CIAO DATE: 11/04

Intersecting Responsibilities between Business and Politics

Manfred Lahnstein

Occasional Paper Series No. 41

January 29, 2001

European Union Studies Center

Introductory Remarks

Looking at the Bush administration or at the previous ones the questions contained in the title of my speech may seem somewhat irrelevant. But believe me: The situation in Europe is markedly different. And that is why I hope that you find my remarks sufficiently interesting.

In Europe and in Germany in particular, Politics and Business seem to be two distinctly different worlds, even if you watch with a lot of attention. If you want a convincing proof of this observation it is sufficient to look at the daily news and how they are treated in the different media. It may be the "news show" in television, it may be the newspapers, the teletext or the information pages in the Internet — politics and business are as neatly separated as are culture and weather forecast.

However, this strange separation does not only occur in the "virtual reality" of the media. In the "real reality" as well you will not easily get the impression of a dense interrelationship between the two worlds of Politics and Business.

As distinct from the USA, the serious exchange of ideas, opinions and persons between those two worlds is clearly underdeveloped in Germany and in Europe. Well, we have discussion rituals, even too many as is been shown by the Davos Forum and other bonfires of vanity. It is astonishing to note, however, that most political debates dealing with economic questions are marked by a considerable lack of knowledge of major economic phenomena and interrelations. Suffice it to mention that all major reforms in Europe, particularly in Germany, are being discussed in political, but not in economic terms.

In my country, and this is an immense difference to the situation in the USA, in Great Britain, in Spain or in Taiwan, there is not one renowned economist to be found in the central government. And there is only one with some experience in practical management. The times of Ludwig Erhard or Karl Schiller are all but forgotten.

On the other side, the number and the stubborn tenacity of the prejudices business is cultivating if it comes to political issues is equally astonishing. As I see it, Europe and America are not very different in this respect. Just listen to the cronies in posh bars and restaurant, on airplanes and in holiday resorts! Listen to the many speeches of the representatives of big societal institutions, those dinosaurs of our times as well!

Some Basic Questions

I am afraid that these observations are more or less correct. And that is why they should be a cause of grave concern for all of us! If the political world addresses economic challenges with tactical and electoral considerations it is gambling with our future.

And if the world of business doesn't give a damn about political considerations, if it doesn't take into account the realities, difficulties and insufficiencies of a parliamentary democracy, it can fall quite easily victim of populist or even reactionary seduction. We can find examples of such a danger not only in pre-Hitler Germany. We can find it in many countries and at different times.

Set against this background I want to briefly analyze and if possible answer the following questions:

— Where are the real differences between the worlds of politics and business for someone who has to exert leadership?
— What are the reasons for different viewpoints, mutual misunderstandings and prejudices?
— How can the worlds of politics and business get to a more relaxed, not prejudiced and more fruitful relationship?

Let me ask an intriguing question first:

Political responsibility, is it intrinsically "superior"?

Well, if we look at Presidential inaugurations in Washington or parliamentary debates in Germany, our instinctive answer might be: Yes, it is! We should not be misled by outward appearances, however. Let us get closer to the heart of the matter.

If we do that we will encounter and should attack very rapidly a dangerous intellectual and semantic construction. We find it in many discussions with politicians and it is formulated roughly like this:
"We politicians are responsible for the well-being of all citizens. Business representatives are responsible for partial interests only. That is why political responsibility is superior". "Pursue the commonweal of all citizens", "Foster the unity of the nation" you may hear such phrases in televised speeches all over the world, be it in the USA, in London or in Berlin. Surprise, surprise: You find them in Kinshasa, Haiti or Baghdad as well!

These comparisons between the principles of responsibility in Politics and Business are based on intellectual constructions which are basically inadmissible and which foster ideological aberrations in public debates. As I see it, it is inadmissible to equate politics with politicians or managers with companies. This may seem rather casuistic. However, it is important as I hope to show a little later.

