Board Europe - The Conference Board

Volume 22• Number 7/8

July / August 2007

Inside 3

Managing for a CarbonConcerned Future

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Webcast Update

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Upcoming • Climate Change Forum • New Global Research Working Group on Managing Reputation Risk

Council News • • • • • •

Business Conduct Innovation Human Resources Strategic Manufacturing Pensions Learning, Leadership & Organisational Development • Corporate Communications • Investor Relations

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Board Europe A NEWSLETTER FOR MEMBERS OF THE CONFERENCE BOARD IN EUROPE

A distinguished welcoming group greets the former President of France, (from left): Bertrand Collomb, Global Counsellor, The Conference Board and Chairman of Lafarge; Samuel A. DiPiazza, Chairman of The Conference Board and Chief Executive Officer, PricewaterhouseCoopers; Valéry Giscard d’Estaing, former President of France (1974-1981); Jonathan Spector, President and CEO, The Conference Board; Richard Zisswiller, Regional Representative, The Conference Board Europe.

Valéry Giscard d’Estaing Outlines Challenges for Europe Former French President, Valéry Giscard d‘Estaing, outlined some of the main challenges facing Europe during a private audience with Trustees and Members of The Conference Board in Paris on 7 June. Giscard was positive about what has been achieved so far. The European project has been more successful than its founders could have ever hoped. There have been no wars, a true European space has been created, European institutions have been set up including a representative parliament, and the euro has become the second most important global currency. Nevertheless, national interests persist, and the general view is that most people do not support increased European integration, even though polls show that a Valéry Giscard d’Estaing, majority of Europe’s citizens favour common foreign and defence former President of policies. France Certainly, believes Giscard, some radical changes need to be made. Despite successive EU enlargements, the institutions have not essentially changed, and the rotating EU presidency does not help to create an impression of stable government. The voting system must be overhauled, as it gives disproportionate weight to the smaller countries. ( ➢ 2) 1

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William Y. Yun, President, Franklin Templeton Institutional (left) in conversation with Conference Board Trustee, Jaime Augusto Zobel de Ayala II, Chairman and CEO, Ayala Corporation

Jean-Bernard Lévy (left), Chairman of Vivendi, host of the Trustee and Global Advisory Council meetings, and Bertrand Collomb, Chairman of Lafarge and Global Counsellor, The Conference Board.

The former French President pointed out that a major part of the new treaty, under discussion at the EU summit in June, retained much of the original proposal for a European constitution of which he was the chief architect, and which was rejected by French and Dutch voters two years ago. He underlined the fact that 45% of the French population had voted “Yes”.

Later in the month, the EU Summit in Brussels paved the way for treaty reform. An intergovernmental conference will draw up the new treaty in detail.

Looking ahead, Giscard d’Estaing said that the original treaty could not be thrown out, as it had already been ratified by two thirds of the member states. It needs to be softened, simplified and modified slightly. He called for: • EU decision-making powers to be restructured and competencies extended beyond international trade, competition and monetary policy • Rules for admitting new members to be more clearly defined • Internal security and external defence policies to be put in place • Comprehensive strategies to respond to global challenges such as energy sources and environmental protection • Much better communication of the European idea to EU citizens

From left: Christian Noyer, Governor, Banque de France; Gail Fosler, Executive Vice President and Chief Economist, The Conference Board

The Trustees of The Conference Board held their summer meeting the following day, and were hosted at a private luncheon by Jean-Bernard Lévy, Chairman of Vivendi.

Anton van Rossum, Trustee of The Conference Board and Member of the Board of Directors, Crédit Suisse Group.

From left: Alan Dachs, Trustee of The Conference Board and President and CEO, Fremont Group LLC; Axel Miller, Chief Executive Officer, Dexia Group; Padraig McManus, Trustee of The Conference Board and Chief Executive Officer, Electricity Supply Board; Samuel A. Piazza, Chairman of The Conference Board and Chief Executive Officer, PricewaterhouseCoopers with his wife, Melody. 2

Also on 7 June, CEOs and other senior members of the Global Advisory Council met at Vivendi’s headquarters to discuss the world economic outlook. Topics included the effects of excessive liquidity, changes in hedge fund activities and private equity firms, the relevance of public markets, and the balance between financial regulation and private market discipline. In the evening, members of The Conference Board enjoyed dinner in the splendid surroundings of the Galerie Dorée (Golden Gallery) of the Banque de France. Christian Noyer, Governor of the Banque de France, welcomed the guests, and explained the significance of the 17th century works of art that adorn the gallery.

