Microsoft is appealing a $1.3 billion fine from European antitrust regulators. But its antitrust worries in the United States appear to be over. The consent decree with the US Justice Department expired May 11th. A lot has changed since Microsoft crushed Netscape in the browser wars of the 1990s. This month on The Digital Future, Strategic News Service publisher Mark Anderson says Microsoft has transformed itself into a much better corporate citizen.

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And in order to fully appreciate the importance of this subject, it may be helpful to do a quick review of the role of Intellectual Property in modern trade and economics.

Much is made of the word “innovation” in today’s world, but very few seem to know anything about it. Let’s stipulate that creativity, innovation, drives the creation of Intellectual Property, and let’s further suggest that IP is the core economic value structure in an Information Society, the civilization model most of the world enjoys today.

IP may be created and owned by individuals, nonprofits, or universities and research laboratories, but the preponderance of IP is created under, and owned by, corporations. Hundreds of billions of dollars – perhaps even trillions – are invested annually by corporations to create new IP. Shareholders demand a return on this investment.

I will note here, and come back to, a shifting level of international organization: company, country, civilization/society. We will want to pay attention to the changing role of corporate IP control vis-a-vis these other structures.

When we look at the modern mercantilist model, or what China calls the “East Asian Socialist” model, we see recent histories of strong success, and evolving models, ranging from Japan to South Korea to China. Their past histories and politics, dramatically different, matter little compared with the similarities of their economic models in the 20th and 21st centuries.

In each case, we have a relatively simple, and very successful, story: steal or appropriate IP from the countries creating it; use top-down controls to favor government-selected industries; and create an export-based economy, funded by high domestic prices and low (often WTO-illegally low) export pricing, usually supported by forex currency manipulations. Discourage or prohibit imports, particularly in targeted export industries, favor your internal “champion” companies in all deals, and ultimately create large trade imbalances with so-called trading “partners.”

In the case of China, the evolved model includes encouraging huge amounts of foreign direct investment, but generally disallowing majority ownership by foreign companies, and prioritizing market success in targeted industries (wind and solar energy, Internet search, wireless infrastructure, social networks, etc.). Government policy favors local firms, locally owned, using Chinese-owned IP (now, that’s ironic; where could it have come from?), under Chinese brands, and often – another specialty – only if the products themselves are made with Chinese equipment. In Chinese law, this is called “Indigenous Innovation.”

Can you imagine your own country (assuming it is not China) having such a publicly stated policy of preference? It is offensive to the most basic concepts of free trade.

Finally, as partner countries are gutted of jobs, targeted industry companies, and money, the mercantilist country starts moving plants inside partner borders (Japan did this with Toyota, and China has just begun with solar energy fabs) so that they are immune to tariff laws, and to the inevitable adverse World Trade Organization outcomes.

We’ll come back to this theme shortly, but first, let’s update our views on security.

» Security Until Now

In recent times, computer security has been a subject of interest by many different parties, often for similar reasons. Those reasons, stated generally, would include:

1. Avoiding spam. This problem persists today.
2. Avoiding viruses. Ditto.
3. Avoiding worms, Trojans, etc. Ditto.
4. Avoiding Personal ID Theft. Still a problem today.
5. Avoiding ID Theft of employees and customers. More a problem now than yesterday.
6. Avoiding your computer becoming part of a Botnet and wreaking havoc on others on the Net. Still a problem.
7. Avoiding other forms of malware, changing daily. Lots of new problems.
8. Experiencing Denial of Service attacks and other misbehaviors and sources for extortion and criminal behavior against corporations and groups.
9. Avoiding privacy invasion, generally the result of legal or quasi-legal malware installed without permission on systems, often for “ad-tracking” purposes. These issues are multiplying daily.
10. Avoiding the Unknown, dodging future hacks that will disable, publicly embarrass, or somehow compromise business operations in the short term, at least.

Although, as you can see, not one of these security motivations has been successfully removed from today’s CIO nightmares, they all now pale in comparison to something new. Whatever your reasons for investing in security up to now, you will have to create a new line item of expenditures for this new issue.

