Diego Ramiro Guelar
Diputado de la Nación

JUN 23 1986

Buenos Aires, June 11, 1986.-

MR. Henry Kissinger
Twenty-Sixth Floor-350 Park Avenue.
New York, N.Y. 100022.

Permit me to enclose a copy of my latest speech -"the Paths of Peronism"-
for your consideration.

My thoughts and observations were given during a Seminar at the America's Society on May, 15. I hope you will find the material to be pertinent and helpfull to you in understanding more about the changes taking place in Argentina.

If I or other Peronist colleagues may be of assistance at any time, please
feel free to contact me.

Thank again for your attention and hopes of hearing your response soon.

My best regards,

HK:

Loel Guinness' grandson writes that he has been told you offered to help the 1986 MountEverest Expedition in attaining official authorization from China to import and use a Satellite Transmitter and provide live coverage of the North East Ridge Climb next fall.

Guinness provides massive information on the project to date along with a detailed chronology of events leading them up to now in terms of their contacts with the Chinese.

The bottom line appears to be that CCTV has not granted permission for this.

Leave it alone

Draft ltr. saying "I will do what I can" but leave it at that ✓

Draft ltr. saying
I am not able to assist

Prefer

The Rt Hon the Lord Hunt
The Hon Angus Ogilvy
David Stirling
The Rt Hon the Earl Jellicoe

[LCT]

EVEREST '86
N.E. RIDGE ROUTE

EXPEDITION LEADER
Brummie Stokes

DEPUTY EXPEDITION LEADER
Paul Moores

Dr. Henry Kissinger,
Suite 1100,
55 East 52nd Street,
New York,
N.Y. 10055,
U.S.A.

28th March, 1986.

Dear Sir,

I was pleased to hear from my Grandfather that you are well and enjoyed yourself in Acapulco. He has informed me that you had offered to help the 1986 Mount Everest Expedition in attaining an official authorization from the Chinese Authorities to import and use a Satellite Transmitter and provide live coverage of the North East Ridge Climb to the news networks of the world. I must first thank you and let you know how pleased I am of your participation which, I am convinced will prove invaluable. Please accept my apologies for not having written to you sooner - I have only recently returned from Germany where I had very little time for myself, let alone access to a typewriter.

As you may already know, it is the purpose of the 1986 Mount Everest Expedition to climb the longest and the last unconquered route of Mount Everest, the North East Ridge. It is a spectacular challenge which is made even more interesting by the fact that it will take place in Tibet, a country I have always wanted to visit. The Expedition will be led by Brummie Stokes, a close friend of mine, ex SAS of 19 years presently serving with the SAS Territorials and himself a summiteer in 1976. His provenance is outstanding and the team he has selected, probably one of the best ever assembled. Our chances of success are excellent.

The Patrons of the Expedition are David Stirling, founder of the SAS, Lord Jellicoe, founder of the SBS, Lord Hunt, leader of the first successful ascent of Mount Everest which saw Sir Edmund Hillary and Sherpa Norgay Tensing to the summit in 1953 and the Hon Angus Ogilvy, married to Princess Alexandra, President of the National Association of Youth Clubs and a friend of my Grandfathers.

contd.

Chairmen of Executive Committee: David Stirling, Gerald Rix
Expedition Administration Officer - Loel Guinness
22 South Audley Street, London W1Y 6ES.

- 2 -

The Expedition's second objective is to provide, for the first time in history, live coverage of a Mount Everest Expedition to the medias and publics of the Western World and the People's Republic of China. This has never been attempted before, and would be for both our sponsors and the climbing team, a unique opportunity to profit from this expedition were it successful or not. To the sponsor the possibility of massive television exposure for a fraction of the cost of standard television advertisement and air time and to the climbers the opportunity of making some form of revenue. It has been one of our main intentions to ensure that the members of the team do not suffer financially from this expedition. Too often enterprises of this nature have ended in debt or with disturbing long term consequences.

