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2012 CEO Outlook

In the wake of the 2008 financial collapse, the Great Recession, continuing rates of high unemployment, record and growing government debt and indebtedness and the rise of a President who at best is suspicious of capitalism, some question whether the American free-enterprise system has a future. The current economic crisis is far from the country’s worst but it has induced a panic that allows those who question free enterprise a pretext to introduce sweeping changes.

Chief Executive asked a dozen CEOs of companies of various sizes and in an array of industries, situated across the country, this question: “Given the political threat to American capitalism evidenced by recent events and the fact that many people in their reduced circumstances are disillusioned by the system’s recent shortcomings, is the U.S. free-enterprise system broken and, if so, what should business leaders do about it?”

Here is what they said:

Fix the Country’s Credit

Scott Davis, CEO, UPS

I don’t think capitalism truly is under threat. But we’ve got to get fiscal responsibility back in Congress and the administration instead of lack of decision-making and compromise, and people digging in their heels. The uncertainty is causing a lot of economic problems.

I’m part of a campaign of business leaders to try to “fix the debt.” We believe the Simpson-Bowles [deficit-reduction commission] lit the way; it’s not perfect, but it’s better than anything else we’ve seen. And if we don’t, there will be continued slow growth and restlessness. Hand in hand with that is that we’ve got to encourage free trade, to get exports going to get the economy going.

None of it is easy, but it has to be done. We can’t have the global embarrassment of having the U.S.’s credit rating cut again like we did in August [of 2011].

UPS is the $53 billion, Atlanta-based logistics and package-delivery giant.

Bring Back Budgeting

Jason Beans, Founder & CEO, Rising Medical Solutions

It feels like free enterprise is being vilified in the United States, by the president and others, and that’s incredibly unhealthy. But it’s not something you can ever kill. Entrepreneurship by nature is flexible and adaptable and driven, and I know lots of people who remain capitalistic.

We hear about people paying their fair share, but what does that mean when nearly half the population pays nothing in federal taxes? It means there’s a bias against success that’s as bad as racial or gender bias.

An even bigger threat is government debt across the capitalistic system, in Europe as well as the U.S., and under Bush even before Obama. Government has to live within its budget constraints. What happened to Europe will happen to us if we keep it up.

Chicago-based Rising Medical Solutions, with about $26 million in revenues, provides medical-cost-containment and care-management services.

A Distorted System

John Mackey, Co-Founder & Co-CEO, Whole Foods Markets

Capitalism is the greatest system for human cooperation that humanity has ever created, but it’s not understood and not loved. It’s the greatest value creator in the world.

But business has been put in a very narrow perceptual box of existing to maximize profits and shareholder value and be greedy. So we believe we have to have a powerful government, and that’s led to a distorted system that has ended up in crony capitalism.

Free enterprise isn’t a zero-sum game; it’s a positive-sum game where you have mutual gains and prosperity. We’ll probably eliminate global poverty in the next 50 years, and it’s free-enterprise capitalism that will do it.

Business leaders are heroes, not villains, and we have to do a better job of telling that story and not apologizing.

Whole Foods is based in Austin, Texas, and sells better-for-you foods at its supermarkets nationwide, with annual revenues of about $10 billion.

Speak Your Mind

Monty Bennett, Founder & CEO, Ashford Hospitality Trust

[It] is not entirely broken, but it is deeply wounded. The most serious threat is due to an eroding confidence in one of the fundamental pillars of the free-enterprise system: fairness.

Corporate scandals, as well as the financial crisis, have brought to light the realities of modern-day crony capitalism. People see government, big business and unions working together to centralize power and entrench themselves more deeply into all aspects of society, all the while creating more inefficiencies, more regulations, and raising taxes.

Business leaders need to stop being disengaged from the political process and start getting proactively involved. Speak your mind. Share your experiences.

We also need to communicate these concerns and issues throughout our employee ranks. They need to understand that public policy has a very real and tangible impact on both the company and their own individual well-being.

