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CHIEF executives Businesses have long had to be jugglers balancing the needs of their employees, suppliers, and above all, shareholders, while staying within government-mandated limits. But the twisting and stretching movements were more ferocious than ever. The world is becoming dangerous and chaotic as governments seek to manipulate corporate behavior. Global companies and their bosses find themselves being pulled in all directions.
Few multinational companies are unscathed. Chipmakers from Micron to Nvidia have been targeted by sanctions as tensions between China and the United States rise. The Chinese-owned short video app “TikTok'' is attracting the attention of American lawmakers. The Biden administration's plan to curb foreign investment will also include major private equity firms and venture capitalists. As countries scramble to build their next electric vehicle factories, once stalwart automakers are now in the spotlight for their investments. China's big tech companies are being tamed by Xi Jinping. Everyone from bankers to brewers has been caught up in America's toxic culture wars.
All of this will tear apart the tacit agreement between governments and corporations that has held sway in the United States and much of the Western world since the 1970s. Businesses aimed for shareholder value by maximizing the wealth of their owners and promising efficiency, prosperity, and employment. Governments set taxes and created regulations, but business was largely left alone. Although the benefits of this system were not distributed evenly across society, trade flourished and consumers benefited from more choice and cheaper goods.
The rules have changed.Government is increasingly Dirigiste, driven by weak supply chains in the pandemic, a more threatening China, and the dangers of climate change.company CEONew times require new approaches.
The re-entry of corporations into politics began in the Trump era. By taking a stand on social issues, bosses have found a way to demonstrate their distaste for populism. And it was definitely a way to demonstrate one's virtues to employees and customers. It was around this time that Larry Fink, president of BlackRock, America's largest asset manager, became an advocate of investing using environmental, social, and governance principles. S.G..
However, rather than solving social problems, this seemed to only deepen divisions. As noted in the detailed profile, Mr. Fink has been demonized by the right for going too far and by the left for going far enough. he is not alone. Former Disney boss Bob Chapek fought with Florida Republican Governor Ron DeSantis over gay rights, which was one of the reasons he lost his job. In the UK, Dame Alison Rhodes, the head of NatWest, resigned over the bank's sacking of Brexiteer Nigel Farage. Part of the reason is because of his own political views. Such encounters hurt egos, but have little impact on long-term returns.
The real front is wider and the stakes are higher. Government seems to be everywhere at the same time. They want to solve the problems of globalization by bringing back manufacturing jobs. They want to strengthen national security by protecting critical technology. And they want to fight climate change by accelerating decarbonization.
Each goal is valuable from its own perspective. But the means to achieve this are flawed or involve trade-offs. Manufacturing jobs are not the high-paying jobs they are made out to be. Approximately $1 trillion in green subsidies in the United States will reduce efficiency and increase costs for businesses and consumers. The United States insists that national security requires “small gardens and high fences,” but unless policymakers clarify the risks from subsidies, export controls, and investment restraints, the gardens will get bigger. , the fence is likely to be even higher. This confusion affects large companies far more than the debate over who should use which bathroom. However, few bosses are ready to say so because of the confusion after the awakening.
Some companies fly the flag to become national champions. That has long been the norm in places like China and India, but the trend is moving westward. After Intel broke ground on two semiconductor manufacturing plants in the United States last year, Pat Gelsinger, the company's chief executive, said he felt a surge of national pride.Similar patriotism is expressed in generation theory. A.I..Venture capital heavyweights like Marc Andreessen express fear of Chinese risks love To conquer the world.
Some hope that by keeping a low profile they can avoid political criticism. Taking a cue from Jack Ma, the once outspoken boss of Alibaba who was brutally ousted by the Chinese government. CEOThey hide from public view. Tencent founder Pony Ma recently emerged just to pay lip service to new guidelines set by the Chinese Communist Party. In the United States, fast fashion giant Shine, popular with Gen Z shoppers, is doing its best to hide its Chinese roots. TikTok is similar, calling it a “myth” that its owner ByteDance is Chinese.among westerners CEOEven loud voices like Elon Musk are learning the importance of silence in China. He was not provided media access during his recent visit to Tesla's factory in Shanghai. He didn't even tweet.
However, both of these strategies can easily fail. Patriotic cheerleading becomes a problem when doing business in other parts of the world. Intel is building factories not only in the United States but also in Germany. The average American multinational corporation has eight foreign subsidiaries. A huge company like General Motors has 100 companies. And what may be considered a sneaky-under-the-radar strategy by your boss may be like sticking your head in the sand to others. Ask any American lawmaker where they think TikTok originated.
corner office diplomacy
what will you do? In a volatile world, companies cannot hide from politics and geopolitics. But the lesson of Wakelash is that outspokenness can backfire. Executives at global companies should use long-term shareholder value as a guide when deciding whether to speak out. The more their words directly impact your business, the more trustworthy they will be and the less risk they will be seen as scammers or hypocrites.
This approach could include reminding politicians of the benefits that efficiency and openness once brought to economies around the world. It's not a bad thing if the government appears to be short on supporters of either. ■
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