We have had, however, some difficulty in attaining an official authorization from the Chinese Authorities to import and use a Satellite Transmitter in Tibet. The CCTV, XINHUA and the CMA, the Chinese Mountaineering Association were approached in the early days of January by Geoff Petts, requesting such an authorization and asking for the greatest possible participation of the Chinese. Geoff Petts, Managing Director of Satellite Express, a London based organisation, was invited by the Expediton to deal with in China contacts on the premises that he had already negotiated several TV contracts with the CCTV. The latest he has succeeded in attaining, you may have heard of, is the first ever live Satellite Transmission from the Forbidden City of John Denver's concert later this year. His knowledge of Chinese Television policy and mechanics appears to be very good. Geoff was introduced to the Chinese by William Kuoli whose father was the Managing Director of the Bank of China in the UK. William worked for the CCTV before the Cultural Revolution when he was imprisoned and now is with VisNews in London. He is acting as an advisor for the Expedition.

Geoff Petts has contacted since January, and on
several further occasions, Mr Guo Bao Xiang, deputy
General Manager of CCTV, Mr Chang Peng Shih, CCTV's
Head of News and CCTV Director Wang Feng and has not yet
received a definite answer. Mr Hu Guocheng of Xinhua
News Agency has confirmed that Xinhua will be covering the
climb as a news story and has advised that an official
approval had to be provided by the CCTV. I must add that
Mr Hu had trouble understanding why the CCTV was so
reluctant in providing us with an immediate answer.

Our next step was to approach the Chinese Ambassador
in London. Geoff and John Slim, ex SAS Colonel, presently
running Gulf Securities, a London based security firm;
met Ambassador Hu on Monday March 17th, who showed great
enthusiasm in the historical nature of live transmission.

[L]

He was particularly interested in the fact that these
transmissions would take place on Chinese territory and of
the various advantages such a project could have for the
CCTV. He proposed to contact several of his friends in
Peking. We are expecting some news from Ambassador Hu
in the near future. He is, I hear, a member of the Long
March generation of Chinese Politics.

I have enclosed for you copies of all telexes and
correspondence with the Chinese Authorities.

As you can see, contact has very definitely been
established and for close to 3 months. This delay is
making the expedition's sponsorship effort very
difficult. The selling value of this project is dependent
entirely upon live transmission and without such an
authorization, there is no difinite product to sell.

There are several points which make it particularly
difficult to understand the apparent reluctance of the
Chinese Authorities to provide this authorization.
Understandably, there may be certain bureaucratic delays,
but they do not justify the 'no-answer' situation, which
has worried us since mid January. There are obvious
advantages such a project could have for the CCTV whose
principal objective today appears to be the international-
ization of its skill and capabilities as a network. Other
factors of particular importance are:

1. The Expedition and the final summit attempts will take place at the same time as her Majesty's official visit to the People's Republic.

2. All transmissions will go through Peking before linking up with the Indian Ocean Intelstat Satellite which will relay pictures to London.

3. The Chinese Flag will fly, with the Union Jack on the summit of Everest were we successful.

4. Live coverage of the 1986 Mount Everest Expedition is very definitely a world television first, never attempted before and I would have thought an ideal opportunity for the CCTV to expose its proficiency as far as international television is concerned.

These four factors offer a unique combination which
could be made to serve the Chinese and particularly the
CCTV as well as the Expedition.

One of the main problems in attaining this permission
is undoubtedly the security status of Tibet and its
controversial position in Chinese Politics. Colonel
Stirling has spoken to Field Marshal Bramall, recently
retired Chief of the Defence Staff, who has offered to
contact his counterpart in China, the Commander in Chief
and Chief of Staff of the Chinese Army. Since it is a
security zone, there may be some doubt as to the use of
a satellite transmitter and a possible need of getting

- 4 -

[lc]

military clearance. Taking into consideration the geography of the area, it appears somewhat far fetched that a transmitter assembled and located at 16,000 feet could be used for purposes other than an Everest Expedition. Further, I very much doubt that the limited SAS element of the climbing team could arouse any suspicion since, 2 years ago, the 1984 North Face Expedition saw 14 serving members travel through China and Tibet without any difficulty. We are expecting news from Field Marshal Bramall in the near future.

