Business, Leadership and the Next Generation
Duke University Fuqua School of Business Distinguished Speakers Series
March 25, 2003
Rick Priory
Chairman and CEO
Duke Energy
Good morning to you all.
I have to tell you — no matter how big Duke Energy gets, no matter what part of the country or world we’re operating in, we get questions about the Duke Energy/Duke University connection. I don’t know about you, but we enjoy and encourage the association — especially in the month of March! And this year, it feels darn good to hear the name Duke — any Duke! — linked to victory and a winning season!
So congratulations to your Blue Devils on their 5th consecutive ACC championship. And congratulations to “team Fuqua” on turning out some of the finest MBAs in the country. Duke Energy recruits at Duke University for our Commercial Associates Program, which rotates new MBAs through key areas of the company. And we’ll be back on campus this Friday to participate in the first North Carolina MBA Fair.
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But I’m not here to talk about our hiring practices. Or to promote Duke Energy as a great place to build a career. I’m here because I wonder — and I worry — what must you be thinking?
What must you be thinking, as you prepare to graduate and enter the world of business — a world that seems — at least from watching the nightly news — to be full of greed and malfeasance? What were you thinking as you watched Enron, IMClone, Global Crossing, Tyco and others unfold — and implode? As you read accounts of corporate excess and obfuscation, and witness the downward slide of the stock market? As you study hard — and face the prospect of repaying your student loans and joining the ranks of business — what must you be thinking?
What must you think when you hear that in the most recent Gallup poll on honesty and ethics, conducted three months ago, only 17 percent of the participants rate business executives’ level of honesty as “high” or “very high?” That puts us behind lawyers and real estate agents — but ahead of car salesmen and telemarketers! In another Gallup poll, only one in five people surveyed said they had a “great deal” or “quite a lot” of confidence in big business — marking the lowest level in 22 years. That’s a lifetime for most of you here!
So I really can’t imagine what you’re thinking and feeling — I hope you’ll tell me during our Q&A time. I’m going to spend my time today sharing what I’ve been thinking and feeling — from the perspective of both business practitioner and business proponent.
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I’m going to begin as a business proponent, because that is a voice that hasn’t been heard from enough lately. In fact, the silence has been downright deafening.
Business has been a prime topic — some would say target — of media attention. And while we can all agree that public trust has been damaged by the irresponsible, unethical acts of some, the vast majority of businessmen and women — and the companies they work for — are focused on doing the right thing. Consider this: There are more than 11,000 publicly traded companies in the U.S. today. Eleven thousand. I don’t have data on the numbers of people employed by those companies, but tens of millions is probably a conservative range.
To condemn the entire institution of business for the failures of a few is irrational and unproductive — and it unjustly discounts the contributions of dedicated, hardworking, honest employees around the world. It also diminishes the tremendous accomplishments — and the enormous potential — of business in our society and our world.
Business has inspired, enlightened and energized our world for centuries. From Thomas Edison’s invention of the light bulb that sparked my industry, to the biotechnology, micro circuitry, and pharmaceutical advances occurring 10 minutes down I-40 in the Research Triangle Park, business has been an engine of progress and prosperity.
The list of achievements delivered by business is long — and ever-growing: The working laser led to fiber optic communications and new and better forms of surgery. The single-chip microprocessor is at the heart of today’s trillion-dollar technology industry. The discovery of the human genome opens up promising new vistas to cure disease and extend life. And the very security of our nation — our world — is aided by science, defense and intelligence gains that come from business.
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Businesses at their best are far more than profit machines — they become the means through which we give back to the world. Communities, schools, health and human service organizations, the arts and culture — all are touched and often guided by the generous hand of business.
In the early 1900s, our company’s founder and your school’s benefactor, Buck Duke, envisioned a series of electric generating facilities along the Catawba River to energize Carolina textile communities. He recognized the power of the Catawba’s flowing water to electrify the mills and bring prosperity to the region; but he also envisioned far greater value than turbines and textile mills could produce.
