Citigroup Can't Afford to Ignore Corporate Culture

In ''Is this marriage working?'' (Cover Story, June 7), John S. Reed's statement that ''the culture will take care of itself'' is typical of an industry that has repeatedly paid a high price for ignoring the critical issue of corporate culture--especially in the course of mergers. In the financial sector alone, such institutions as Drexel Burnham Lambert, E.F. Hutton, Kidder Peabody, Shearson Lehman, First Chicago Bank, CoreStates Bank, and, most recently, Bankers Trust all owe their demise to failed corporate cultures. Others, like Prudential Securities Inc. and Merrill Lynch & Co., have been heavily penalized. This is what happens when corporate leaders ''let [corporate culture] take care of itself.''

Jerome H. Want
Managing Partner
Organization Strategies
International
Wayne, Pa.

Dave Heenan and I explore this issue in our new book, Co-leaders, and we believe the new co-leadership at the top will be taken for granted beyond 2000 for several obvious reasons: merger mania ($1.6 trillion in '98), globalization, and the Web. It may not seem natural, but it's going to be necessary, given the hyper-turbulence and complexity of the marketplace. It will work out with Reed and [Sanford I.] Weill, even given their initial discomfort. We're challenging the time-honored notion that all great institutions are the lengthened shadows of a great man or woman.

It is a fallacy that dies hard. We have long worshiped the imperial leader at the cost of ignoring countless other contributors to any enterprise. The old corporate monotheism is finally giving way to a more realistic view that acknowledges leaders and co-leaders working together to get important things done.

Above all, co-leadership is inclusive, not exclusive. It celebrates those who do the work, not just a few charismatic leaders who are regally compensated for articulating the organization's vision.

Warren Bennis
Distinguished Professor of Business
University of Southern California
Los Angeles

Don't Discount Net Present Value

Ringing the death knell for net present value (NPV) analysis seems indecorously premature (''Exploiting uncertainty,'' Finance, June 7). The concept of real options theory has its roots in NPV by valuing the segments of a project rather than taking the whole at once and allowing for an abandonment option. Segmenting project NPVs with an abandonment option gives you a similar result. There is no escaping the fundamental project evaluation basis that risk-adjusted, discounted future cash flows must exceed initial investments for a project to be viable, which NPV has been so capable of doing.

Where the theories differ illuminates the weakness in real option theory, which by its nature requires the proposed project to be volatile (read risky). NPV has sought to reduce the volatility associated with new projects by subjecting them to profitability scrutiny. Therefore, a company such as Amazon.com Inc. can command astronomical multiples with no profits, but ultimately it, too will have to pass the scrutiny of NPV.

Also, the adage that ''you just let the option expire'' is not as harmless as purported. Projects require initial investments and other sunk costs that rarely come cheaply and are not as forgiving as an individual investor letting an option expire. Given the narrow profit margins of many corporations today, how many can afford to put numerous risky ''irons in the fire'' and bear the ''burns'' of the failed endeavors, even if the initial investments are relatively small?

John Cetta
Holbrook, N.Y.

Companies may embrace ''real options'' for large projects, such as Enron Corp.'s Mississippi plant, that command the attention of top management. But real options are, with good reason, used in only a minority of project-selection decisions. I surveyed managers in a variety of industries, who offered these as the top reasons for hewing to net present value:

Information for evaluating real options is costly or unavailable, and asking for more money later is difficult and may be interpreted as a lack of foresight. Projects are selected by financial managers, who do not trust operational managers to exercise options properly.

Other kinds of corporate inertia keep projects from being expanded or discontinued. All contingencies cannot be anticipated. Finance departments always know when options come due. But employee turnover may mean no one in operations has the data needed to exercise a real option. Finally, plenty of prospective projects do have a positive NPV, so there is often no need to look into those that only show a positive return under an options calculation.

Saying that real options were ''conceived more than 20 years ago'' ignores that they were taught (under the name ''decision trees'') to undergraduates in the 1960s and possibly earlier. Every credible MBA knows how to solve real options, which are sound and appealing in principle. But their widespread use will require the same culture of trust and decentralized decision-making that mark the most flexible companies, and this is not easily achieved.

Fred Phillips, Professor
Oregon Graduate Institute
of Science & Technology
Portland

Automation: Siemens Is No Slacker

''Will Rockwell find some roots?'' (The Corporation, May 10) contains three points of contention. One, the Standard & Poor's worldwide automation market-share figures, citing Siemens with 28% and Rockwell International Corp. with 21%, can't be validated by three leading market analysts. Author De'Ann Weimer doesn't mention what specific products and services S&P used to calculate these figures.

Two, Siemens doesn't concede any ''edge'' in automation technology to Rockwell, nor has any of its business been ''stolen.'' Siemens has continued to grow worldwide market share during the 1990s, featuring the world's broadest range of automation products and services. Last year, our research and development expenditures alone nearly eclipsed Rockwell's total earnings. We're not retrenching, we're investing.

