Donald Trump – Why It’s Easier To Be CEO Than Mayor, Governor or President

Donald Trump – Why It’s Easier To Be CEO Than Mayor, Governor or President

by | Aug 4, 2016 | Election, Leadership, Politics

Donald Trump has had a lot of trouble gaining good press lately. Instead, he’s been troubled by people from all corners reacting negatively to his comments regarding the Democrat’s convention, some speakers at the convention, and his unwillingness to endorse re-election for the Republican speaker of the house. For a guy who has been in the limelight a really long time, it seems a bit odd he would be having such a hard time – especially after all the practice he had during the primaries.

The trouble is that Donald Trump still thinks like a CEO. And being a CEO is a lot easier than being the chief executive of a governing body.

CEOs are much more like kings than mayors, governors or presidents:

  • They aren’t elected, they are appointed. Usually after a long, bloody in-the-trenches career of fighting with opponents – inside and outside the company.
  • They have the final say on pretty much everything. They can choose to listen to their staff, and advisors, or ignore them. Not employees, customers or suppliers can appeal their decisions.
  • If they don’t like the input from an employee or advisor, they can simply fire them.
  • If they don’t like a supplier, they can replace them with someone else.
  • If they don’t like a customer, they can ignore them.
  • Their decisions about resources, hiring/firing, policy, strategy, fund raising/pricing, spending – pretty much everything – is not subject to external regulation or legal review or potential lawsuits.
  • Most decisions are made by understanding finance. Few require a deep knowledge of law.
  • There is really only 1 goal – make money for shareholders. Determining success is not overly complicated, and does not involve multiple, equally powerful constituencies.
  • They can make a ton of mistakes, and pretty much nobody can fire them. They don’t stand for re-election, or re-affirmation. There are no “term limits.” There is little to tie them personally to their decisions.
  • They have 100% control of all the resources/assets, and can direct those resources wherever they want, whenever they want, without asking permission or dealing with oversight.
  • They can say anything they want, and they are unlikely to be admonished or challenged by anyone due to their control of resource allocation and firing.
  • 99% of what they say is never reported. They talk to a few people on their staff, and those people can rephrase, adjust, improve, modify the message to make it palatable to employees, customers, suppliers and local communities. There is media attention on them only when they allow it.
  • They have the “power of right” on their side. They can make everyone unhappy, but if their decision improves shareholder value (if they are right) then it really doesn’t matter what anyone else thinks

One might challenge this by saying that CEOs report to the Board of Directors.  Technically, this is true.  But, Boards don’t manage companies. They make few decisions. They are focused on long-term interests like compliance, market entry, sales development, strategy, investor risk minimization, dividend and share buyback policy.  About all they can do to a CEO if one of the above items troubles them is fire the CEO, or indicate a lack of support by adjusting compensation. And both of those actions are far from easy. Just look at how hard it is for unhappy shareholders to develop a coalition around an activist investor in order to change the Board — and then actually take action. And, if the activist is successful at taking control of the board, the one action they take is firing the CEO, only to replace that person with someone knew that has all the power of the old CEO.

It is very alluring to think of a CEO and their skills at corporate leadership being applicable to governing. And some have been quite good. Mayor Bloomberg of New York appears to have pleased most of the citizens and agencies in the city, and his background was an entrepreneur and successful CEO.

But, these are not that common. More common are instances like the current Governor of Illinois, Bruce Rauner. A billionaire hedge fund operator, and first-time elected politician, he won office on a pledge of “shaking things up” in state government.  His first actions were to begin firing employees, cutting budgets, terminating pension benefits, trying to remove union representation of employees, seeking to bankrupt the Chicago school district, and similar actions. All things a “good CEO” would see as the obvious actions necessary to “fix” a state in a deep financial mess.  He looked first at the financials, the P&L and balance sheet, and set about to improve revenues, cut costs and alter asset values. His mantra was to “be more like Indiana, and Texas, which are more business friendly.”

Only, governors have nowhere near the power of CEOs. He has been unable to get the legislature to agree with his ideas, most have not passed, and the state has languished without a budget going on 2 years. The Illinois Supreme Court said the pension was untouchable – something no CEO has to worry about. And it’s nowhere near as easy to bankrupt a school district as a company you own that needs debt/asset restructuring because of all those nasty laws and judges that get in the way. Additionally, government employee unions are not the same as private unions, and nowhere near as easy to “bust” due to pesky laws passed by previous governors and legislators that you can’t just wipe away with a simple decision.

With the state running a deficit, as a CEO he sees the need to undertake the pain of cutting services. Just like he’d cut “wasteful spending” on things he deemed non-essential at one of the companies he ran. So refusing funding during budget negotiations for health care worker overtime, child care, and dozens of other services that primarily are directed at small groups seems like a “hard decision, well needed.” And if the lack of funding means the college student loan program dries up, well those students will just have to wait to go to college, or find funding elsewhere. And if that becomes so acute that a few state colleges have to close, well that’s just the impact of trying to align spending with the reality of revenues, and the customers will have to find those services elsewhere.

And when every decision is subjected to media reporting, suddenly every single decision is questioned. There is no anonymity behind a decision. People don’t just see a college close and wonder “how did that happen” because there are ample journalists around to report exactly why it happened, and that it all goes back to the Governor. Just like the idea of matching employee rights, pay requirements, contract provisioning and regulations to other states – when your every argument is reported by the media it can come off sounding a lot like as state CEO you don’t much like the state you govern, and would prefer to live somewhere else. Perhaps your next action will be to take the headquarters (now the statehouse) to a neighboring state where you can get a tax abatement?

