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Obama's CEO meeting: 'Uncertainty' an excuse for hoarding profits?

After the fleet of corporate jets landed in Washington, carrying the 20 CEOs summoned by the president as he attempts to counter the image that he is anti-business, one word likely came up often in their meeting today: "Uncertainty." CEOs are increasingly saying that it is uncertainty over the economy and regulations that is prompting them not to spend, or invest toward hiring, the nearly $2 trillion in cash on their books--the highest amount in half a century.

Increasingly, the word is being used to explain why business is wary of doing more. In a speech in June, Ivan Seidenberg, the Business Roundtable's chairman and CEO of Verizon Communications, said that "government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses." He sounded a similar note Tuesday, when the Business Roundtable announced a survey showing that despite all that unpredictability, CEOs are now more optimistic than they have been since 2006.

What I find perplexing about this rationale is the implication that there was a time when there was so much definitiveness in our economy that it was much easier to make decisions. It seems to indicate that under past presidents, there was enough certitude about what would happen next, what the economy would do next or what impact the next election would have, that deciding whether to spend or invest was as easy as pulling out a crystal ball. In fact, one of the fundamental jobs of any leader is to make the best decisions they can in any environment, all of which are inherently uncertain.

Perhaps what they mean is that things are not as certain as they would be if a more conservative president was in office. One did not hear many complaints about George W. Bush creating uncertainty while he was in power, despite extraordinarily unpredictable events that marked his presidency, from Sept. 11 and the economic fallout that ensued to the housing bust and massive financial crisis that came toward the end of his second term.

There may not be many certainties, but there are facts. Industrial production and manufacturing are improving, sending stocks to around their highest levels in more than two years. Corporate profits were higher in the third quarter than ever recorded. Yes, ever. And 80 percent of CEOs--up from 66 percent in the third quarter--say they expect sales to increase over the next six months, according to the Business Roundtable's survey. All of those may not mean the environment for business is certainly good, but it's certainly not all bad either.

I understand that business leaders are concerned about some of the regulations in the health-care and financial-reform laws, and that they question some of the far-reaching measures Obama deployed to fight the historic economic crisis he inherited. And I can see how a two-year extension of tax cuts, versus a permanent one, would make things a little more difficult. The fact is it is extremely challenging to manage during uncertain times, and to make good decisions based on incomplete information. But that is what we pay leaders--quite handsomely, I might add--to do.

By Jena McGregor

 |  December 15, 2010; 4:05 PM ET |  Category:  CEO watch , Corporate leadership , Crisis leadership , Economic crisis , Federal government leadership , Government leadership , Presidential leadership , Public leadership Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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Getting paid for being smart? Not sure, my chainsaw pays me to use it. It's not smart, it beats an ax though. It's faster and easier. Hoarding wood. Gas line is shot, looking for Franklin Stove. We have 38,000 new gas lines, quality uncertain. Now we're going to pump chemicals into shale to get gas and maybe ruin ground water.

Posted by: jobandon | December 21, 2010 9:11 AM

Actually what the businesses are saying is that it took years to build the consumer base and the capital base that made their expanded business models on U.S. soil sustainable inspite of the high taxes they pay, but since that consumer base and that capital base shrank they had to shrink their business models to stay profitable. Most of their profits are coming from markets outside the U.S. right now. lol.

Like most people they are only responding to the environment they find themselves in - may be the new Stimulus will give them a little breather from the choke-hold they found themselves in, but we'll have to fix the systems to get things running properly again. Its not about selling it to them through a public relations bonanza - they'll feel it on the ground when we've fixed the systems, before that its not possible to bluff them, these are smart guys too, and they get paid for being smart. lol.

Truth is, businesses got taxed too high (which was only sustainable) while things were going well (and government was expanded based upon those taxes), but when things changed on the ground for them "tax reform" wasn't initiated to reflect those changes (it was like an automated milking machine that kept milking the cow after it ran out of milk - the cow shrank). lol.

Posted by: darkasnight1234 | December 17, 2010 6:17 PM

Remove the 'uncertainly' from management employee loyalty during the recovery. Businesses, Universities worldwide are into a phase of creative disassembly where reinvention, adjustments are constant while recovering from the greatest recession in 80 years. Hundreds of thousands of jobs are being shed by Lockheed Martin, Chevron, Sam’s Club, Wells Fargo Bank, HP, Starbucks, Yahoo etc., state, counties, cities. Even solid world class University of California Berkeley under the leadership of Chancellor Birgeneau, Provost Breslauer, Vice-Chancellor Yeary are firing employees, faculty via “Operational Excellence (OE) initiative”: 1,000 fired; 0 Vice-Chancellors (management) fired. Yet many employees, faculty cling to old assumptions about one of the most critical work relationship of all: implied, unwritten contract between employer, employee.
Until recently, loyalty was cornerstone of that partnership. Employers promised work security, a progress up the hierarchy in return for employees fitting in, accepting lower wages, performing in prescribed ways, sticking around. Longevity was a sign of employer-employee relations; turnover was a sign of dysfunction. None of these assumptions apply today. Organizations can no longer guarantee work careers, even if they want to. Senior managements paralyzed themselves with an addiction to “success brings success’ rather than “success brings failure’ and are now forced to break implied contract with their employees – a contract nurtured by management that future can be controlled.
Jettisoned employees are finding that their hard won knowledge, skills, earned while being loyal are no longer wanted in employment market place.
What kind of a contract can employers, employees make with each other?
The central idea is powerful, simple: job is a shared partnership. Employers, employees face financial conditions together, longevity of the partnership depends on how well the for-profit, not-for-profit meet customers and constituencies needs. Neither employer nor employee has a future obligation to the other.
Organizations train people.
Employees create the security they really need – skills, knowledge that enhance future employability.
The partnership can be dissolved without either party considering the other a traitor.
Let there be light!