It is equally inadmissible to equate politics and the State or, even worse, political parties and the State as it happens very often in European democracies, Germany included.

Let us try to solve this intellectual and definitional puzzle. I want to do it with arguments, which are admittedly a bit pointed:
The history of political theory and political practices is full of attempts to glorify the abstract notions of "The State" or" Politics" in theological, philosophical or ideological terms. Those who acted in "The Name of the State" or in "The Name of Political Reason" transformed such a glorification into specific claims on a responsibility marked by special prerogatives and by special obligations. Well, History tells us that very often prerogatives have degraded into personal privileges whereas the special obligations have been put to the backburner of a painful silence.

Such a concept has repeatedly produced great statesmen, state philosophers and teachers. It is a great tradition which includes personalities like Plato and Augustine, Alexander the Great and the Jesuits. And its traces can be found in many constitutions those of Germany and the United States included. All in all this tradition has not been very beneficial, however. And all the great criminals in history, from Hitler to Mussolini, from Stalin to Pinochet have recurred to the same concept.

Well, as I said, my arguments have been a bit pointed. And I am far from disputing the fact that there is a specific political responsibility. However, both our constitutions offer us a different philosophical concept, if we recur to the "Pursuit of Happiness" or to "Human Dignity". Our constitutions define the "State" more as a receptacle for different, partially contrasting values, norms and traditions guiding both our individual actions as our societal balances. Our constitutions do not serve as a basis for the primacy of politics, let alone a primacy of politicians or political parties.

To accentuate it even more: Our modern understanding of Constitution and State doesn't offer a space for the so-called "superior" political responsibility and leadership, compared to economic or social responsibility or leadership. Political responsibility is different and, what I acknowledge easily, it is much broader, of course.

It remains the challenge of politics to comprehensively balance out and to bundle many partial interests. We might mention the balance between economic and environmental interests or the compromise between national and international interests and we could enumerate many other examples. All that points to the fact that political responsibility is more encompassing compared to the responsibility of management. However, ''more encompassing'' does not mean ''superior''.

And even the notion of an "all-encompassing political responsibility" can easily be misunderstood or used in a misleading way. A broader type of responsibility cannot be equated to a more important type of responsibility. And as far as importance is concerned: Let us not only look at American Presidents or German Chancellors. It is very doubtful for me if the specific responsibility of the Mayor of Stuttgart is more important than that of DaimlerChrysler's CEO. All in all we should ask the world of politics to be a little more modest when describing its role.

The Responsibility of Business: Is it intrinsically "superior"?

On the other side: We might easily note an equally inadmissible glorification of economic responsibility in the debate between the worlds of Politics and Business. We can detect it always if partial economic interests are disguised as a common interest. Sometimes such a disguise is expressed in rather brutal terms such as "What is good for General Motors is good for the United States".

Normally those who glorify their personal or collective interests in the name of "economic constraints" argue a lot more subtly. Let it be well understood: The relation between marginal tax rates and economic efficiency is a lot less stringent than we are made to believe by those who view primarily their off-shore bank accounts! The same is true for the so-called stringent relationships between working hours and employment, between wages and price levels, between economy and ecology. The real interrelations are a lot more complicated. And that is a fact of live to which we should not wake up only when a rotten tanker spills its load on the beaches of the Galapagos Islands!

As a consequence we should conserve a healthy mistrust against all those who pretend a fictitious and inevitable objectivity of many economic interrelations. Economic interrelations are neither immovable nor logically stringent. They all are manageable according to different interests and within the limits of the reasonable.

To unjustifiably generalize partial economic interests that is not only dishonest. There is a most unwelcome and dangerous side effect as well: A well-justified mistrust leads many critical observers to neglect economic objectivity altogether. This is nonsense, I know. But exactly that is happening in the minds of the self-styled "civil society" which may be civil, but which is neither civic nor civilized.

Responsibility without Ethic Foundation: Does it Exist?

