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Election 2010: Likely Scenarios and Implications for CEOs

Panelists Frank Luntz, CEO of The World Doctors and pollster; Mark Penn, worldwide CEO of Burson-Marsteller and president of Penn Schoen Berland; and Michael Barone, senior political analyst, Washington Examiner, discussed the upcoming election at Chief Executive’s CEO2GOV Summit. Here are excerpts from the discussion, which was moderated by Chief Executive’s J.P. Donlon.

Donlon: What are the likely scenarios in the upcoming selection—and the likely ramifications for CEOs?

Barone: I’ve been writing for the past five years now that we have moved from a period of trench warfare politics in which opinion was very static and stable and the two parties were sort of like equal-sized armies in a culture war, to a period of open-field politics when voter opinion moves around, politicians move around, and we see a lot of changes.

Those changes tended to favor Democrats by a wide margin in 2006 and 2008 cycles. I think they now favor Republicans, or at least disfavor Democrats.

Democrats came to office in January 2009 with an assumption that economic distress would make Americans more favorable to big government policies.I think that assumption has proved to be wrong. In particular, and of importance to CEOs, is that we’re seeing a revolt against government spending, against government bailouts and what is seen as special favors and crony capitalism. We’ve got two South Carolina Republican Congressmen, one running for governor and one running for re-election, who look likely to be defeated. They voted for the TARP bill in 2008. That issue was also used against Republican Senator Bob Bennett in Utah where he lost in the Utah Republican State Convention.

So I think that we have seen an outpouring of new people into the political arena, symbolized by, but not limited to, the Tea Party movement. Basically, voters disapprove of the ’09 stimulus package. They’re on the case against public employee unions where they threaten to bankrupt various state and local governments. And they disapprove of the GM and Chrysler bailouts and the muscling of the creditors. They disapprove of other forms of corporate welfare.

I’d say that on one issue that’s of importance to a lot of CEOs, we’ve seen a big shift of opinion to the right, and that is the issue of global warming or the anthropogenic global warming. Public opinion even before the Climategate emails were revealed in November was moving against the proposition that we had to penalize our economy by 5 percent or 10 percent of GDP to prevent what scientists said was sure disaster 60 years down the road.

Now, the public is aware of the fact that a large number of these important climate scientists are liars and cheats. My guess is that in most CEO circles, belief in global warming is part of the credo. CEOs should be aware that the American public no longer agrees.

Mark Penn: As Michael is illustrating, it’s a very tough time to be a CEO these days. It’s a tough time to be President, a Senator or a Congressman. It’s even a tough time to be a Catholic priest. So the truth is, it’s a tough time to be a leader of virtually any institution, given what the American public has been through in recent years.

I joke that the daily briefings at the White House now sound like the theme song of Car 54, Where Are You? You’re really in a situation now where those problems are really boiling up, almost in the same way that the BP well boiled up and blew. The question is: Is this an electorate that’s ready to blow?

On the one hand, you’ve got the Republican Party. They’re having primary fights, taking down their own. They’re about as disunited as a party can be.

The Democratic Party is more united. President Obama has been a pretty good turnaround artist. And he’s got something of an opportunity. He’s really said, “Look, we’ve got to crack down on Wall Street. We’ve got to crack down on BP and oil companies. We’ve got to put some controls in areas where we didn’t think controls were necessary.”

And if he turns it around from that into a more forward-looking, let’s take hold of our energy policy, let’s have a real imagination about our future and goes back to a basic message of hope, change and inspiration out of these problems, he could really draw a pretty stark contrast versus the Republicans. I’m not saying he will do that. I’m just saying that as we look back on the 500-day mark at this same time, I think Nixon was through the stratosphere in terms of his ratings, Clinton was about 52-53, Reagan was frankly lower at this point than Obama was. The Obama ratings are not fixed in stone. He’s about 47-48 percent approval.

A lot that can happen between now and the midterms. The opportunity is there for a real turnaround for a President who seizes the mantle of leadership out of these crises and against a Republican party that is completely disunited in every conceivable way.

As for the impact on CEOs, the era of re-regulation is here. There have just been—between Toyota, BP and the financial crisis—too many lapses where politics, politicians and Washington will say, “You know, we really have to rethink this.”

Time and time again, overconfidence has resulted in bigger failures than people imagined. If things shift to the Republicans, well, then obviously you will have a changed environment in Washington. The Administration will have to restrategize. Their biggest weakness continues to be the health care bill. If they’ve got setbacks in the midterms, they’ll [revisit] at the health care bill, and press ahead in advantages like energy and other areas.

Luntz: I want to focus specifically on CEOs… and I want you to understand that I’m on your side. I voted for probably the same people that most of you voted for, and I want to fight to get rid of the regulations that you want to get rid of.