The historical appeal of this expedition, I hope, will find as good a reception in the People's Republic as it has in the United Kingdom. It is a good project, genuine and exciting, and one which should, I think, see a greater participation from the Chinese. Sir, I would very much appreciate any help and advice you could provide on this matter. I very much hope a joint British/Chinese effort can be manoeuvred at the television transmission level of the expedition and a healthy working relationship established in the near future. It would consolidate UK-Chinese approachment which will ideally be symbolized in October, by Her Majesty's visit.

We are now very late in the day and if this authorization is not granted over the next 2-3 weeks, it will be difficult, if not impossible, to raise the necessary sponsorship.

I hope the above details will be sufficient. I have enclosed, for you, the 1986 Mount Everest Papers which will help you better visualise this project as a whole. I have also enclosed a copy of 'Who Dares Wins' a historical account of the SAS which I thought you would like to have. In it you will find details of the Regiment's selection process you were interested in when we last spoke in Piencourt.

I must thank you again for your help - and hope to see you in mid-May in New York, on my way to Mount McKinley or later this summer in Piencourt. Until then, please send love to your wife and accept my greatest regards.

ELCJ

SAAB-SCANIA

The Chairman of the Board

Linköping, Dec 4th 1986

Dr. Henry Kissinger
Center for Strategic & Int'l Studies
Georgetown University
1800 K Street Northwest, Suite 400
WASHINGTON DC 20006
U S A

DEC 11 1986

Dear Henry:

I would like to thank you so much for the London meeting with the Center for Strategic and International Studies. I think it was a very pragmatic conference, all the time down to the point. I was very much impressed by the program and the participants.

Once again I would like to thank you for inviting me. I told Peter that he really missed a good meeting.

I hope to see you at the Bilderberg Meeting next year.

With my very best personal regards,

Yours sincerely,
Sten Gustafsson

SG/mk

LAKESIDE TALK - BOHEMIAN GROVE - E. W. LITTLEFIELD

ENJOYING THE CORPORATE CLIMB

JULY 17, 1983

Thank you Roger, Fellow Bohemians, and Guests:

In the beginning - the very beginning - God created heaven and earth and God created man - all in six days. This earned him very high marks for productivity but not much for product design. The early prototypes left much to be desired, and so He experimented.

Later models were fashioned out of ribs - or road tested in harsher climes. He introduced new shapes, ranging from sublime to ridiculous, a fact made apparent by a glance around this Lakeside. He introduced a variety of colors, but not as an option, which has caused more unnecessary trouble than He ever intended.

Finally He called on the skills at His command and He developed a breed apart, united in "their love or appreciation of .... Literature, Art, Music, and The Drama."

But it is imperfections that set men apart from the gods, and so even the Bohemians were flawed - albeit only slightly - with the necessity of eating regularly. This hard truth drives them to the market place to confront Dull Care in order to acquire the wherewithall to enjoy all that the Bohemian existence implies - and, indeed, demands. Some have chosen worthy professions. Others of us have sought our fortune in the Corporate World. I am of that world.

Corporate life, then, is a subject on which I feel qualified to speak. Those of you knowledgable in the nuances of corporate nomenclature (a subject known to make grown men cry) will recognize my qualifications from my title, "Chairman of the Executive Committee."

[47]

This is a title reserved almost exclusively for those who have made it to the top - are over the hill - and on the way down - but as yet - not quite out. It's a sort of soft landing pad - a halfway house in the corporate world, between prominence and obscurity.

But at least the title warrants that the holder has been once at the top and seen the view from there.

So... I was asked to talk to you about "Enjoying The Corporate Climb." There is recognized ambivalence in the title finally chosen. The Lakeside Committee had hoped I would counsel you on how best to claw your way up the corporate ladder. Well, now, I was not about to part with advice that valuable for the size of the honorarium involved here.

Therefore, we compromised. On the confident assumption that all of you have - or soon will have - reached the top, my mission today is simply to tell you how to get the most out of the blessings and the opportunities that thus come your way.