Let me come to another erroneous concept, which we encounter quite frequently. It is formulated roughly like this:
"Political leadership is based on an ethically defined responsibility. Leadership in business can renounce on such ethics and normally acts without it." The logical consequence of such a concept would be to prevent Business from leading altogether. I cannot understand how responsibility could be defined without ethics. Responsibility in itself is an ethical notion. However: What may have been a logical flaw has become an instrument of demagogy often used by the media and their more lazy representatives. No responsibility in Politics and in Business are both defined in ethical terms. That is the way we should look at and evaluate the matter.

Of course: The ethical foundation of political actions has to be both broader and deeper. Legislation affects large groups of citizens and sometimes even their totality. And Politics deal in financial amounts, which are quite extraordinary even for big conglomerates.

But this means in turn that special requirements have to be made if it comes to the moral and professional qualifications of our politicians (this does not mean, by the way, that they should be saints! Saints usually don't make good politicians), It remains doubtful if these standards are met. If we look at the immoral behavior of many business tycoons the same kind of doubt can be expressed as well.

As you may have noted it is very difficult to find basic, conceptual differences if we discuss responsibility in Politics and Business.

Psychological Foundations of Responsibility

As a critical audience you might ask me to stop here and to ask myself the following question: Aren't there deep differences in the psychological foundations of responsibility at least?

Well, this is an interesting question, indeed. Let us have a look at the attributes with which leaders in politics and business like to be decorated. We might read about "relentless effort", of a "gigantic work load" or about the "necessity to help others all the time". We might hear about "loneliness at the top" or the "frustrating necessity to hurt other people". There is some reality behind all those attributes even if we de-mystify them. However, very similar attributes have to be associated with people who are far away from any leading position. We should talk then about the responsibility of nurses in hospitals or about bus drivers as well.

A next question the psychology-minded ask could be formulated like this:
And why are leaders doing all this, why this mixture of self-exploitation and rat race? Their answer: Well, there is a basic difference of motivation between politicians and managers. The managers are acting for money's sake; the politicians are acting for power's sake.

To put it bluntly: Such juxtaposition is blank nonsense. We all know from experience: Motivation comes in clusters and clusters are complicated. They may contain individual ambition, a strong drive to influence things, readiness to serve or simply not enough willpower to say "No!" And the structure of these motivational clusters is changing over time. I am doubtful if Ted Turner is acting exclusively for the sake of money. I am equally doubtful if power is the only driving force behind an American or a French President.

Some observations from Germany might help to further clarify the matter. I know many members of our parliament who fight to be re-elected not only with political, but with financial motives as well. And I know many business leaders who act against the logics of economics just to get an honorary degree, a high decoration or, as seems to be the case over here, an ambassador's post.

All in all: As far as responsibility in Politics and Business is concerned there are no basic differences of a logical, conceptual or psychological nature. These are not two different worlds. We have to take our responsibility in one world, in one society.

Different Challenges and a differing framework

The differences lie elsewhere. They have to do with the specific challenges Politics and Business have to meet. They have to do with the specific conditions in which leadership has to be exercised.

My next questions and observations are deeply rooted in my own experience, which are a German and a European one. I can only hope that they shed some light on the American framework as well.

A first question:
What does a leader need to come to responsible decisions? He needs some very simple, very practical, very important things

Leaders have to be able to concentrate on the tasks they are performing

Any leader has to be able and has to find the right environment to concentrate on the tasks he or she is performing. If this is not the case he risks taking decisions, which are not well founded both in professional and in ethical terms. I call these decisions irresponsible.

If as political or business leaders - we really want to concentrate on the challenges ahead we need two things in particular: We need assistance while analyzing and evaluating the basics for our decisions. And we need to be protected against diversion. There is no doubt in my mind that both assistance and protection are a lot better organized in business than in politics, political groupings, public sector administration or our universities.

