I cringe every time someone says government should be run like a business. A former business journalist, I have had the opportunity to study the inner workings of Corporate America, and I know the one secret that businessmen and conservative politicians would rather you not know: Most American businesses fail. They fail due to poor leadership at the top.
Bush, after all, took great pride in calling himself the “CEO president.” He proudly referred to his days as chief executive officer of an oil drilling company called Abusto, Spanish for “bush.” What he never mentioned was that Abusto – as well as every other business Bush was involved with – went bust.
Nor was he the only failed CEO in his administration. As chief executive officer of Halliburton, Dick Cheney drove the oil drilling equipment giant to the brink of bankruptcy. He saved Halliburton only by appointing himself Bush’s vice-president and steering billions of dollars of government contracts to the company – at great cost to the taxpayer.
The myth of corporate leadership – that business executives could run government better than politicians – is just that, a myth, a fable that makes good bedtime reading for Ayn Rand fans but has little basis in reality.
Failed Corporate Leadership
In his book, “Built to Fail,” business author Jonathan I. Klein concludes “failure claims an overwhelming majority of businesses within five years [of start up] and almost all businesses within ten years.” Despite claims of conservatives that most business failures stem from government interference, Klein concludes that these failures are rooted directly in the internal leadership of the failed companies.
Bush and Cheney, in fact, are splendid examples of the modern CEO. Gone are the Horatio Alger days when a young man worked his way up from the mail room to the board room. Most CEOs today land in the big office with the help of their rich father (like Bush) or with the help of personal publicists who make sure their clients get the credit for anything that goes right, and deflect the blame for anything that goes wrong.
As a result, CEOs often begin to think they can do no wrong. By believing themselves infallible, CEOs turn a deaf ear to nay Sayers or any other harbingers of reality who might disagree with them. In his book, “Why Smart Executives Fail,” Sidney Finklestein points to this “executive mindset” as well as “protective mechanisms and delusional attitudes” as the cause for the growing number of corporate leadership failures.
Klein came to similar conclusions. The genesis of such failures, he says, came not from without but from within the corporation, and “included inappropriate motives for entrepreneurship, disdain for procedure, underestimation of resource needs, insensitivity to the environment, infatuation with the product, and unrealistic projections of the future.” In other words, poor judgment.
Bush showed this quality before Sept. 11, 2001, when he refused to listen to more than 40 separate warnings of an impending attack from Al Qaida – including two personal phone calls from the presidents of France and Russia. He showed it again when he refused to accept intelligence reports that refuted his belief that Saddam Hussein was responsible for the 9/11 attacks and was harboring terrorists and weapons of mass destruction.
Short-Sighted Leadership
Governing requires a long-term view of the needs of the population and the nation. American business executives, however, are notoriously short-sighted. In the American business world, everything revolves around the quarterly profit statement. Bonuses are based on the degree of profit seen in each three-month business cycle. This produces extreme myopia. Decisions are made to close plants, layoff workers, outsource jobs, etc., based entirely on how it will look on the next balance sheet. As a result, American businesses tend to suffer in the long run.
The Bush administration’s entire war strategy showed this kind of short-sightedness. When the United Nations refused the administration’s call for an immediate invasion of Iraq, the president did what too many CEOs would do: He plunged ahead without any plans for the long-term occupation or rebuilding of Iraq. His infamous landing aboard an aircraft carrier to announce “Mission Accomplished,” got him what he wanted – a jump in the polls – but his failure to plan ahead left our troops and the Iraqis in an ever bloodier quagmire.
Similar corporate leadership failures are leading to a volatile business environment. In the last decade, CEO turnover in the United States jumped from around 10 percent during the 1990s to nearly 50 percent, according to Chief Executive magazine. Not all those turnovers were firings, of course, but it shows a terrible instability in today’s corporate leadership.
Both Fiorina and Whitman were part of that volatility. Like Bush, both candidates boast of their CEO experience, yet neither candidate left behind a legacy that would promote confidence in their leadership skills. Fiorina, after all, was fired by HP’s board in 2005 because they lacked confidence in her abilities. Whitman resigned in 2008 amid demands from shareholders she be fired for driving the company stock value into the ground. Since her departure, most of Whitman’s business decisions at eBay have been reversed by her successor.
CEO candidates invariably claim they know how to create jobs. Unfortunately for American workers, their legacies prove otherwise. Despite his vaunted “trickle down” tax cuts, CEO President Bush reigned over the worst U.S. job growth since WWII – and that was before his policies tanked the economy in late 2008, resulting the loss of 700,000 U.S. jobs.
Fiorina personally helped Bush’s legacy by cutting nearly 30,000 U.S. jobs at HP and shipping thousands of them overseas in an attempt to make up for massive financial losses at HP caused by her ill-conceived acquisition of computer maker Compaq. Whitman helped as well, outsourcing 40 percent of eBay’s workforce to other countries. Her corporate leadership failures also resulted in 1,000 eBay workers losing their jobs. Despite their failure, both Fiorina and Whitman left their posts with expensive golden parachutes.
Romney, born rich, made himself richer at Bain Capital by buying up perfectly good American companies, firing their employees, and shipping the jobs overseas. Of course, that tactic didn't always work: twice while Romney was CEO of Bain, the company nearly went insolvent and Romney had to arrange for federal bailouts amounting to tens of millions of dollars.
This is one of the biggest failures in corporate leadership. Too often the CEO’s solution for every problem is handing out pink slips, and making their remaining employees work harder and longer. As a result, American workers put in longer hours than their European counterparts (50 to 60 hours compared to 30 to 40 hours in Europe) with less time off (one to two weeks of vacation compared to four to six weeks for Europeans). This, business leaders tell us, makes America more productive. Coincidentally, it also makes CEOs richer.
The last place you want to see this sort of “do more with less” CEO mentality is in government, where doing more with less usually means fewer police, prosecutors, firefighters, paramedics – the very government workers we need to protect our property and lives. We saw the impact of doing more with less in Iraq and Afghanistan where our armed forces, stripped down by the Bush administration in the months preceding the 9/11 attacks, where stretched to the breaking point.
Corporate Welfare
Yet nearly every CEO candidate chants the same mantra: cut taxes and reduce government spending. Their religiosity in this regard would be more convincing if the corporations which spawned these same candidates weren’t the largest recipients of government welfare spending. In 1998, TIME magazine reported the federal government spent $125 billion a year on corporate welfare, and this undoubtedly doubled if not tripled under Bush’s CEO presidency.
This largess – which typically goes to the richest corporations in the country – includes cash subsidies, free or below-cost government services and products, tax-payer subsidized loans to foreign countries to buy U.S. goods, and tax breaks, including credits for outsourcing U.S. jobs overseas. This also does not count the subsidies and tax breaks given large corporations by state and local governments.
Despite such aid from the government, these corporations and their leaders continue to fail, miserably and repeatedly. Which is what makes me cringed when people say government should be run like business, and when failed CEOs like Mitt Romney want to run our government.
