Executives urge: Avoid the fiscal cliff

  • Article by: JIM SPENCER , Star Tribune
  • Updated: November 20, 2012 - 6:10 AM

Executives argue that corporations won't escape the damage if U.S. can't find solution to coming cuts, tax hikes.

WASHINGTON - When Minneapolis lawyer John Stout took over leadership of the American Bar Association's corporate governance committee in 2011, he knew the position would have as much to do with politics as business.

American companies are "sitting on hoards of cash," but the craziness in Congress has made them afraid to spend, said Stout, who practices at Fredrikson & Byron and advises boards of directors on how to oversee the companies they serve.

"You can't commit to a full economic recovery when you don't know what tax policy is going to be and they're screwing around with the debt ceiling," Stout said in an interview.

Stout, who was in Washington for a bar association presentation on corporate governance, is part of a growing movement arguing that fiscal clarity from the government has become a central issue in the operation of American businesses.

He argued that businesses need to intervene with elected officials on the immediate issue of the "fiscal cliff," the package of automatic spending cuts and tax increases that will begin in 2013 unless Congress acts.

John Engler, who represents dozens of the nation's biggest businesses as president of the Business Roundtable, said executives need a certainty in economic policy that doesn't exist and are committed to pushing Congress to create that environment.

Engler, whose group's Minnesota members include UnitedHealth Group, General Mills and Target, said corporate America recognized the need to get more active after Congress nearly caused the nation to default on its debt in 2011 because of an impasse over the debt ceiling.

"In 2011, I don't think anyone thought the debt ceiling would play out the way it did," said Engler, a former Republican governor of Michigan. "We thought [Congress] would do the right thing."

Stout told dozens of lawyers attending a roundtable discussion Friday that greater involvement of private companies in the nation's political business has become an uncomfortable necessity as Congress has shown that it won't act decisively.

At the same time, he said in an interview, the move to political activism comes with risks to individual businesses or industry sectors where directors and executives have a legal duty to act in the best interest of their companies.

The balancing act is not easy and explains why the business community has put forward few specific plans to bridge the fiscal cliff and only made general suggestions, such as comprehensive tax reform and modifications of Social Security, Medicare and Medicaid, experts agree.

"Ultimately, this is the politicians' job," said University of Minnesota management Prof. Myles Shaver. "The importance of corporate involvement is pressing them, maybe guilting them into doing something."

Many sources cite business participation in groups that have sprung up to influence politicians, most notably the Campaign to Fix the Debt.

On its website, fixthedebt .org, the group describes itself as "working to build a broad coalition of organizations concerned about the country's fiscal future ... engaging organizations, unions, associations, think tanks, advocates, elected officials and businesses across the political spectrum and representing diverse constituencies."

Fix the Debt includes UnitedHealth Group, Minnesota's largest company, as a corporate member, and lists the CEO of another major Minnesota employer, Honeywell International's Dave Cote, among dozens of chief executives calling for action.

Former Republican U.S. Sen. Alan Simpson and Democrat Erskine Bowles, who worked as Bill Clinton's chief of staff, founded Fix the Debt. The two men also co-chaired the National Committee on Fiscal Responsibility and Reform, which offered a specific plan for fixing the U.S. economy.

These days, Engler said, Fix the Debt is looking to promote an economic plan coming out of Congress, not draft one for senators and representatives.

What the business community can provide officeholders, Stout added, is a reality check and possibly some cover if they must do things that are not popular. Executives must do that all the time.

"They say, 'This is the hand we're dealt, and we have to play it,'" Stout said. "Businesses adapt."

Jim Spencer • 202-383-6123

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