February 2004

Who's in the News

BP Adds Russia to Energy Portfolio

News of vendettas and intrigue out of Russia do not seem to faze BP's leader John Browne, Sloan '81, who recently finalized an $8.1 billion deal with Russian oil producer TNK, one of the large oil and gas companies created in the wake of the Soviet Union's collapse.

"The rule of law is not widespread. Corruption is widespread," Browne told BusinessWeek during an autumn trip to Moscow. But he added, "Where everything is cut and dried there is no opportunity."

Browne's top achievement so far has been making BP one of the world's top three oil companies. Queen Elizabeth named him Lord Browne of Madingley in 2001.

Smart Debt Bolsters GM Pension Fund

General Motors and its treasurer, Walter Borst, MBA '87, recently completed a $17.9 billion debt offering, the largest ever by a corporation. Intended to provide the country's second-largest company with flexibility, the June 2003 offering involved 11 separate transactions and 41 banks.

The deal was triggered by the pension fund shortfall affecting many companies that had banked on higher stock market prices and interest rates to cover their pension costs. While those liabilities will shrink again if the markets change, GM's $19.3 billion pension shortfall had prompted Standard & Poor's to lower its credit rating in October 2002.

"We felt that GM was becoming a little bit of a poster child for this issue," Borst said in Treasury & Risk Management, a trade journal that detailed the offering. While the bond market's record-low rates were part of the reason for pension fund shortfalls, the GM finance team recognized that the rates also made GM's cost of issuing debt attractive. Prices spiked shortly after the offering, making Borst's finance team look especially prescient, the journal noted.

Volunteering Pays Off

When Jeff Halpern's position at a start-up energy trading company disappeared in the wake of Enron's collapse, the 1991 MBAturned to Rebecca Zucker, MBA '94, for advice. Zucker, cofounder of Next Step Partners, a San Francisco career advisory firm, runs group workshops where she advises clients on how to replace some of the taken-for-granted advantages of having a job, according to the New York Times.

"The insider knowledge that's gained from being in the flow of things is linked to a person's confidence and sense of competence in the field," she said. "Like compound interest, those experiences build on each other."

Based on that advice and because he was diabetic, Halpern volunteered to work for the Juvenile Diabetes Research Foundation, where he helped a fundraising event generate about four times as much money as in the past. "It was better than feeling sorry for myself, and during interviews it gave me something to talk about," he said.

The contacts paid off, and Halpern is now marketing manager of TheraSense in Alameda, Calif., a company that develops products for people with diabetes.

Influential Hispanics

Hispanic Business Magazine recently named Business School Professor Jerry Porras and alumnus Richard Leza to its list of the 100 most influential Hispanics. Porras, the Lane Professor of Organizational Behavior and Change, Emeritus, is coauthor of the best-selling book Built to Last: Successful Habits of Visionary Companies. He and senior lecturer David Bradford developed the highly successful MBA class Interpersonal Dynamics, the editors noted.

Leza, MBA '78, is CEO of AI Research Corp., a venture capital firm focused on early-stage investments in technology companies. He is also chairman of Hispanic-Net, an organization dedicated to improving entrepreneurial opportunities for Hispanics in technology, and a member of the School's Advisory Council.

Knowing When to Stop Taking Risks

GSB Professor Roderick Kramer was interviewed by CNBC about the risk-taking behavior of some CEOs during the trial of former Tyco executive Dennis Kozlowski. "Leaders are often rewarded for taking big risks early in their careers," Kramer noted. "One of the messages they take from that is taking big risks is one way to succeed. And then when they get to the top, they continue engaging in some of those behaviors. But of course, once you're at the top you have a lot more people looking at you."

Maltimus Maximus for the Masses

After decades of settling for chocolate candy with federally restricted cocoa content, Americans are starting to produce the good stuff patterned after European recipes. One of the new entries into the market is Cocoa Pete's Chocolate Adventures of Campbell, Calif., where marketing chief Helen Song, MBA '02, has the official title of cocoanaut.

