An analysis of the leadership qualities and effectiveness of Kwek Leng Beng, Chairman of Hong Leong Group, one of the largest property developer in Singapore.
KWEK LENG BENG
Chairman
Hong Leong Group
Singapore
Table of Content
Page
. Extract
2. The Founding of Hong Leong Group
3. The Rise of Chinese Family Business and the Singapore Economy
4. Influence of Confucianism
5. Organizational Structure and Culture
6. Kwek's Leadership Style
7. Kwek's Managerial traits and skills
8. Participative leadership and Delegation
9. Leadership in teams
0. Contingency theory of effective leadership
1. Leading change in organization
2. Is Kwek's leadership effective?
3. Transformational leadership
4. References
. Abstract
This paper is an analysis of the leadership qualities and effectiveness of Kwek Leng Beng, Chairman of Hong Leong Group, one of the largest property developer in Singapore, in the context of what has been covered in the Preston MBA module MG 6030 Leadership along the guidelines of the core text, Leadership in Organizations (Yukl, 1988). It should be noted that many of the observations about the leadership were based on my own personal experiences while working as Deputy Director of Design in the organization from December 1997 to February 2000.
3. THE FOUNDING OF HONG LEONG GROUP
Kwek Leng Beng is Chairman of the Hong Leong Group, one the largest conglomerate in Singapore which has often been hailed as one of the success stories of the modern Singapore business environment. The company was founded in 1950 by his father, Kwek Hong Png, a poor immigrant from China. Kwek Leng Beng rules the conglomerate with an iron hand and will. Total sales in 2001 topped US $2 billion. The Hong Leong Group is involved in everything from manufacturing plastics to property development to hotel management. It is the majority shareholder of City Developments Limited, the second largest public-listed property development company in Singapore with a market capitalization of about US$4 billion. Other listed companies in the stable include Millenium & Copthorne International Limited, Hong Leong Asia, Republic Resorts & Hotels and Singapore Hong Leong Finance.
The original patriarch, the late Kwek Hong Png started as a merchant, having left China to work as a coolie for the British traders in Singapore in the 1940s right after the Second World War. Having worked for years and gained some degree of prosperity, he moved into property related business and then into any business deemed profitable. Although the group's core activity is property development, it had in the past ventured into business every which way as opportunity arises. The conglomerate comprises some fifty companies, as it had tended to expand by adding on lots of little companies, rather than simply working on expanding several core companies. Shell companies are often set up to own other companies, so that the profits and revenues of the group can be centralized in the one place. The group is therefore defined more by its disparate parts sharing a common owner.
Kwek Leng Beng was born in 1941 in Singapore where he grew up and spent his youth before heading to London for further education. He graduated from University of London with a law degree in 1963 and returned to join the family business. He was initially sent to Malaysia to take care of Hong Leong's Malaysian operations. In 1969, he initiated the takeover of City Developments Limited, a listed property developer which was in financial trouble then and turned it around. City Developments Limited rode on the boom of the Singapore economy in the 1970s, early 1980s and early 1990s to become one of the largest property players in South East Asia.
In 1979, Kwek launched a takeover of listed Singapore Finance, and boosted the size of Hong Leong's operations. These takeovers gave Kwek the necessary experience when he began buying up hotels to build up his global CDL Hotel chain. Time and again, Kwek proved his foresight by snapping up major hotels at bargain prices, particularly the high profile purchase of The Plaza Hotel of New York, helped by Saudi prince, Alwaleed Bin Talal Alsaud.
4. THE RISE OF THE CHINESE FAMILY BUSINESSES IN SINGAPORE
Sound economic planning by the government, the prodigious productivity of the workforce, and the able leadership of Singapore's longest serving Prime Minister resulted in a remarkable economic boom despite the scarce natural resources, since gaining independence from the British in 1957. To develop into an international city and to attract foreign investment, the government put in place many policies to spur this growth.
The well documented efforts of the Chinese family businesses such as Hong Leong Group were catalysts in Singapore's economic success and these alongside with government-linked companies such as Port of Singapore Authority, Singapore Technologies and Jurong Town Corporation, came to dominate the Singapore economy. Although they had been criticized for their " octopus-arm" style of expansion - characterized by aggressive infringement on the operations of small businesses, ruthless business tactics, and a concentration of wealth in small, select groups of people- these Chinese family businesses had been part of the backbone of the Singapore economic growth.