The key point is that if you are fortunate enough to reach the top of the ladder, there are special rewards awaiting you. One of the chief things that comes with the territory is the opportunity to influence the levels of executive compensation. Especially your own.

This is an opportunity that should be seized because nothing is so rewarding in corporate life as being well paid for your troubles. Executive compensation is not the occult science it appears to the uninitiated. While not in the management manuals, here are a few tried and true ways that corporate leaders have developed and refined over the years to guarantee freedom from want.

First, you appoint an executive compensation committee composed exclusively of outside directors. This allays suspicions from

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corporate critics, and it is risk-free as long as the members
are chosen with care. And, of course, you choose them.

The very best kind of executive compensation committee member
is another CEO - another CEO on whose compensation committee you
serve. But it's not really necessary to go this far; almost any CEO
will do because he has common cause in seeing that the game is played
strictly according to the unwritten rules.

The next step is to have the compensation committee adopt a
resolution stating, in effect, that in order to obtain, retain, and
reward superior executive personnel it is the policy of the company
to pay compensation ABOVE average competitive levels.

Such a policy will never be successfully challenged. It is a
"motherhood" issue. It will stand up even when the company record
suggests that your executive staff is having real trouble keeping up
with the competition. For if company performance is lagging, it is
obvious that the differential above average compensation levels needs
to be widened to get the desired result.

The logic is unassailable. Good performance deserves above-
average recognition. Poor performance requires above-average
motivation.

With this policy in place, the third step is to couple it with
an annual survey of the executive compensation practices of your
"peer" companies, on the modest assumption that there are any. This
is standard operating procedure and it virtually guarantees an ever
rising level of top-executive compensation.

With survey results - hard numbers - to work with, the
compensation committee will quickly raise the corporate officers to

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at least the level of the competition. The selection of "peer companies" can be pre-tested to make certain none will skew the averages unfavorably.

Meanwhile, you my rest assured that your peer companies are conducting their own surveys It is a golden circle. Each year all the laggards will raise their salaries to catch up. It follows as night the day, with mathematical certainty, that the averages will rise and next year's survey will show that you have failed to keep pace. Corrective action is thus ALWAYS needed to raise executive compensation.

A side point. One of the nice things about compensation studies is that, with rare exceptions, they relate compensation to the size of the company or its gross sales. They never obscure the findings by introducing other complicating performance factors like profit or return-on-investment.

Obviously, this opens up the possibility of raising yourself by your own bootstraps. If you don't like your place on the size scale, simply acquire another company or two. The deals don't have to be good - just large.

Now, even in the best regulated board rooms, one is troubled once in a while with a director who is so inconsiderate as to challenge the process and its findings. He may even talk about his responsibilities to look after the shareholders' interests. He may be ill-mannered enough to wonder openly if "anyone is worth that much money."

This is an annoying but easily solvable problem. It is readily dealt with by the simple step of retaining a management consulting firm. And this, too, is a risk-free maneuver.

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[4]

Not all successful management consultants are whores at heart -
but it helps. Consultants who survive and prosper learn early on
that very little repeat business comes to those who find compensation
levels in client companies too high. Indeed these people can provide
you with the latest and most subtle ways of making certain that
executive compensation levels are not needlessly influenced by such
extraneous factors as how well the owners of the business are faring.

Even though your aggregate annual amount is gratifying, of
course, one must never rely on just one form of incentive compensa-
tion. If you are so unfortunate or ill-advised as to be caught in
such a trap, consultants can show you a variety of escape routes.

Certainly one of the most defensible of all compensation
devices is the stock option plan. It couples gain to the executive
with gain to the shareholder - and what shareholder can ask for more
than that!

Stock option plans worked well - or at least selectively well
- when mild inflation was the rule. However, when rampant inflation
took over, company after company was able to report record revenues
and profits.

But the stock market is not altogether stupid. Unfathomable,
yes; but not stupid. It recognized that record earnings were being
reported in dollars of lesser value, and so, alas, share prices did
not respond.

