Commentary


The private sector could take a leaf from our book

During the 21 years I have worked in city government, I often have heard the question "Why can't government operate more like a business?" With the current scandals involving such corporations as Enron, WorldCom, and Arthur Anderson, perhaps the question should be "Why can't business operate more like a government?"

Take, for instance, the local government for which I work, a council-manager community. Our board of directors, the city council, is democratically elected. Of course, each citizen who wants to choose his or her councilmember can cast only one vote. Our ballot is always chock-full of candidates running for office, and in the last election we had eight candidates for three council positions.

Contrast this picture with the election of the board of directors of a corporation. Usually, there is only one name appearing on the ballot for each position. The CEO usually has hand-picked the candidate. The one-person/one-vote rule does not apply, as the number of shares you own determines the number of votes with which you can stuff the ballot box.

An election of a corporate board of directors is more like the old-time elections of the Russian Politburo than it is like those of American legislative bodies. Rather than "one person/one vote," it s "one candidate gets all the votes."

The CEO of a corporation wields tremendous clout because most of the decision-making power is concentrated in the hands of this one person. Again, contrast this situation with a local government, in which administrative and policy-making powers are split among the mayor, council, and manager. If Machiavelli was correct about the corrupting influence of power, government's power-sharing arrangement might be a good antidote for the negative influence of a corporate czar's absolutism.

Government decisions are made in public, and most governmental entities have to abide by both open-meeting and public records laws. Private sector decisions are made behind closed doors and in absolute secrecy. It's a lot easier to get away with chicanery and deceit if no one knows what you are doing.

Oftentimes, members of the public extol the virtues of the private sector's financial acumen. Our local government has a triple-A bond rating and places a premium on securing the lowest possible cost for our debt placements. In contrast, private sector organizations think nothing of floating junk bonds and paying usurious rates to raise capital.

Executive compensation is another area in which the public sector seems to operate a lot more rationally than the private one. As we know, private sector CEOs earn hundreds of times the compensation of the average organizational wage earner. In the public sector, this ratio is closer to three-to-one.

Members of the boards of directors of many major corporations earn hundreds of thousands of dollars annually in salaries and stock options. Our city councilmembers earn $16,942 annually. Who do you think is more committed to furthering the welfare of the enterprise, and who is more concerned with furthering their own welfare: the person who takes the job for the potential income from large increases in the value of stock options, or the person who takes the job for the potential public tribute from large-scale community improvements?

Councilmembers and employees operate under strict conflict-of-interest rules; they are prohibited from engaging in any activities in their duties as municipal stewards that could lead to personal financial gain. Corporate board members and executives, however, are encouraged to engage in activities that increase their net worth, even though in the long run these activities may be injurious to the organization and its stockholders.

Councils meet almost every week of the year, while boards of directors meet about once a month.

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