5. INFLUENCE OF CONFUCIANISM
Top down decision making was common in Chinese family businesses, and without exception, the management philosophy affected the process of planning, development, and implementation of business strategies for the Chinese family businesses. These practices reflected the pervasive effect of Confucianism on the Singaporean psyche. Westerners were mystified by the influence of a secular code of conduct like Confucianism, but an understanding of its profound impact on Singapore's social fabric was key to understanding Singapore's modern corporate culture.
The main Confucian virtues - love of humanity, consideration of others' feelings and emotions, treatment of each person according to his or her social role, respect for others' rights, sincerity, and truthfulness of purpose were viewed as necessary for proper interaction with others in Singaporean society. Moreover, the Confucian ethical standard defined five basic hierarchical relationships: father/son, king/subject, husband/wife, older brother/younger brother, and friend/friend. Age was the prime determinant of how one should be treated and how one should treat others. For example, the oldest person entered the room first, was seated first, and began eating before anyone else at the table. Of course, social position was also important and commanded respect. In most cases, however, the older people were, the higher their social positions became.
Chinese relationships were vertical, not like the horizontal "all men are equal" relationships of the West. The relationship between a father and his oldest son was the backbone of the Chinese family system. The oldest son was traditionally the heir of his father's assets and role in the family and, therefore, was given priority over younger siblings in terms of educational and other opportunities. The power of the father passed to the oldest son. Within the family, the oldest son was responsible first for his parents, then for his brothers (in the order of their birth), and finally for his sisters.
Imprinted by the Confucian ethos, Singaporean corporations based their identities on intangible values like harmony, challenge, power, and determination. In contrast, U.S. corporations tended to rely on visual and symbolic forms of identity, like logos, slogans, and rituals. In addition, the Confucian ideals underlying Singaporean corporate philosophies were very strong: employee loyalty to the corporate family, and employees' self-sacrifice for the company and country.
Corporate culture provided the Chinese family businesses with a set if written or unwritten rules, beliefs, norms, guidelines, philosophies, or patterns to be followed by members of the organization. These morals were so ...
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Imprinted by the Confucian ethos, Singaporean corporations based their identities on intangible values like harmony, challenge, power, and determination. In contrast, U.S. corporations tended to rely on visual and symbolic forms of identity, like logos, slogans, and rituals. In addition, the Confucian ideals underlying Singaporean corporate philosophies were very strong: employee loyalty to the corporate family, and employees' self-sacrifice for the company and country.
Corporate culture provided the Chinese family businesses with a set if written or unwritten rules, beliefs, norms, guidelines, philosophies, or patterns to be followed by members of the organization. These morals were so powerful that any that failed to abide by them usually developed feelings of guilt, isolation, or failure to "keep up". Such feelings were a response to pressure - both from within and from other members of the organization- to conform to the ideal culture.
Because Chinese family businesses had a relatively short history, many founders still held top management positions. The question of succession is important because, according to the tenets of Confucianism, the founders owed much of their successes to the Chinese concept of family. Nepotism and paternalism, which is viewed negatively in the West, is prevalent in the Chinese family businesses. At Hong Leong, Kwek employed at least 12 relatives who closely manage 50 Hong Leong companies including 6 public ones.
The expansion of the businesses followed the dictates of his upbringing, the culture and experiences possessing a Confucian emphasis on the family, and employed the Confucian perspective of societal relationships as extensions of, yet subordinate to, familial relationships.
The Confucian emphasis on personal relationships, with the historical lack of institutional support from government agencies, reinforced the organization's emphasis on personal relationships. These combined factors also ensured that the families and their businesses never separated. The family still controls the companies outright or through their networks' partners with whom the families share projects and interlocking directorates.
Organizational structure and culture
The following summarizes the business approach of the leadership:
-It is driven mainly by profits,
-The corporate direction of the organization is determined by opportunity, not corporate 'vision' and strategy.
-The organization is poorly structured
-The ownership is narrow, i.e., family.