While talking about "assistance" I am not only talking about help coming from inside the organization. I am talking about a systematic cooperation with the world of science as well. It is true: there are many institutionalized links between politics and science. In Berlin, all the ministries are accompanied by one or several "Scientific Advisory Councils" which group first-class talent and experience. All the more shameful that most of these valuable groups suffer from the fact that the results of their research and discussions are used only if they fit into tactical or ideological considerations.

If you witness the current debates on Mad Cow Disease (not that I urge you to do so!), on Global Warning or on ammunition using depleted uranium you will find striking proof for this observation. This kind of cooperation between science and leadership is a lot better organized in the business sector even there where such cooperation is not of direct importance for the survival of the company in question.

Furthermore, the entrepreneur is shielded much more effectively from diversions of all sorts and kinds. Please compare political processes such as budget disputes or one of the so-called "summit meetings" with the process of careful strategic planning in a well-managed company! Of course: Assistance and protection do not prevent us from making mistakes. However, the chances of early detection, of reducing the margin and the rate of errors are much, much bigger there. And as far as diversion is concerned: A good manager can withstand the horrible pressure of media presence; even a good politician cannot.

Determine the adequate timeframe to solve problems

The time we need to solve a problem should be determined by the nature of that problem. This is part of a responsible evaluation and a responsible action. This timeframe should not be determined by outside factors such as election dates. Election dates should have no decisive bearing while we are dealing with long-term challenges such as structural unemployment, education reforms or peace in the Middle East.

As a former politician and an active citizen of my country I am shocked to observe that important decisions are not only dictated by the date of the next general election, but by the dates of regional and even local elections as well.

Again: Business is better off than Politics in this respect. Or should I say:

Was better off? The bad American habit to judge the performance of a company and her leaders by quarterly results is spilling over into Europe as well. I doubt that such a timeframe is valid for any serious judgment. But perhaps I am only too old-fashioned.

The Principles of Cooperation and Delegation

In our complicated societies, in our economies marked by a delicate division of labor a responsible leadership needs partners. It cannot be exerted alone. The lonely, all-empowered leader is either a fictional being or an unhappy, if not dangerous person. And this brings us to the twin principles of "cooperation" and "delegation".

They are formulated in a similar way in the worlds of Politics and Business. It is sufficient to look at the internal rules and regulations governing a cabinet and a company board. They are strikingly similar, indeed! The same goes for the formal links between leadership and working levels. So much about the theoretical principle of delegation. Remarkable differences are to be found, however, if it comes to their practical application.

I have already mentioned one if not THE major reason for this differences: Public opinion and the media focus a lot more on politicians than on managers. "Media Democracy" or to put it even more bluntly the soft dictatorship exercised by television and magazines are based on a growing personalization of content. And those who are in the spotlight attract the voyeurs. The simple consequence: it has become increasingly difficult to apply the principle of delegation in the world of politics.

We should not be astonished by this observation. Day after day our media are filled with politicians bragging about achievements, which had nothing to do with them, or formulating quite unrealistic promises (The Bush story). On the other hand the same media then hold them responsible for developments and scandals, which they have not initiated at all (The BSE story). How can you effectively delegate in such an atmosphere?

We learned to live with such a process though it is quite senseless. But it is not God-given! Excellent politicians and statesmen like Adenauer, Truman, de Gaulle or Helmut Schmidt have known how to delegate! And it hasn't done them any harm. Of course, the principle of delegation is poorly applied in many companies as well. But these mistakes are less frequent, external circumstances do not encourage them, they produce less havoc and they can be corrected more easily. All in all, it is a lot easier for Business to exert leadership based on the delegation and the ensuing cooperation principle. I do not want to be misunderstood: In the last analysis the boss himself has to be held responsible. However "in the last analysis" and not in the personality shows of glossy magazines and superficial television programs.

Exercising of responsibility has to be controlled

It is obvious and generally accepted that the exercising of power and responsibility has to be sufficiently controlled. Political parties and parliaments, State comptrollers and public opinion on one side supervisory boards and shareholders, accountants, workers' councils and public opinion again on the other side: Quantity, structure and competence of the control mechanism for both politics and business seem to be sufficient.