» IP-Based Trade Wars

Two weeks ago, I was visited by two people speaking for China, representing a new company whose job would be to – well, they described it, but it was a bit vague. During this description, we talked about IP and China, and they pointed to the new high-speed trains China is building everywhere.

Indeed, China has laid more high-speed rail, and plans for more of these showcase trains, than any other country in the world.

My visitors pointed to these trains as examples of how China was now developing its own IP, and not just depending on IP theft or forced disclosure from others.

Last week I learned the rest of the story: how Japan (Kawasaki Heavy Industries and others) brought this technology to China, hoping to make money, and now are watching as their IP reappears in Chinese products owned by Chinese companies, and the Japanese get little or nothing.

That’s the story of modern mercantilism, and of the so-called China Miracle. (For a more detailed description, Premium Members, see the “SNS: What Is China?” issue in the website archives, January 6, 2010).

As nations enter into predatory trade practices that lead inevitably to win/lose outcomes, the world will increasingly recognize these efforts not as free trade, but as trade wars. At the same time, those countries with the most at stake – that is, those which create the most innovation value – will be likely to show preference in trade for countries which protect IP interests.

The result is almost certainly going to be consideration of IP in the formation of future global trade alliances and policies. This is the one event that mercantilist model countries cannot tolerate or allow. Watching China implement its Indigenous Innovation national preference policies, while hounding the U.S. and Europe to maintain their open trade practices, is one case in point.

» The New Mandate: Economic Survival

This brings us to today, and to the next level of security concerns for CIOs and CEOs.

What if one country, or more, were so focused on the above model, based on IP theft, that it mounted a prolonged, concerted effort, using multiple layers of activity to obtain the “crown jewels” of all targeted companies, in all targeted industries?

These levels might include, and not be limited to: outright physical theft; industrial espionage; political, business, and trade pressures/requirements to disclose IP; espionage by state agencies; recruitment of students, grad students, tourists, and business people into the espionage effort; and cyber espionage. Levels of attack would include the Net, company networks, company employees and contractors, and the computing and storage devices (and communications) of traveling executives.

(In China, for instance, all communications contents are the property of the State. Better not call the Home Office and tell them how it’s going during a negotiations session.)

What if your industry and company were one of the targets?

Last quarter, a letter was reportedly sent from the Prime Minister’s office in the U.K., to the country’s top 300 CEOs, informing them that they should consider all of their current IP crown jewels to have been compromised.

All of them.

This brings the level of security concern to a level not yet anticipated by most executives: what if the cost of broachable security is your company’s future ability to compete and survive?

Ask Boeing, Cisco, Kawasaki, Qualcomm, 3Com, Sony, Google, General Electric, BASF, or Microsoft how they feel about all this. Most will dissemble in public, but tell you the truth offline; and many are rapidly coming clean, even in their public comments, as GE CEO Jeffrey Immelt did not long ago.

You are now CEO of a 50-year-old global corporation with, say, 60,000 employees. And the PM’s letter sits open on your desk.

You call in your CIO, close the door, show him the letter. Have we been hacked? you ask. He goes into geekspeak, describing various levels of difficulties, generally safe behavior, all seems well today, no guarantees or ways to tell.

What? You ask. There are no ways to tell if our crown jewels have been stolen by some competitor?

Here are some of the crown jewels obtained by China in the last couple of decades: the top U.S. nuclear warhead design, from Livermore Labs; wing fabrication machinery and blueprints, from Lockheed-Martin; selected Boeing airframe designs; navigation and rocket design for Intercontinental Ballistic Missiles (specifically, the Long March series), from both Boeing and Lockheed; high-speed router designs from Cisco; the source code to Windows, from Microsoft; complete car designs from Chevy and Ford; advanced chip and fab designs, from IBM; high-speed rail systems from Japan; etc.

And you think your company’s IP is somehow safe?

What we are watching, currently, is the largest theft in global history, happening in front of our own eyes. And while one group is busy exclaiming at the wonder of China (and South Korea and Japan) making all that progress and money in their turn, another group is now recognizing the mercantilist model in its third iteration.

