Putting social policy and global politics on the CEO's agenda

Citation

Leavy, B. (2003), "Putting social policy and global politics on the CEO's agenda", Strategy & Leadership, Vol. 31 No. 5. https://doi.org/10.1108/sl.2003.26131eae.001

Putting social policy and global politics on the CEO's agenda

Brian LeavyBrian Leavy is AIB Professor of Strategic Management and former dean at Dublin City University Business School (brian.leavy@dcu.ie). His research is focused on strategic leadership, competitive analysis and supply chain strategy. The author of more than 40 articles on these topics, he has also published three books – Strategy and Leadership, 1994 (co-authored with David Wilson), Strategy and General Management, 1995 (co-edited with James S. Walsh) and Key Processes in Strategy, 1996 (and reprinted in 2001).

The Politics of Fortune - A New Agenda for Business Leaders

Jeffrey E. GartenPublished by Harvard Business School Press,2002,185 pp.

In the opening essay of his book The Cycles of American History, Arthur Schlesinger highlighted the central dynamic in his country's story by asking: "Does America mean commitment to a national experiment or consecration of a national destiny?" If the end of the Cold War and the fall of the Berlin Wall in the late 1980s seemed to crown a destiny, the combined effects of 9/11 and the Enron scandal have jolted the project back into experimental mode with new political and economic challenges to further test the virtue and resilience of Western-style liberal democracy. The central message of The Politics of Fortune is that the American experiment can now be kept on course, only if the corporate world is prepared to re-engage with public policy to a level not seen since the days of post-war reconstruction more than half a century ago. This implies a new agenda for business leaders. If they fail to take it up, the opportunity cost for all of us may be high.

Persuading hard-pressed CEOs to engage with wider social and political concerns will not be easy. Given his background, Jeffrey Garten stands a better chance than most. He is currently dean of Yale School of Management and a columnist for Business Week. He has also held senior executive positions on Wall Street with Lehman Brothers and The Blackstone Group, as well as serving in the Nixon, Ford, Carter and Clinton administrations.

His argument that "Americans need no less than a new paradigm for leadership in society" is not a reactive one. Nor is he alone in advancing it. Prior to the terrorist attacks and recent corporate scandals, Barbara Kellerman had already begun to make a similar case in Reinventing Leadership, as had Garten, himself, in the final section of his previous book. Recent events give it new urgency. In The Mind of the CEO many of Garten's respondents had told him "their entire business strategies were based on the assumption of continued momentum in global economic liberalization". Since then, Enron and 9/11 have been a wake-up call to business and government alike that market efficacy and globalization can no longer be taken for granted. The unilateralist emphasis emerging in American foreign policy will have implications for overseas trade and investment, one way or another, particularly in strategic Asian markets.

In short, Garten argues that we are at an inflection point for American business, a new world, ready or not. Business leaders are at the heart of the major changes currently sweeping the globe, and they are the ones with much of the world's resources and intellect at their command. In an increasingly interconnected world, where the political and legal frameworks for international trade are lagging advancing economic globalization, business cannot afford to take a passive role. A new agenda is called for, and a new perspective needed to drive it forward. For the author of The Politics of Fortune, the new perspective begins with the recognition that public interest is more than the aggregate of private interests, and in a market society (as distinct from a market economy) that we should not look to market forces to govern everything. The most pressing issues on the new agenda for US business leaders are homeland security, restoring integrity to the markets, preserving economic security, sustaining free trade, reducing global poverty, expanding corporate citizenship, influencing foreign policy and improving business education. One way or another, in most sectors of the economy, all of these issues will have implications for future business costs and prospects. Garten makes his case with facts and arguments that are likely to hit home with many CEOs.

Each item on the new agenda is given its own chapter, and priorities are identified. For example, in the case of restoring integrity to the financial markets, the issue of corporate governance is seen as central, and this is examined in terms of the need to relieve short term earnings pressures, strengthen accounting systems, rein in executive compensation, rethink the composition and role of the board of directors and reassess the role of institutional investors, among others. Some advice is also offered on how to go about it. Regulation is seen to have some role to play, but one that can only go so far before it threatens to become counterproductive. The overriding concern is to restore trust to the market system – loss of trust not only raises transaction costs but also slows down the economy's metabolism. It all comes back to the leaders themselves. "The more complex the markets become, the more the integrity of its leaders matters".

Restoring integrity to the markets is one that most CEOs will readily recognize as a priority. However, many will baulk at being urged to become more directly involved in reducing global poverty. This is surely an issue for governments not business, or is it? Recently, leading strategy thinkers like Clay Christensen and C.K. Prahalad have been highlighting the latent opportunities for substantial economic growth among the world's poorest communities. As Garten points out in this book, "The real source of market promise is not the wealthy few in the developing world, or even emerging middle-income consumers: it is the billions of aspiring poor who are joining the market economy for the first time". A primary inhibitor to releasing this dynamic are the harsh terms of trade imposed on many third world commodity exports to protect first world producers. In short, US business leaders may have bigger stakes in global poverty reduction than most might realize.

Few of these issues can be addressed adequately by government or business acting in isolation. A new level of public-private partnership is called for. It is one for which there are few contemporary models, since recent decades have been marked by reducing public involvement in the economy and declining business interest in public policy. Go back a bit farther in time, however, and we can find impressive exemplars for the kind of private-public engagement that the book now advocates. This is particularly evident in the Committee for Economic Development (CED) set up under FDR in 1942, and in the Economic Cooperation Administration (ECA) established under Truman in 1948, which played such a pivotal role in the success of the Marshall Plan.

Can the US business community recapture the spirit of this earlier era? The author believes not only that it can, but also that it must. The prevailing climate now emerging within American society will demand no less. Furthermore, the new leadership paradigm will require a fundamental reappraisal of business and executive education of a kind not seen since the Ford Foundation and Carnegie studies in the late 1950s and early 1960s, because "today's system for educating business executives does not go far enough to train CEOs to be leaders in society".

Most business leaders should find The Politics of Fortune helpful in offering perspective on these uncertain and confusing times, and many will be moved to act on it. Undoubtedly, some may find its new agenda wanting in specifics, since it is more manifesto than blueprint, which may inhibit uptake. However, the key to its realization probably lies elsewhere. Since much of it calls for concerted initiative on the part of the business community, leadership will be needed to get things moving. Which CEO today can afford to play the role of industrial statesman? Yet, which can now afford not to? This is the conundrum that is likely to have the biggest influence on the new agenda's own fortune.