Ashford is an $890-million, Dallas-based real-estate investment trust.

Blocking and Tackling

Art Coley, CEO, AlphaGraphics

Capitalism isn’t in trouble because, globally, more people are still trying to move toward it. It’s lined up with individual life, freedom and liberty. And our company is continuing to add locations, while the number of Americans starting businesses is still at an all-time high.

The market is certainly adjusting to where banks can’t make loans now to someone who shouldn’t get one; so you have to work harder for credit. It takes longer and they ask deeper questions. But that’s not all bad, either.

When they say they’re concerned about Europe or a double-dip recession, I tell our people that what they can do is take care of their own business. Be responsible in the people you hire and deliver the best-quality products and services you can. And give back and help other small-business owners when you can. It’s blocking and tackling.

Salt Lake City-based AlphaGraphics is a $250 million franchisor of business-to-business printing services.

Unsustainable Spending

Susan DeVore, CEO, Premier Healthcare Alliance

At its very core, capitalism delivers innovation and competitiveness for the long term. But in the U.S. we’re spending twice as much as other advanced countries on health care, and our outcomes aren’t as good as they can be. Our spending is growing at a rate that’s unsustainable.

With the debt and deficit we have, we must change the way health care is paid for and delivered in this country, because health care is a huge part of the ongoing economic challenge. A combination of the free-enterprise private-market system with supporting, enabling regulation is the right answer.

There are parts of Obamacare that enable the private-market system to function more efficiently. But if we over-burden the system from a regulatory perspective, with lots of antiquated rules and regulations that prevent the integration of the health-care system, it’ll work against a solution.

Premier is a $920 million, Charlotte-based, provider-owned alliance aimed at improving health care.

Free Enterprise Will Win Out

David Fox, CEO, DenTek

A small handful drive free enterprise and will continue to drive it because the American people have a desire to get ahead. There are mitigating factors, such as higher levels of taxation. But capitalists will continue to push regardless of that. And tax rates today aren’t that materially different than they’ve been in the past.

I don’t think there are systemic problems with capitalism. Shocks have hit the American free-enterprise system, such as the housing bust. The economy was clearly overheated as people used real estate like ATMs, and that led to the recession.

There’s also a lot of talk about equal opportunity and equal outcomes. And I think that somehow guaranteeing equal outcomes could be a threat to capitalism. You have to have winners and losers, and after the game you can’t go back and give the losing team 20 more points.

Maryville, Tennessee-based DenTek makes oral-care products and has annual revenues of more than $55 million.

Re-Fuel the Engine

Jeff Joerres, CEO, Manpower Group

The system isn’t broken. It’s like a car.: The car is fine. We’re just not putting any fuel in the tank and we’re being told that driving the car is bad. And I think that’s the biggest problem with the system.

So business can do a lot with that by showing confidence and showing that [being in business is] an honorable thing to do, and that making money and being profitable and doing it the right way can be rewarded.

And we really need to encourage people — especially young people — to continue to look at [business] as a profession.

Business must stand up to contrary sentiments and make sure that the free-enterprise system and the capitalist system is the best system in the world.

Milwaukee-based Manpower Group is a $22 billion global leader in staffing and human-resources development.

Alive and Kicking

Brian Knight, CEO, Pragmatic Works

In our sector, the unemployment rate is only about 0.5 percent, so the free-enterprise system is really working from that perspective. We can’t find enough people.

That means we’re bringing in a lot of people the protests are about — veterans, the jobless, the underemployed — who are getting good-paying jobs in IT. We’ve done that with hundres of people the last few years.

But things aren’t as hot for the people we sell to. So we have had to get creative by lowering our prices; and we came up with virtual training for $700 versus $3,000 for a physical class.

Capitalism will re-center itself. People have been saying it’s dead now for over a century, but it’s still alive and kicking.

Based in Middleburg, Florida, with $12 million in revenues, the company provides training and services in the Microsoft SQL Server market.