When someone breaks into the bank and steals all the money, do you compliment him later on his brand-new car?

All of which brings us to the here and now.

Is there a way to protect your company’s crown jewels – starting now and going forward, as the British prime minister suggested at the end of his letter? I’ve been talking with people more versed in this question than I am, and I am convinced that the answer is a qualified Yes.

The first, and most important, step is to get out of denial mode. Accept that your current IP has been compromised.

Steps Two and beyond have to do with physically isolating your next generation of Intellectual Property, restricting employee access all over again by new and more stringent policies. Don’t take company laptops overseas, but instead use reserved, cleaned machines just for this purpose. Assume all communications with any office overseas is completely compromised. Do not count on encoding or encrypting.

Ultimately, you will be heading your firm toward increased spending on a brand-new level of mandated security, not much different from that of the Pentagon. The Department of Defense’s job, which they take very seriously, is to survive the thousands of cyber attacks they experience every single day. As of now, that is your job, too.

Finally, a comment is in order here regarding the hierarchy of corporations, country allegiance, and civilization and society. In past generations, “what was good for GM was good for America” – i.e., corporations were national assets. While this remains true when they are state-owned (part of GM, all of France Telecom, and most Chinese companies), it is not true of modern capitalist and socialist country companies.

These firms have been guilty of trading IP across borders, and into the hands of their competitors, making the (provably incorrect) assumption that access to sales inside China would justify this forced disclosure. (It turns out that only a small percentage of foreign firms operating in China have made a profit, perhaps in the 5%-20% range.)

Here is the real deal, after more than a decade of effort: if you lose your company’s crown jewels, you lose your shareholders’ money, too.

If the sustained ability to invest in – and get a return on – IP is the cornerstone of modern civilization, then corporations have unwittingly compromised society’s well-being.

We live today in an Information Society, whose future is driven by innovation and Intellectual Property. Those of us creating it have an obligation, to our shareholders and to the system itself, to protect that investment. If the value of IP is repeatedly degraded or destroyed, we’ll enter a world that no one – not even the mercantilists – desires.

After all, those Somali pirates drive pretty nice cars these days.

Your comments are always welcome.

Mark Anderson

When Nokia decided its Symbian operating system wasn’t the path to success in the smartphone market and started looking for outside options, it found two major suitors: Microsoft’s Windows Phone 7 and Google’s Android.

The Friday before Valentine’s Day, Nokia announced it was hooking up with Microsoft. Will this marriage work? Strategic News Service publisher Mark Anderson says this deal may not be the best thing that ever happened to Nokia, but it won’t be the worst.

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My primary suggestions were:

1. That Steve Ballmer share an Office of the President with Ray Ozzie and Craig Mundie;

2. That Microsoft decide whether or not the company wants to be a force in the consumer markets, and, if so, how it should go about doing this; and

3. A new charter for Microsoft product design that might give it more lift based on existing corporate skill sets and markets.

I hope everyone inside and outside the company finds these points worth discussing; please feel free to post here.

You can hear the interview here: www.kplu.org

On Wednesday, I’ve agreed to speak at, and moderate, part of a larger event.  For the last seven years, the Australian government has sponsored Australia Week in the United States, which showcases the country’s culture, business, food and fashion — in addition to showing off some of its brightest celebrities.

As part of that celebration, the Aussies took it a step further in 2007, when they started inviting the country’s most promising new technology startups to compete in California for venture cash to break into the U.S. market.  It’s called the Innovation Shootout. Select companies will appear at the Microsoft HQ in Mountain View and do a business model competition before a jury (I am the MC, a judge and speaker), who will vote for the winning company.

The panel of judges includes: Deborah Magid, of IBM Venture Capital Group; Allison Leopold Tilley, of Pillsbury; and Chris Shipley, of Guidewire. Microsoft’s Dan’l Lewin will be there as host, and one would guess many others.

This year, we will be taking a look at companies providing physical surveillance and IT security systems; solar-energy tech; emissions assessment and reduction systems; and labor management software.

