusing on diversification and innovation. Our vision is to become an innovative global leader in branded, healthy, fresh foods. To achieve this goal, we are focused on two key objectives: to pursue profitable growth by delivering innovative, higher-margin products and to build a high-performance organization.

We are transitioning from low-margin commodities to more profitable, value-added products, while maintaining excellence in food safety, cold-chain management, product quality, customer service and in-store execution. We have more work to do, but as we continue to transform into a consumer-centric and customer-preferred company, we will strengthen our balance sheet, improve our risk profile, focus on market initiatives and diversify our company by product, channel and geography.” _

Chiquita Brands International is a $4.5 billion provider of fresh and value-added food products in Cincinnati, Ohio. 

Economic Distress

T.J. Rodgers, founder, president and CEO, Cypress Semiconductor

Most of all, I worry about the overall economy. We’re spending money at an atrocious rate in Iraq, and the price of oil is going up, which is like a tax on the economy. We just mail the extra $50 a barrel to the outside world instead of to the U.S. government. Also, if the Democrats get control of the White House next year and greater control over Congress, they won’t have the courage to cut spending-and they’ll end up taxing us more. Those three factors could bring our economy to its knees.

I would have thought the economy would be suffering more under high oil prices. But actually, we’ve got a lot of protection against high prices because there is still so much energy inefficiency in the economy. It amounts to a lot of low-hanging fruit that we’re just starting to harvest to keep the economy running as it is while burning less oil.

For our industry, the biggest issue is the end of Moore‘s Law. I’ve been saying that it will die in the boardroom, not the laboratory-that return-on-investment calculations would kill Moore‘s Law even while scientists were telling us that they had the capability to move to the next level. And I still believe that. There are technological solutions to the challenges of continuing to extend Moore‘s Law, even four decades after it became effective. Many companies will make those investments, but they won’t pay off.” _

Cypress Semiconductor is a $1.1 billion manufacturer of integrated circuits and other digital components based in San Jose, Calif. 

Politics and Profits

David Brandon, chairman and CEO, Domino’s Pizza

Uncertainty. Which political party will be in power after the November 2008 election? How will consumer spending habits change as a result of the cost increases they are experiencing every time they visit a grocery store or a gas station?

Forecasting sales, costs and business outcomes over the next 18 months will be very difficult. We will be going through a period of considerable change and volatility. Businesses will need to stay nimble and react quickly to sudden change situations.” _

Domino’s Pizza is a $1.4 billion pizza brand and franchisor based in Ann Arbor, Mich.

Choking Competitiveness

Andrew Liveris, CEO and chairman, Dow Chemical

When I look ahead to 2008-and look back on 2007-it is alarming to realize that the concerns I was expressing 12 months ago are the same ones I talk about today. The only difference is that with a softening U.S. economy, they are significantly more critical.

Global competition is rising; U.S. industry is weakening; and American jobs are disappearing. Yet U.S. policy continues to choke the competitiveness out of its manufacturing sector through lack of action on key issues: tort reform, taxation, health care, pension costs and, most alarmingly of all, energy. The devastating impact that the lack of a comprehensive energy policy is having on American manufacturers- and therefore the entire American eco no my- cannot be understated: three million jobs lost since 2000, skyrocketing costs for feed stocks and energy, lack of diversity in terms of supply. All are forcing American companies to consider taking their jobs, their technology and their philanthropy to regions where energy and feedstock costs and supply are more reasonable. Even innovation- the catalyst for new growth-is at risk of moving abroad, since 70 percent of all business research in this country is done by industry.

If America wants to restore vigor and vitality to the economy, it must start with a coherent energy policy. We must have a national call-to-arms on conservation. We must increase research and development investments to make coal a more sustainable energy source. We must diversify our domestic supplies. And we must do it all while reducing our impact on climate change. If we don’t act soon, the window for proactive decisions based on sound principles may close on us, displaced by unavoidable and prescriptive choices that will ill-serve this country and its indispensable role as the leader of the Western World.”

Dow Chemical is a $49.1 billion chemical and plastics manufacturer based in Midland, Mich.

Excellence in Energy

John Rowe, president, chairman and CEO, Exelon

The fundamental challenge to our business, and one that will remain a challenge well beyond the next 12 months, is to meet the energy needs of our customers at a competitive and politically acceptable price in a carbon constrained world. For years I have believed that environmental concerns generally, and climate change in particular, is inextricably tied to our business. We must constantly think about what we can and must do to ensure environmental leadership without sacrificing sound economics. First, we must advocate for efficacious but practical carbon regulation. We need a mandatory federal program- either a carbon tax or a cap-and-trade program with an achievable emission cap and an economic safety valve to provide price certainty-and we need it now. Companies like Exelon that need to make major investments in new infrastructure and new technologies must know the rules before making these business decisions.