And in both cases those who shoulder responsibility are unhappy with these controls since they constitute an obstacle to the quiet exercising of power. Controls are time-consuming and they might even become nerve- wracking. That is why leaders have an inborn tendency to avoid controls.

On the other side they know quite well that those controls are inevitable. Controls produce prudence. And prudence produces lower rates and margins of error. Controls are a first-class instrument for risk management. Finally, we should not forget that most of us are both controlled and controllers in varying circumstances. That is contributing to a balanced view of things although it may lead to a system of undue comradeship as well.

As far as controls are concerned the worlds of politics and business seem to be largely intersected, indeed. There is one important difference, however. What is a day-to-day experience for the manager and what has no real bearing for a politician: The incomparable control by figures and results, by productivity gains and EBITDA's. What are opinion polls against the immediate impact of a weekly reporting, of quarterly balance sheets or the daily control by the stock market?

A strict control by figures constitutes a unique instrument while exercising responsibility. It sharpens our thinking, it points to weak spots quite rapidly and it fosters the one quality, which is paramount for every leader: the quality of constant self-criticism.

Recruiting tomorrow's leadership and the continuity of responsibility

I want to conclude this part of my comments with a last, important question: How do politics and business cope with the paramount necessity to recruit highly qualified talent, which has to constitute tomorrow's leadership? And how do they develop this talent once it is on board?

Let me tell you a story here. An English journalist traveled Germany in the early Sixties. In one of her many articles she wrote the following:" If you want to find interesting faces in this country, you should not go to Bonn. You should go to the Ruhr area". Well, she could have said Frankfurt or Hamburg as well. This lady may have exaggerated a bit. However, her remarks are well founded. It is a fact of life that very often interesting and fascinating people are not attracted by the world of politics. They are drawn much easier into the fields of science, of culture and of business. And this deplorable process begins with recruiting and training of young talent!

The basis for recruitment is a lot larger for business. And the reasons for this cannot be simply explained away with the superficial hint to earning potential. Of course, you may earn a lot more in the business world than in politics. But beware! Not all managers will become high-flyers, earning-wise.

It is as important that the chances of developing one's full potential for a promising young man or woman are a lot better in business than in politics. And the basic feature of "creativity" has to be mentioned here. Creativity, controlled by self-discipline, is and remains a fundamental factor for any societal, cultural and economic development. And creativity, even an independent opinion, is not well rewarded in the daily life of an average politician.

Another essential point in the same context concerns the possibilities of a long-term planning and development of leading personnel. This is important not only because top positions will have to be filled with the right people at the right time. It is equally important because the need for continuity remains overwhelming.

I am watching political processes in both Europe and North America for some decades now. Nowhere and never have I detected such a long term planning of leading personnel. The reality in Washington is as unsatisfactory as are the realities in Berlin or in Brussels. And as I see it this constitutes a serious handicap, even if we acknowledge the particular features of the democratic process.

What is the sobering result of all these observations? Well, it is clear to me. The structural conditions to exercise responsibility are a lot better in business than they are in politics. The ensuing dangers are equally clear:
— The quality of political decisions might deteriorate even further. A "vicious circle" would follow
— Politicians might look at people from the business world with a growing inferiority complex
— The world of business might look at politics with growing distance and arrogance

That such a development would endanger a sound democratic process as well as important pillars of a civic, civilized society. As a consequence

Change is needed. But how can it be brought about?

It is very difficult to find a satisfactory answer to that question. The worlds of both Politics and Business have developed traditions, norms and taboos, which are very difficult to modify. Some partial and practical answers seem to be possible, however. We will not find them in sociological or politic theories. These theories have proven almost worthless for analysis of and therapy for my problem.

Attention: Blind alleys!

Let me come to some blind alleys first.