Australia is increasingly seen as one of the most pro-innovation environments, where government and industry work closely in tandem to position themselves globally – as in the passage, and implementation of, the National Broadband Network – a project that seems to have inspired the Obama administration.  Perhaps the US will finally get its own broadband policy and initiative, thanks to our friends from Down Under.

FRIDAY HARBOR, Washington, December 10, 2009 -  Mark Anderson, CEO of Strategic News Service, released his predictions tonight for 2010 at the fifth annual SNS Predictions Dinner at the Waldorf=Astoria in New York.  The global press in attendance included Bloomberg, the Financial Times, Business Week, The New York Times, Fortune, Le Monde, Strategy+Business and ZDNet among other business leaders.  His top ten predictions for technology for 2010 are:

1. 2010 will be The year of Platform Wars: netbooks, cell phones, pads, Cloud standards.  Clouds will tend to support the consumer world (Picnik, Amazon), enterprises will continue to build out their own data centers, and Netbook sector growth rates continue to post very large numbers.
2. 2010 will be The year of Operating System Wars: Windows 7 flavors, MacOS, Linux flavors, Symbian, Android, Chrome OS, Nokia Maemo 5. The winners, in order in unit sales: W7, MacOS, Android.  W7, ironically, by failure of imagination and by its PC-centric platform, actively clears space for others to take over the OS via mobile platforms.
3. All content goes mobile. Everything gets tagged, multi-channeled, and the walled gardens open up.  TV and movie content, particularly, break free of old trapped business models.  We are moving toward watching first-run TV and movies on phones, for a price.  Which leads to no. 4.
4. MobileApps and Mobile Content drive MicroPayments, which move from niche to mainstream payment models.  Payment for content will split along age lines, at around 35; above, pay; below, don’t pay.
5. The Phone vs. the PC: A Split Along Two Paths (enterprise vs. consumer)
   • fully integrated user experience, poor back-end (mail and calendar services, etc.) integration; the Apple environment;
   • splintered user experience, like WMobile vs. WPC, with integrated back end.
   • Windows sells integration in the plumbing, Apple does it on the screen.
   • Note: The phone is now the most interesting computer platform, and it is driving innovation: software, business models, distribution.  Netbooks are next up as drivers.
6. There will be a Cloud Catastrophe in 2010 that limits Cloud growth by raising security issues and restricting enterprise trust.  CIOs will see the cloud as the doorstep for industrial espionage.
7. A huge chasm opens in computing, between Consumer and Enterprise (government/business.), with Apple, Google and most Asian hardware companies in Consumer, and Dell, IBM, Cisco, and MS on the Enterprise side.  HP will straddle both.  Before 2010, talk was all about unifying consumer and enterprise.  Now, talk will be about their split.
8. Microsoft loses in its Consumer play: except for gaming, it is Game Over for MS in Consumer. This will make Consumer the place to be, where the most robust and exciting change artists will work.
9. News media that survive will move to the subscription model, in whole or in part, along age lines.  (See no. 4)
10. Connecting remote data to people and things in real time will lead to a series of exciting new devices and applications. Possible examples: real time comparison and recipe-driven shopping, facial recognition (in social spaces) linked to bios, self-guided tours by phone, voice-queried information about your personal environment.  Many of these are technically proved out today, but they will start to emerge as an exciting and brand new trend in applications in 2010.

Anderson included some predictions for the economic landscape as well:

1. China shows its weakness.  Will the bubble break?  Equity markets too volatile, banks are fake.  After the stumble, people start to see that China is also economically unreliable, for its own reasons.
2. Currency Wars intensify: world vs. China.
3. Corporate vs. Government Power: The new battle.  Countries are betrayed, corporations viewed with increased mistrust.
   • mercantilist vs. open markets
   • corporate (US, Japan, SK) vs. govt. (China, Russia)
4. Western Systems Remain Broken:
   • Congress: reelection costs and bribery
   • Healthcare: out-of-control premiums and operating costs
   • Higher Education: too-high tuition and operating costs
   • K12: Teaching and Learning: Failing and cost-independent
   • Finance: No reinstatement of Glass Steagall, no uptick rule, 133 banks dead 2009, 455 on the FDIC watch list.  Big banks lying about balance sheets.
   • Science: Only incremental discoveries.  Perhaps technology drives science now.
5. Global Liquidity remains the greatest risk; carry trades everywhere.  Inflation wherever the economy is not unemployment-impaired.  Now we will face a split world, just as the U.S. economy was split, this time caused by unemployment.

