Should business step up its involvement in public policy issues? According to a recent poll conducted by the FTI Consulting firm, shareholders want CEOs to be more engaged in Washington policy debates. Specifically 85 percent of the institutional investors and analysts surveyed believe CEOs should actively engage policy makers in Washington in order to protect shareholder value.
“Much has been made of the gulf between Wall Street and Capitol Hill and, while many corporate leaders are alarmed by the increased oversight of business as a response to the Great Recession, few CEOs have made it part of their mission to engage in policy debates,” said Edward Reilly, Global Chief Executive Officer of the Strategic Communications practice at FTI Consulting.
There are two curious problems with this view. What makes the survey respondents think that business has been a wallflower at the DC dance? And second, what makes them think that this administration is really interested in hearing business’s point of view—unless very big bucks in the form of campaign support is at issue?
Taking the second point first, the Obama administration has the lowest percentage (8 percent) of people who have any business background in their C.V. of any Presidency since Woodrow Wilson. For the most part the current group in Washington are lawyers and former academics, who if not hostile to commercial interests, are nonetheless socially removed from any understanding of how the private economy actually works. One might as well try to explain needlepoint to a yellow fin tuna.
While it’s true that most lobbying by business is conducted by large corporations, there are scores of trade groups starting with The U.S. Chamber of Commerce, the Business Roundtable, and the U.S. Manufacturers Association—all based in Washington that seek access to both the administration and Congress everyday.
Then there are the big spenders such as the banks. The American Bankers Association spent $4.6 million in lobbying in 2010. The Financial Services Roundtable, an organization representing 100 of the country’s largest financial firms, spent heavily as well. JPMorgan Chase has it’s own in-house team that spent $3.3. million in 2010. (In one quarter alone Amazon.com spent $450,000 lobbying about the online sales tax as well as on rules about data protection and privacy.) And we haven’t even got to Boeing which has sizeable defense contracts.
According to the Chicago Sun-Times, Boeing is one of the most influential companies in airline manufacturing and has continually shown its influence in Congress. Between January and September of 2011, Boeing spent a total of $12 million lobbying according to research by the Center for Responsive Politics. Additionally, Boeing has its own political action committee, which donated more than $2.2 million to federal candidates during the 2010 election cycle. Of that sum, 53 percent went to Democrats.
Not surprisingly large company CEOs such as GE’s Jeff Immelt are regular visitors to the White House, although no one tops SEIU union boss Andy Stern. Obama had Immelt head his Council on Jobs and Competitiveness until he stepped down late last year. The GE chief has been much criticized for his cozy connection with the President considering the massive government aid GE Capital received when its subprime mortgage bets went pear-shaped.
Named to the super-committee on economic policy, the National Commission on Fiscal Responsibility and Reform, known as the Simpson-Bowles panel, Honeywell CEO David Cote served in a high profile position associated with the administration but has received less publicity even though his influence is said to be greater.
Ford CEO Allan Mulally, Boeing CEO James McNerney Jr. and former Verizon CEO Ivan Seidenberg all served on Obama’s Export Council, which the president established in 2010 to help advance his goal of doubling the exports of American products to other countries by 2015. Nor does it end there. The president invited International Paper CEO John Faraci to travel with him to Brazil for the signing of a preliminary trade agreement with that country. Later Faraci spoke warmly of the experience.
With respect to FTI and its survey of institutional investors, access is not the problem. The size of government is. The more rules and laws our solons enact the more snares are created for the unwary and the more opportunities are created for those who can afford access at the expense of those who cannot.
Often being regulated is highly profitable if one is a big business because one can crush the smaller guys that get in one’s way. A classic example is Nike leaving the board of directors of the Chamber of Commerce over climate change. The company was applauded because the move was reported as a gesture to Congress that it wanted to save the planet. But Nike makes all its shoes in Malaysia, Indonesia, China—all outside the U.S. Regulating greenhouse gases in the U.S. wouldn’t add to Nike’s costs, but smaller competitors such as New Balance which makes its shoes in New England would be hit by higher costs. Why try to win in the marketplace when one can get the government to crush the competition for you?
Much is made of the unseemly relationship between special interests and government. It is unseemly but it didn’t start with Obama or even George Bush. Alexander Hamilton commented on the number of special pleaders that constantly darkened his door when he served at Treasury. Thucydides commented on the special interests that plagued ancient Athens. Machiavelli observed that Florentine merchant princes were constantly at his elbow when he served as a minister to that republic. It comes down to this, if government isn’t involved having access or having lobbyists isn’t worth very much. The more government is involved someone is going to seek advantage by other means and get very rich.
