ANDY STERN

The AFL-CIO is expected to elect Rich Trumka as the new leader of the federation
today, succeeding longtime President John Sweeney. Trumka would be heading a
much larger organization if Andy Stern, head of the Service Employees International
Union, had not taken his union (now 2.1 million strong) out of the AFL-CIO four years
ago. Stern, who once was a student at the Wharton School, was an early critic of
banking industry practices and the private equity juggernaut. He is passionate about
health reform (about 1 million members of the SEIU are health-care workers), and he is
a staunch supporter of President Barack Obama. The SEIU, according to The Wall
Street Journal, was also a generous backer of the voter registration group Acorn (the
Association of Community Organizations for Reform Now), which is at the center of a
scandal that just erupted.

Can This Man Save Labor?

Andy Stern wants to radically retool the U.S. labor movement. But first he must win
over some powerful union leaders

The symbolism couldn't have been more stark: The son trying to overthrow the father.
Seventy-year-old AFL-CIO President John J. Sweeney had come to San Francisco in
June to give a pep talk to 3,000 members of the Service Employees International Union
(SEIU), a union of public-sector, health-care, and janitorial workers he had run before
becoming labor's chief honcho in 1995. But instead of a rousing homecoming reception,
his successor and former protégé, 53-year-old SEIU President Andrew L. Stern, let rip a
razor-sharp swipe at Sweeney's largely failed struggle to rejuvenate the labor
movement over the past nine years. Stern's message: Labor remains in a death spiral,
and its house needs a top-to-bottom overhaul if it's ever going to revive. The AFL-CIO,
he charged, has become an antiquated structure that "divides workers' strength." When
the SEIU's own policies and traditions hindered its expansion, Stern reminded his
audience, he swept them aside. Barring drastic action, he told his delegates, the 1.6-
million-member SEIU should break away and start a new federation. Change "is so long
overdue that we either transform the AFL-CIO -- or build something stronger," he
proclaimed.
 JAMIE HOUGHTON

Corning: Back From The Brink

How retired CEO Jamie Houghton rescued his family's 150-year legacy

In early 2002, James J. O'Connor, the lead outside director of Corning Inc. (GLW ),
quietly began a campaign to replace CEO John W. Loose. Such unrest was unheard of
at Corning, which for most of its 150 years had been governed by the descendants of
founder Amory Houghton Sr. "But I felt the business was in a meltdown, and time was
running out," says O'Connor. Just two years earlier, Corning had been a high-tech star,
with $7 billion in sales and a market value of $100 billion. But now tornado-force winds
were whipping through the telecom industry, slicing sales by more than half, sending the
stock down 95%, and raising fears that Corning -- one of America's oldest and most
innovative companies -- might not survive. To have a chance, "we needed someone at
the top whom everyone could rally around," says O'Connor. In the board's view, there
was only one credible candidate: retired CEO James R. Houghton, 68, who had turned
Corning over to an outsider in 1996 after 13 years at the top.

After the board approached him, Houghton went to see his older brother Amory at the
hideaway suite of offices they keep above Market Street in Corning, N.Y., two blocks
from the company's headquarters. "Jamie didn't particularly want to do it," recalls Amo,
as he's universally known in town. Jamie was engrossed in a glittering second career in
the nonprofit world, serving as both chairman of the Metropolitan Museum of Art and as
"senior fellow" of the Harvard Corporation, the super-secret body that governs the
nation's premier university. But as the brothers talked, Jamie realized that he needed to
answer the call, just as Amo had stepped in to lead the recovery effort after Hurricane
Agnes flooded Corning in 1972. He knew what the townspeople would say: "The
Houghtons have been around a long time. They're going to fix it."
T.K.KURIEN

Taking A Page From Toyota's Playbook

Wipro and other Indian info-tech companies are boosting efficiency by emulating the
Japanese carmaker

A year ago, executives of Wipro Ltd. (WIT ) got a glimpse inside a Toyota (TM )
assembly plant. During a guided tour of the factory that produces Corollas near their
headquarters in Bangalore, India, Wipro execs hoped to pick up fresh ideas for their
businesses of developing software and handling clients' back-office operations.

There were plenty of lessons to learn, but for Sambuddha Deb, Wipro's chief quality
officer, one stands out. Deb began to take a shortcut when the safety path painted on
the factory floor made a sharp turn. The Japanese manager walking behind him
reached out, took his shoulders, and gently guided him back onto the path. The
message -- all the little rules count. "They had that sort of discipline. It's second nature
to them," marvels Deb.

Before the Toyota tour, Wipro had been struggling to get on track in back-office
services. That might sound odd: With $1.7 billion in revenues, 42,000 employees, and a
U.S.-traded stock that has advanced 230% in two years, Wipro is the embodiment of
India's info-tech revolution. It's not only a leader in software development but also a
pioneer in business-process outsourcing, where it does everything for clients from
running accounting operations to processing mortgage applications. In that business,
the company was respected for its low prices and dependability, but the work was too
labor-intensive. Wipro wasn't doing enough to improve the way it did its clients'
business.

