Alan Murray is uniquely qualified to speak about business and the economy at our Top Small Workplaces Conference on October 15. Executive Editor for The Wall Street Journal Online, Murray previously wrote the paper’s award-winning “Business” column and has been a regular contributor to CNBC for several years. In this interview, he talks about what small firms can do to remain competitive in a tough economy and the implications for them of a Democratic or Republican-controlled White House after the November election.
In your book “Revolt in the Board Room,” you talk about how chief executives at large companies increasingly govern instead of rule. How has this trend continued to play out since your book was released a little over a year ago? Do you see any differences in how small businesses operate?
This is a trend that I think began in big businesses. My book starts with the firing of Carly Fiorina at Hewlett-Packard and moves quickly to Hank Greenberg at AIG, and then if you look at what’s happened since then, it’s been like the French Revolution for CEOs. I think about a third of the Fortune 100 CEOs have been pushed out of their jobs involuntarily since 1985, and that’s a dramatic change from two decades earlier, when being a CEO meant you were virtually tenured.
I do think this has ramifications for smaller companies because what’s emerged from this is a new breed of business leader, who is obviously still concerned about profit and shareholder return, but has to take into account a much broader set of circumstances. A.G. Lafley at Proctor & Gamble, when I talked to him, talked about how they no longer talk about shareholders, they talk about stakeholders. That’s their employees and their customers, but it’s also the communities they live in and the environment they work in.
I think that’s just as significant for small businesses. In fact, one of the interesting things I’ve found in talking to business leaders is that, while some of this has been brought about by regulation and shareholder activism, some of it has been brought about by the demands of employees. You’ve got a highly competitive job market with people who want to work for a place they feel good about, that they think is doing good in the world. So a lot of the broader social consciousness that you see on the part of business today comes from trying to keep their employees and potential future employees happy, engaged and productive.
From your vantage point, how do you see the current economic cycle playing out for small business? Where are the opportunities? What are the risks?
It’s a confounding picture. I talk to people who run small businesses who are just being clobbered by fuel prices that are wiping out thin profit margins. Credit is clearly a problem, and a bigger problem for smaller businesses because they don’t have as many options for raising money as larger ones do. You know, when you go through an entire quarter without a single venture firm coming to market through an IPO, that’s a pretty frightening scenario.
Part of this is a reflection of the fact that, probably for the first time in my lifetime, the U.S. is not the engine of the global economy and doesn’t have to be. In the past, when the U.S. went down, the rest of the world went down with it. But now you have all this dynamism out there that continues to move ahead even as the U.S. is slowing down.
I think the second thing that’s going is just continued innovation. It’s a very fast-moving, innovative economy. There’s a lot going on the tech and the bio sciences area that companies like DuPont are taking advantage of.
I understand that the topic for your Keynote Address at our conference in October is “The Stakes for Small Business in the 2008 Election.” How do you think the policies of a new administration will impact the small business sector? Can you anticipate what an Obama presidency might mean? A McCain-led White House?
Clearly the mood of the nation has shifted. We’ve been through an extraordinary three-decade period where there was a real embrace of free markets and of a movement toward less government intervention in the economy, more reliance on the creativity that comes from market forces.
In the last few years, we’ve seen that attacked on multiple levels: As a result of the scandals in 2002-2003, Enron, WorldCom, etcetera; by the War on Terrorism, which has led to greater expenditure on the part of government. Now you see it happening in credit markets, where there are calls for more regulation of financial institutions, and more national ownership. You can see it happening in the utilities area, too.
So regardless of who gets elected, public sentiment is moving away from the embrace of free markets and toward a greater government intervention, greater regulation in the marketplace.
I think you’ll see that with whoever gets elected. Even John McCain is talking about a cap-and-trade system to deal with global warming, which would be a huge new regulatory structure when you think of all the aspects of our society that are carbon based. With Barack Obama, I suspect it would go that much further. He talks about building consensus, but he does come from the liberal wing of the Democratic Party, and many of the people advising him are part of that wing.
I’m not saying this ideologically, I’m just saying that there’s a big movement toward more regulation, more taxation, more government intervention in the economy that may not always be detrimental to small businesses, but may sometimes be detrimental to them.