Talking governance with Mike Armstrong.

IN AN INTERVIEW with DIRECTORS & BOARDS conducted in 1981, Peter Drucker was asked what advice he gives to a new CEO. His answer: Make a big move, and make it quickly. Here is the management guru's own inimitable observation on the subject: "Whenever I see somebody who is about to become a CEO, I say, 'You'll make one big decision and don't make it a small one. One gets hanged for a sheep as well as a lamb. Do the one really big thing you can accomplish in 180 days.'" Pointing as an example to J. Peter Grace, legendary head of the W.R. Grace & Co. conglomerate who was then riding high in American business, Drucker said, "[He] made one basic decision when he became CEO, which was to get out of shipping and out of South America -- and it took him 20 years of hard work to carry it out."

3. Michael Armstrong appears to have followed the good professor's script. He hit the ground running when he became AT&T chairman and CEO on November 1,1997. He made several significant decisions of a multibillion-dollar nature in his first few months, including selling AT&T Universal Card Services (as a non-strategic asset) for $3.5 billion and buying Teleport Communications Group for $11.3 billion. The "big one" came just a few weeks past the Drucker-suggested time-line. In June 1998, AT&T announced a $48 billion merger with Tele-Communications Inc., paving the way for AT&T's entry into the cable, local phone service, and high-speed Internet access markets.

Some wags have characterized Armstrong's big move as turning "Ma Bell" into "Ma Cable." Armstrong himself, in the following interview with DIRECTORS & BOARDS, describes the transformation now underway as AT&T's going from being "the domestic long-distance company to a global communications company." Such a transformation was judged by The Wall Street Journal as "one of the greatest gambles underway in the business world" because of the breathtaking investment involved ($140 billion and counting) and the strategic and technological complexities of carrying it out.

As part of our cover story, DIRECTORS & BOARDS Chairman Robert Rock and Editor James Kristie talked with Mike Armstrong about his approach to corporate governance. Excerpts from the interview follow.

How did you use your board to help you transform AT&T? What role did they play in the redefinition of the company and in the development and execution of its strategy?

Probably the single way that I could describe the board would be "educated involvement." We punished them with many, many, many sessions describing technology, competition, globalization, deregulation, and the options that faced the company and what we had to do to prevail. We took them through the logic and the whys of transforming the company, as well as what the risks were and the cost. Their governance was one of complete involvement and a very thorough education, and they have been supportive for the some 22 months that we have been together on this.

You did so much so quickly. How well-formulated was your game...