That's one reason Wipro decided to use Toyota as a model for overhauling operations.
Its aim is to make business processes as simple, smooth, and replicable as the way
Corollas slip off that Bangalore assembly line every 5.3 minutes. In an unprecedented
move, Wipro took on the tricky task of translating Toyota's vaunted principles for
manufacturing into the realm of services. "What we do is apply people, technology, and
processes to solve a business problem," says T.K. Kurien, the head of Wipro's 13,600-
person business-process outsourcing unit.

Today, Wipro's paperwork processing operations in Bangalore, Pune, and Chennai bear
an uncanny resemblance to a Toyota plant. Day and night, thousands of eager young
men and women line up at long rows of tables modeled on an assembly line. Signs
hanging over each aisle describe what process is being handled there -- accounts
receivable, travel and entertainment, and so on. Team leaders such as P.V. Priya, who
oversees medical claims in Bangalore, set goals with their colleagues at the beginning
of each shift. Just like in a Toyota factory, electronic displays mounted on the walls will
shift from green to red if things bog down.

HOWARD SOLOMON

A CEO and His Son

The remarkable saga of Howard Solomon, his son Andrew, and his company, Forest
Labs...a journey of depression and hope

When Andrew Solomon, then 31, fell into a deep depression in 1994, his father's life
changed immediately and immeasurably. Howard Solomon, the head of a modest drug
company in New York City called Forest Laboratories Inc. (FRX ), brought Andrew to
live with him the day his son started taking medication. At first, says Howard, "I didn't
understand what Andrew was suffering, that he was really ill. I told him, `Cheer up, hang
in there, it will pass.' Andrew made me understand. We were fortunate that he could
articulate his terror." Howard, 67 at the time, became Andrew's nurse, advocate,
companion. He woke Andrew every morning, assuring his son the hopelessness would
fade; he ate dinner with Andrew every night, cutting up his son's food when Andrew
couldn't.

In this way, the Solomons could be any parent and child brought together by a serious
illness. What sets them apart is how the experience transformed both them and the
company that Howard Solomon has run for the past two and a half decades. Solomon is
remarkably reserved, a lawyer by training, a man used to going about his business
unnoticed. But now his professional and personal lives, once as separate as any chief
executive's could be, are intertwined. All too familiar with the harrowing nature of
depression and impressed by the efficacy of some medications for it, Howard sought to
license a popular European antidepressant that was unavailable in the U.S. It was a
decision that would change the fortunes of Forest. Andrew, who emerged from the
worst of his melancholy after several months, went on to write an agonizingly intimate
book about the disease. The Noonday Demon: An Atlas of Depression was published in
June, 2001, and won the National Book Award for nonfiction. He concludes with this
thought: "Curiously enough, I love my depression. I do not love experiencing my
depressionI love who I am in the wake of it."
Today Forest Labs is a dramatically different company from what it was eight years ago.
Its antidepressant, Celexa, is the fastest-growing of its class of drugs, which includes
Prozac, Paxil, and Zoloft; its share of new prescriptions is 17.5%. Since its U.S. launch
in September, 1998, Celexa has come to account for almost 70% of Forest's overall
sales--about $1.6 billion in the fiscal year that ended on Mar. 31. That's more than five
times the level before Celexa was introduced. Profits have grown from about $37 million
in 1998 to $338 million last year. Forest's share price has quadrupled in that time, from
$20 to nearly $80. This year, the company ranks 18th on the BusinessWeek 50 list of
top-performing businesses in the Standard & Poor's 500. And Solomon turned out to be
the third-highest-paid U.S. executive in 2001 inBusinessWeek's annual survey, largely
because he cashed in stock options worth some $147 million.

Solomon considered offering free antidepressants to those who needed them after
September 11 but decided against it. While Andrew is enthusiastic about the drugs'
efficacy, he wrote candidly of their peril: "Taking the pills is costly--not only financially
but also psychicallyIt is toxic to know that without these perpetual interventions you are
not yourself as you have understood yourself."

What Howard tells his son, and all those who suffer depression, is that there is nothing
to be ashamed of. Indeed, both speak of what they have gained. Andrew's despair
could have brought his family even greater misery had he not emerged from it in as fine
form as he did. Instead, the experience transformed him, his father, and Forest. Theirs
is a story of hope, perhaps not rare, but certainly remarkable.