I don’t know how to say this in a way that’s polite, but what is the impact of this election? Shut up and start listening. Up until a few years ago, it was easy for a CEO to dominate. They don’t like you in Washington. You know this. You’re in hostile territory in this room. Four blocks from here, they’re trying to figure out how to take away bonuses—and by the way, Goldman Sachs caused so much damage by insisting on calling it a bonus [rather than performance pay]. We did language testing on it. If you call it performance pay, 71 percent of Americans believe even TARP companies should be able to deliver that. But if you call it a bonus and you’re collecting money from the government, it’s 29 percent. Twenty-nine to 71 by changing one word.

Look at this whole issue of drilling for oil, which it should have been exploring for energy. How dare you say, “It’s a tiny drop of oil in a really big ocean.”Can you empathize, please? Can you show some regret, some contrition?

I have never seen a group of people who are worse at communicating. In your annual reports, you guys will have paragraphs that go on for an entire column. Your corporate letter is the most-read item in the annual report. If you write that whole people just get agitated with you. On the inside cover, all they want is a few facts and figures. They want credibility. Just give them two, three, four facts on the inside cover, and you’ve already started to change how they react to your annual report.

Then it’s the idea of repeating the same mantra. Ronald Reagan was the best at this. He said the same thing wherever he went, and it always sounded like it was the first time he was saying it. We learned later that he probably thought it was the first time he was saying it, but it resonated because it was language that worked.

Now I have three questions to share. How do you know if your employees are going to stay with you in this day and age? Ask them: Do they have a job or a career? If they tell you that they’ve got a job, it means they’re looking for another one. If they tell you they have a career, they’re trying to invest in you.

Second, the word employees are looking for more than anything else from you is “respect.”Do they respect what they do, and do they think that their supervisors respect them? Because if there’s one thing we’ve learned in business, it’s that middle management has the real problem because they are always managing up rather than managing down.

Third, and this is the saddest thing of all, is next year going to be better than this year? We asked: Are you better off than your parents were when they were your age? Almost everyone says yes. Then we asked: Will your kids be better off than you when they get to your age? Almost everyone says no. And that stops people short.

If you, as a CEO, can give an answer the politicians have not been able to—why your kids are going to be better off, and prove it to them—you’re on the right course. They want vision from you. They want a mission—not a mission statement. Actually, what they want from is commitment, commitment to the communities that you serve.

Do you see generational issues in inspiring employees? How do you get commitment from the younger generation?

Luntz: One of the most powerful words in the English language is the word “imagine.”Because if I say to you, “Imagine a life of perfection. Imagine the American dream,”every one of you has your own definition.

In terms of aspire and inspire, what the 20-somethings want is flexibility. They want the right to choose. They want to do something different because they don’t have the same attention span and they don’t have the same focus. And for them, flexibility and the right to choose says that they will have the freedom to do what they want to do when they want to do it. You may not want to give it to them, but that’s what they’re looking for.

Barone: The Millennial generation supported Obama in the election 66/32, the biggest margin we’ve seen in the young age group and the most different from the rest of the country. People over 30 supported Obama by only a 50 to 49 margin.

I thought then and think now that there is a tension among the Millennial voters between their desire to make choices, to mouse-click their own preferences, to shape their own world, to build their own Facebook pages and the public policies of the Obama Administration and the Congressional Democrat leadership, which tend to be one-size-fits-all, we’re going to shove you into a union or put you into this health care plan.

Mark Penn:An interesting change in the electorate is that 85 percent of America says that they’re middle class. But now, about 57 percent of America says they’re professionals. And so people have a different view of themselves and their work now. They view themselves fundamentally as professionals, regardless of their job. As long as they’re not in a factory, they’re a professional.

Obama is a professional President, coming from law and the Harvard Law Review. He really represented that changeover and he did extremely well, not just with youth, but with people making more than $100,000.

Usually the people making over $100,000 were either corporate executives or small businessmen, and those people were extremely anti-government in nature. Now, with the mix of professionals, dual incomes, college education, new types of jobs, the over-$100,000 group is individualistic to some extent, but much more comfortable with team orientation and with activist government. Not exactly big, overtaxing government, but certainly activist government.

That is both a fundamental change in our economic structure and also in our voting structure, and it has a lot to do with the kinds of people you’re employing and talking to.

Luntz: There’s also a stylistic approach because Obama is so at ease. One of the CEOs of one of the big TARP companies used to do his stock reports with his arms folded. Do you realize how standoffish that is? This was his natural stance, and shareholders would see this and say, “I hate this guy.”

Visual actually matters. Words actually matter. And this time, because of Bill Clinton and Barack Obama, your presentations, what you say and how you say it matter. That is the greatest challenge for CEOs right now.

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