Rethinking the CEO

International Economy, The, Wntr, 2003 by John J. Castellani

Jeffrey E. Garten, The Politics of Fortune: A New Agenda for Business Leaders, Harvard Business School Press, 2002.

In his new book, Jeffrey Garten uses the terrorist attacks of September 11 and the corporate scandals of the past year to illustrate the growing alignment among the interests of corporate executives, government, and the American people as a whole. Therefore, he argues, CEOs must engage with public policymakers to seek solutions to national issues and adapt their way of thinking to reflect responsibilities to a society as a whole as well as to their shareholders.

Garten's strength and originality lie in his overall thesis that CEOs should retake the lead in public responsibility, and seek to partner with governments and NGOs in doing so. He generally cites existing programs or ideas that provide best practices which can be emulated. Among these are The Business Roundtable's Security Task Force which has partnered with the Federal government to provide a means for connecting CEOs with top security officials within minutes to protect and defend our nation in times of crisis, and the Bill and Melinda Gates Foundation which has taken a proactive effort to improve healthcare worldwide.

Garten writes clearly and concisely and is at his best when he diagnoses the obsession with short-term thinking that underlies most of the problems that have afflicted the capital markets over the past year. He identifies the latent power of institutional investors to drive corporate governance, as well as their failure to appreciably do so. Working from his professional expertise, his call for a reform in the way business education is conducted and business schools are rated is timely and his further efforts on this matter should be interesting, especially as dean of a top tier school.

Garten's argument for more consistent international accounting rules, if a case of somewhat wishful thinking, draws an important line connecting corporate governance and trade. Although erring on the side of encouraging social activism, Garten rightly stresses the collateral social benefits of trade for developing countries. It is somewhat disappointing, however, that he does not benchmark American performances or practices to major competitors. The reader would have benefited from a more in-depth discussion of corporate-driven alternatives to the Kyoto Protocol on climate change or the European concept of the triple bottom line of economy, society, and environment which would have added a greater degree of interest and depth.

What Garten's analysis lacks is a connection to creating value for shareholders, the primary responsibility of CEOs. This is particularly evident in his plans for restoring the reputation of CEOs and integrity to the markets. He does not acknowledge whether or how shareholders stand to benefit from his proposals. I believe that they do, but it has to be clarified before any CEO, much less all CEOs, can consider adopting any of the measures Garten proposes or participates in the initiatives he suggests.

The Politics of Fortune is the beginning of a debate, and Garten's hopes to build on World War II-era public-private cooperation have merit, but are not yet fully formed. This is understandable, and given the book's brevity, it is more of a call to action than a detailed plan to implement his proposals. The Politics of Fortune makes a positive contribution to the debate over corporate responsibility in the changed world that Garten describes, which is likely to be lengthy.

John J. Castellani is president of the Business Roundtable.