I recently had an opportunity to listen to recordings of radio broadcasts from the 1940s that featured CED’s first chairman, Paul G. Hoffman. Wikipedia, the source of all modern knowledge, describes Hoffman as an American automobile company executive, statesman and global development aid administrator. He was all that.
From 1935 to 1948, he was president of the Studebaker Corporation (and later Chairman of the Board). In 1948 he became the director of the Economic Cooperation Administration, also known as the Marshall Plan aid program. Later he served as the president of the Ford Foundation. In 1966 he became the first administrator of the United Nations Development Programme.
My interest, of course, was in his role as Chairman of the Committee for Economic Development from 1942 to 1948. Paul Hoffman was what we now call a business statesman. What is a business statesman? Here is how Hoffman was described before an appearance on Meet the Press in 1948: ‘Chairman of the Committee for Economic Development, a group of business leaders whose recommendations for the national welfare are made from a broad-minded viewpoint beyond their individual business interests.’ In those days business statesmanship was not so unusual among national business leaders. Hoffman was far from the only one.
A recent CED paper describes business statesmanship as: ‘the kind of thinking and behavior that recognizes societal health as part of what it means to be a business leader. A prime goal of business statesmanship is to strengthen the fabric into which society and business are interwoven.’ This type of societal engagement, for example, speaking out for the common good on key public policy issues of the day, is a distinct business-leadership trait, though often occurring in combination with other attributes such as showing a long-term commitment to the enterprise, ethical integrity, and other leadership characteristics.
Business statesmen and -women have no illusion that their company’s interests are independent of the strength of the surrounding society, or that their business enterprise can stand apart from the system that supports it. They understand that our society and domestic economy need their help for the nation to regain civility in public discourse and develop common ground for sensible policies. They know that CEOs, in particular, can speak credibly to issues that most directly affect the long-term health of their companies, including the nature of the markets they serve, the availability of well-trained workers, and the general economic and social environment.
One way to illustrate the meaning of the term “business statesmanship” is by reference to the group of leaders CED has honored since 2005 with its Peter G. Peterson Award of Business Statesmanship—leaders such as Jeffrey Immelt, A.G. Lafley, Indra Nooyi, David Cote, and Alan Mulally to name just a few. The Peterson Award “recognizes corporate executives who champion issues in the interest of the public good, rather than just their company’s or personal interests, and who hold themselves to the highest standards of ethics and integrity.”
Business statesmanship is not easy. In fact, it’s hard. It takes time and patience, and results are not easily measured. But it is valuable. CED understands that the jobs of corporate leaders are tightly focused on their companies and that oversight by directors, shareholders and government make it difficult for a CEO to step outside the confines of immediate business concerns. It is understandable that business leaders are reluctant to jump into a morass of societal problems, and to be on the receiving end of pointed criticism from shareholders, boards, and the public. There should be no illusions about the difficulty of achieving the goal of more business engagement in the public square. But the reluctance of business leaders is actually at odds with their responsibilities to protect and develop their businesses.
CED believes it is an asset rather than a liability to have a leader willing to engage in critical public policy discussions. Many of America’s CEOs are active participants in lobbying throughout the political system for laws and regulations directly favorable to their own circumstance. And many are willing to take a more expansive view, for example by actively seeking to improve educational performance and worker training, which determine the quality of the labor force and the pool of talent available to business. The societal issues for which we seek business engagement are no less important to a business’ success.
It takes an exceptional leader who is secure in having the backing of his or her board and shareholders to feel able to speak out on public issues. That is one reason why CED is focused on the entire corporate ecosystem—shareholders, boards, business leaders, and stakeholders. Without strong support from others the CEO cannot have a forceful voice in the public arena. Board members have to share the CEO’s vision and fully support the goal of responsible business statesmanship. Shareholders, too, must realize that their long-term interests are served by responsible, civically engaged corporations (and corporate leaders) that help create societal conditions conducive to economic opportunity. Institutional shareholders representing individuals with longer-term economic goals hold a key to market acceptance of corporate efforts to emphasize long-term growth based on well-functioning societal conditions. Shareholders should reexamine their strategies from a long-term perspective, especially when their ultimate beneficiaries have goals linked to retirement, education, and other longer-horizon objectives.
CED today remains as active and committed as the prominent business leaders who founded the organization in 1942 because they were determined to have sound economic policies in place at the end of World War II. CED’s critical concern is for the future sustainability of capitalism, which is necessary for a free society, steady economic growth, increasing standards of living, equal opportunity, and shared improvements in the quality of life.
The issue faced today is how this system will evolve. It cannot and will not continue exactly as it is. It has evolved over time and will continue to do so. Compared to earlier eras, the political and economic environment today seems less stable and less hospitable to business or, more broadly, to the success of free-market capitalism. The challenge to capitalism today is the erosion of public trust in business, government, and virtually all societal institutions. It appears that public trust in business has waned, endangering the “social license” of business to operate.
Many claim that the loss of support for capitalism is due in part to the inability of business leaders to be effective in sustaining the system that sustains them. New York Times columnist David Brooks, for example, observed that “business leaders have been inept when writers, intellectuals and politicians attacked capitalism.”
A significant part of CED’s work agenda will be to promote business statesmanship while continuing to investigate the competitive, governmental and leadership pressures that may inhibit the ability or willingness of business leaders to address the societal issues that will in the long run be critical to their respective businesses and the overall health of our economy and society.
We urge your participation with CED in this debate.