Economic Crisis a Breakdown of Corporate Leadership
November 13, 2009
The current economic crisis is like any other in that it shakes up world order and conventional thinking, said Gary Locke, U.S. secretary of commerce. “In the months and years ahead, we are going to see new industries, new economic powers, and new leaders emerge,” Locke said during a forum at the Singapore campus on November 13.
“The decisions we make today will resonate and impact people for generations to come,” he told students and alumni. “When those decisions are made, many of you will be those decision makers. You are going to influence the future, and I hope you take to heart the lessons of the last few years that brought us to this worldwide economic recession.”
The world will depend on business leaders to chart a path for real, sustainable growth for the global economy, Locke said. “They are going to depend on you to come up with the innovations that will address some of the serious problems facing our world, whether it’s in health care, education, finance, or economic development,” he said.
Aspiring business leaders face the added burdens in corporate boardrooms and executive offices throughout America and the world of an absence of leadership and ethics and of a failure to understand the challenges of everyday people, Locke said. “You’re going to have to fix that,” he said.
An example of the breakdown of corporate leadership is American CEO pay, which on average has grown from 40 times the average salary of corporate employees in 1985 to 450 times that average a few years ago, Locke said. “American CEO pay exploded over that time by a factor of 11,” he said. “The CEO pay in Europe and Asia also increased significantly. This was not just a phenomenon of America, but throughout the world. Meanwhile, the average wage of U.S. workers has remained flat for the last 10 years.”
The problem is not that anybody has accumulated great wealth, but that many corporate leaders have lost perspective and achieved vast sums of wealth without creating economic value for anyone else, Locke said. Bill Gates, cofounder and chairman of Microsoft, is an excellent example of someone who has using business and wealth to enhance the lives of other people, Locke said.
“Microsoft has changed the world and created hundreds of thousands of jobs and indirectly created millions of more jobs by creating technology that is now a platform for innovation,” he said. “And, of course, now Bill Gates is using all of his wealth to give it away.”
Contrast Microsoft with the prime engine of wealth generation over the past decade, Locke said. “What long-term economic value was created by speculation in credit default swaps and subprime mortgages?” he said. “And what is the legacy of this round of greed of speculation? Foreclosures of homes, business bankruptcies, and worthless mortgage securities.”
Recent announcements of the return to “astronomical” bonuses on Wall Street, including firms bailed out by the U.S. government, have caused outrage among the American public, Locke said. “People have lost their homes, are losing their jobs, are losing pay, have lost much of their retirement benefits, and are helping pay for the survival of major financial institutions who turn around and give out obscene bonuses,” he said. “We simply cannot afford business as usual in corporate boardrooms or office suites of America and around the world.”
Locke’s presentation one of several events that Chicago Booth and the Polsky Center organized or sponsored in celebration of Global Entrepreneurship Week (GEW), November 16-22, 2009, across its Chicago, London, and Singapore campuses. Other events included the Midwest Alternative Energy Venture Forum, which featured a keynote by Matt Rogers, senior advisor to U.S. Secretary of Energy Steven Chu, and a panel on alternative financing options for clean technology.
Others included the student energy conference in Chicago; an Innovation Workshop Series event, which supports commercializing university technology and innovation; a session on social entrepreneurship entitled “Wake Up and Smell the Sustainably Produced Coffee—Why Social Enterprisers Need Feasible Business Models” at Chicago Booth’s London campus; and the 11th Annual Entrepreneurship and Venture Capital Conference (EVC), which brought together successful entrepreneurs and seasoned venture capitalists to share ideas and provide insight to entrepreneurial-minded Chicago Booth students