Christian Noyer, Governor of the Banque de France and host of the dinner for Trustees and members of The Conference Board.

Managing for a CarbonConcerned Future As concerns about the global carbon load are growing, so are the demands for companies to reduce their carbon footprint. The carbon question poses new strategic, managerial, and process challenges for business, according to a new study by The Conference Board. It finds that a company's choice to manage its carbon footprint and seek related new businesses may range from the simple to the complex, with the organisation's unique circumstances being a decisive factor.

Managing for a Carbon-Concerned Future: Other perspectives influencing how a A Decision-Making Framework Report 1404

company proceeds include:

• Business-based drivers (e.g. whether to reduce certain emissions or enter new product or service markets) will be evaluated by business investment criteria and based on whether the decision will yield a needed return on investment. • Value-based drivers (e.g. "we need to do this because it is the right thing to do") may create more flexibility in investment and return decisions. "The interplay between the various drivers is likely to be complex for some companies, and reaching decisions on whether and how best to move forward will be challenging," says Meredith Armstrong Whiting, Senior Research Fellow at The Conference Board and co-author of the report with Charles Bennett. While the case for immediate reductions of greenhouse gases is increasingly compelling, development of a complex carbon management programme might not be a practical choice for some companies, especially those whose operations are not carbon-intensive. Such organisations may choose to concentrate on near-term measures such as energy efficiency, which can offer important returns with a minimum of investment. For many companies, however, policy and societal conditions appear to be headed toward mandatory emissions reductions and ultimate stabilization, a process that may take years or decades. This wide range of timing scenarios is important to consider when developing a business strategy. "Tallying and reporting greenhouse gas emissions is not new," says Whiting. "Many companies have been doing so for over a decade, and the processes' sophistication has increased dramatically as a result. But it is a demanding process - time-consuming, expensive, and technically complex. To ensure credibility, once a company decides to embark on the process, it must be thoroughly completed."

“We are in a perfect storm right now – a confluence of public concerns, stakeholder demands, climate change, policy developments and rising energy costs. If you are not on top of certain indices, you are going to lose out. It’s all about business value and it has to be done.” Mark Chatelain, Johnson Controls

European Webcast Update Note: Webcasts are archived and available for purchase at www.conference-board.org/webcasts

Global, Cross-Cultural Leadership 22 May Today’s global leaders need a heightened sense of cultural awareness. Prof. Celia de Anca, Professor of HR and Organizational Behaviour at the Instituto de Empresa Business School and Executive Director of the Center of Diversity and Global Management pointed out that most top managers need additional skills before they can meet the challenges of global leadership today. When leading in a multicultural environment, the cultural context of the leader, the cultural context of the follower(s) and the cultural context of the organisation is relevant. Global leaders must recognize the importance of diversity, said Melissa Lamson, Founder and Director of Diversity Works. They should understand how a person’s identity affects the work atmosphere and productivity, how to make people across different cultures feel heard and understood and how managing diversity can cultivate the optimal outcomes for an organization. Hans Joachim Juntermanns, EMEA HR Director, DuPont de Nemours, said that intercultural leadership in DuPont means effectively connecting the company core values with those of the employees and teams expressed by behavioural settings.

NGO-Business Co-operations in Managing Humanitarian Relief 31 May This webcast highlighted the latest findings of the European Research Working Group on Corporate Responses to Humanitarian Disasters. Presenters were the INSEAD research team of Prof. Luk van Wassenhove, Rolando Tomasini and Orla Stapleton. Corporate contributions can range from cash donations to knowledge, expertise and sharing of infrastructure. While adding value to the humanitarian sector, companies also create internal value by building their reputation and improving their image, enhancing employee motivation and acquiring new knowledge. The INSEAD researchers also reported on the different experiences of the Working Group members (GSK, Swiss Re, Philip Morris and Global Impact) while setting up and driving forward a private-humanitarian partnership. 3

