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A letter from the chairman

When IBMers think about leadership, they mean more than increasing our market position or growing shareholder value - as important as those are. For us, leadership must occur on multiple fronts, and it must spring from innovation. I'm not just talking about technology. The innovation we seek is broader than that - the joining of invention with insight to produce important new value.

This is not new ground for IBM. From our earliest days, we have helped pioneer global commerce, have led corporations and even governments to provide equal opportunity for all, and have applied the discoveries of science to advance business, healthcare and education. As I said, leadership for us means all the dimensions in which a business can lead. So, for example, since 1994 we've required that a majority of our board be independent of the company. For each of the last 12 years, we've earned more U.S. patents than any other company. And as early as 1935, our policy was for men and women to receive equal pay for the same kinds of work. To IBMers, these facts are not unrelated. They are evidence of a continuum of innovation.

You cannot achieve this kind of leadership all by yourself. It requires engagement with a broad spectrum of enterprises and people - openly, collaboratively and with a deep sense of responsibility. It requires addressing the concerns of the wider society in which competitive markets operate and technological discoveries occur. And, importantly, you can only sustain such broad-based leadership by continually reshaping your own enterprise to be a force for positive change.

Today, many businesses are newly discovering the importance of ethics, corporate responsibility and the multiple ways in which they are part of this wider ecosystem. In some cases, perhaps, it is a reaction to excesses of the prior decade. But for us at IBM, this is much more than a matter of legal compliance or even "giving back to the community." It is and has always been integral to how we conceive of ourselves as a business.

As IBM's CEO, I'm glad to see the recent focus on corporate accountability and trust. From a purely competitive perspective, it plays to our company's strengths - whether we're after new client contracts, new talent and expertise, or new markets. A business environment that raises the bar for companies in this way is one in which we are very much at home.

However, I also welcome a broader concept of corporate responsibility for more personal reasons. I have spent my entire working life in this company. I first learned about business when I joined IBM, and so I naturally developed an IBMer's point of view on what a corporation can and should be. That's how I learned that you can deliver increased shareholder value and consistently high returns on invested capital as the result of developing deep relationships with clients, employees, suppliers and entire communities.

You can read more about that view and our practices on our corporate responsibility Web site. They're part of how we describe our work at IBM and among the things for which we want to be known. We think managing these responsibilities effectively is one of the marks of true leadership. And - as you will see - it is certainly a hallmark of our company.

Samuel J. Palmisano
Chairman, President and Chief Executive Officer

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