In the early nineties, Pete Slosberg, a former microbrewery owner, called on Stanford Business School students to analyze the chocolate market, and they concluded it was ripe for change, just as the beer market had been in the eighties. Song, who later went to work for Slosberg, told the New York Times the startup's strategy is to get rid of the highfalutin gold foil packaging and bring a good product to the masses. "Expensive chocolates have become so precious that you need a special occasion just to open the box," she said. "Forget the gold foil and the artisan heritage."

Available so far only in the San Francisco Bay Area, the company's chocolates have whimsical packaging and names like Maltimus Maximus (high-end malted milk balls), Hallowed Grounds, Berry Berry Dangerous, and Nuts So Serious.

Plastic Paychecks

America is becoming an "unbanked" society, according Carl Pascarella, president and CEO of Visa USA. "Many people today are unbanked—they don't have bank or checking accounts—so we've offered corporate entities the opportunity to pay their employees with a Visa payroll card," Pascarella, Sloan '80, said in an Associated Press interview. The payroll card is reloaded each payday so consumers can use it everywhere Visa is accepted. "We'll never get to a cashless or checkless society," he said, but "what we are looking for is less cash and less checks."

And what has been his most unusual Visa card purchase? "We've paid for horse shoeing. My wife rides a lot."

Alumni to Know

Faculty

Newsmakers

Silicon Valley Sage Bullish on Future

Forget about predicting the next big business trend to hit the Silicon Valley, says venture capitalist Vinod Khosla, MBA '80. "It's literally unpredictable."

The San Francisco Chronicle also asked Khosla, a partner in Kleiner Perkins Caufield & Byers and one of the founders of Sun Microsystems, if the Valley's economy might suffer permanently from high-tech jobs moving overseas. He said no, the money saved by firms shipping jobs overseas would result in higher profits, which in turn will drive domestic job creation.

Student Cofounds 9/11 Survivors Group

Massive intelligence failures preceded the September 11 terrorist attacks, according to a censored congressional report last summer. Nevertheless, the panel said it found no one to hold accountable for not preventing them, a conclusion that second-year MBA student Carie Lemack finds totally unsatisfactory. Lemack lost her mother, Judy Larocque, on American Airlines Flight 11, which crashed into the World Trade Center. She cofounded the 1,500-member advocacy group, Families of September 11, which lobbied heavily for a law that created an independent commission. The National Commission on Terrorist Attacks upon the United States is mandated to provide recommendations designed to guard against future attacks no later than May 27.

The families' battle for the law began when "we realized there were a lot of questions that needed to be answered and that there were very few people in the world who truly understood what we were going through," Lemack told Newsweek. "To say that no one is responsible [for 9-11], well, you're not going to stop it from happening again with that attitude." While hopeful the independent commission will produce a better document, Lemack said not every government agency was fully cooperating. "It's a matter of constant vigilance. This is what it takes, and we are willing to do it."

Boarding School

Since the Sarbanes-Oxley Act of 2002 addressed the accountability of corporate board members, corporate governance courses have proliferated both in and outside of boardrooms, according to CFO Magazine. While some corporations offer training as part of their board meetings, others prefer to send members to college-based programs, such as the one offered by the GSB's Executive Education program.

"Having diversity of thought and the opinions of a range of board members is very important," Jim Barth, CFO of NetIQ Corp. of San Jose, said after taking the four-day Stanford Business School course. Besides learning about the legal requirements and ethics, he said, he also learned more broadly about board communication and "how to be a better listener."

Creative Solutions

Facing a cashflow crisis near bonus time, Bob Moog, MBA '84, came up with an idea. He would fly his employees to Las Vegas, give each $100 from bags painted with dollar signs, and let them gamble to help earn the money for their bonuses. "It was a joke, but one that made light of a stressful situation in the early nineties," said Time Inside Business in a recent article on "profiting from fun." Moog, the cofounder of University Games, also has taken employees on a cross-country Amtrak murder mystery tour (the company's first board game hit was Murder Mystery Party), and he has outfitted the company's San Francisco headquarters with a giant Pinocchio marionette, a glow-in-the-dark walk-through cave, and a secret bookshelf that opens into another room. After five years, employees are given a month off with pay on the condition they don't check their email or call work. "It's part of an informal social contract between managers, employees, and shareholders," Moog told Time. "People need to have a balance between their home and family and work."