Second, we must continue to be aggressive wholesale competitors. Over the last 12 years, wholesale competition in the electric industry has resulted in an impressive record of new, environmentally preferred in vestment, improved operation performance in our existing low carbon nuclear plants, and savings to customers. If we do it well, carbon regulation can set the stage for the next great global industry-low carbon energy. If we do it poorly, however, carbon regulation can impose an impossible burden on our economy and threaten our global competitiveness.”

_ Exelon is a $15.7 billion utility holding company based in Chicago, Ill.

Innovate and Adapt

Jeffery Yabuki, president and CEO, Fiserv

The first issue for us is thinking about how to modify our business model to coincide with the changes going on in our marketplace. We’re seeing movement toward more integration, so we are focusing on having products that will work together in new ways and interact in order to give our financial-institution clients access to more information about their end customers. That is critical for them because consumers’ needs are evolving very rapidly. A few years ago, consumers would complete transactions using cash and checks. Then it was cash, checks and credit cards. Now, it’s cash, checks, credit cards and debit cards-and different kinds of debit cards, as well as mobile payment technology and paying bills online. It’s a very dynamic environment around payments. We need to bring innovation there to our clients and to their customers.

We also are watching to see if consumers begin to lose confidence because of the problems in the mortgage market. If that happens, you get into a bit of a vicious circle of slowing consumer spending that will affect business generally. We have to think prudently about how we deploy capital over the next 12 to 18 months. That includes what kinds of investments we may make in terms of acquisitions, internal investment, capital investment and talent.

When your business model changes a bit, you have to think about deploying human and financial capital differently. You need to make sure that you can gather diverse views to help solve some of your challenges, as well as to help better capitalize on addressable opportunities. We’re working on ensuring we have a mix of people with deep  experience in the industry, complemented by some people from the outside who will bring new and different thinking, which together will enhance our products and services. It’s an exciting and interesting time.” _

Fiserv is a $4.5 billion processor of financial data based in Brookfield, Wis.

Bring on the Balance

Cathie Black, president of Hearst Magazines and author of Basic Black: The Essential Guide for Getting Ahead at Work (and in Life)

The challenges for CEOs today are around innovation and reinvention, keeping an eye on the profit ball, maximizing investments in technology, and attracting and retaining the best people we can get our hands on to help us grow our businesses. We must balance investing for growth in growth markets with managing more stagnant markets-fueling one side of the ledger while managing for profit on the other side. For example, we are seeing tremendous growth in Russia, China and Australia. The issues of Cosmo and Harper’s Bazaar published in those countries are huge; the Russian edition of Cosmo prints 1 million copies a month. And we publish seven magazines in China today.

The outlook for the U.S. economy is more troubling. We believe that issues like gas prices, subprime mortgage defaults and a weakening housing market will trickle down to the average American consumer. Magazines are impulse purchases; one less trip to the supermarket a week means one less opportunity we have for the consumer to see and buy a magazine. We are looking at being conservative with our 2008 budget, particularly in the U.S. We are feeding the hungry beasts, and trying to manage our cost on the less robust parts of the business.

With today’s 24-hour news cycle and rapidly advancing technology, reinventing the wheel literally on a day-by-day basis is both a huge opportunity and a huge challenge for media companies. I probably spend 20 to 30 percent of my day dealing with forms of digital media. Cosmo is the best example of a multiplatform brand. In any given year, Cosmo sells 2 million magazines a month (in addition to its 900,000 subscriptions), has a channel on Sirius satellite radio and does podcasts. We want to build brands and take them across as many platforms as we can to attract the young consumer who is on Facebook or texting.

On the people side, our job as executives is to create an atmosphere to attract, retain and develop the best talent. There are enormous numbers of talented young women entering the workforce today. Companies have undergone a huge change and created a work environment that can tap into this highly educated workforce but be more accommodating to the demands of balancing work and family. The hierarchical approach has really begun to disappear, and there’s a greater understanding that more voices reflecting different perspectives lead to a better product. We are not completely there, but a lot of those barriers have broken down. My generation was first in there; the generation that followed found their own paths to balance, which many people in my generation could not do. Today, the expectations of 22- and 25-yearolds are different. Companies that don’t respond to that are going to lose a lot of talent.” _

Hearst is a diversified media company in New York City.

Customer Connection

Jim Skinner, CEO, McDonald’s

As we head into the New Year, it would be easy to reflect on the record-breaking business results McDonald’s produced in 2007 and become complacent. That’s not the McDonald’s way. My challenge as CEO is to remain committed to our customers with a renewed focus of being better, not just bigger. That means staying connected to our customers as a brand they trust to serve great food with more choices than ever before. We are accountable to our customers both inside our restaurants and outside in their every day world. McDonald’s is offering more menu variety than ever before. Fifty two million customers visit McDonald’s every day around the world-that’s six million more per day than four years ago. The numbers tell us that we’re getting it right with clean, comfortable and modern restaurants, extended hours and dependable drive throughs.