Posted by: Transparencynow | December 17, 2010 6:08 PM

Uncertainty is an excuse. The reality is that firms have cut excess staff and driven profits to record highs. The economy is growing. You cannot force companies to hire workers, nor can you convince them to do it by pleading with them.

There are 2 things that can be done. 1) we can wait and the economy will slowly adjust as people drop out of the labor force, or retrain themselves for opportunities. This will take 5 - 10 years to return to 'normal' unemployment. 2) we can fundamentally restructure the tax code to favor labor more heavily over capital. Currently, we give multitudes of tax breaks to capital. The way to change this is to implement a carbon tax, and use the proceeds to decrease medicare & social security taxes - on both the labor side and the employer contributions - ie - decouple social security and medicare revenue from their trust fund, and fund them through the general treasury (which is done anyhow). That way, you make hiring workers cheaper, relative to investments in fuel or capital projects.

Posted by: beersquirrel | December 17, 2010 2:15 PM

The only uncertainty here is whether the GOP will succeed in giving in giving the U.S. Chamber of Commerce the keys to the U.S. Treasury.

Posted by: st50taw | December 17, 2010 10:13 AM

The problem is not really the uncertainty in government regulations. But the level of uncertainty in our economy is very high. Its performance over the last year was purchased with life support from unsustainable extreme Federal Reserve policies. The Federal Reserve has resorted to those policies because they have been unable to maintain economic stability with anything like a normal policy with predictable consequences. The result is that nobody has any good idea of what current government policies are going to stimulate and even less idea what is going to happen when the Federal Reserve takes away the life support. The trends in our economy over the last decade have been highly unstable stock and real estate prices, stagnant employment growth, large scale loss of manufacturing jobs, and declining competitiveness of American business. Those trends all create a large degree of uncertainty in the prospects for the outcome of business investments. The other reality is that good investments don't appear just because there is money to spend on them. There is no point in investing in more capacity or different products when current capacity is more than adequate and the new products don't offer any significant advantage over current ones.

Posted by: dnjake | December 17, 2010 10:11 AM

Uncertainty is what makes America great. If you have certainty then you are really not free.

Posted by: AMQ1 | December 17, 2010 1:00 AM

Business Channel CNBC said that Uncertainty is just a smokescreen. Corporations are booming without hiring Americans and nobody cares.

Posted by: jeffrey3 | December 17, 2010 12:43 AM

I think we need to realize that this restraint by CEOs is not due to economic uncertainty but regulatory uncertainty. Agree with Obama or not he has added a lot of new regulation to our country. With the large controversy over that in two years you could see things change drastically again with the possibility of a new president. Congress has already shifted significantly and let’s face it there are a lot of unknowns in the business world right now about how things will change in the coming years.

These leaders are typically very good at determining the best course of action in these uncertain times and their course is to provide very conservative growth. Think about it from a business prospective, if it would cost you $65,000 to hire a new employee and pay them $45,000/yr. But with this new healthcare bill that cost will go up to $75,000 for a new hire with the same salary, wouldn’t you wait until you knew what it was? And now with congress and possibly the presidency changing in two years and a lot of talk of repeal wouldn’t you want to wait until you knew? And with the government so far in debt there is a lot of talk of debt reform, is that going to mean new taxes? These things are far more difficult to predict than the price of oil or the stock market.

As they say in investing you can have very safe growth of small amounts or very risky growth of large amounts. Adding this regulation moves us closer and closer to the safer more moderate growth. There is no such thing as a safe bet with a high rate of return. Perhaps we need to come to terms with 1.5% growth as 5% or 6% is just not going to happen anymore.

Posted by: mpdpilot | December 16, 2010 1:25 PM

Words of a non-investor. My family is uncertain what happens to businesses. Being uncertain is not a market held completely by business. Consumer uncertainty will kill a business as quickly if not more so.

Reading a post in "I believe" a Chicago paper stated it wasn't uncertainty, it was the lack of consumers. WELL DUH!!! But it is the uncertainty of consumers impact on business as well.

Consumers want to know if they pay money for an item that is even moderately expensive the company is solid and dependable down the road. Those same consumers are employees. They want to know their jobs will still be there.

When all we can do is hype 10% unemployment instead of 90% employment, we scare the back pockets of consumers CLOSED.

Posted by: educ8er | December 16, 2010 10:04 AM

"Anti-Business" means the game is fixed. Too many Chiefs and not enough Indians.

"Uncertainty" means we don't trust the people fixing it. Too many Chiefs and not enough Missionary's to blame it on.

Posted by: gannon_dick | December 15, 2010 7:27 PM

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