Donald Trump the CEO has loved the headlines, and the media. He was the businessman-turned-reality-TV-star who made the phrase “you’re fired” famous. Because on that show, he was the CEO. He could make any decision he wanted; unchallenged. And viewers could turn on his show, or not, it really didn’t matter. And he only needed to get a small fraction of the population to watch his show for it to make money, not a majority. And he appears to be very genuinely a CEO. As a CEO, as a TV celebrity — and now as a candidate for President.

Obviously, governing body chief executives have to be able to create coalitions in order to get things done. It doesn’t matter the party, it requires obtaining the backing of your own party (just as John Boehner about what happens when that falters) as well as the backing of those who don’t agree with you.  ou don’t have the luxury of being the “tough guy” because if you twist the arm to hard today, these lawmakers, regulators and judges (who have long memories) will deny you something you really, really want tomorrow. And you have to be ready to work with journalists to tell your story in a way that helps build coalitions, because they decide what to tell people you said, and they decide how often to repeat it. And you can’t rely on your own money to take care of you. You have to raise money, a lot of money, not just for your campaign, but to make it available to give away through various PACs (Political Action Committees) to the people who need it for their re-elections in order to keep them backing you, and your ideas. Because if you can’t get enough people to agree on your platforms, then everything just comes to a stop — like the government of Illinois. Or the times the U.S. Government closed for a few days due to a budget impasse.

And, in the end, the voters who elected you can decide not to re-elect you. Just ask Jimmy Carter and George H.W. Bush about that.

On the whole, it’s a whole lot easier to be a CEO than to be a mayor, or governor, or President. And CEOs are paid a whole lot better. Like the moviemaker Mel Brooks (another person born in New York by the way) said in History of the World, Part 1 “it’s good to be king.“

What’s wrong with bailouts – B of A, Citibank, Wells Fargo,

by | May 7, 2009 | Current Affairs, Defend & Extend, In the Swamp, Leadership, Lock-in

Good public policy and good management don't always align.  And the banking crisis is a good example.  We now hear "Banks must raise $75billion" if they are to be prepared for ongoing write-downs in a struggling economy.  This is after all the billions already loaned to keep them afloat the last year. 

But the bankers are claiming they will have no problem raising this money as reported in "The rush to raise Capital." "AIG narrows loss" tells how one of the primary contributors to the banking crisis now thinks it will survive.  And as a result of this news, "Bank shares largely higher" is another headline reporting how financial stocks surged today post-announcements.

So regulators are feeling better.  They won't have to pony up as much money as they might have. And politicians feel better, hoping that the bank crisis is over.  And a lot of businesses feel better, hearing that the banks which they've long worked with, and are important to their operations, won't be going under.  Generally, this is all considered good news.  Especially for those worried about how a soft economy was teetering on the brink of getting even worse.

But the problem is we've just extended the life of some pretty seriously ill patients that will probably continue their bad practices.  The bail out probably saved America, and the world, from an economic calamity that would have pushed millions more into unemployment and exacerbated falling asset values.  A global "Great Depression II" would have plunged millions of working poor into horrible circumstances, and dramatically damaged the ability of many blue and white collar workers in developed countries to maintain their homes.  It would have been a calamity.

But this all happened because of bad practices on the part of most of these financial institutions.  They pushed their Success Formulas beyond their capabilities, causing failure.  Only because of the bailout were these organizations, and their unhealthy Success Formulas saved.  And that sows the seeds of the next problem.  In evolution, when your Success Formula fails due to an environomental shift you are wiped out.  To be replaced by a stronger, more adaptable and better suited competitor.  Thus, evolution allows those who are best suited to thrive while weeding out the less well suited.  But, the bailout just kept a set of very weak competitors alive – disallowing a change to stronger and better competitors.

These bailed out banks will continue forward mostly as they behaved in the past.  And thus we can expect them to continue to do poorly at servicing "main street" while trying to create risk pass through products that largely create fees rather than economic growth.  These banks that led the economic plunge are now repositioned to be ongoing leaders.  Which almost assures a continuing weak economy.  Newly "saved" from failure, they will Defend & Extend their old Success Formula in the name of "conservative management" when in fact they will perpetuate the behavior that put money into the wrong places and kept money from where it would be most productive.

Free market economists have long discussed how markets have no "brakes".  They move to excess before violently reacting.  Like a swing that goes all one direction until violently turning the opposite direction.  Leaving those at the top and bottom with very upset stomachs and dramatic vertigo.  The only way to avert the excessive tops is market intervention – which is what the government bail-out was.  It intervened in a process that would have wiped out most of the largest U.S. banks.  But, in the wake of that intervention we're left with, well, those same U.S. banks.  And mostly the same leaders.

What's needed now are Disruptions inside these banks which will force a change in their Success Formula. This includes leadership changes, like the ousting of Bank of America's Chairman/CEO.  But it takes more than changing one man, and more than one bank.  It takes Disruption across the industry which will force it to change.  Force it to open White Space in which it redefines the Success Formula to meet the needs of a shifted market – which almost pushed them over the edge – before those same shifts do crush the banks and the economy.

And that is now going to be up to the regulators.  The poor Secretary of Treasury is already eyeball deep in complaints about his policies and practices.  I'm sure he'd love to stand back and avoid more controversy.  But, unless the regulatory apparatus now pushes those leading these banks to behave differently, to Disrupt and implement White Space to redefine their value for a changed marketplace, we can expect a protracted period of bickering and very weak returns for these banks.  We can expect them to walk a line of ups and downs, but with returns that overall are neutral to declining.  And that they will stand in the way of newer competitors who have a better approach to global banking from taking the lead.

So, if you didn't like government intervention to save the banks – you're really going to hate the government intervention intended to change how they operate.  If you are glad the government intervened, then you'll find yourself arguing about why the regulators are just doing what they must do in order to get the banks, and the economy, operating the way it needs to in a shifted, information age.