But our work going into the New Year goes well beyond the restaurants. McDonald’s is inspired to continue our industry-leading work in environmental and corporate social responsibility initiatives. We’re proud to be recognized for the third consecutive year on the Dow Jones Sustainability Index, and to have been named an Energy Star Partner of the Year by the U.S. Environmental Protection Agency. We don’t have all the answers, so we continually listen to the top experts from leading NGOs such as Greenpeace, Conservation International, World Wildlife Federation and Environmental Defense. With their help, and the partnership of our suppliers, we’ve made a difference. For example, 83 percent of our consumer packaging is made from paper or wood-fiber material.

Today’s consumers expect more from a brand than just products and service. They are looking for brands that stand for something. That’s why I am leading a McDonald’s initiative based on values: placing the customer experience at the core of what we do, committing to operating our business ethically, and giving back to our communities.

We recognize that we’re living in a culture where choice matters. We understand our customers have a choice as to where they eat and what they eat, and we appreciate that they’re choosing McDonald’s in increasing numbers. That continues to be our goal going forward.” _

McDonald’s is a $21.6 billion global fast-food brand based in Oak Brook, Ill.

A Focus on Fuel

Timothy Hoeksema, chairman, president and CEO, Midwest Airlines

Fuel is the largest single cost in the airline industry, deeply affecting the cost structure of all airlines. While these costs have to be passed along to consumers, airlines have to carefully balance how much of the cost increases the market can bear without affecting demand for travel. Yet I’m surprised that the rise in fuel prices actually hasn’t been more crippling to the U.S. economy so far. A few years ago, if you would have said that we were going to see $100-a-barrel or even $90-a-barrel oil by now, everyone believed that would stop the economy in its tracks. But the economy has been very resilient, and I hope that continues.

Our industry is exploring ways to reduce our dependency on fossil fuels; however, considering the amount of power required by a jet engine along with the need to minimize weight, alternate technologies are much more difficult than in other industries. A related issue that we must address is emission reductions, and work is being done in that area.

There’s one more urgent issue that the U.S. airline industry faces: We really must move to a next generation air-traffic control system. Most air traffic control centers are still operating on antiquated systems that date back as far as the Fifties. There’s been lots of debate in Congress about funding this for the next ten years, and that dialogue really needs to move into action. A state-of-the-art system will reduce flight delays, save fuel, lower emissions and help the entire economy.” _

Midwest Air is a $665 million national airline based in Oak Creek, Wis.

ROI Initiative

Mark Gumz, president and COO, Olympus America

A critical issue confronting leaders in 2008 and beyond is how to best assess and place quantifiable values on employees’ work by understanding their talents. This should translate into knowing where the strength points are in the organization. Planning to measure a company’s €˜return on talent’ is as important as measuring any return on investment. Olympus America recently completed a 26- month corporate headquarters re location from Melville, N.Y., to Center Valley in Eastern Pennsylvania, achieving a significant amount of change. We knew, however, that this was just the foundation for sustainable change, and that the more important work was ahead in aggressively investing in developing employees’ workplace strengths, while also continuing to attract the best talent who would choose to build careers with us.

With this approach, we can take the long view on employee retention and development, researching what constitutes engaged employees and measuring the quantifiable returns on their work. This metrics focused process is a commitment to our employees. It is also an investment we’ve made in talent selection and development, which should also manifest itself in bottom-line returns. The Gallup Organization is helping us put quantifiable metrics in place for an overall talent evaluation/measurement process, with the ultimate goal to maximize financial performance through increased employee and customer engagement and potential.” _

Olympus America is a wholly owned subsidiary of Olympus Corp., based in Center Valley, Pa., that creates imaging solutions in health care, life science and consumer electronic products.

Going Green

Jonathan Schwartz, CEO, Sun Microsystems

It’s undeniable that the Internet is becoming a social utility. And it’s creating enormous wealth globally, driving transparency, social progress and efficiency across markets. No one can possibly doubt the value of connectivity. Every week, 12 million people join the network, most of whom live outside the U.S., and will first experience the Internet through a mobile device. As the world comes online over the next decade, we as an industry must also pay close attention to reducing the ecological impact of an increasingly connected planet. The energy required to power this infrastructure has been doubling every five years, and we need to re-examine some fundamental assumptions.

That’s why, about five years ago, Sun made a simple but important bet: that our customers would eventually look at inefficiency in their data centers with a far more scrutinizing eye

About Dale Buss

Dale Buss
Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other top-flight business publications. He lives in Michigan.