Research Finds That Executives Should Play a More Active Role in Policy and Regulatory Debates to Protect Their Businesses
WEST PALM BEACH, Fla., March 8, 2012 /PRNewswire via COMTEX/ — Shareholders believe corporate chief executive officers of companies with interests in the United States should be engaged in Washington, D.C., policy debates, according to a new survey of institutional investors conducted by the Strategic Communications practice of FTI Consulting /quotes/zigman/224004/quotes/nls/fcn FCN -2.15% . The report’s findings run counter to a viewpoint in corporate America that the machinations of government and public policy are no place for corporate executives. In fact, the message from the FTI Consulting research is that analysts and investors not only give their permission for CEOs to engage in the political process — these analysts and stakeholders mandate it.
The study, entitled The CEO as Statesman, shows that institutional investors believe that decisions made in Washington, D.C., have had a significant negative impact on the value of investors’ portfolios. By extension, investors want the management of their portfolio companies to explain how public policy can affect the business and how those executives are managing the impact of policy changes.
With respect to CEO-level engagement inside the Beltway, investors and analysts are clear. More than 85 percent of participants in the study feel CEOs must proactively engage with policymakers to help protect shareholder value. Not surprisingly, chief executives that connect with D.C. influencers are significantly more likely to be seen in a positive light by institutional investors, who would welcome greater transparency into efforts of companies that aim to shape government action.
“Much has been made of the gulf between Wall Street and Capitol Hill and, while many corporate leaders are alarmed by the increased oversight of business as a response to the Great Recession, few CEOs have made it part of their mission to engage in policy debates,” said Edward Reilly, Global Chief Executive Officer of the Strategic Communications practice at FTI Consulting. “When you consider just how much even a small policy shift can shape a market — not to mention more serious overhauls on the magnitude of healthcare, financial services regulation and America’s corporate tax rate — it is self-evident that executives must be part of the dialogue. Along with customers, suppliers and investors, policymakers can be critical to the success of a business, and this constituency cannot be left to chance.”
Policy Threats to Enterprise Value
Investors want CEOs to protect their interests in Washington, D.C., according to these key findings from The CEO as Statesman:
A large percentage (89 percent) believe that current policy decisions are important to investors’ portfolios.
Nearly all (95 percent) overwhelmingly report that the impact of the decisions coming out of Washington, D.C., has been negative for investment portfolios. Eighty-six percent wish for CEOs to be at least moderately engaged in public policy debates related to their business. More than one-half of investors say that CEOs should be actively engaged.
According to Reilly, the research shows that company management should be required to protect its organization from political and regulatory threats. “A thoughtful and rational civic engagement program can give a CEO or company access to policymakers and opinion leaders who are interested in finding common ground and solutions that are mutually beneficial. Becoming a ‘CEO Statesman’ is essential to position executives above the partisan fray as policy leaders and broad advocates — for industry and for the country as a whole.”
While investors are clamoring for information about the potential impact of government decisions, companies must be thoughtful and deliberate. The study concludes that there is a clear balancing act between appropriate and reasoned policymaker engagement and the desires of institutional investors. For more information, methodology and access to the complete findings and white paper entitled, please visit http://www.fticonsulting.com/global2/media/collateral/united-states/fti-consulting-ceo-as-statesman-2012.pdf .
About the FTI Consulting CEO as Statesman Research The sample consisted of N=260 American investors (analysts and portfolio managers) from 228 different firms. The study was conducted online from Dec. 9 through Dec. 19 of 2011. The total equity of assets managed by the represented firms was $2.6 trillion, with an average equity of $11.3 billion and a median equity of $677.1 million. The sample was generated from Ipreo by screening for U.S. portfolio managers and analysts. About the Strategic Communications Practice of FTI Consulting The Strategic Communications practice of FTI Consulting, formerly known as FD, is one of the world’s most highly regarded communications consultancies. With more than 20 years of experience advising management teams in critical situations, the Strategic Communications practice supports clients in protecting and enhancing their reputation in the capital markets, society and the political environment. Services of the Strategic Communications practice are financial communications, corporate communications and public affairs, with specialty offerings that include strategy consulting, research, creative engagement, crisis and issues management, and change communications. The Strategic Communications practice of FTI Consulting is an established market leader in M&A communications and has been for many years.