TERRY SEMEL
Yahoo! (YHOO) Chairman Terry Semel stepped down as chief executive June 18 in a
surprise move, ending his increasingly ineffectual pursuit of online search leader Google
(GOOG)—a losing battle that had demoralized Yahoo's shareholders and employees.
The Sunnyvale (Calif.)-based company appointed co-founder Jerry Yang as its new
CEO and named Susan Decker as its president. Decker, who had been touted as
Semel's heir apparent, was recently promoted from Yahoo's chief financial officer to
oversee the company's advertising operations.
Semel, 64, will remain chairman in a non-executive role after spending the past six
years running the company. "I saw myself as more of a coach than a player going
forward," Semel told analysts and media during a Monday conference call.

BEST-COMPENSATED CEO EXITS

Signaling Semel's decision was voluntary, Yahoo said he will not receive a severance
package. The former movie studio executive already has made a fortune since joining
Yahoo in May, 2001, having realized nearly $450 million in gains by exercising some of
the stock options that he received during his tenure.

Despite Yahoo's recent struggles, Semel received another big bundle of stock options
last year that boosted the value of his 2006 compensation package to $71.7 million.
That was more than any other CEO among 386 publicly held companies covered in an
Associated Press analysis of executive compensation using new rules dictated by the
Securities & Exchange Commission.

In Monday's conference call, an emotional Yang hailed Semel as "a role model and
mentor" and then sought to defuse recent speculation that Yahoo might be sold to
Microsoft (MSFT) or another suitor hoping to exploit the recent turmoil at the company.
"I am totally excited and energized about assuming the leadership of this great
company," Yang said. "We have a long and prosperous future if we execute correctly

STOCK GAINS
Google's meteoric rise also has decimated the employee morale at Yahoo, leading to a
recent wave of executive departures that raised concerns about whether the company
would be able to retain the talent it needs to regain its stride.

Just last week, Semel assured shareholders attending Yahoo's annual meeting that he
had the fortitude to lead a comeback. He has been counting on recent improvements to
Yahoo's online advertising system and a series of key partnerships to boost profits after
the company suffered an 11% drop in its first-quarter earnings.

In the June 18 conference call, Decker said the advertising upgrade, known as Panama,
is delivering results that so far have exceeded management's expectations.

Yahoo shares gained 81¢ to finish at $28.12, then surged 4.2% in the extended
session.
 ARTHUR LEVINSON

Genentech's Medicine Man

CEO Arthur Levinson got the biotech pioneer off life support. Will it finally deliver on
its promises?

On Mar. 14, hundreds of angry Wall Street analysts converged on The Pierre hotel in
New York and demanded answers from Genentech (DNA ) Inc. CEO Arthur D. "Art"
Levinson. The biotech company's experimental drug, Avastin, had failed a key trial in
breast cancer in September, 2002, causing Genentech's stock to nose-dive 14%, to
$27.50, in one day. Why, analysts wondered, would Levinson dream of spending a
penny more to develop a product that was clearly dog? "They said I was stupid,"
Levinson says. "It was like I was a charlatan selling snake oil."

The CEO isn't one to gloat. But as he prepares to file for Food & Drug Administration
approval for what could be the most important drug in Genentech's history, he can't
resist. Late-stage trial data released in May showed that Avastin significantly extended
the lives of patients with colon cancer. Analysts now hail the drug as a potential billion-
dollar-a-year blockbuster. The agency will receive Genentech's filing on Avastin by the
end of September.

Avastin is just the latest in a series of coups for the world's oldest biotechnology outfit,
which was founded in 1976 in South San Francisco. In June, the FDA approved
Genentech's Xolair, the first biotech drug to treat asthma. On Sept. 9, an FDA advisory
committee unanimously recommended approval of the company's psoriasis drug,
Raptiva, which should hit the market by December and could one day be worth more
than $400 million a year.

In short, Levinson could be on the cusp of a rare pharmaceutical trifecta. If Avastin is

approved by mid-2004, as expected, Genentech will have launched three new products
in a year, all of which offer entirely new methods for attacking the diseases they target.
Genentech's sales of $2.7 billion already make it the second-largest biotech after
Amgen (AMGN ) Inc., with $5.5 billion. Analysts say its revenues could surge to $5
billion by the end of 2005, and profits could hit $1 billion. In anticipation, investors have
bid up Genentech's stock 164% this year, to $87 -- more than twice the gain of the
Morgan Stanley Biotech Index.
"IT'S GOING TO BE TOUGH"
Genentech's discomfort with TV could put it at a disadvantage to competitors such as
Amgen, maker of the blockbuster drug Enbrel. That product has yet to be approved to
treat psoriasis, but Amgen is already collecting potential patient names via a Web site
and a psoriasis-related magazine that Amgen has been promoting in national TV ads.
"Genentech is going up against the best in the business, in markets where it has no
track record," says Gary M. Stibel, founder and principal of the New England Consulting
Group. "It's going to be tough."

