For the past seven years America´s political leaders have been trumpeting the spread of American-style democracy, with decidedly mixed results. Developing countries aren´t eager for America to impose its form of democracy on their fledgling – and often fragile – governments. In fact, many of them resent America´s attempt to tell them how to run their governments, especially when threats of “regime change” are not-so-subtlety mentioned.
It is American-style capitalism – not democracy – that is spreading like wildfire around the globe.
Every government leader and business executive I have met in developing countries is eager for one thing: American-style capitalism to build their economies, create jobs and wealth for their people, and bring their countries fully into the global trading network. From Kazakhstan to the United Arab Emirates to Vietnam, people are hungry for capitalism. They want to study it in the U.S., learn how to create local capital markets, acquire American technology and know-how, and build up companies that can export their goods around the world, especially to the U.S.
But most of all they want America´s hidden asset: global capitalism leadership.
Let me emphasize that this is not the old-style business leadership of the 20th century which thought U.S.-based companies had superior products and management processes and could simply export them to the less sophisticated markets around the world, eager for American goods and know-how. That day passed by twenty years ago.
In recent years America´s new competitive advantage has emerged: the ability to train and develop global leaders, capable of leading global organizations. These new leaders, who are mostly in their thirties and forties, have lived all over the world and are as comfortable doing business in the Ukraine or Indonesia as they are in Des Moines, perhaps more so. Many of them have attended America´s best graduate business schools, where they interact with a vast array of foreign nationals and newly immigrated Americans with similar leadership abilities and like ambitions.
Attending my class at Harvard Business School, my wife remarked, “I feel like I am in the United Nations.” In fact, more than one-third of Harvard´s MBAs at HBS and two-thirds of participants in its executive programs come from outside the U.S. to learn the latest leadership approaches in global business. These percentages do not include the substantial number of newly-immigrated Americans from all over the world attending these programs.
This new generation of American business leaders – as well as foreign nationals trained in America´s leading academic institutions – is very different than the previous generation: they are authentic leaders – collaborative, not imperial, in their relationships. They genuinely respect and appreciate the comparative advantages that people of other nations bring to their global companies, from manufacturing skills to ingenuity. Most importantly, they know how to bring together and motivate people of very different backgrounds to build high performing organizations.
America´s competitive advantage is seen most vividly in financial markets, where governments and business people around the world are eager to have America´s investment banks help them restructure their financial institutions and industrial companies to become competitive in global markets. Serving on the board of Goldman Sachs, I have had the opportunity to witness first-hand just how important this leadership is to countries like China, Saudi Arabia and the United Arab Emirates. In building financial institutions in these countries, America is developing the relationships with business leaders that will sustain this competitive advantage in global leadership for the next several decades.
For all the xenophobia about immigration and widespread panic over outsourcing, the reality is that America is the world´s melting pot. We are more accepting of people of diverse national origins and ethnic backgrounds than any country on earth. Progressive business leaders like IBM´s Sam Palmisano, Andrea Jung of Avon Products, GE´s Jeff Immelt, and PepsiCo´s Indra Nooyi recognize that diversity is not a challenge to be overcome, but a source of sustainable competitive advantage.
Whatever issues diversity may create – both real and perceived – America´s hidden competitive advantage is the ability of our leaders to operate effectively in integrated global organizations and to deploy the principles of capitalism throughout the world.
Our political leaders would be well advised to recognize this strength and use it to build America´s relationships with countries around the world, while helping them build their economies through capitalism, irrespective of their form of government.
Paul Wolfowitz, Alberto Gonzales, Joseph Nacchio of Qwest, Heinrich von Pierer of Siemens, . . . What do they have in common?
A failure to accept the responsibilities of leadership.
No one seems to be willing to take responsibility for leading anymore. Either they “don´t know,” “can´t recall,” or “were just following their lawyer´s advice.” These leaders are either asleep, incompetent, not telling the truth about their actions, or simply unwilling to be responsible leaders.
What ever happened to leading with honor and accepting full responsibility for leadership? It brings to mind the title of the introduction to my first book, Authentic Leadership, “Where Have All the Leaders Gone?” – that is also the title of Lee Iacocca´s new book.