-The organization is family run
-The organization is highly diversified
-It invests on the basis of connections, not research
-Minority shareholders are not well treated
-It has centralized decision-making
-It has a large number of units/companies
-It prefers cash accounting, not accrual
-It dislikes services
-It has little R&D
-The management is patriarchal
-The leadership is hands on
-Has vague career ladder for staff
-Low priority given to transparency, auditing, and disclosure
-Fringe benefits are a high component of salary; remuneration is paternalistic
-Staff are trained informally and on the job
-Employees tend to be promoted on the basis of their connections and perceived loyalty, not their inherent productivity
-Job descriptions are vague and employees work as directed and not encourage to use their initiative.
7. KWEK'S LEADERSHIP STYLE-managerial traits and skills
Kwek Leng Beng, like every other successful entrepreneur, works very hard. He once declared to a Singapore reporter, "My motto has always been to work hard, say less and do more". Rising before 6.00a.m, he often starts his day by reading biographies of powerful men who had changed world history and business magazines to keep abreast of current issues. By 6.30a.m. he would be on the phone to offices around the world. His early phone calls would be followed by breakfast at home with both his wife and younger son aged 17. He would arrive at work by 7.30a.m. and a typical day would end 16 hours later, ideally capped by drinks with a friend.
Described as possessing an innate business sense coupled with a gambler's instincts, Kwek Leng Beng presents visitors with an air of soft-spoken reticence and informality. He is modest for a billionaire and does not like to be photographed. He is often not recognized even by his own employees. People who have dealt with Kwek invariable describe him as having lots of energy and stress tolerance. He is self-confident and has a high achievement motivation.
Intuitive approach to decision making
Kwek has a rather intuitive approach to decision-making and relies on his own hands-on experience. He makes decision based on extensive knowledge and experience without the detailed analyses of hard data to make quick decisions. His managers are expected to know first hand the products, markets, business environments and industries. Many of his long serving cousins and managers remain active in all aspects of the business past retirement age. These levels of involvement appear necessary for the management to comfortably make the right decisions without data support. Hence Kwek's in-depth knowledge of the local hotel industry and markets allowed him to make rapid decisions.
Kwek Leng Beng expects his relatives to be active and participate in all the important aspects of the organization's activities and markets. This experience gives the leadership the intimate, incisive knowledge of the business, which forms the keystone to the intuitive decision-making. Through its web of associates, the leadership, where possible, also pursues preferential treatment, and lobby for or against the promulgation of laws, regulations, and privileged positions within the industries. In this fashion, the leadership strives to enhance patterns of change and continuity that enhances its strengths and minimizes weaknesses.
Kwek always uses external sources of information when making strategic decisions. He is less likely to refer to documented evidence or data in published form. He prefers to use sources of often qualitative, even subjective information, such as friends, business associates, government officials, and other people whose judgement he trusts. He may often travel to local scenes to check personally on the reliability of local information, rather than to rely on secondary information that may not be published.
Speed in decision making
Kwek can be quick in his decision making when situations demand it. As he explains in an interview with Singapore Business magazine in November 1996 on his acquisition strategy: "If we want to do it, we do it very quickly. When someone approaches me to sell a hotel, I ask the price, the number of rooms, the location, and whether the deal includes a management. If it doesn't fulfill these conditions, I say 'no'. And I say no quickly." He often makes decisions without consulting anyone. This speed has, in the past, enabled Kwek to seize business opportunities before local competitors sense they exist. Kwek zealously maintains secrecy over the sources of information that guide his investments. As a core competence, his networks provide potential access to various markets. This practice of 'guanxi' leads to a high degree of reliance on trust.
The strategic planning behavior can thus be classified as ad hoc and reactive. The only important, market-related factor is centered on the Chairman's personal knowledge of the markets. It reflects a highly centralized decision-making; specifically the Chairman's personal knowledge of the market assumes importance, not the company's or the marketing manager's.
Participative leadership and delegation
Kwek's leadership can hardly be considered participative, since participative leadership would involve efforts by him to encourage and facilitate participation by others in making decisions that would otherwise be made by him alone. This is a pity since a broader participation by his senior managers would result in better quality decisions and a greater acceptance of decisions by staff who will implement them or be affected by them. His managers are likely to be more effective if they can use decision procedures that are appropriate for the decision.