Most option plans were under water. This was a dreadful situa-
tion crying out for a creative solution, and management consultants
rose to the challenge. They conceived a miracle called "performance
unit plans." These had the obvious advantage of disassociating

ξ

[N]

rewards to management from rewards to shareholders.

Various formulae were devised so that management compensation could rise even as dividends were cut and stock prices fell. Such plans were explained to the shareholders with some prefatory phrase like "because share prices have failed to reflect accurately management performance, we are recommending . . . etc." This should have received the Pulitzer Prize for creative writing.

Let's remember that in the field of executive compensation there are quantitative aspects - and qualitative aspects. Salaries and incentive payments and options are all well and good, but to a greater or lesser degree they share a common disadvantage. They are taxable.

From a qualitative standpoint, the best forms of executive compensation are the perquisites - those incomparable "perks." Perks are hopefully non-taxable, but must be carefully devised. The IRS is constantly ready to attack. And Congress is always worrying about "tax loopholes," by which they don't mean things like franking privileges unique to Congressmen but rather things more broadly based like "the three martini lunch."

Well, for heaven's sake, whatever you do, don't settle for the three-martini lunch when perks are being passed out. That would be selling out much too cheaply - and drink will dull your wits, which can be better used to pluck the far richer plums hanging from the perquisite tree.

Let's look at some perks that are truly worthwhile.

First, there are the private clubs. Clubs with mottos like "Weaving Spiders Come Not Here" make a poor prima facie case. But

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luncheon clubs will generally sail through as long as you take the occasional client there - and particularly if the building offers an imposing sandstone facade that suggests on the face of it that no one inside could be enjoying themselves.

Golf clubs are a little tougher to swing ... but again can be justified with a careful customer count and a handicap high enough to suggest that you can't really be playing the game for fun.

Yachts and hunting lodges are not necessarily smooth sailing and generally may not be worth the gamble, especially when there is bigger game to be caught and finer fish to be landed.

Certainly best of all is the company plane. What better way to show you've earned your wings?

But here again, one should not go for the jackpot right off the bat. Get into it slowly. Plan your justification carefully each step of the way.

The really astute executive will first acquire some corporate operations located in remote areas where there is little or no commercial airline service. This gets easier all the time. Since deregulation, commercial airlines have done their best to concentrate service in the major areas already saturated with service and to eliminate service from any community that absolutely requires it.

Having taken the first covert step, you next justify the purchase of a modest little plane. You demonstrate that the executive time saved, along with the wear and tear on the individual, makes this a worthwhile corporate investment.

Once this is done, you're almost home free. Now all you need to do is take some of your directors with you on your small plane to see some of those out-of-the-way plant sites. Choose those far

7

enough away so the travel time exceeds the bladder capacity of the occupants and where air turbulence at lower altitudes is severe. All small planes, if they have heads at all, have heads that require a combination of suppleness and athletic ability that is likely to be beyond the capability of any one of director's age.

After a decent interval the purchase of a larger plane will sail through the board easily. (I witnessed one request go through unchallenged when an invited director - a big man - noted that the existing plane, a Lear 35, was the only plane in which he had ever "urinated on his necktie.")

In this field "dream no little dreams." Don't pay more than $2 million for a plane you can't stand up in. Properly handled, there's a G-3 out there at the end of the rainbow to serve as your own imperial barge.

But even here, use of the corporate aircraft will be subject to IRS challenge unless the plane's log is carefully documented. If ports of call like Las Vegas, Bermuda, Sea Island, Los Cruces, or even Santa Rosa appear too frequently, embarrassment can arise. One's enjoyment can be inhibited by being required to reach recreational areas by commercial lines. However, if your corporate plane's log shows an occasional stop in Texarkana or Gary, Indiana, for example, it will be apparent that you're not using it just for fun.

A tax-free corporate jet can be justified by yet another step, although it is one not open to every executive. The ultimate is to get the board to resolve that because of the CEO's indispensability to the company's welfare - and the possible threat to his person from terrorist attacks - the CEO is required (indeed, ordered) to

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travel wherever he goes by company aircraft.