Let´s look at what these leaders have done or said and explore the common threads:
Wolfowitz directed the World Bank to pay after-tax compensation at the State Department for his “friend” Shaha Riza which exceeded the amount paid to Secretary of State Condoleezza Rice, and refused to own up to it. In so doing, he has besmirched the values of the office he is sworn to uphold, and completely undermined the credibility of his “anti-corruption” campaign. In working behind the scenes to hang onto his job, he risks cutting so many deals that he will render the power of his office useless.
Why doesn´t Wolfowitz resign with honor?
Under oath before the Senate Committee, Gonzales testified time after time that he “could not recall” being involved with the decisions to eliminate the nine prosecuting attorneys and replace them with Bush loyalists. Couldn´t recall? Where was he on such an important decision? Either he failed to do his job, or he had a convenient memory lapse. In hanging onto his job, he damages the credibility of the Attorney General, and brings dishonor to the President.
Why doesn´t Gonzales resign with honor?
Joseph Nacchio of Qwest:
Last Thursday Joseph Nacchio, the former CEO of Qwest, was convicted on nineteen counts of insider trading for selling his Qwest stock just before it collapsed, at the same time he was giving shareholders rosy predictions about earnings growth. Nacchio led Qwest´s hostile takeover of U.S. West, a regional Bell operating company, drove its stock price to $60/share by initiating dramatic cuts in its service levels, and then sold his stock while the stock price declined all the way to $1.07 per share when the telecommunications bubble burst.
Shortly thereafter, he was replaced as CEO by the Qwest board of directors. Now it seems our legal system has judged him accordingly.
Heinrich von Pierer of Siemens:
As CEO and now chairman of Siemens during the 1990s, Heinrich von Pierer was one of Germany´s most respected business executives. He resigned last week to remove himself as a focal point of criticism of the firm for its alleged $500 millions in illegal payments by its communications division. While von Pierer claimed no knowledge of the payments, one has to wonder how engaged he was in the business if he did not know, or why he had not put in an effective audit system that would reveal the payments.
To his credit, von Pierer did the honorable thing and resigned.
All of these cases lead the general public to the conclusion that leaders can no longer be trusted. This is a very dangerous conclusion because the very nature of leadership requires that leaders maintain the trust and confidence of their constituencies.
The problem is not that leaders cannot be trusted. Rather, we are choosing the wrong people to lead. We should choose responsible leaders who are well grounded in their values and place the interests of their institutions and their constituencies ahead of their own. We don´t need leaders of public or private institutions that are known for their charisma, their style or their image. We need leaders known for their character, their substance, and their integrity. We need leaders who have demonstrated throughout their lives the capacity to lead in a responsible manner, especially under pressure – and when they fail in their responsibilities, to resign with honor.
Two weeks ago President Bush had the audacity to say that executive compensation should be based on “pay for performance” and long-term incentives. As reported by the media present at this event, the business executives in his largely Republican audience sat in stunned silence. No one spoke in support of his proposal.
As often as I disagree with the President in matters of foreign affairs and government budgets, I think he is right on the money here. Who can argue with “pay for performance”? Only the “takers,” I guess. Why didn´t the business community rise up in support of the President on this point? Were we too focused on getting whatever we could take from the system?
The President was simply stating a basic principle of capitalism: those of us engaging in capitalistic businesses get rewarded for creating value. In my experience, those capitalists that create long-term value for their organizations and their shareholders claim the greatest gains. Think of Bill Gates, Warren Buffett, the late David Packard, Michael Dell, and Oprah Winfrey.
Are we so enamored with people like Bob Nardelli, Bill McGuire, Donald Trump, Marc Rich, and Michael Milken and their enormous wealth that we are prepared to abandon even the most basic principles of capitalism? If we are, I predict that capitalism is doomed. We will have regressed to Russian-style capitalism: take all you get for yourself legally, and then take whatever else you can get illegally, and ship your spoils out of the country. Be sure to keep your passport with you and your private jet available at all times so you can get out of the country before the law catches up with you, as it did with Jeff Skilling, Bernie Ebbers, Dennis Koslowski, Richard Shrushy and their compatriots.
It´s about time the rest of us who care about the future of capitalism speak out on behalf of “pay for performance” and not leave the President standing alone.
Let me know your views on these thoughts.
P.S. If I have offended any of you who are “takers,” please look in the mirror before responding.