Although Kwek leaves the day to day running of the various companies to his numerous executives, he still makes all decisions pertaining to acquisitions or strategic directions. He does not delegate the authority to make these decisions which tends to frustrate many capable managers who find it difficult to develop or grow within the organization. As a result, turnover rate is very high. For example, he recently lost two of his key staff, David Cook the financial directir of CDL's listed subsidiary, Millenium & Copthorne Hotels and Miguel Ko, a longtime executive of CDL, had quit to take the job of managing Starwood's Asian operations only ten months after being promoted to be CEO of CDL. This is also seen in the hotel arm, CDL Hotels Limited, the Hong Kong listed company, which has seen 8 CEOs come and go within six years from 1994-2000. Obviously, Kwek has difficulty retaining good executives. He seems to have a lack of confidence in his subordinates and his probable desire to consolidate power prevents him from delegating important matters as much as he should.
Paternalism
The leadership is paternalistic; Kwek demands absolute loyalty from employees. This has resulted in a culture where employees are fearful of him. As mentioned earlier, management is rarely participative. Scaling the corporate reflects one's trustworthiness rather than one's inherent productivity. This has resulted in a culture where senior managers are always right even if they are wrong, and junior employees should not express their opinions before their seniors do, because it means their superiors have no room to move should their view be contrary. Kwek cannot be seen to be contradicted by a staff member, as this would imply a loss of authority. He expects employees to say only what is expected and to keep one's real feelings private. Orders are passed down from the top.
Vision building
Hitherto, vision building lies entirely with Kwek and his two trusted right-hand men, who solely guide the direction of the organization. Essentially his circle of trusted managers mingle and exchange information with their networks and through these provides feedback and recommendations on new directions for the organization.
For example, one of his Directors, through contacts with outside market sources, surmised that there is a real need in the Singapore property market for New York-style executive studio apartment housing and recommended that the Group cater to this potential niche. Without further consultation or research to confirm this hunch, Kwek launched a search for a suitable site for such housing. The focus of the organization then shifted to providing more studio type housing for the local market. There were no demographics to support this.
Outsiders must work hard to earn trust, and very rarely achieve it fully; whereas unconditional trust is automatically awarded to insiders, particularly family members. One problem with family control is that the family is stuck if none of its immediate members is interested in the business. Kwek has tried to solve this by trawling the outer reaches of his family to look for those who have the right skills to take senior management positions in the family firm. Sometimes the links to the family can be somewhat tenuous, but as long as they can somehow be defined as 'family', they are deemed to fit the bill. Although Kwek is acutely aware of the need to have new skills injected into the organization, he is still unable to cede management control to outsiders. The children are sent overseas for a Western education, particularly to study for an MBA and they return to assume management positions.
Kwek typically invests in a new market not because of research but on the basis of local connections. That is probably why the group generally sticks to real estate, which is relatively risk-free and doesn't require a great deal of research or supervision. The organization's dislike for service inputs is an attribute that needs to change for a healthy demand for services is the sign of a maturing organization.
Although Kwek's intuitive approach to decision making has enabled him to make quick and valuable acquisitions in the past, it is ad hoc and the absence of a legible methodology makes it hard for the employees to understand or grasp the strategic intents of the leadership. The leadership's sparse vision building and decision-making are always focussed on a small, tightly knitted and trusted group. Directions are passed down to middle management via closed-door meetings and are then disseminated to the rest of the organization through general meetings. Occasionally, they are reinforced by company newsletters. This does little to enhance understanding or enthusiastic participation by employees at large.
Leadership in teams
Because of Kwek's rather intuitive approach to decision-making, there is hardly any real teamwork since middle managers tend to array themselves like pieces in a chess game whose next move is contingent on everyone else's. Of course any organization anywhere that promotes and rewards on the basis of personality and where procedures for advancement lack transparency, will exhibit some of these characteristics. Staff and especially senior staff, who leave the company to join other companies or competitors, are seen as treacherous. Their departure implies a rejection of, and therefore a loss of 'face' to the leadership. Often there will be a great deal of demonizing of departed staff after they leave; or they are never mentioned again, as if they had never worked there at all. The remaining staff would certainly not want to openly canvas the true reasons for their former colleague's departure-the conclusions might be an affront to management.
Contingent theories of effective leadership
From a contingency point of view, Kwek is regarded as a task oriented leader. He seems to do well in situations with decent leader-member relationship and strong position power. The leader-member relations in the organization are favorable, as his employees are loyal, dependable and supportive. His positioning power is strong, as he perceives himself to have full power and authority to direct, reward and punish subordinates. He experiences pride and satisfaction in task accomplishment for the organization. As a task-motivated leader, he is at his best when the group performs successfully in achieving new sales record or outperforming the major competitors.