Buck Duke referred to his plan as a “grand design,” and it truly was. By the turn of the century, it was clear that hydroelectric power had great potential in fueling the region’s economic growth. But the “grandness” of his design was more than profits and power.
Mr. Duke set aside a substantial portion of his company stock to create a charitable trust to benefit communities in the region. As his business prospered, his trust grew into the Duke Endowment. Since 1924 the Endowment has committed $2 billion to education, health care and spiritual life in the Carolinas. His legacy of course includes Duke University, and his company’s continuing, proud tradition of giving generously to the communities we serve.
The capacity of business to create value beyond a financial bottom line is immense.
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Back to basketball for a moment. I know better than to ask you how you spent the weekend of the ACC tournament — I think I can still spot some blue paint in the crowd! But let me tell you how I spent that weekend — along with 120 other CEOs from the Southeast.
We weren’t on the golf course. We didn’t have court-side seats in Greensboro and we weren’t watching the tournament on TV. We were hunkered down at a hotel in Charlotte for a conference called the Forum for Corporate Conscience. We discussed, debated and dug deeply into the issues of values-based leadership.
We focused on six key areas: economics; leadership; justice; environment; community; and family. We didn’t just talk to ourselves. We caucused with representatives of non-governmental organizations who are actively committed to important causes — causes that are only advanced by collaboration between the public and private sector.
At the end of the weekend, we issued a paper of “collective intentions” on each of the six areas of focus. The collective intentions covered such topics as long-term performance benchmarks in executive compensation; the imperative of reducing the environmental footprint of business; the elimination of a dual-system — affluent vs. poor — in education; and corporate support for employees serving on active duty with the military. That is the stuff of business — the soul of business — that doesn’t make headlines.
You should also know that Fuqua School of Business was a participant and contributor to the conference, drafting the white paper that drove the discussion around justice. Special thanks to students Matt Fore, Sonia Steele and Professor Greg Dees for their hard work and good thinking — and for spending the weekend with us!
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Let me now turn to the view of business practitioner and share with you some of my reflections on the turbulent times we’ve all endured.
First, we have collective accountability. As I said earlier, not all companies are guilty or deserving of the broadside indictments we’ve seen play out. Very few are. But we are all accountable for the fix.
When those who invest their dollars and their confidence in our companies begin to doubt our word and question our integrity, we risk a far greater and more lasting loss than what we experience with a bear market. In my view, the investing and consuming public is the ultimate regulator of any business. We operate only with their license and consent. And when trust is broken or compromised by any one business, we all suffer.
Even if we don’t deserve the bad rap, we deal with it. We know that the work of scrubbing our systems and practices, of instituting new and enhanced measures of control and governance, and of working to set new standards and raise the bar — is good and healthy work.
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Second, success rests on the bedrock of values and strategy. As I wrestle in my mind with the new business reality we face — I am struck by the fact that two reliable fundamentals hold up: integrity and clear and purposeful strategic thinking.
Integrity is the foundation of business success. You can have every other advantage — the best balance sheet, the brightest stars, the smartest portfolio. But lose your integrity and you lose it all.
We all witnessed the market’s painful doling out of punishment for corporate transgression and individual greed last year. And while few enjoyed rich rewards in last year’s bear market, companies built upon the tenets of fair play and sound ethics are with us today. And they’ll be with us tomorrow. Investors, customers and good employees are drawn to companies that operate by the principles of integrity, trust and respect.
Sound strategy is the other constant that kept us grounded. Simple as it sounds, knowing and having a high degree of confidence in your business model and its fundamentals is essential at all times — but especially during volatile times. You can’t build strategy on shifting sands. It needs to be a bedrock that provides strength and resilience. Granted, you adjust and adapt to changing market conditions, but if you’ve wisely grounded your company in the good times, you’ll have a compass that will guide you through the tough times.
