(FORTUNE Magazine) – MANAGING/Cover Story 58 BOB ALLEN RATTLES THE CAGES AT AT&T This quiet executive went through a profound personal and professional reassessment when Jim Olson, his friend and predecessor as CEO, died in office. Allen's conclusion: The company's culture must change -- and so must he. ''Every one of us can fall into the trap of thinking, 'I don't need to change,' '' he says. Allen went on to do things no AT&T CEO had ever done before. Results? The stock price and profits are up, and even competitors have words of praise. by Andrew Kupfer

MANAGING 69 SMART WAYS TO HANDLE THE PRESS As Exxon's ordeal shows, dealing with reporters can be tough. Here are 14 guidelines for businesses to follow. by Stratford P. Sherman

THE WORLD 77 HOW CHINA'S CHAOS AFFECTS THE WEST Whatever the immediate outcome, communism is in crisis worldwide. We should cheer, not fear, the reform forces from Beijing to Budapest, Moscow to Warsaw. by Richard I. Kirkland Jr.

POLITICS & POLICY 82 SHOULD AIRLINES BE REREGULATED? No. Deregulation has been a triumph overall, and recent talk of rolling it back makes little sense. But Washington still must ensure that competition survives. by Kenneth Labich

EXECUTIVE LIFE 95 HOW A TOP BOSS MANAGES HIS DAY You'll find Bob Lutz, Chrysler's No. 1 operating executive, in lots of meetings, visiting people -- and rarely behind a desk. by Alex Taylor III

THE ECONOMY 105 ARE WE TOO SCARED OF INFLATION? We sure are, say some dovish economists, and it isn't worth a recession to cure it. They think we can live with steadily rising prices. Trouble is, they're wrong. by Charles G. Burck

MONEY & MARKETS 114 THE SCREWIEST S&L BAILOUT EVER After wealthy Texans ran the huge thrift into the ground, the feds sold it to billionaire Ronald Perelman for a song. The old owners came out well. But the taxpayers? by Brett Duval Fromson

EDUCATION 127 THE NEW, IMPROVED VOCATIONAL SCHOOL Worried about the shortage of technicians? Can't find people who can communicate and solve problems? Here's hope. by Nancy J. Perry

136 WEST GERMANY'S COMPETITIVE ADVANTAGE

ENTREPRENEURS 141 WHAT A WAY TO START A COMPANY! SmithKline has put more than $70 million into Nova Pharmaceuticals, which didn't even have a lab before it went public. by Gene Bylinsky

CORPORATE PERFORMANCE 147 COMPANIES TO WATCH Continental Bank comes back. Plus: Loctite, Westmark International, Crown Crafts, and J&J Snack Foods.

JAPAN 153 JAPAN DISCOVERS WOMAN POWER Labor-short Japanese companies are making managers of young college graduates once condemned to be mere office ladies. by Sally Solo

DEPARTMENTS 4 EDITOR'S DESK 6 INDEX 8 NEWS/TRENDS The shrinking business globe, Wall Street complains about corporate pay, and more. 19 FORTUNE FORECAST Put the dollar in perspective: It's way below the peak, and will drop again by year's end. Exports are safe. by Vivian Brownstein 49 PERSONAL INVESTING Bonds that look good now. by John J. Curran

Also: Which rails to ride, getting service from full-service brokers, and Portfolio Talk with Roger D. Newell of Newell Associates. 161 FORTUNE PEOPLE Roy Bostock's red meat diet, shareholder Abbott Leban, and more. by Mark Alpert 162 ON THE RISE 187 BOOKS & IDEAS In a brash work that will provide plenty of fuel for creative arguments, Peter Drucker tells how the world has changed. by Paul Johnson 191 LETTERS TO FORTUNE 195 KEEPING UP The Senate's superliberal, unfree speech at Berkeley, and more. by Daniel Seligman 201 OFFICE HOURS Your subordinates can tell you how to be a better manager. by Walter Kiechel III

ABOVE: Bob Allen being made up in Washington, D.C., for a TV appearance, photographed by Louis Psihoyos -- Matrix.

COVER: Psihoyos snapped Allen at Baltusrol Golf Club in Springfield, New Jersey.