So far, Kwek has always been strongly concerned to completing successfully any task he has undertaken. He runs a "tight ship" with clear orders. As Fiedler (1967) suggests that there are two fundamental leadership styles that are differentially effective in different situations, Kwek will need to develop more as a relationship motivated leader. This will enable him to derive greater satisfaction from better personal relationships with others. He should show more sensitivity to his subordinates' feelings and encourage them to participate and offer more ideas. Effective leadership will depend on the characteristics of the situation in terms of the ability of the leader to exercise power and control. The more power he has and the greater his influence and control then the less will be the dependence on the goodwill of others, and the easier his leadership task will be. Therefore, the ease with which he might be able to cope with either of these situations will depend upon whether he finds it easier to use a relationship-motivated or a task-motivated leadership approach.
Leading change in organization
Up till now, no real change effort has been instituted because Kwek and his managers take the views that 'father knows best' and 'if it ain't broken, don't fix it'. Also, any change is thought to have a negative impact on them since the change could alter the formal, psychological, and social relationship that employees have with the organization. It will require everyone to give up long-standing habits and people will feel that they are forced to change by people and events outside of their control. The current recession, however, has forced the need for reorganization since profits for 2001 have dropped drastically. There has been a big slump in property sales and this is expected to continue in the near foreseeable future. Also, peripheral businesses such as plastic moldings have folded. There has also been increasing customer dissatisfaction with core products, recurring delay in delivery of projects, and disgruntled minority shareholders who feel that their interests have been ignored.
Kwek will need to establish and communicate a compelling reason to change that shows people how their lives will be better and show a compelling vision for the future of the organization. The change is aimed at achieving clear, tangible, bottom-line results that all can see. The leadership will need to flood the organization with information about the change effort. Kwek will need to appoint a strong and committed top-management guiding coalition that is in full agreement about the need to change and what the change is intended to accomplished. Kwek could create a coalition to approve change, forming teams to guide it, selecting the right people to fill key positions, making symbolic changes that affect the work, making structural changes to institutionalize change, and monitoring the progress of change to detect problems that require attention.
Kwek could create a sense of urgency, preparing people for change, helping them cope with change, keeping them informed, demonstrating continued commitment to the change program, and empowering people to implement change. He can increase learning and innovation in the organization by encouraging experimentation, reflection, knowledge importation, information sharing, diffusion of knowledge, systems thinking, and improvement of mental models. By doing these, the chances of making the right decision such as the direction of the organization is greater since more information is disseminated, and everyone provides input. There will be greater commitment and greater acceptance of change as integral part of daily work
IS KWEK'S LEADERSHIP EFFECTIVE?
The leadership of Kwek Leng Beng has so far brought the organization many years of prosperity and growth in the context of modernizing Singapore. Although the Hong Leong Group has done well in the past, there is no guarantee that it will continue to do so in future. In this turbulent, fast changing world in which decisions need to be made throughout an organization and in which the information needed to make those decisions can be rapidly distributed, the principles and consequences of leadership are breaking down. In this environment, the Industrial Age leadership of "command and control" or "planning, organizing, motivating, and controlling" is becoming out of date. "Control" has given way to "coordinate", and coordinating implies a respect a respect for underlying beliefs and values in a way that controlling did not.
To thrive in the Information Age, Kwek will need to do more. The employees will not only do what they are asked to so, but they will do it willingly and believe in it deeply. Kwek needs to understand what encourage people to work their hardest and brightest voluntarily and to know that unless they can find ways of organizing to elicit this kind of work, the Group will fall behind its competition-who will understand and find ways to so it.
Transformational leadership
Kwek would need to develop more as a transformational leader, with a stronger vision that appeal to his employees' "better nature and move them toward higher and more universal needs and purposes" (Bolman and Deal 1997: 314). In order words, he needs to be a change agent. Transformational leaders seek to raise the consciousness of followers by appealing to higher ideals and moral values. Transformational leaders make followers more aware of the importance and value of task outcomes, activate their higher-order needs, and induce followers to transcend self-interest for the sake of the organization. Transformational effects are achieved by using four types of leadership behavior: individualized consideration, intellectual stimulation, idealized influence, and inspirational motivation.