A Citizenship Model

David Langstaff, CEO, TASC

Fundamentally, the public is asking whether the game of business is fair. The system isn’t broken, but it’s misaligned. It’s become so focused on winning in the short term for shareholders at the expense of the long-term interests of society.

We have to get back to important values and make sure the system is operating within them. Business received liability protection so that by pursuing good business, it would contribute to society.

We want a citizenship model for business, not one with the primacy of the shareholder. And fairness of opportunity is important. But that doesn’t have to translate into equality of outcome.

This is not a model for socialism. We fall into a false discussion if we say that if you don’t support the free-enterprise system as practiced today, you must be a socialist. It’s like Baskin-Robbins: Capitalism, too, can come in 31 flavors. We must have the courage to change what is not working.

TASC provides systems engineering to national-security agencies, is based in Chantilly, Virginia, and has revenues of more than $1.5 billion.

Confidence is Fragile

Paul Purcell, President & CEO, Robert W. Baird & Co.

Our system is not broken. There are enormous challenges with the current administration, which hasn’t been friendly to business—especially small business. This is the most important election in my lifetime, with two very different view of the world.

The United States free-enterprise system is bigger than one political party or one administration. But we’ve got this movie from Europe that could be our future. How can people not be paying attention and see that their policies haven’t worked?

Confidence in a system is a very fragile thing. Business leaders aren’t investing much because they’re not confident in the leadership of the country. The current administration is going after people who are successful.

But that’s not the history of our country: People who take risks and succeed are applauded, not raked as money-grubbers. It is creating envy.

Baird is a $925-million, Milwaukee-based investment and securities firm.

Fixable Problems

Andra Rush, Founder & CEO, Rush Group

I don’t think the U.S. free-enterprise system is broken; I don’t think it’s over. But we need to have confidence in America so people will start to consume again. Things like political campaigning cause a lot of uncertainty, and that’s reflected in a softer economy.

But there are big problems. One of them is we need to have fair trade and trading partners that reciprocate in that. Another problem is that the banking regulations that ensured we didn’t have financial collapse but which also had the unintended consequence of making it extremely difficult for banks to lend to small businesses.

Everyone around the world still wants to come to America because it’s the greatest place and you can pursue your dreams. That is intact. What’s troubling is the current frustrations, which make it easy to feel discontent with the system.

The Rush Group is a Wayne, Michigan-based company with trucking and manufacturing arms and about $650 million in revenues.

Championing Free Enterprise

Don Thompson, President & CEO, McDonald’s

Each McDonald’s is on average a $2.6-million business bringing dozens of jobs into local communities, and making a substantial impact on those local economies. All of us recognize that consumers and businesses alike are anxious for the economy to swing back up. We don’t presume to speak for other businesses on how to sustain during these times.

The McDonald’s legacy champions the spirit of free enterprise. We are staying focused on our business strategies and prioritizing value for our customers as the economy continues to recover.

McDonald’s, based in Oak Brook, Illinois, is the $27 billion leader of the quick-serve restaurant business worldwide.

Businesses Need to Bear Up

T.J. Rodgers, President & CEO, Cypress Semiconductor

We don’t really have a true free-enterprise system. The question should be, “Is America’s big-government version of free enterprise broken?”

So I’d answer “Yes.” We’ve got a lot of problems, and a disproportionate share of them are caused or allowed by the government. You can’t have a free-enterprise system where a central authority controls the economy. That’s called socialism and it doesn’t work.

The housing crash, for example, was the result of government incentives for banks and Wall Street to make loans beyond the edge of free-enterprise risk, and the lenders did that. And government has subsidized green energy, and “greedy” corporations in all rationality accepted the subsidies.

What business leaders can do is stop sucking on their government pacifiers. Be a man or woman and run your damned company in the free market.

Cypress is a $995 million, San Jose, California-based producer of computer and digital components and systems.


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