On this month’s Future in Review with Mark Anderson [of Strategic News Service], we look at a challenging year for Microsoft. The company has been struggling with European antitrust issues and its first-ever layoffs. But there’s plenty of optimism about Microsoft’s new operating system, Windows 7. Mark spoke with KPLU’s Dave Meyer.

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Last week, I gave a keynote talk at the CRIM Crystal Ball Conference in Montreal, and the speech seemed to be really well received. I had decided ahead of time that the best way to talk about today’s problems was to have a frank conversation about how the world really worked – not how it was supposed to work, nor how we all thought it worked a few years ago, but how it really was working during the already-infamous Bush era.

 This was an era in which many systems were broken, and whole sectors were coming apart, driven by the failures of key players. The media have already blamed the regulators (or lack of regulations), greedy CEOs, off-balance sheet banking practices, unethical hedge fund operators, removal of the uptick rule, general short-selling in wolf packs, the repeal of the Glass-Steagall Act, program trading, physicists coming to Wall St., the ethical collapse of the rating agencies, the fall of Fed power, the global liquidity bubble, speculation-driven oil pricing, oil price manipulation by oil providers, and bad luck.

 There is a simpler way to describe what happened: intellectual honesty, and real honesty, went by the boards.

 The people involved in all these things generally knew they wouldn’t work for long, knew they were unethical, knew they were skirting the legal (or were illegal), and knew they were lying to themselves, their families, and their colleagues about the long-term effects of what they were doing.

 I had dinner last week in Washington, D.C., with a top lobbyist, who told me proudly that she had led the charge in repealing the Glass-Steagall Act. (This allowed banks to get involved with non-bank, high-risk activities.) I had heard that the bankers spent $1B to get rid of this iconic piece of learning from the Great Depression; she confirmed it. Ten years later she is 38, and she laughingly told me over hors d’oeuvres that she now recognizes it was a huge mistake, adding that she no longer represents the banks.

 Oops. I guess that’s how you destroy empires.

 Which leaves the obvious unfortunate impression: the banks themselves must have known what a mistake this would be.

 Yesterday, in a lunch discussion with serial entrepreneur Al Davis, we covered all this ground in about an hour, and then he said, “You know, this all comes down to the board of directors.” And that brings us to today’s subject.

 We can blame the regulators who really came from industry, we can blame the bankers and CEOs and their lobbyists, we can blame the politicians who pretended that no regulation was good regulation, we can blame co-presidents George Bush and Dick Cheney. But, with the exception of the last two, there is another layer of governance that should take most, if not all, of the responsibility: the board of directors.

 Too much is made of the symptoms of bad management, and much too little is made of those really responsible for the quality of this management.

 At different times, I’ve written open letters to specific boards, but today I wanted to write an open letter to all boards. If you are a corporate board member, please read this carefully; I’m betting that, after reading it, you’ll agree: you were probably not doing your job.

 Let me start by breaking the neck of the good-old-boy scheme: most board members are friends (or even relatives) of the CEO, or work for him or her. Those who are not – even the most independent “outside” directors – tend to be selected on a rank of the CEO’s ability to direct, manipulate, or intimidate them; OR because they are guaranteed not to look too closely at the company.

 This formation step is the first place where things go wrong.

 A good board of directors should number 9 to 11, and have the following composition:

 The Chairman, often  the past CEO, and certainly NOT the current CEO.

The CEO.

The CFO. This will surprise most readers.

At least half the directors should be “outside” directors.

There may be a rotating spot for one or more employees (the German model).

The General Counsel.

