Rethinking Corporate Strategy

The past four years have not been easy for American business. President Bush was trusted to protect economic concerns in areas ranging from the environment to civil rights—and he betrayed that trust. His obsession with making America “kinder and gentler” triggered a massive tide of regulations that inundated businessmen and entrepreneurs. With the Democratic Party now in total control of the executive and legislative branches, this trend is likely to worsen.

It is past time for the business community to reevaluate its political strategies. Too often business allows its preoccupation with tactics—piecemeal exemptions from regulatory mandates, delays in the adoption of new rules, and the like—to eclipse any concern for a long-term strategic vision for how to deal with Washington. While these battles certainly are important, the lack of an aggressive strategy means that victories over regulatory encroachments are short-lived.

In addition, business lobbyists too often insist on adopting a “proactive” stance—working within the political process even when self-interest would dictate a more adversarial stance. Seeking to appear “progressive” and “socially responsible,” businesses refuse to defend their self-interest or the interests of their employees, share holders and consumers.

The story line is all too familiar. First the business community endorses the goals of the opposition, merely calling for a more prudent approach: “Yes, greenhouse gas emissions should be reduced, but not so fast and not so expensively.” The debate is immediately transformed into one between public-spirited crusaders and cold, calculating bean counters more concerned with profits than with human welfare. No one mentions that corporations do not seek to produce greenhouse gases and other wastes, but rather these are by-products of the production of energy, materials and consumer goods—all things that improve the quality of life. Thus, the moral high ground is sacrificed to the opposition.

Similarly, business groups are too willing to compromise the positions of potential allies in political battles. This can be seen in the decision of the auto makers to endorse a higher gasoline tax. It is clear that the decision is motivated, at least in part, by concerns that the Clinton administration will push for an increase in fuel efficiency and/or another round of vehicle emission standards. The gas tax is thus being offered as an alternative. But, of course, this then enables the opposition to adopt a “divide and conquer” approach, driving a wedge between the oil and auto industries. Rather than protecting the auto makers against additional regulatory initiatives, it makes both a higher gas tax and higher CAFE standards more likely. This was one of Congressman John Dingell’s primary concerns during the debate over the 1990 Clean Air Act Amendments when he insisted that neither industry breach the united front against environmental extremism. This truce should be continued.

Of course some business leaders—call them political entrepreneurs—have found ways to ingratiate themselves with the regulators and public interest group is that set the tone of the policy debate. These corporate executives have become adept at manipulating the political process for their own ends, squeezing out competitors and finding guaranteed markets through regulatory provisions. Yet, as with any special interest, the benefits are conferred on a small minority at the expense of the American economy as a whole.

The business community can no longer afford the consequences of continued regulatory micromanagement. Not only must it approach these battles like the opposition—holding its cards close to the chest and refusing painful compromises until absolutely necessary—but business leaders must again articulate the intellectual and moral case against excess government intervention in the economy. Even in those instances when the goal of government action may seem desirable, it is important that legislators be reminded that there is a difference between a virtue and a necessity. It is rarely possible to endorse statist goals and maintain free market institutions. One must yield to the other, and America’s businesses have been making all of the sacrifices.

As Governor of Arkansas, Bill Clinton demonstrated that he does consider the arguments of business leaders concerned with the potentially adverse effect of government policies. But President Clinton cannot be expected to be accommodating to business if business leaders do not demand it. The pressures that stayed Clinton’s hand in Little Rock will not be as strong in Washington, D.C.

Raising the white flag of surrender is hardly an effective tactic to win battles. Make no mistake, the market economy is under assault from statist interest groups that see no end fo the usefulness of government regulation. Certainly business would lose more fights if it chose to fight any at all. But a war waged without any opposition has only one possible outcome.