Comprehensive Cases Case 1 ‘The governor of California, Arnold Schwarzenegger, or “Arnold” as the state’s residents like to call him, is, arguably playing the biggest role of his career. Elected in the October 2003 recall election that featured a hodgepodge of 135 candidates, including celebrities Gary Coleman, Larry Flint, and Mary “Mary Carey” (Cook, Schwarzenegger replaced incumbent Gray Davis as the governor of the most populous state in the coun- try by raking in 48.1 percent of the popular vote. Californians, weary of Gray Davis's lack of progress, decided to put their trust in a man best known for his roles in action movies such as the The Terminator and Total Recall. ‘Schwarzenegger's ascent to the governor's seat is impressive when one considers his background. Born in the small town of Thal, Austria, on July 30, 1947, Schwarzenegger was the product of a modest and harsh upbringing. His parents strictly disciplined him— treatment that he says “would be called child abuse” today, Schwarzenegger explains, “My hair was pulled. I ‘was hit with belts. So was the kid next door, and so was the kid next door. It was just the way it was. Many of the children I've seen were broken by their parents, which was the German-Austrian mentality. Break the will. They didn’t want to create an individual .... It was all about conforming. I was the one who did not conform and whose will could not be broken. Therefore I became a rebel. Every time I got hit, and every time someone said, ‘You can’t do this,’ I said, ‘This is not going to be for much longer, because I’m going to move out of here. I want to be rich. I want to be somebody.’ ” Determined to leave Austria, Schwarzenegger began to search for a way out, a way to become “some- body.” He found that way out through bodybuilding, ‘As a child, he idolized bodybuilder Reg Park, a for- mer Mr. Universe. Though his parents objected, ‘Schwarzenegger pursued bodybuilding so vehemently that at one point he was able to bench-press 520 pounds Arnold Schwarzenegger: Leader of California? (for comparison, physical fitness experts typically say that it is good to be able to bench press one’s own body weight). At age 19, Schwarzenegger was crowned Mr. Universe. He continued to win championships, and, in 1970, he even defeated his idol, Reg Park, for the Mr. Universe title. Schwarzenegger now says that bodybuilding was instrumental to his success as an actor and as a politician. “I know it from my bodybuilding — that I can see my goals very clearly... . It takes the confi- dence to ignore critics and naysayers,” he states. Having accomplished his goal of becoming Mr. Universe, Schwarzenegger set his sights on America to pursue acting and moved to the United States at age 21. Although he attended acting school, his odd Iast name and thick accent at first kept him from acquiring roles. He eventually landed a small role in the film Hercules in ‘Naw Yorkand continued to appear in other films such as. Stay Hungry and Pumping Iron. In 1982, however, Schwarzenegger made his mark in the film Conan the Barbarian, which grossed more than $100 million world- wide. His on-screen charisma, massive physique, and uniqueness compared to American actors made him a standout. Since moving to the United States, ‘Schwarzenegger has made 38 movies and has become one of the most highly paid actors in the world. For Terminator 3, Schwarzenegger earned an astounding $33 million—a record sum at the time. After succeeding as a bodybuilder and an actor, Schwarzenegger began eyeing a bigger prize: the California governor's seat. During his acting career, Schwarzenegger had formed a strong network of pow- erful friends and advisors, including investor Warren Buffet, economist Milton Friedman, and Israeli Prime Minister Benjamin Netanyahu. As the recall election neared, Schwarzenegger consulted with his network of allies. Buffet told Schwarzenegger that California needed strong leadership, and Friedman gave him ‘Scanned with CamSeanner 7advice on how to improve California's dismal economy. All of this advice gave Schwarzenegger the vision he needed to propel himself to the rank of governor. Running as a moderate Republican, he sought to unite Democrats and Republicans, pass a balanced budget, reduce government spending, and resuscitate the busi- hess community. Once he accomplished these goals, Schwarzenegger would confidently state to the rest of the world that California was back. Schwarzenegger's vision came at a perfect time: Governor Davis witnessed. the rise and fall of the tech boom. When the tech bub- ble burst, revenue plummeted. In 2001 and 2002, state revenue from the income tax fell 27 percent, yet spend- ing remained the same. Although Davis was not solely responsible for the resulting Californian debt, Californians were eager to place blame. Hungry for someone to take the reins from Gray Davis and steer California away from its troubles, many Californians embraced Schwarzenegger as he cam- Paigned across the state. His name recognition and charismatic personality made him a leading candidate. Schwarzenegger's style is vastly different from other politicians. His wit, honesty, and lack of concern for political correctness struck a chord with voters. (As he told one interviewer at Fortune magazine following the election, “I love smart women. I have no patience for bimbos.”) It was perhaps this larger-than-life persona that led him to “terminate” Gray Davis in the recall election. Following the election, Schwarzenegger immedi- ately began making policy for California. Within only a few days of his swearing in, Schwarzenegger had a viable economic recovery plan. To the praise of the late’s residents, he repealed the cartax increase, which ould have raised almost $4 billion in revenue but was ed by Californians. He continued his strong push. sr reform, passing propositions that made a $15 billion offering possible and that paved the way for a bal- yudget. In April 2004, he persuaded the state's a bill ovethauling workers’ compen- /for businesses trying to reduce costs rkers. ‘to his approachable personality was ke tradition by actually going from t floor to the upstairs offices of ‘meet with them. Schwarzenegger's Glarey, can’t remember the previous 1g that, All in all, the newly elected his charisma and network of pow- thed closer each day to his vision blican party took notice. Though more the Republican Party would like, ¢ knew that his popularity and charisma 10 the Republican convention during Ofge W. Bush’s 2004 reelection campaign. Case Arnold Schwarzenegger:Leader of California? 