Upcoming Climate Change Forum

Business Action on Climate Change: The Way Forward Brussels, 10-11 October “The growing evidence of the cost of climate change points to one simple conclusion: we cannot afford to do nothing,” states a recent draft Green Paper from the European Commission, “Adapting to Climate Change in Europe – Options for EU Action.” The document warns that, unless there is advance planning, European countries will be left to respond to “increasingly frequent crises and disasters which will prove much more costly and also threaten Europe’s social and economic systems and its security.” The Conference Board will hold a forum on 10-11 October in Brussels to discuss the practical steps that business can take to address the pressing challenges of climate change. The forum will be limited to 50 participants, and the emphasis will be on frank discussion of the key issues. Speakers from government, regulatory bodies, industry and NGOs will examine: • The impact on business of recent reports and initiatives such as the Stern Review, IPCC reports, EU, G8 and national government initiatives and an assessment of possible future scenarios. • How business is responding to the challenge – practical actions being taken or planned by leading companies in key industry sectors — and what more can be done. • Connecting with customers. • Cross-sectoral initiatives. • The challenges of climate change in developing countries. • How to manage a carbon-constrained future. For more details about the Climate Change Forum, contact [email protected]

New Global Research Working Group

Managing Reputation Risk Inaugural meeting: New York, 2-4 October While a company’s reputation is built over time, it can collapse overnight. When that happens, rebuilding reputation is a long and costly process. Some companies can never reach the standing they enjoyed before the damage. The Conference Board’s Research Group on Managing Reputation Risk will give members the knowledge and the tools to assess reputation risk. The assessment framework developed by the group will enable boards and senior management to better understand threats to reputation and to devise proactive reputation risk management plans in response. The size of the Research Working Group will be limited to enable participants to dialogue extensively. The inaugural meeting will take place in New York City on 2-4 October. The group will meet three times a year in person and three times via Web conferences. One of the three annual live meetings will be held in Europe. For more information, contact the Research Working Group Director: [email protected]

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Olivier Loubière, Corporate Business Ethics Adviser, AREVA, is the first European to be elected chairman of The Conference Board’s Global Council on Business Conduct.

Council News Global Council on Business Conduct.

First European Chairman Elected Olivier Loubière, Corporate Business Ethics Advisor at the French energy company, AREVA, is the first European to be elected chairman of The Conference Board’s Global Council on Business Conduct. Olivier was appointed Corporate Business Ethics Advisor of the AREVA Group in November 2002 by the Executive Board. AREVA offers customers reliable technological solutions for CO²-free power generation and electricity transmission and distribution. The group is the world leader in nuclear power and the only company to cover all industrial activities in this field. The Global Council on Business Conduct provides an exclusive network for a candid exchange of views on the key ethics and business practice issues that corporations confront in home and host countries. As a forum for representatives of companies from diverse regions, the Council seeks to build a global perspective in discussion of common concerns such as

articulation of core principles, developing effective compliance systems, and balancing stakeholder int erests. “The Global Council on Business Conduct,” says Olivier, “is able to provide – through the level of trust and the ongoing participation of The Conference Board’s Principal Researcher on Ethics – a comprehensive approach to business ethics and compliance issues for global players. It enhances members’ ability to advise the CEO on good practice and to benchmark company Ethics and Compliance programmes against other leading global companies with regard to both short-term and long-term objectives.” The Council will hold its next meeting in Shanghai, 24-26 October 2007. For more information, contact Ron Berenbeim, Council Director and Principal Researcher on Ethics: [email protected]

Innovation

Open Innovation Eindhoven, 24-25 May The May meeting of the Innovation Council was divided between the Philips High Tech Campus at Eindhoven and TNO’s Business Unit Automotive in Helmond, The Netherlands. Philips's goal is to “Improve people’s lives through timely introduction of innovation,” and the company is known for the power of its innovation over several decades. Through a demo-tour of start-up activities and research projects, members had the opportunity to learn about “Open Innovation” at Philips and the company’s approach to intellectual capital. They heard how collaboration with manufacturing partners has enabled business to flourish while using negative working capital, in the same way retailers operate. The development of platform technologies can be shared with partners to make costs more reasonable.

