Why has the elite business lobby in the U.S. abdicated its former role in proposing bi-partisan solutions and regularly calling on big business to sacrifice near term gain for America’s strategic advantage? Where are leadership groups like the post WWII Committee on Economic Development (CED) that was led by top CEOs who championed full employment, increased funding for education and research, universal healthcare and – at numerous times – increased taxes on both the wealthy and business?
Business professor Mark Mizruchi whose recent book The Fracturing of the American Corporate Elite was published by Harvard University Press, asks this exact question in a Harvard Business Review blog post entitled: Why The Decline in Corporate Statesmanship? See: http://blogs.hbr.org/cs/2013/04/why_the_decline_in_corporate_s.html
Professor Mizruchi highlights the postwar developments that he believes caused the elite U.S. business lobby to devolve into its now sadly predictable reflexive vehemence against most all tax increases (despite the fact rates are far lower then when the CED advocated for increases) and most all regulation – even after thirty years of de-regulation. What professor Mizruchi does not explore is the counter trend of digitally empowered entrepreneurial business leaders self-organizing to give expression to their patriotism and their longer-term self-interest in an emerging global knowledge economy that requires the public investments in education, research, infrastructure and our environment that the U.S. Chamber of Commerce and Business Roundtable effectively oppose.
Mizruchi first comments on the change that manifest in the cultural and economic tumult of the 1970s. When the rise of a rebuilt Japan and Germany coupled with an energy ciris and run away inflation to challenge American economy hegemony and life in the C-Suite of America’s top corporations became more stressful. Mizruchi then highlights three developments in the 1980s. First, he asserts that by the 80s big business had so thoroughly vanquished its structural counterweights in government and labor that business leadership lost its ability to organize across sectors since “having won the war against its adversaries” big business and its leaders no longer felt the need to coordinate across sectors.
Second, challenged by new technology, “large commercial banks increasingly turned toward fee-for-service activities morphing increasingly into quasi-investment banks.” One consequence of this was that CEOs of non-financial corporations were far less often invited to serve on the Boards of large commercial banks which added to the fragmentation of business leadership. Finally and most important, a massive wave of “junk bond” fueled acquisitions inverted the traditional relationship so instead of capital markets responding to top corporate boards, even top corporate board became the mistress of capital markets. After almost a century of stability, nearly one-third of the Fortune 500 disappeared during the 1980s hostile takeover binge and the role of CEO became extraordinarily lucrative but on average a position of far shorter tenure.
All this created a culture of insecurity among super wealthy corporate CEOs. Mizruchi believes this reduced the ability of big company CEOs to offer public leadership in the national interest. What he does not explore is the counter-trend of genuine leaders in business who are beginning to step forward publically to give expression to their patriotism and passion for long-term value creation. Since the turn of the century, businesses adding jobs in the U.S. are increasingly led by well educated innovators in dynamic knowledge economy sectors such as value add consulting in high-tech, life sciences, health care, social media and clean energy. These business leaders are entrepreneurial students of science who are very concerned about unstable financial markets and an unstable climate as well as America’s role in history and its role in an increasingly global economy they have worked in since they left graduate school. They are used to dealing with risks many multiples of intensity beyond the “risks” managed by large cap CEOs. A growing number are concluding that the traditional U.S. business lobbies are not representing their perspective on the need for effectively regulated financial markets or environmental protections or the need for increased investments in education and research required by the emerging knowledge economy. Just how these leaders of America’s growth economy are being empowered by digital media to connect, explore public affairs and offer a new voice of American business, will be the subject of subsequent posts. I invite your suggestions and submissions to inform it. Thanks!