It does not make much sense to me if we would organize our democratic structures along those lines of efficient leadership, which rule the business sector. Conservative managers, at least in Europe, are asking exactly that! No the old dream of the "benevolent dictator" remains a dream as Human History is telling us convincingly.

Political responsibility and leadership in Western democracies cannot survive if "efficiency" is made the most important benchmark. Balance and separation of power, federal structures, the constant need for compromise or the rules of international coexistence are equally important. However, it doesn't make much sense either, to transplant the rules of democracy into the business world. As a German I am fully aware of what we call "Democratization of the Economy". I am not talking about co-decision on the levels of the working place, the office or the single plant. This makes a lot of sense, even in business terms. But a formal "democratization" on the level of companies or even branches of industry would only diminish the quality of business decision while it would not at all improve the quality of political decisions.

Potentially, rituals of discussion constitute a third blind alley. Widespread remarks like "We should talk more to each other" are appealing at first glance. An organized dialogue between politics and business is not only useful it is absolutely necessary! This means, however, that both sides are prepared to listen, to learn from each other and to remain discrete, if necessary. Both sides would have to be prepared to know about their opponents' motives and constraints and to take them into account in their own decision-making process. That is why conference and other discussion rituals and there are many of them around! don't serve these purposes at all. They are clearly deceptive.

Since those rituals do not lead to concrete results and their application, the frustration after such "talks" "conferences", "symposia", "fora" or ''summits'' is greater than before.

So much about blind alleys.

My own proposals are marked by my European experience. I know that the USA is clearly better off in many respects. The first point of the agenda should be to attack the notion and the reality of the so-called "professional politician".

The Reality of the "Professional Politician"

Until recently our democratic societies have not known the "professional politician". He is not God-given! And where the Constitution or valuable traditions require the holder of a public office to concentrate his whole energy on the "Res Publica", i.e. on politics, the holding of office very often is limited in time. For your country this is a well-known fact. The situation in Europe and particularly in Germany is markedly different, however. I ask myself: Why is it that the President of the United States, the President of France (until now) and even our Federal President can be re-elected only once whereas literally thousands of Prime Ministers, members of governments, undersecretaries and mayors can stay in and stick to their offices over unlimited periods? This should and could be changed rather speedily.

I ask myself: Wouldn't it be possible to require from all our politicians a sufficient experience and a sufficient qualification obtained outside the world of politics? Look at the German situation (and again: you, the Americans are much better off!): When it comes to government, even when it comes to parliament we find practically no managers from the private sector, no entrepreneurs, no artists, no blue-collar workers but whole hordes of lawyers, sociologists, social workers, teachers and former civil servants. Again: This should and could be changed rather speedily.

Against full-time parliaments

In Germany parliaments require almost complete physical presence of their members, not only on federal, but on regional level as well. This is a very dangerous development for at least two reasons:
— The politicians live in a container without sufficient contact with reality
— And those who do not want to lose contact with reality and their own professional life don't run for parliament
The cleavage between the sociological structure of the country and the sociological structure of its politicians has gained alarming proportions. Whole groups of the electorate are thus excluded from the democratic process.

As a consequence I plead for a return to part-time parliaments.

"Public Service" — a Real Privilege and not a Perogative

I like and adhere to the American notion of "Public Service". I like and adhere to an American reality where entrepreneurs and eminent representatives of the academic world are prepared to serve their country for a certain period. And not all of them go to Washington, as you know a lot better than me. We should devote a real effort to introduce this great tradition into other Western democracies as well. The quality of political decisions would be greatly enhanced.

And a final proposal:

Let us learn from each other!

"Lifelong learning" has become a compelling necessity for all of us. And that includes business people as well as politicians. Why should it be impossible for a politician to spend a kind of "sabbatical period" in business and vice versa?

Well, Ladies and Gentlemen,

These and similar proposals are far from being perfect, and I am not completely satisfied with them, either. But we have to start somewhere! I hope that these observations from a European have found your kind interest and that you did not find them too exotic.

Thank you for you kind attention.