Monday, October 08, 2012

Will CEOs smile half as much?

People have been overwhelmed by his victory but business leaders are guarded in optimism. Virat Bahri & Pallavi Srivastava of B&E analyse what Barack Obama’s election could mean for business

It is truly undeniable that the tide was heavily against John McCain. As he was busy talking on the economy, health care, banking, real estate, taxation, bail outs, experience, “Why I am not Bush!”, “My years in Vietnam!”, et al, the Americans were busy getting overwhelmed by the phenomenon of Barack Obama, and gaining faith in his promise of change. Obama won primarily because he had mastered the art of inspirational leadership; and harped repeatedly on his slogan, “Yes, we can!” Very little complicated language; just a case of excellent positioning at an excellent time.

That did compel critics and even TV show comedians to comment that Obama had very little in terms of definite plans for American revival. In the heat of what will now be remembered as a historic US Presidential election, American stand up comedian and talk show host Jay Leno quipped, “Barack Obama continues to criticise John McCain’s economic plan. McCain would like to criticise Obama’s plan, but nobody knows what it is yet. So we’re still waiting!”

While media here goes ga ga over what his election means to India; we should realise that his first priority is to rescue his own country from arguably one of its most testing times in history. His foreign policy is undoubtedly crucial, but even by reviving America itself, he would automatically be doing the world, and India, a great favour!

his business voice

So far, Obama’s egalitarian stance on various issues facing the economy hasn’t exactly kept him in the good books of business. It is well evident from his statement, “We cannot have a thriving Wall Street while Main Street suffers.” His focus seems to be more bottom up; first the people and then the big fish; i.e. businesses. Obviously, that is not what corporate leaders would appreciate. Thomas J. Donohue, President and CEO, US Chamber of Commerce, which represents over 3 million businesses, commented on what he felt should be Obama’s priorities, “Restoring the nation’s economic health must be our top priority. Any successful and sustainable recovery will involve the business sector, which creates the jobs, the growth, and the revenues on which all Americans and our government depend.” His mandate was: Get economy and business on its feet first; and then we can take care of controversial issues. One of them is the Employer’s Free Choice Act, which takes away an employer’s rights over a secret ballot to decide whether workers may form unions. He has also talked about reforming bankruptcy laws to protect employees and to ban executive pay for executives of such companies.

In particular, the issue of CEO compensation has been a thorn in the flesh. The US President elect has clearly given the top honchos of big American businesses nightmares with his backing of the ‘Say-on-pay’ bill which will give shareholders a nonbinding proxy vote on executive pay. It is believed that Say-on-pay will become a legislation within first 100 days of Obama’s administration. Now that clearly is bad news for the big guys but Anjan Roy, Economic Advisor, FICCI argues, “If Lehman Brothers is falling apart, why can’t shareholders decide to cut on the exorbitant expenses on CEO pays. It will only be good for business.” Well, a CEO does hate to see his company go down; and if his cheque follows suit, you can imagine his plight!

The new President elect has also suggested supporting small businesses by offering more lending for them and cutting taxes. For the corporate sector on the whole, the plan is to cut tax rate to below 35% and act stringently to broaden the corporate tax base & reduce loopholes; like special interest loopholes for large companies as well as wealthy individuals. He is also advocating removing tax cuts for oil companies. He has anyway repeatedly lamented America’s reliance on Middle East oil; and the need to bring in a new ‘alternative’ energy economy. So oil companies may see their ‘windfall’ profits getting threatened.


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.

 
IIPM : The B-School with a Human Face