728 While the Republican party convention organizers were debating whether to invite the moderate Schiwarzen: to speak, Schwarzenegger told the New York Tomes they're smart, they'll have me obviously in prime « Schwarzenegger got his wish. Two days after the view, he was invited to speak during his requested time Republican operatives weren't disappointed with quips such as “This is ike winning an Oscar. As if would know! ‘Speaking of acting, one of my movies was called Thue Lies. And that’s what the Democrats should have called their convention.” Schwarzenegger's speech at the convention electrified the crowd, further solidifying his role as a charismatic leader. Not everything has been rosy. One of his major goals was to pass a $103 billion budget plan that he believed would be a tremendous step toward economic recovery. He set an optimistic timeline of passing the budget by June 30, 2004. Schwarzenegger worked tire~ lessly, negotiating budget reductions with state-affili- ated organizations such as universities, prisons, and the teacher's union. However, negotiations began to fall apart when he made conflicting promises to the oppos- ing parties on state and local budget linkages. Instead of victoriously passing his budget on time, the state legislature recessed for the July 4th weekend, leaving ‘Schwarzenegger and his budget on hold. Not to be dissuaded, Schwarzenegger began cam- paigning to the public to garner support for his bud- get. He even went so far as to call opponents “girlie men” ata public rally—an incident that infuriated his critics. Though eventually he was able to pass a revised yersion of his original budget, Schwarzenegger contin- ued to attempt to fix California’s financial crisis through various cost-cutting initiatives. He took on the California teachers’ union, trying to persuade it co revamp entirely the way it hires, pays, and fires teach- ers. During this time, his approval rating fell ro 55 per- cent. Though still high, his approval rating was down from a staggering 65 percent, Many of his ideas are abhorrent to the teachers’ union. For example, Schwarzenegger wants to tie teachers’ pay to test scores. Many teachers feel that this undermines their ability to teach what they think are important topics and will result in a narrow curriculum, ‘Some believe Arnold Schwarzenegger is a power ful politician, but he says that he really doesn’t like the ‘word power because it tends to have a negative conno~ tation, Schwarzenegger says, “Power is basically influ ence, That's the way I see it, I's being able to have the influence to make changes to improve things.” Schwarzenegger has a clear vision of how he wants fo improve things; the question is not only whether he can, create beneficial policies but also whether he has the ability and support to implement those policies Although he realizes that his charisma helped him to ‘Scanned with CamSeanner30 COMPREHENSIVE CASES become governor, Schwarzenegger also knows the impor- tance of vision to a leader. As he puts it, “There is no one, and when I say né one, I mean no one, who will back me off my vision. Iwill go over burning coals for that.” Questions for Discussion 1. What words would you use to describe Arnold Schwarzenegger's personality? Do any of these fit into the Big Five taxonomy of personality? How might these personality traits influence Schwarzenegger's leadership skills? How might these traits have helped Schwarzenegger get to where he is now? 2, Based on the case, as governor of California, what types of power is Schwarzenegger likely to have? What types of influence tactics does Schwarzenegger appear to use? 8. How would you describe Schwarzenegger's leader- ship style using the leadership theories covered in. this textbook? What details of the case lead you to these conclusions? Is Schwarzenegger's leadership style likely o be effective? Why or why not? 4, Applying concepts from goal-setting theory, explain. how goals have influenced Schwarzenegger's pro- gression to the governor's seat. What aspects of the Case suggest that Schwarzenegger is committed to the goals that he has set for himself? / ‘Are there any “dark sides” to Schwarzenegger's charisma and leadership skills? What might these | be, and how might they affect his relationships with others and his ability to govern? How might Schwarzenegger's personality and lead- ership style help or hinder his ability to effectively negotiate with other parties such as the teachers) union? Suree: Based on B. Morris, A. Gil, P. Neering, and O. Ryan, ‘Arnold Power," Fortune, August 9, 2004, 77-87; and R. Grover: ‘and A- Bernstein, “Arnold Gets Strict with the Teachers,” Business Week, May 2, 9005, 84-85. What Customers Don’t Know (e173 Sitting at her desk at the car rental shop where she worked, Elena couldn't believe what she was hearing: Gripping the phone tightly, Elena listened asthe head anager of the company’s legal department told her that a car that she had recently rented to a customer trad blown a tire while the customer was driving on & hhearby highway. Although the customer, Jim Reynolds, fied to maintain control of the vehicle, he crashed into another car, seriously injuring himself and the other Griver. Apparently, the tire had noticeable structural Gamage that caused it to blow. Elena stared at her desk fn shock as the legal department manager asked whether she was aware of the tire’s condition before renting the car to Mr. Reynolds. “. 'm sorry, what did you say?” asked Elena. “[ asked whether you were aware that the tire was damaged before renting the car to Mr. Reytiolds,” repeated the manager. ‘Elena paused, thinking back to when she had rented the car to Mr. Reynolds. Unfortunately, she knew the answer to the manager's question, but she did not know Won't Hurt Them, or Wall It? whether she wanted to answer it. Her mind raced with worried thoughts about how she let herself get into this position, and then she remembered when her superv sor first told her to lie to a customer Elena had started working for the rental car com pany 2 years ago. Fresh out of college, she was intrigued by the possibilities of joining a company and moving uP the ranks into management, She worked hard, some times putting in 50 or more hours a week. And she was good at her job, too. Customers would frequently tel her supervisor of Elena's great service and courtesp Within no time, the supervisor began telling her that she was a strong candidate for management and would probably be running her owa rental office within the next yeat. Tntrigued with becoming a manager, Elena begat to work even harder, She was the first one at the office each morning and the last one to leave. Things were going well, until one particularly busy day, when the Pental office had more business than it could handle. The office typically had a few vehicles left for walkin ee ‘Scanned with CamSeanner