Once upon a time the world was flat, as Thomas Friedman put it, and CEOs didn’t need to check their phones at dinner. Now, it’s one crisis rolling in after another: all bets are off when it comes to supply chains and trade routes, auditors plead “material uncertainty” over accounts, and boards note the dates of elections in wealthy countries. “Government relations” is no longer a corporate backwater.
War in Ukraine, Brexit, the French fuel protests, the Trump presidency followed by Biden’s Inflation Reduction Act: all were products of politics, of voters and leaders behaving in ways which didn’t fit the globalisation paradigm. Executives who weathered the 2008 financial crisis and the Covid-19 pandemic, were already feeling daunted by the challenges of the energy transition, diversity and AI. Now they need to care about politics too. It’s no longer just governments that need a foreign policy: so does every big company.
If you’re going to switch your supply chain away from China, where do you go? India, Vietnam, Morocco? Which risks are insurable? Which activities can survive political upheaval? This is war gaming of the kind that used to be done by generals. Economic and political uncertainty left more FTSE-listed companies issuing profit warnings in the third quarter of last year than at any comparable period since the global financial crisis.
Talking to executives at corporate conferences in the US and UK, it strikes me that no single leader can be across all the challenges. Instead, big companies need something like a Chief Political Officer. Not some political has-been, peddling a list of contacts which will expire when their party loses office. Instead this would be a technocrat who understands that government is a constant triangulation between parliament, party and press; that politicians rarely move ahead of public opinion on any issue; that unlike business there is no simple bottom line. And it should be someone who can forge a new era of co-operation between two sides that often frankly despise each other.
In recent years, industry and governments in the west haven’t had to worry much about each other. Apart from the financial crisis, they largely operated in silos — with little mutual understanding. But governments are becoming more interventionist. Not only is Biden’s energy and chips legislation forcing other countries to respond; technological advances will make regulation a hallmark of this decade. When even the creator of ChatGPT is calling for guardrails for AI, it’s a watershed.
Meanwhile, climate change is affecting how nations think about farming, construction and travel. Genetic testing is still largely unregulated; new gene editing techniques have the potential to permanently alter future generations. These issues are being discussed by eminent scientists but politicians need to enter the fray to wrestle with experts and commercial innovators too. Are governments capable of meeting the challenges? They have been notoriously clumsy and slow to regulate fast-moving technologies.
Upping their game will mean working in concert with commerce rather than being captured by lobbyists. The “revolving door” often gets a bad rap: when the former German Chancellor Gerhard Schröder became chair of Nord Stream 2 it arguably was the worst kind of cronyism. But it has done Kyriakos Mitsotakis, the quietly impressive Greek prime minister, no harm to have spent a decade in finance. Experiencing what it’s like on the other side can foster greater respect — and less of the naivety that leads to regulatory capture.
Business leaders often find politics totally bewildering, as if it’s a totally new language. In the UK, it doesn’t surprise me that so many executives are horrified by politics, and would rather stay out of it. Five prime ministers in seven years have made wild policy lurches, despite sporting the same party label. David Cameron accidentally created Brexit, Boris Johnson had no plan for it, and Liz Truss bestowed upon the nation the “moron premium” in the form of higher mortgages. Even before that, business folk who entered government often sank.
For its part, government must stop treating business relations as mere theatre and find ways to actually listen. At different stages of my career, I have sat on different sides of the table in meetings between chief executives and government ministers. I have watched CEOs fail to communicate clearly, not understanding what is and is not in the government’s gift, and seen ministers fail to realise that no one will say anything useful if their competitor is in the room.
Business will also be affected by the trade-offs governments make between the economy and national security. It’s possible that this may change which institutions will actually be allowed to fail. Banks, insurers, energy companies, railways, universities: theoretically autonomous in many countries may end up being protected in practice. Was the Fed’s move to rescue uninsured depositors at Silicon Valley Bank a sign of things to come?
A Chief Political Officer would need a tolerance for ambiguity. The level of uncertainty is exhausting, and may be why the average age of new CEOs is falling for the first time. The former lieutenant general and US national security adviser, HR McMaster, once described the post-cold war period as a “holiday from history”. But now, geopolitics is back with a vengeance. Bosses must marshall their own generals — ones who can stomach the grubbiness of politics.