Businesses Should Steer Clear of ‘Crony Capitalism’

Mid-market firms must have policies in place to ensure they are neither promoting nor bearing the brunt of governmental favoritism.

In the 1990 movie Pretty Woman, Edward, a businessman who specializes in buying companies and breaking them up, stalls a competitor’s government contract with a single phone call to a senator, who promises to keep the program tied up in red tape for months. Although a work of fiction, the scene depicts an all-too-real situation that happens all the time in the legislature, where favoritism determines which initiatives are pushed through and which are not.

Fast forward to today. The primary defeat of U.S. House Majority Leader Eric Cantor, who was a friend to Wall Street and mega-corporations, and the near-fall of Mississippi Sen. Thad Cochran, have underscored this increasingly thorny position. Opponents of so-called “crony capitalism” are making waves, causing conservatives to attempt to curb the power of the business establishment within the Republican Party.

“Having solid vendor policies in place along with strong oversight will ensure that chiefs and their companies don’t find themselves on the wrong side of this issue.”

Of course, CEOs and business leaders are monitoring this trend for a number of reasons. Some leaders want to ensure their own companies’ privileges and perks under an economic system that always has been rigged in various ways, while others are fighting just to have an equal chance.

Going forward, there will be much to watch as the fall campaign season unfolds and crony capitalism plays out in crucial arenas such as the Republicans’ bid to gain a majority in the U.S. Senate. As a result, business chiefs may want to re-evaluate how they and their enterprises are aligned politically as crony capitalism comes under greater threat.

The poster child for anti-crony capitalism has been the criticism pointed at the U.S. Export-Import Bank, a vital line of support for small businesses and large manufacturers alike that helps them bid for contracts abroad by guaranteeing loans to overseas customers and providing working capital to the domestic enterprise. Many conservatives would like to see it eliminated, and Cantor’s victorious opponent in the Virginia primary, David Brat, a Tea Party-inspired economics professor, campaigned on that point.

The 2008 financial bailout, although six years behind us, is another issue that still sticks in conservatives’ craw as a clear show of crony capitalism and the protections provided to companies and entire industries that would be penalized in a truly free market. How the Obama administration and Republican leaders provided banks with a soft financial landing after helping to spark the global financial meltdown was an issue in the near-defeat of Sen. Cochran by Chris McDaniel, a populist conservative.

CEOs need to protect themselves by remaining neutral. Having solid vendor policies in place along with strong oversight will ensure that chiefs and their companies don’t find themselves on the wrong side of this issue.


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.