As a transformational leader, Kwek could then help team members view their work from more elevated perspectives and develop innovative ways to deal with work-related problems. He should appeal to employees' ideals and moral values and inspire them to think about problems in new or different ways. He should develop behaviors to influence them through vision, framing and impression management. Vision is his ability to bind people together with an idea. Framing is the process whereby he defines the purpose of his movement in highly meaningful terms. Impression management is his attempt to control the impressions that others form about him by practicing behaviors that make him more attractive and appealing to others.
Other skills for transformational leadership include inspiration, intellectual stimulation, individualized consideration, participative decision making, and elective delegation. Transformational leadership will result in lower turnover rates, higher productivity and higher employee satisfaction. He will then instill feelings of confidence, admiration and commitment in his employees. He will create a special bond with them, articulate a vision with which the subordinates will identify and for which they are willing to work. Each subordinate is coached, advised and delegated some authority. He will need to stimulate them intellectually, arouse them to develop new ways to think about problems. He will need to use contingent rewards to positively reinforce performances. He will need to find clear and workable ways to overcome obstacles and show concern for the qualities of the services his organization provides to the mass of the people.
People are bonded to their companies by more than paychecks and fear of unemployment. They need to believe in what the company is doing, They will need to have information available to them about how the company is doing. They need to understand the importance of delighting the customer in a world in which alternative sources are proliferating. Kwek needs to understand that unless the employees are delighted, the customers will not be. Forcing people to go to work, to break a strike, to stay late, to do anything, may be the easiest solution at the moment, but in the long run, this approach creates much more difficulty. Effective leadership is about thinking beyond the immediate to identify other avenues that ultimately impinge on the hearts and heads as well as the bodies of the associates. A big part of effective leadership is the view that the leader takes of the strategic thinking tasks facing him, the work group, and the organization. The quality of the relationships with others had a major impact on whether others would accept his view of the strategic challenges facing them. The leadership needs to build its influence on a moral foundation and then to communicate clearly and effectively to the employees.
The judgement of whether the leadership of Kwek Leng Beng is effective or not is then predicated upon whether he is able to fulfill four key roles, namely, whether he is the direction setter, the change agent, the spokesperson, and the coach. These roles are articulated as follows:
.Direction setter- he needs to select and articulate the direction of the organization that will be recognized as representing real progress. The leadership will have to establish a vision so compelling that everyone in the organization will want to help make it happen. This is by means of the organizational charter outlined earlier.
2. Change agent- he needs to catalyze changes in the internal environment; in personnel, resources and facilities to make the vision achievable. This is done by an overhaul of the organizational designs, system and culture.
3. Spokesperson- he needs to develop his skills as a speaker, listener through courses and seminars. He has to be the major negotiator with other organizations, and the builder of networks of external relationships to provide useful ideas, resources, support, or information for the organization. The leader and his vision must become the medium and the message that expresses what is worthwhile, attractive, and exciting about the future of the organization.
4. Coach- to be an effective, he must let people know where he stands, what the vision means to him, and what he will do to make it happen. The leader as coach, must also be committed to the success of everyone in the organization, respecting them, building trust, helping them learn and grow, and teaching them how to constantly improve their ability to achieve the vision.
It is still too early to tell whether Kwek will be able to develop all these characteristics of effective leadership, but signs are that efforts are being made in the appropriate direction.
1. REFERENCES
Yukl, G. (1998). Leadership in Organizations. New Jersey: Prentice-Hall
Shameen, A. (2001).
Doebele, J. and Brown, H. The Man with the Golden machine gun. Forbes Magazine July 9, 2001
Schiffman, B. Forbes Faces: M&C's Kwek Leng Beng. Forbes Magazine December 11, 2000
Forbes World's Richest People - Kwek Leng Beng. Forbes Magazine November 16, 2000.
Shameen, A. A reclusive tycoon fights for the underdogs-including himself. Asiaweek Magazine June 9, 2000
Shameen, A. The Deal. Asiaweek Magazine June 1, 2001.
Shameen, A. Enter the Asians: Will Kwek and Co. break up a New Zealand conglomerate? Asiaweek.Magazine April, 1996
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