Examining anti-collision sensor devices on a robot demonstration vehicle at TNO’s Business Unit Automotive in Helmond, The Netherlands.

In Helmond, Council members were introduced to TNO Science and Industry/Business Unit Automotive. They gained an understanding of the way TNO has developed, and how this has powered the growth of a high-technology region. Hearing about tyre testing at TNO

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Council News Human Resources

Europe’s Future Workforce London, 7-8 June Europe’s workforce is ageing and shrinking. What are the practical implications for companies of these demographic changes? At the HR Council's June meeting, hosted by Citigroup, opening presenter Dr Judith Banister, Director of Demographics, The Conference Board, set the scene with a comprehensive analysis of the demographic trends and key issues for Europe. Europe today has the oldest population structure in the world, together with Japan. Its population is shrinking in the younger working age groups and increasing in the older working age groups. Attempts to raise the retirement age have had little practical effect. The result will be specific skill shortages and gaps in the age structure, making it imperative for companies to adopt a more sophisticated approach to strategic workforce planning.

Enjoying pre-dinner drinks on the London Eye.

Stuart Brocklehurst, Partner, Carbon Leadership, led a discussion on how the external talent market will look in 5-10 years. He believes that diversity initiatives place forwardlooking companies in a better competitive position to attract the best talent. Businesses need to think much more laterally about sources of candidates and to plan ahead. The Council continued its debate on differing models and approaches to HR governance and heard a case-study about the challenges faced by a company when taken over by a private equity investor.

From left: Michael Mager, Vice President Human Resources, Grohe Beteiligungs GmbH; Christel Berghäll, Vice President Human Resources, Amersports; Jaap de Vries, Vice President Human Resources, Borealis.

Strategic Manufacturing

Remaining Competitive in High Cost Countries Seneffe, 3-4 May Low labour cost countries like China and India are challenging Europe as a manufacturing location. European senior supply chain mangers are looking for innovative ways to compete. Continuous process improvements and the creation of new low cost business models are vital. At their meeting in Seneffe, Belgium, hosted by Dow Corning, members talked about their recent experiences and obstacles in this field. Continuous process improvement methodologies such as Six Sigma offer powerful tools to dramatically improve customer services, ways of working and business performance overall. It can be applied across all business processes including the extended supply chain from vendors to customers. Pierre Descamps said that Dow Corning has adopted Six Sigma as its methodology to manage global excellence projects. It has proven most effective when the problem-solving approach penetrates the whole organisation and becomes part of the company culture.

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Onofrio Caradonna of Procter & Gamble talked about the changes that must be made to the manufacturing system to really add value to the extended supply chain and meet the competitive, environmental and social challenges. Drive for efficiency (cost, capital and inventory), increase in agility to react to changing demand patterns, end-to-end transparency of the supply chain processes and different approaches to risk management are some of the key factors. Members discussed how global and unified supply chain applications and IT systems architectures can become key drivers in global process harmonization, master data management and performance improvement management, besides being often more cost effective, quicker to update and easier to maintain.

Council News

Learning, Leadership & Organisational Development

Employee Engagement Pensions

The Changing European Pension Scene Oslo, 10-11 May As usual, the meeting opened with a discussion on the changing European pension scene and recent developments in individual countries. This included: the legal challenge to include fixed allowances in pensionable pay in Norway; how companies are reacting to the new pensions legislation in Italy; and the implications of increases in retirement age in several countries. Simen Lunaas of Mercer Human Resource Consulting gave an overview of trends in Scandinavian pensions. The impact of mergers and acquisitions on pension schemes is a topic of key interest to the Council. David Nunn of host company Hydro and Mario Chiebowy of Siemens led a session on this, based on their own M&A experiences.