It is sad but all too true that such threats to CEO's in many companies are very real, and I might be the first to admit that, where this is true, such a resolution is entirely justified. Some CEO's are entitled to combat pay. Others are hardly worth stealing.

It is far better to avoid being kidnapped and held for ransom. You may learn quickly who your friends are but you can end up profoundly embarrassed to find how little you fetch in a free market.

All of the suggestions about compensation and perks that I have made so far are well within the realm of good corporate manners. Within reason, all reasoning shareholders are willing to entrust their affairs to those with the good sense to look after themselves - at least within reason.

But not everything is Utopian in the life of the Chief Executive. Some of the duties are demanding and onerous. For example, you must preside over the annual meeting of the shareholders.

Fortunately, by definition this happens only once a year. It can be a tedious - sometimes even a trying - experience. The important thing here is to keep the whole thing in proper perspective.

Not to worry! If you still have your job by the time the annual meeting rolls around, you are almost certain to have it when the meeting adjourns. Nothing - repeat, nothing - will be decided at the annual meeting that has not already been decided in advance. Proxies have been solicited and returned with instructions as to how votes are to be cast. No discretion is left with the proxy holder. The proxy cannot be swayed by the logic of any arguments

[Y]

advanced from the floor, nor can he or she yield to whatever emotions
are touched as the carefully orchestrated pleas from the organized
dissidents are recited.

As presiding officer, approach the whole ceremony as if you
were the high priest in the Cremation of Care.

Go into the annual meeting with confidence. No unknown perils
await you. And don't over-prepare. That's a common mistake. CEO's
who spend weeks studying a crib book full of answers to every
conceivable question about the corporation are not only wasting their
time - they may even learn things about the company they'd be
better off not knowing. In any event, they are certain to end up
with a huge inventory of unused answers.

You will be lucky to get any questions at all about what's
actually going on in the company, particularly if it is a vast enter-
prise operating internationally or in socially sensitive fields. Any
question on company affairs that you do get can be answered by any
reasonably qualified office boy with a penchant for reading mail
addressed to others.

If prepare you must, spend your time learning the latest buzz-
words pertinent to geopolitics, societal problems, and the Third
World. Show that you at least have some knowledge about the loca-
tion of South Africa and Chile - and be able to argue the relative
merits of bottle vs. breast feeding of babies in Black Africa. Also
be aware of the threat posed by Communist professors residing on
college campuses.

Corporate gadflies are annoying but harmless. The Gilberts are
okay, but others are rude and ask rude questions. Fortunately,

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however, they are only interested in their own questions; they never
listen to or care about your answers.

When you come right down to it, as the presiding officer at the
annual meeting you have only one real responsibility. Like a good
Sire you must control the timing and the pace of the show so that it
is over before you or your directors must make a mass exodus to the
Men's Room.

We should mention some land mines to be avoided in the general
field of corporate governance. Upon assuming office, young chief
executives are hell for putting in a retirement age for directors.
They think that such a rule will be helpful in producing a board
where all members are alert and wide awake. Only a young and naive
CEO would think this to be an advantage. But, qualities of
governance aside - the time will come, alas, when the retirement
rule applies to you. You can then either fade away or give scholarly
speeches to half-clothed intellectuals lolling on some lakeside some-
where.

Back to my subject. When Penn Central went down the tube,
critical eyes were focused on how boards functioned. The view was
advanced that, if one was a director, one should attend directors'
meetings. The SEC even required that the attendance record be
reported in the proxy statement.

Ugly words like "directors' liability" caused a certain crisis
of conscience among the more sensitive members of the board. Some
began to think that they were supposed to think for themselves.
Audit Committees began to take their jobs seriously, and a host of
other committees were created to give the impression that the board
was hard at work and "in charge."

11

These moves seem to mollify most critics without unduly
hindering management's capacity to continue to do business as usual.
And one popular new committee - the Nominating Committee - may
actually have done some good.