Moreover, the new drugs will be costly, potentially making Genentech a lightning rod for
insurers and politicians who have been griping about rising health-care costs. The price
tag on the asthma drug, for example, is about $1,000 a month, while older treatments
such as steroid inhalers cost just $300 a month. Although most health plans have
agreed to cover the product, they require patients and doctors to fill out lengthy
questionnaires before determining who can get it. "They're making us jump through
hoops because the price is just so high," says Dr. Brian Smart, chairman of the asthma
and allergy center at DuPage Medical Group in Glen Ellyn, Ill.

Even when grappling with pricing and other complexities, Levinson preserves his sense
of humor. In an infamous prank two years ago, he hazed incoming research chief
Richard Scheller by orchestrating a ruse in which all the top managers pretended
Genentech was actually going down the drain. At Scheller's first management meeting,
each executive presented fake overhead slides, complete with charts and tables,
showing how poor the company's prospects were. Levinson lamented that the board
would surely fire him momentarily. "They really had me," says Scheller, who had left a
tenured professorship at Stanford University to join Genentech. Scheller got back at the
CEO by placing a 6-foot-tall cutout of Levinson dressed as Star Trek's Spock at the door
of an off-site meeting and distributing hundreds of smaller copies to executives.

In the world of Big Pharma, Levinson remains an oddball. He shuns the CEO spotlight,
rarely accepting invitations to speak at industry events. He would much rather be at
Genentech peering at chemical assays or at home tinkering with his telescope and
talking science with his wife and two children. When his son and daughter were young,
Levinson used Legos to teach them about DNA, and he recreated the solar system with
tennis balls and a flashlight. "He's just like a little kid," says his wife, Rita.
These days, when he needs a break from the ever-mounting pressures, he rigs up his
digital camera to his backyard telescope and takes photographs of faraway stars.
"Some people look at the sky because they like to marvel at how small we are," he
says. "I'd rather marvel at how much we've learned and the possibilities that are still out
there." Now, it's time for this scientist-turned-CEO to prove that he can keep
Genentech's star from falling.

FUJIO MITARAI

Q&A with Canon's Fujio Mitarai

The CEO talks about how he used American business practices to turn the company
around

Canon Inc. (CAJ ) has always been more global, more focused, and much more
profitable than the average Japanese tech behemoth. But under the direction of Fujio
Mitarai, president and chief executive since 1995, the world's leading maker of copiers
and printers has emerged as a model for others in Japan to emulate. Canon (CAJ )
achieved record profits and sales in 2001, while conglomerates like Toshiba (TOSBF )
and Fujitsu (FJTSY ), which churn out hundreds of product lines, fell into the red.

Mitarai, who spent 23 years in the U.S. building up Canon's North American operations,
introduced cash-flow management and other American business practices to improve
profitability. He spoke about these and other reforms in a recent interview
with BusinessWeek Tokyo Correspondent Irene M. Kunii. Here are edited excerpts of
their conversation:

Q: After spending much of your career in the U.S., what was it like to return to
Japan in 1989?
A: I knew how business was conducted in Japan, having traveled back and forth over
the years while running Canon USA. But I myself had changed. I found Japan too
irrational, particularly in how business is conducted and the attitude people have toward
pay. For example, even if the economy is bad, unions demand basic wage hikes.
The thinking is that companies here have a social obligation to provide salaries. This
dates back to the early post-World War II days, when Japan's biggest problem was how
to resolve unemployment at a time of high inflation. The government was too weak to do
much, so companies took on the responsibility of providing jobs. This continued even
after the country became wealthy.

Q: What has been your biggest achievement since taking over Canon?
A: Japanese tend to put sales and market share first. They make many products with
the aim of raising sales. But then profits decline, and companies find themselves falling
into debt.... I changed the mindset at Canon by getting people to realize that profits
come first.

Q: What did you do specifically?

A: I started by closing down money-losing divisions, like PCs, typewriters, LCDs, optical
data-storage cards. These four divisions generated 30 billion yen [$225 million] in sales
and 10 billion yen [$75 million] in losses. By doing this, I changed the company's basic
philosophy.

Then I introduced cash-flow management. I scrapped our tradition of relying on loans

and bond issuances, and instead raised our own cash for investment. We were able to
increase cash by raising net profits and cutting operational costs through measures
such as inventory reductions. To raise net profits, I cut costs drastically. I changed our
manufacturing system. We switched from using conveyor belts to the cell production
system [putting workers in "cells," or clusters, resulting in higher productivity]. As a
result, we were able to cut labor costs and factory-floor space, and reduced the
warehouses from 34 to 14.

In 1995, our loan-dependency rate was close to 35%, and now it's down to around 10%.
Our shareholder equity ratio went from 33% to 51%. So this is how I improved Canon's
financial situation. While business has been good in our overseas markets, we've had to
deal with a strong yen until recently. Even so, we still managed to raise profits.