Gothenburg, 24-25 May Council members who met in Gothenburg as guests of AB Volvo gained privileged insights into how this leading supplier of commercial transport solutions is engaging its employees. Eva Broberg, Senior Vice President Competence Development, Global, AB Volvo welcomed the group to the Volvo Demo Centre. She explained that engaging employees through identification with company products and services helps build pride in the organisation. To illustrate this point, Council members were given the opportunity to learn more about the various vehicles and test drive some modern trucks. Kjell Svenson, SVP HR, explained the importance of the Volvo culture as a unique and differentiating competitive factor for the business. Kjell shared the results, progress and challenges of employee engagement at Volvo and led a lively discussion on how this was being put into operation in the business. At Philips, the focus on employee engagement is seen as a key initiative to help grow the business. Clementine Leroy, Director of Engagement at Philips, shared the very comprehensive approach being adopted by Philips worldwide.

How can pensions be successfully incorporated into flexible benefits? The Royal Bank of Scotland has one of the largest benefit choice programmes in the UK, covering around 100,000 employees. Peter Hurcombe, Head of Group Pensions for RBS, spoke about the changes made in 2006 which allowed pensions to be fully incorporated into this benefit programme.

Avery Duff, Director – International Human Resources, Rolls Royce, tries his hand at driving a Volvo Truck.

Discussions continued over lunch at the Pensions Council meeting in Oslo, hosted by Hydro.

Céline Février (left), Council Coordinator, The Conference Board Europe, and Clementine Leroy, Director of Engagement, Philips.

At the Volvo Demo Centre in Gothenburg, Sweden.

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Council News Corporate Communications

Building Brand and Reputation Across Cultures in Times of Organisational Change Warsaw, 10-11 May The European Council on Corporate Communications joined with the Polish Council of Marketing Executives for part of its May meeting in Warsaw, hosted by Orange Poland.

From left: Françoise Vanthemsche, Corporate Communication Manager, Bekaert; Francis Bouchard, Global Head of Corporate Communications, Zurich Financial Services; Guy Nielsen, SVP Corporate Affairs, AEGON.

The meeting focused on how to deal with the particular challenges of communicating and brand building in emerging markets, and the importance of cultural understanding. Members of both groups agreed on the importance of choosing messages and media carefully to build trust across different countries and cultures. Initiatives that demonstrate corporate social responsibility enhance both reputation and brand. CSR was disregarded by Polish companies in the past. This is now changing following EU membership and the increase of foreign investment in Poland, but it is not yet integral to business. Cultural interaction is a process that must be managed, said Michael Gates of Richard Lewis Communication. It cannot be left to chance. When mergers and acquisitions fail, cultural differences are often cited as the reason. Business tends to be good at processes and finding the logic behind changes, but human beings defy logic. To communicate successfully with people of other countries and cultures, you need to understand your own cultural type as well as that of those with whom you are seeking to communicate, and adapt your behaviour and language accordingly.

Dinner host: Guy Nielsen of AEGON

Investor Relations

Improving Communications with Investors Stockholm, 31 May – 1 June How can Investor Relations Officers (IROs) better target their communications with investors? At the Stockholm meeting, hosted by SAS, members learned about the structural and process changes that have occurred recently at major investment houses and how to target the right fund managers and/or buyside analysts at each major house. There was an opportunity to dialogue with a panel of Nordic investors about how best to approach and communicate with them. The panel recommended that IROs provide accessibility to management; demonstrate that they are close to management; and convey the same message to everyone.

Council members from both groups continued their discussions over dinner.

Two Council members, Marita Björk of SKF and Björn Tibell of SAS Group, led a discussion on what’s new for IR on the corporate website, demonstrating some new IR website features. Staffan Lindgren from Halvarsson & Halvarsson explained how the company rates and ranks 500 European companies’ IR websites, and spoke about spotlight reports on CSR, visibility and labeling. The Council also discussed ways of coping with shareholder activism and how to handle the quiet period.

The newsletter Board Europe is published six times a year by The Conference Board Europe, 130 Chaussée de La Hulpe, box 11, 1000 Brussels, Belgium (Tel. 32/2 675 54 05, Fax 32/2 675 03 95, e-mail: [email protected]) and is edited by Sandra Lester. Opinions published in Board Europe shall not be construed as representing those of the Board's European Associates. All rights reserved. Reproduction in whole or in part permitted subject to due acknowledgement. United States: The Conference Board Inc., 845 Third Avenue, New York, NY 10022-6601, USA. Asia-Pacific: The Conference Board, 22/F, Shun Ho Tower, 24-30 Ice House Street, Central Hong Kong.