Designed to meet the charge that the CEO controlled the board
- instead of vice versa - the Nominating Committee found it had to
face up to some tough choices. Most of the nominations received from
the shareholders in general were easily dealt with since most were
nominating themselves. Their qualifications made for easy answers.

But even incumbents up for renomination to the Board had to be
scrutinized carefully. The Committee couldn't really nominate "Old
Joe," who by public record had only attended 25 percent of the
meetings. Nor could the Nominating Committee name "Old Bill," whose
name had been so much in the news that it had become a household word
- and the word wasn't "Mr. Clean." The committee also discovered to
its amazement that good directors could be of either sex and of
different colors.

But our topic, you will recall, is "Enjoying the Corporate
Climpe." No one can really enjoy the corporate life without a sense
of job security.

The perceived threat to this security is not from the inside.
Here the CEO already has demonstrated his ability to survive within
his own company's corporate jungle. It is to be hoped that he has
surrounded himself with bright, capable people to do his work for
him. These people may not wish him to last forever, but it serves
their purposes not to see him toppled from the throne in untimely
fashion by insurrection or mutiny-from-within. All feed from the

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same trough. And well.

The threat to corporate serenity is from the outside, and one needs to be everlastingly vigilant because there are abroad in the land those with voracious corporate territorial ambitions. The danger is especially great for any corporate ship perceived to be drifting or dead in the water.

By any definition, a "raider" is a potential buyer who is willing to offer more for the company than the market says it's worth - at least UNDER THE EXISTING MANAGEMENT.

Like a falcon from on high, the raider drops on his intended victim, arriving either unannounced or, at most, preceded by a single telephone call on a Sunday. The call is placed at a time when the chances of reaching the victim are "de minimus," for he is more likely to be on the golf course than either at home or in the office, but such thoughtfulness is intended to meet the minimum standards of good corporate manners.

The intent of the call, whether completed or not, is to inform the victim that a tender offer well above the existing market will appear next morning in the The Wall Street Journal and the New York Times.

The offer does not necessarily have to be in good coin of the realm. Sometimes the tender can be in securities just this side of counterfeit - as long as it is complicated enough to confuse. Certainly it doesn't have to be fair to all the shareholders of the intended victim. As a matter of fact, fairness could be self-defeating, for it fails to appeal to the sense of greed just under the skin of your loyal shareholders. By limiting the time and the number of shares the raider will purchase at this high price, he can

[4]

rely on panic setting in as the shareholders rush for the life boats
to get a safe seat before the ship goes down.

"Raiders" do not enter popularity contests. Indeed, the most
successful are those whose company - both personal and corporate -
is most shunned. They rarely are required to make good on their
offer but send the victim frantically off in search of a "white
knight." Rebuffed, the raider subsequently sells his stock to the
white knight, pockets a handsome profit, licks his chops, and plans
his next assault.

White knights have two features that distinguish them from
raiders. First, they are willing to pay even more for the company
than the raider, which suggests logically that they think even less
of the entrenched management than does the raider. But the white
knight is quiet about it.

The second distinguishing feature of the white knight is a
sense of chivalry. The victim at least feels that the white knight
holds out the prospect of living out one's corporate life in dignity,
free from want, and with a decent and proper funeral when the time
comes. Usually, the raider will feed you to the lions. The white
knight will ultimately send you off into the sunset in a fine galley
with the sails set and your loyal dog at your feet.

The truth is that neither raiders nor white knights are welcome
visitors in the corporate halls. No management wants to be disturbed
by outside interference. This desire for corporate tranquility has
lead directly to plans designed to discourage outside attention
through impediments put in the way of any would-be buyer - impedi-
ments designed to diminish his willingness to pay above the market.

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These are generally referred to as "shark repellents" and can be quite effective in driving off would-be suitors by frustrating in advance their plans to improve the company.

Here are some specific "repellent" suggestions:

* To make it difficult to change the management, put in staggered terms for the board of directors.

* "Selling the crown jewels" is another effective ploy. This is a way of getting rid of the good assets that caught the raider's attention in the first place. You can hope his ardor will cool and he won't want the junk that's left.

