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CEOs Washington Imperative

CEOs Washington Imperative

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Published by Kevin Cashman

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Categories:Types, Business/Law
Published by: Kevin Cashman on Nov 22, 2011
Copyright:Attribution Non-commercial

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08/13/2014

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CEOs’ Washington imperative
Political engagement has never been more critical tocompanies. More CEOs need to make it a personal priority.
by Nels Olson
 American CEOs fall into two camps: those who relishopportunities to engage with Washington and, at theother extreme, those who engage only whenthreatened with a subpoena.
Ivan Seidenberg, chairman and recently retired CEO of Verizon, ts thearchetype of the corporate leader who sees the long-term benet of having apresence in the capital. As CEO, he frequently met with regulators, membersof Congress, and White House ofcials (including invitations to speak withthe President with other CEOs). President Obama named him to thePresident’s Export Council in July 2010, and he served three years aschairman of the Business Roundtable, the Washington-based group thatadvocates for pro-business policies. Among the senior executives working at Verizon are a former congressman, a former general counsel for the U.S. Trade Representative, and, until 2008, a former attorney general of theUnited States. “I’ve focused on Washington because it’s essential to thelong-term health of Verizon, but also because I want to help developsolutions to the nation’s pressing problems,” says Seidenberg.Engaging Washington is critical for a CEO, given the ramications of regulation, taxation, global trade, and more. While this is well understood by top executives such as Seidenberg, Jim McNerney of Boeing, David Cote of Honeywell, Glenn Tilton formerly of United, and Bill Green of Accenture,there is a clear need for more Fortune 500 CEOs to similarly ratchet up theirefforts to address what Seidenberg has characterized as “a growingdisconnect between Washington and the business community.
September 2011Politics and policy need to behigher on the agenda of AmericanCEOs. The ramifications of trade,taxation, and regulation are toogreat to be neglected, or evendelegated. As notable cases show,companies are far better off  working to influence the processthan responding to the result. Thiscalls for more direct effort on thepart of CEOs, and for companiesto recruit and develop leaders with deep policy experience.
 
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 There is some evidence that companies recognize the likelihood of publicpolicy impacting their operations, based on the ndings of a January 2011McKinsey global survey of business executives. Among survey respondentsfrom companies in North America, 71 percent said they expect increasedinvolvement from both government and regulators—the highest percentageof any region in the world. Another indicator is that membership in theBusiness Roundtable, which represents chief executive ofcers of leadingU.S. companies, increased from 143 to over 200 during the past 12 months. As a Washington-based lobbyist has succinctly explained, “The policyprocess is an extension of the market battleeld.
Why Washington engagement matters
 The federal government’s dramatic interventions in the health care,nancial, and automotive industries in recent years renewed attention on why business—and CEOs in particular—must be well versed in the ways of  Washington. Company leaders in each of these sectors were thrust into thespotlight, which meant testifying before Congress, negotiating with federalofcials, and appearing in the media. Their successes and failures hinged ontheir understanding of how to navigate Washington and communicatedirectly with policymakers.Engagement is also critical to help shape high-prole policy reforms. Forexample, as proposals to reform the U.S. health care system werecontemplated in 2009-10, the CEO of Pzer, Jeffrey Kindler, worked closely with the pharmaceuticalindustry’s trade association, whichhe chaired. He also made a numberof visits to Capitol Hill and the White House, which included twomeetings with the President. Kindler’s investment of time and energy paidoff. “Pharma came out of [health care reform] better than anyone else,” saidone Washington-based health policy analyst, echoing a widely heldsentiment. “I don’t see how they could have done much better.” The need for CEOs to develop more comprehensive relationships in Washington, and a more nuanced understanding of the policy process,reaches beyond those industries—and will extend beyond the currentadministration. The federal government and, to a lesser extent, stategovernment are deeply entwined in sectors throughout the U.S. economy.Regulation, in particular, can affect companies signicantly, and inunexpected ways, given that statutes are regularly being modied in a
 The need for CEOs to develop more comprehensiverelationships in Washington will extend beyond thecurrent administration.
 
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range of areas, including environmental protection, consumer privacy, and workplace conditions. It is far preferable to try to inuence the process than be stuck responding to the result.“If you’re not engaged, you can wake up one morning and nd a big problemon your hands,” says McNerney of Boeing. As the company’s chairman,president, and CEO, he is acutely aware of the need to develop relationshipsin Washington, given that the company is consistently the second-largestrecipient of U.S. government contracts. And a recent dispute betweenBoeing and the federal government’s National Labor Relations Board hasunderscored how Washington can impact companies. Wal-Mart learned the importance of executive engagement with Washington the hard way. In the late 1990s, a key trade agreementinvolving China contained a provision Wal-Mart opposed, but the companydid not have the relationships with government ofcials—or even lobbyists—to get the provision amended. In the years since, Wal-Mart executives havestepped up their involvement considerably. In January 2011, the company’shead of U.S. operations joined with First Lady Michelle Obama to publiclyannounce a new campaign focused on healthy foods. “When I see acompany like Wal-Mart launch an initiative like this, I feel more hopefulthan ever before,” said Ms. Obama.Microsoft is another company that was slow to engage with Washington asit expanded. When the U.S. Justice Department led an anti-trust suitagainst the company in 1998, it was largely bereft of valuable, long-termrelationships throughout the executive branch and Congress. Since then,Microsoft’s current CEO, Steve Ballmer, has devoted signicant energy tofederal policy issues, and the company has measurably increased its Washington presence. Ballmer’s years of advocacy, focused on curtailingsoftware piracy, helped the issue become a centerpiece of the U.S.government’s negotiations with Chinese ofcials as part of the JointCommission on Commerce and Trade.Microsoft provided an object lesson for other companies. “The entire techindustry has learned from Microsoft,” said the head of Google’s Washingtonofce in 2007. “Washington and its policy debates are important. We can’tignore them.” Indeed, Google quickly established its presence in Washington, and, importantly, the company’s leaders have becomepersonally engaged with policymakers.More recently, Facebook raised its Washington prole, hiring a number of notable Democrats and Republicans. According to
The Wall Street Journal
, thecompany has “learned quickly that demands for regulation would pile up,not just from users and advocacy groups, but also from competitors.
If you’re not engaged, youcan wake up one morningand nd a big problem onyour hands.”
 Jim McNerney
Chairman,PresidentandCEO,Boeing

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