The Politics of Fortune: A New Agenda for Business Leaders - Attention CEOs: Your Agenda for the Future

A continuation of the progress and prosperity of the last two decades of the twentieth century depends on defining the proper relationship between the private and the public sectors. There is some irony to this challenge. Considering the headlines of the 1980s and 1990s, the number of cover stories that depicted CEOs as heroes, and the free-market rhetoric from both Washington and corporate America, someone might think that the United States had entered an era in which business drove the economic boom without government help. The fact is, though, that the interplay between the private and the public sector largely fostered that prosperity. After all, the government invented the Internet and allowed its commercialization. The monetary policies of the Federal Reserve, the fiscal policies of the U.S. Treasury, and the free-trade stance of the Clinton administration all contributed to low inflation and budget surpluses in the late 1990s, the heart of the long business expansion. Legislation allowed deregulation in finance, transportation, and telecommunications (imperfect as it may have been). Moreover, government-negotiated treaties led to expanded trade. That's why we must get the balance between government and business right.

The United States does not have a lot of maneuvering room in managing its sophisticated economy. True, American companies have grown larger, more powerful, more globally focused, and more technologically complex. As noted, government has also grown steadily. Yet, amid both trends, the nation has become more fragile. We saw how the destruction of just two large skyscrapers affected the U.S. and global economies, and now everyone sees how much greater the damage will be if someone attacks other parts of the nation's critical infrastructure—energy grids, telecommunications centers, food supplies, and the like. Quite separately, but almost simultaneously, we saw how quickly major companies with excellent reputations—Enron and Arthur Andersen—can collapse, and how fast other corporate icons such as General Electric and Merrill Lynch & Co., Inc. can lose their market value when facing intense public scrutiny. There are several reasons for this fragility: One is the interlocking nature of all aspects of modern society. Another is the growing demand for transparency in American institutions. There is the instant global reach of the media, and a growing skepticism among ordinary citizens that most big institutions, public and private, can be trusted. One inevitable conclusion is that neither business nor government alone can shore up the overall system. It will take both, working together.

This partnership becomes critical when you put American society in a global context. In the international economy, in which instability is particularly great, there are few rules and institutions. Developing them will take many decades. National governments and business leaders are poorly equipped for the job. Both can abdicate, in which case there will be anarchy. Or they can cooperate to build truly international institutions, in which case the world has a better chance to enjoy a smoothly functioning global economy.

The United States has a lot to do, and neither Washington nor corporate America can do it alone. Over the next several years, the antiterrorism campaign and the response to Enron will result, one way or another, in the rewriting of the rules that govern so much of business and society. How free will Americans be to move around? How much privacy will they sacrifice? What restrictions will the United States place on finance, trade, immigration, communications? How will corporate governance change? How can a nation wage war and live in peace and prosperity at the same time? Someone will make decisions on these and a host of related issues. The question is: Who and how?

Americans need no less than a new paradigm for leadership in their society. In this book, I am looking at the agenda for business leaders, but, of course, they constitute just one important element of a more complicated picture. I don't know precisely what this paradigm should be, but I know that the roles of business, government, and nongovernmental organizations must move in the direction of closer partnership. They must coalesce around a vision of a society in which many new security measures will be taken, yet be carefully weighed against the freedoms that the United States defends. Leaders across sectors must construe security in not just military terms but economic ones. They must understand that global problems are increasingly inseparable from what happens at home. For business leaders in particular, the new paradigm of leadership must go beyond pleasing Wall Street and delivering ever-higher profits on a quarterly basis. By considering all the stakeholders of a company—employees, customers, suppliers, communities—business leaders must also consider the concerns of society, such as a cleaner environment and a higher level of integrity in business dealings.

Indeed, business and other leaders must rethink how they can collaborate to further the public interest on a range of critical issues. I know that a definition of the "public interest" is elusive, but let me explain what I have in mind. First of all, the public interest is not simply the sum of the private interests, which are often self-serving and short term. Nor is a market economy the same as a market society; prices and competition should not govern everything. Moreover, in a highly sophisticated, market-oriented nation such as the United States, the public interest cannot be defined by democratic voting alone or by the judgment of officials responding to opinion polls. American society is more complicated than that. It needs interest groups; it needs political parties. And, given the powerful role that business plays in U.S. society, the nation needs a level of leadership from corporate America that goes beyond that of an interest group and looks at public policy from a more strategic perspective. It needs chief executives who can explain to the government and the public the effects of various policies on the economy over the long term, the risks and rewards of different policy choices, and whom these policies will affect. It needs leaders who can look at the overall economic system and examine ways to strengthen it and recommend national and international policies that will expand open markets and promote democracy—two conditions that reinforce each another. It needs business executives, too, who can expose and condemn the business practices that undermine effective capitalism.

All this translates not into a business community off to the side pursuing its own agenda, or one that sees itself in opposition to government, but one characterized by a closer partnership with government. Such a partnership will bring a market-oriented approach to complex policy decisions and will help guarantee that the nation uses the initiative, resources, and talents of the private sector whenever possible. This approach not only avoids unnecessary expansion of the state but also enhances the government's effectiveness when it does intervene.

In centering my attention on business-government ties, I do not mean that the leaders of corporations should occupy a privileged position in society or in policy development to the exclusion of other groups such as public interest organizations, professional associations, representatives of labor, and educators. At this moment in history, however, business leadership in particular needs attention, and the potential for a more constructive leadership role for corporate America is especially large. In the end, however, the country needs the most inclusive partnerships it can muster, including business-government alliances, but going well beyond that.

Reprinted by permission of Harvard Business School Press. Excerpt of The Politics of Fortune: A New Agenda for Business Leaders by Jeffrey E. Garten. Copyright 2002 by Jeffrey E. Garten.

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Jeffrey E. Garten is Dean of the Yale School of Management. Formerly a managing director for Lehman Brothers, Inc. and The Blackstone Group on Wall Street, he also held senior economic and foreign policy positions in the Nixon, Ford, Carter, and Clinton administrations.