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The third lesson from our turbulent times is this: take a longer view of value. As a society and marketplace we had become fixated on short-term returns and immediate gratification.
Analysts and money managers focused far too much on a company’s quarterly performance — and too little on long-term viability. A company’s strategy, plans and outlook were cast aside in favor of the “McQuarter” report — super-sized, of course! Shareowners moved from the mindset of investors to the outlook of Wild West speculators.
We all — investors, analysts, and businesses — need to take a longer view of value and face the reality that stratospheric short-term results are not sustainable — and they’re not healthy.
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My fourth lesson: It’s not personal. Fifth lesson, it sure is personal. It’s hard not to take it personally when you’re taking heat for a plummeting stock price, or California’s energy crisis, or perceptions of corporate greed and misconduct, or the winter ice storm that knocks the lights out, or mistakes — regrettable but inevitable — within your organization. Business leaders develop thick skin — you have to. But if you shy away from taking personal accountability for your company’s performance and its culture, if you’re reluctant to stand up and be counted as a leader in the broader community of your industry — no amount of thick hide will protect you.
Personal accountability begins long before you reach the executive suite. It begins now, while you’re in school, as you’re working on your resumes and entering the work force. It’s an expectation I have of my entire team. I want to work alongside colleagues who approach their day-to-day work with a sense of commitment and responsibility. Men and women who have the expertise to make good decisions — and the strength of character to be held accountable for those decisions. We’ve seen too many instances lately of finger pointing and passing the buck. It is personal — and it should be.
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Sixth — pedestals belong in museums, not commerce. There’s been lots of talk about how business leaders have tumbled from the state of public icon to public enemy. How CEOs — once regarded with the awe and deference afforded rock stars and sports heroes — have fallen from their pedestals. I sure don’t have any personal experience with being idolized — my family can attest to that! But let me go on record as saying no business leader should have been on a pedestal to begin with. The distance between a pedestal top and solid ground can create great chasms of mistrust and ill-will. It distorts your perspective and judgment, makes you lose touch with your stakeholders, and diminishes your ability to understand, relate to and feel compassion toward others. So we need to smash the pedestals — or retire them to a deserving museum.
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Finally — you’ve got to deliver the goods. No wiggle room here. Hype and hot air can pump up a bubble, no question. We saw it with the dot coms and with other companies that didn’t feel compelled to stand behind their growth claims. But the bubble eventually deflates and the fallout is wrenching.
The ability to execute — to do real work, deliver real goods and services, serve real customers — that is a must. It wasn’t so long ago that assets were considered an albatross that dragged companies down. You remember when clicks were the only securities with any backing — and bricks were considered ballast that Wall Street told us to dump. Duke Energy weathered several years of criticism for being “asset-heavy” — while Enron was envied for its innovation. But today it’s our regulated electric utility and our natural gas pipeline business that are allowing us to weather the challenges in our sector better than most.
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The challenges have been enormous and all-consuming at times. But as they always do, they’ve taught us some important lessons. Integrity, sound strategy, accountability — both personal and shared, the ability to execute, humility — those are some of my key take-aways.
When I came in this morning I wondered what must you be thinking? I hope the lessons I’ve shared have affected that thinking in some small way.
Corporate America needs good and faithful stewards. I am with you today because I believe in the long-term view of business — and I’m committed not only to the next quarter’s performance — I’m committed to the next generation of business leaders.
This is a remarkable time to be in business. As vexing as it can be, I truly believe that we’re living history right now. That 10 or 20 years from now, we’ll look back at the events of 2001 and 2002 and realize they were pivotal, defining years. By then, you’ll be in the corner office and I’ll be enjoying a well-earned, desperately needed retirement!
Study hard. Learn from your professors and from the laboratory of today’s marketplace. Ask lots of questions. Interview companies as critically as they interview you. Then come to work. The world needs business — and business needs you.
Thank you.
