How Bashing CEOs Hurts the Economy
THE PERCEPTION GAP is widening between chief executives and their detractors among politicians, regulators, journalists, shareholder activists and academics. The popular mood appears to be "hang all CEOs." The legal proceedings against Bernie Ebbers, Dennis Kozlowski, Martha Stewart and Jeff Skilling, while necessary, are being blown out of proportion. Their crimes happened years ago and it's wrong to assume that all CEOs engage in those abuses.
The reality at the top of most corporations has changed dramatically because of SarbanesOxley; more aggressive enforcement by the Securities and Exchange Commission and the Justice Department; a wave of shareholder class action lawsuits; and per- haps new rules on "shareholder democra- cy" that would cut CEOs out of the process of picking directors.
The CEOs who responded to our Confidence Index and took part in our cover story (page 26) and other leaders whom we speak to privately are deeply concerned about this negative climate. One recently pointed out that his company spends $400 million a year com- plying with regulations globally. Under Sarbox, the U.S. could become one of the world's most expensive regulatory regimes.
The negative climate facing CEOs is compounded by the outpouring of emotion over jobs. Rather than harping on the outsourcing of jobs (which is inevitable and will continue, no matter what laws are passed), CEOs say the national agenda should be focused on capital formation, innovation and competitiveness. What the country really needs is a major burst of innovation that creates jobs and improves the technological infrastructure. It may be hard to believe, but the U.S is losing technology leadership in many sectors, such as wireless and broadband communications. (See "Korea's Broadband Revolution," page 38.)
Kicking off a wave of new innovation would mean that government and the education sector need to shift gears and get serious about creating a climate in which companies want to take risks and can find the best minds. …