The CTO or CIO should also be considered, since most strategic decisions involve technology inputs that others may miss entirely.

 Outside directors should be just that; not just golf cronies or the targets of interlocking board favors. Rather, they should bring strengths from areas of current or planned company operations.

 In the old model of governance, it was generally agreed that the primary job of the board was to hire and fire the CEO: he/she was its primary, and often its only, point of contact with the company.

 There are some things we can now say about this Old Model:

1. It did little or nothing to prevent corporate fraud and misbehavior.

2. Despite words to the contrary, it did nothing to protect shareholders, and much to protect the CEO.

3. It delivered any pay scheme the CEO wanted, via the Exec or Compensation Committee.

4. It did not prevent the current collapse of today’s many broken systems and companies, but rather encouraged this tragedy; i.e., it didn’t work.

 Let me give a few examples of what I mean by “it didn’t work.”

 AIG wrote insurance in amounts far greater than its total book value, or the value of all its reserves, creating liabilities infinitely beyond its ability to pay. Today, the now-defrocked longtime CEO Hank Greenberg continues to “protest too much” on TV: that he is the good guy, the government got it all wrong, if only he were still in charge all would be fine, the government wrecked his company, and so on.

 How did Hank and his short-term successor, Milton Sullivan, get away with it all? It would appear, among other things, that they used the usual tricks: find famous, busy people who make you look good and have no time to dig deeply into company affairs; and make sure your board is too large, so that nothing ever really happens at board level. In AIG’s case, that number was 17, or about eight more than are really useful.

 Over-large boards are the first sign of an errant CEO.

 How, exactly, did the board let this most egregious set of affairs take place? Obviously, they could not rely solely on their CEO; he’s lost it. But THAT’S WHY THEY ARE THERE: to hire and fire the CEO. This whole board should be named, shamed, and pictured somewhere, so that no one ever hires them again for any but the most menial types of yard work. (We have saved you the trouble. See our “TakeOut Window” below.)

 What about the board of Lehman Brothers? Or Bear Stearns? Who exactly  authorized 30/1 leverage on contracts that no one could understand, in numbers beyond count? Some board members, from the Old Model, would say: Well, that’s a level of detail beyond what we were asked to look at.

 Of course! Because, like Bernie Madoff’s accountant, they wanted you to stand up and sign off on something that was illegal, unethical, or just plain stupid. We can blame the hedge jackal packs, unrestrained by the uptick rule or anyone at home in the SEC, but let’s put the real blame where it belongs: on the board that got the companies into these messes.

 In the New Model, a board member would take the initiative to get answers for him or herself. In the New Model, the CEO looks to the board for real guidance and assistance. In the New Model, the CFO has twin allegiances, to the CEO and to the board. In the New Model, we substitute the charismatic, closed dictator for the engaging, transparent leader.

 In this vein, I’d like to suggest a checklist of questions for new board members:

 1. Are you going to be a good director, or a bad director? Define this now, so you can read it later when you’re under pressure.

 2. What kind of ethical leadership will you bring to the board, and to the company?

 3. How will you know if the company is meeting its Mission, and how will you assist in this?

 4. Who do you answer to? Who else?

 5. Are you willing to be fired or replaced if the company appears headed in the wrong direction? If not, please resign now; you’ll be saving yourself big legal bills later.

 6. Do you accept responsibility for corporate impacts beyond those on shareholders? Impacts on employees? Impacts on customers? Impacts on the planet?

 7. Are you going to miss some meetings, sit quietly, and collect your checks, or will you ask tough questions, make all meetings, and delve into areas needing more explanation?

 8. Are you emotionally prepared to fire the CEO? If circumstances required it, would you be prepared tonight?

 Let me give you a couple of surprising examples of failed boards and failed CEOs, in my opinion.

 Let’s take the two most famous, hero-worshipped idols of the modern corporate age:

   Lou Gerstner, IBM

   Jack Welch, GE

 What if it turned out that Lou smoothed earnings throughout his time as CEO of IBM in order to look great to the Street and to max out his personal compensation plan by keeping stock prices up? What if this smoothing was done illegally or unethically, by ransacking the company’s pension program, violating mandates for funding his own employees’ futures, and taking the money instead to buffer earnings shortfalls?

