Whither the economy:

Catching Up On Economic Outlook

Dave Kinnear1-On Leadership

The October 2012 WSJ and Vistage Small Business CEO Survey has some interesting points:

  • 42% of Vistage members anticipate no change in the pace of economic growth in the next 12 months
  • 50% of Vistage members expect to increase the number of people they employ in the year ahead
  • 37% anticipate increases in fixed investments
  • 65% expect higher revenues in the next year
  • 50% anticipate higher profits in the next year
  • 62% found that differences in the two candidates health care plan to be “critical”
  • 61% found differences in economic stimulus between the two candidates to be “critical”

And to provide another point of view, here’s some information from the “Chief Executive Magazine” and their “Private Company CEO Compensation Report”:

  • Only 68.6% of companies have a formal annual incentive plan. Having a formal annual incentive plan is positively correlated to profitability
    • 74.5% of companies with greater than 5% profit margins have a plan like this
    • compared to only 50.9% of unprofitable companies.
  • The Board of Directors sets CEO pay in 58.5% of all companies. For companies with at least $100 million in annual revenue, 73.9% of those surveyed have the Board set CEO pay. There is no correlation between who sets CEO pay and company profitability.
  • 54.4% of companies have a formal long-term incentive plan, but this is true for only 32.1% of unprofitable companies.
  • 65.0% of companies allow all senior executives to be eligible for long-term incentives.
  • 85.7% of private equity-backed companies make all senior executives eligible. Smaller companies are less likely to give long term incentives to all senior executives.

Barron’s is, apparently, a “pay wall” on-line presence, so I will have to retype and paraphrase the information I want to share rather than my usual “link to it” method. for those of you with subscriptions, you can read the full article, the rest of us will have to take my summary! In their “Other Voices” column, Barron’s gave the 10/29/2012 space to John Marshall who is a small-business owner, Libertarian candidate for the Montana Legislature, and author of Silent Majority, published September 2012. Mr. Marshall had much to say about how many (certainly not all) “Big Business” need to “quit complaining” and making excuses and instead, get back to work.

“Big business has it in for President Barack Obama. There has been a constant stream of complaints by business leaders that the Obama administration is out of touch with American business. Complaints, such as the Obama administration is anti-business, that it doesn’t understand anything about business, and that new rules and regulations are hampering business, come from all sides.”

He sited several big business leaders as being the pot that called the kettle black. Meaning that while they complained about government, they took full advantage of government programs and bail-outs. Mr. Marshall suggested that GE, AIG, Chrysler and GM to name a few “didn’t understand anything about business, either.”
I have often suggested that our congress people and regulators are reactive, not pro-active in most cases. They find the need for regulation because their constituents believe they have been wronged by big (or in the case of compounding pharmaceutical companies, relatively small) business has wronged them and demand some sort of control to make sure people aren’t harmed going forward.

In a perfect world, we would not have to have regulation because all businesses would have their customers’ best interest at heart, not just their own. They would be trusted. Sadly, neither the politicians or business folks have earned the public’s trust and therefore we have regulation even in what we wish to describe as a free enterprise capitalist system. We can complain, or we can make sure we aren’t part of the problem. And to Mr. Marshall’s point, we can sit on all our capital or we can show we have faith in the system and be willing to invest in our companies and our employees.