* You can amend the Articles of Incorporation to require a very, very high percentage of shares that must be voted in favor of any merger.

* Finally, and best of all, there are "golden parachutes." Nothing contributes more to enjoying the corporate life than being so positioned that your income continues no matter who wins or what kind of a job you do.

As for "shark repellents," recent developments suggest that they are more popular with managements than with shareholders. Shareholders are remarkably hard to convince that their interests are best served by devices that make their company less attractive to potential buyers. In short, I know of no more certain road to executive disaster than underestimating the long-term wisdom and perspicacity of shareowners.

I feel quite strongly - and seriously - about that last comment, and many of those I've made earlier. Less we misunderstand each other, let me close on a more serious note. If I've offended anyone here today by my comments, I'm sorry but I do not apologize.

[Y]

If the shoe fits, wear it. It is better to be saved by the needle
than slain by the sword.

I have great respect for the corporation as an institution in
our society. For all its vigor, we must remember that the
corporation is still a relatively new element in this complex world.
It was invented to fill a need created by the Industrial Revolution.
It has made possible accumulations and combinations of capital,
managerial talent, and labor on the vast scale needed to take better
advantage of new technologies and techniques.

It has produced more and better goods at lower prices than
otherwise would have been possible. It has furnished fabric for the
American dream by providing upward mobility as well as merited reward
for the creative and the truly competent. The concept of the
corporation has proved its value to society over and over again.

But this concept must constantly reassert its strength and
renew its vigor. Otherwise it will be chained and fettered.

Being strong and vigorous means far more than ability to accept
and learn from a friend's comments and criticisms, gentle or
otherwise. The concept of the corporation must be capable of bearing
up under public scrutiny of the most intense and searching kind.

The corporation, in the right hands, can be a tremendously
effective servant of society. It is worth saving. And its
governance should be entrusted only to managements worth having.

Thank you for the privilege of being with you. This meeting is
adjourned.

16

PEHR G GYLLENHAMMAR

M. D. HC
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
AB VOLVO · S-405 08 GÖTEBORG, SWEDEN · TELEPHONE 46 31-59 00 90

February 5, 1986

Dr Henry A Kissinger
Kissinger Associates, Inc
350 Park Avenue - 26th floor
NEW YORK N Y 10022
USA

Dear Henry,

I am coming back to the questions you raised about China.

The only assumption I have been given is that the
government would like to have reasonably fast development
of industry in 5½ south-western provinces and that
approximately US$ 10 billion could be allocated for this
purpose.

Having no other details, I will only address the issue of
a general approach to the problem.

It seems to me that the number one priority is to find out
how your friends get the most for their money and with no
loss of time.

The sequence I would follow in an overall study is to
establish what natural resources these provinces offer and
if the quality of these resources are such, coupled with
the cost of extracting them, that they will be naturally
competitive on the world market.

The second step in this sequence would be to study
existing infrastructure to get the raw materials to deep
water ports for shipping.

2 [LC]

PEHR G GYLLENHAMMAR

The third step would be to evaluate what infrastructure improvements are necessary to reduce costs and increase the competitive edge.

The fourth step would be to find out what priorities could be established for existing resources for domestic use and what infrastructure that would demand.

The fifth step would be to evaluate existing industries and their competitiveness, particularly based on access to necessary raw materials and other resources in the region.

The sixth step would be to assess whether competitive conditions exist for developing tourist trade.

The seventh step would be to establish what management resources are available in the region or could be allocated both to overall planning and to project planning, depending on the outcome of the study.

The eighth step would be to evaluate the quality and educational level of existing manpower resources.

The above overall study does not initially require very specific competence in any particular field. Rather should one look for preferably a vital, but retired, person from a department of the interior or a department of planning, where the key person has acquired specific competence in regional planning and infrastructure. To such a team I would add a very senior executive, who is familiar with competitive analysis, and I would also include a builder, who is well trained in infrastructure development.

This is as far as I can go with the very limited information at hand, to date.

I look forward to hearing from you.

With warm regards,