Finally, the reader is misled into believing that Rockwell was chosen as an equipment supplier at the Hong Kong International Airport and that Siemens was not. Siemens supplied and integrated more than $45 million worth of automation products into the airport's baggage-handling system. It also supplied its phone system, check-in counter information hardware and software, ground power systems, and its Air Mail Center postal automation system.

Greg Brewer
Marketing Manager
Automation Products Business Unit
Siemens Energy & Automation
Norcross, Ga.

CEOs Should Fight Class Actions

Is it time for stockholders to hold chief executive officers responsible for paying extortion with stockholders' assets in response to frivolous class actions (''From a raw deal to a winning hand,'' Legal Affairs, June 7)? If we hold our CEOs responsible to vigorously fight these suits, fewer would be filed, and perhaps the political clout could be developed to revamp our court system such that a defendant with truth and facts on his side could win and recover legal costs. It has become too easy to give away a half-billion here or there to avoid facing a court where emotion and the perception of truth rules over real-world facts.

Ralph Strong
Glen Burnie, Md.

Monarch Mortality Isn't Biotech's Fault

''Imperiled monarchs alter the biotech landscape'' (News: Analysis & Commentary, June 7) contains more holes than a moth-eaten sweater. No one disputes the sanctity of butterflies. Everyone agrees follow-up is essential on the Cornell University study that examined the impact of Bt corn pollen on butterfly caterpillars.

But to suggest that one study represents a watershed in development of agricultural biotechnology ignores years of scientific studies and thousands of field tests conducted prior to introduction of crops such as Bt corn.

The Cornell study is not the first to examine the impact of Bt corn pollen on butterflies. The Agriculture Dept. and the Environmental Protection Agency studied the risk extensively and concluded it was remarkably remote. In fact, conservation groups have noted that the primary threat to monarch butterflies is the loss of their crucial winter habitat in Southern California and central Mexico. Other threats come from pesticides, habitat degradation along butterfly migratory routes, and other human activities. More monarchs die in high-velocity collisions with car windshields than ever encounter corn pollen.

Also, biotech companies did consider the impact of their work. The results of scientific studies and field tests are available for perusal. Biotech companies are not on the defensive. By responding to questions about applications of biotechnology, our companies are doing what they always have, educating people about a complex science that holds potential for improving medicine, agriculture, and the environment.

Carl B. Feldbaum, President
Biotechnology Industry Organization
Washington

The Mothers of Invention

Even though I am a banker, I enjoy keeping up with new scientific discoveries and technological advances being made. Therefore, I quickly read ''100 years of innovation'' (Bonus Issue, Summer, 1999), thinking it would a nice keepsake for my niece. By the end, it was obvious that women's contributions to innovations during the last century were given little consideration. For the first 96 pages, the only women mentioned are Jane Fonda, Shirley Temple, Mae West, and Grace Slick--all of whom have made significant contributions to the entertainment industry but had nothing whatsoever to do with the invention being discussed.

Hedy Lamarr, on the other hand, held a patent on a remote-controlled communication device that allowed signals to be transmitted without detection, deciphering, or jamming. Although the government failed to use her invention against Hitler during World War II, this technology is being utilized in satellite communications today.

Lillian Greneker solved a problem that numerous builders and laboratories couldn't when she designed a form for molding the rubber fuel tanks needed on airplanes and tanks during World War II. Her design was substantive enough to allow the material to be applied externally. The form can then be removed without damaging the tank.

Gertrude B. Elion, winner of the Nobel prize for medicine, developed numerous medications, including treatments for cancer and leukemia and the immune-suppression drugs making organ transplants possible. She obtained 45 patents during during her lifetime.

Erna Schneider Hoover was the first woman elected to the National Inventors Hall of Fame. One of her inventions was a software package for Bell Laboratories that allowed numerous incoming calls to be rerouted, thereby preventing the switchboard from overheating and disconnecting calls. Stephanie L. Kwolek invented Kevlar. Marion Donovan invented the disposable diaper.

I found this information in 30 minutes. It is 1999. Shame on you.


S. Laudenschlager
Carmichael, Calif.

You credited Albert Einstein with writing the letter to President Roosevelt asking for funding for atomic-bomb research. Einstein was not even aware of the experiments of Fermi, Szilard, and others in the U.S. to develop an atomic bomb until Alexander Sachs brought him a letter written by Szilard and Fermi to send to Roosevelt. When he received the letter, Einstein said: ''I hadn't even thought about it.'' Sachs took the letter and personally gave it to the President. I think the final letter was written by Leo Szilard and Alexander Sachs, with Einstein's approval.

Calvin F. Neill
Wimberley, Tex.

''100 Years of Innovation'' (Bonus Issue, Summer, 1999)

In ''100 Years of Innovation,'' (Bonus Issue, Summer, 1999), the photograph on page 34 was misidentified by photo agency Corbis Images as a Ford Motor Co. Model T. It is a Model A. On page 37, the 1901 entry in the timeline should have included the modifier ''wireless'' to describe the first transatlantic signal.

''Club Feud'' (Sports Business, June 21)

In ''Club Feud'' (Sports Business, June 21), Orlimar Golf Co.'s 1998 revenues were misstated. They were $68 million, not $6.8 million.