If that were true, you’d probably say he should go to jail, rather than be a hero. AND you’d say that his board of directors should have known about this transgression all along, and stopped it! Right?

What if it turned out that Jack smoothed earnings throughout his time as CEO of GE in order to look great to the Street and to max out his personal compensation plan by keeping stock prices up? What if this smoothing was done illegally or unethically, by ransacking the company’s insurance reserves, violating government mandates for funding the risk taken by his own insurance firms, and taking the money instead to buffer earnings shortfalls?

If that were true, you’d probably say he should go to jail, rather than be a hero. AND you’d say that his board of directors should have known about this transgression all along, and stopped it! Right?

 This brings us to quarterly earnings reports. Some modern-day CEOs have claimed that the combination of quarterly reporting and Wall Street’s savage punishment of any company not beating pre-set expectations by at least a penny – well, it’s impossible for a CEO, under today’s stock-heavy compensation plan, to stay above the law.

 Remember when SNS broke the story on Microsoft smoothing its earnings, back while Billg was CEO? And then, a bit later, the company’s internal auditor apparently sued the company over this very issue, settled in court, got his payoff, and all the papers were sealed by the court forever?

 See, it really isn’t hard to find these things.

 So maybe the board of directors has another problem to solve: how to pay CEOs.

 Today, it’s all about the stock price: cash for stock prices, bonuses for same, stock grants and stock options for the same thing; often tens of millions in compensation, all keying off the stock price.

 I would like to suggest that all F500 boards, worldwide, instruct their Executive Compensation Committees to immediately restructure the CEO compensation package, in this way:

1. Reduce dependency on quarterly performance, and reward longer-term goals and timeframes.

2. Expand the parameters beyond stock price, to include customer satisfaction, employee engagement, and sustainability. Define these to your own satisfaction.

3. Offer bonuses for attracting and retaining especially important talent, one of the CEO’s most important tasks.

4. When appropriate, also offer incentives for “real” innovation, in everything from processes to products. At the top, make these grants large and rare. At the bottom, make them small and common.

 Great companies don’t fail because of one madman; they fail because of one too-timid board. And great civilizations don’t fail because of one company gone awry; they fail because core beliefs and values fall away, which we’ve seen in the U.S. recently.

 When Rome collapsed, it wasn’t because the city burned. It was because the dream that once was Rome, of a great and civilized empire, stopped burning in the heart of every Roman.

 This is the task of being a board member: to bring that fire to the enterprise, insist that it spread throughout, and make sure it survives through intellectual, and real, honesty.

 Keep in mind: the CEO needs you. If she doesn’t, either fire her or resign.

 Your comments are always welcome.

Mark Anderson predicts the year’s coming developments, from expanded home entertainment to voice recognition to new, lightweight netbooks

Read the article and watch the video.

All of which leads to the category of Companies on the Road South, often exacerbated by the current economic climate, but almost always already in dire straits for some other reason.

Here are three obvious nominees for this dubious award:

Yahoo!  Although my friend Matt McIlwain thinks Disney is the likely white knight here, whoever gets it will be paying almost nothing for the privilege.  And if top officers keep leaving, they will be getting almost nothing, too.

Nortel.  One of my tests for companies headed south: I can’t tell you their strategy in a sentence.  And wanting to sell products, or being the coolest company in Ontario, do not qualify as goals or strategies.

Sun.  With the final sunsetting of its proprietary server edge, due, in my opinion, over the next twelve months, exactly what business does that leave Sun in?  Selling free Java kits?  Giving away Office competitors software?  Writing blogs?

Sun, Nortel and Yahoo! have been great companies in their time, but each lost direction, loaded up on way too much hubris, and blew the ego/value ratio out the door, on the way to that fabled Road South.

One hopes they’ll find happy homes inside some other company somewhere, since they still have many skilled employees who deserve better, and since the chances of them being an independent company a year from now are vanishingly small.