Accountability in the Headlines – Public Governance is About the Culture the Leadership Creates

by Hank Boerner

The headlines and news broadcasts over the past few days are titillating and I think, a window into certain aspects of our culture of today. As well as insights into public governance and political management styles. All of which are relevant to the people of the great state of New Jersey (my family’s ancestral home), and way, way beyond, relevant to the people of the nation as the central player in the drama is a front runner for the presidential nomination.

First we have the spectacle of a popular governor, recently re-elected by handsome margins, who has done great things for this state, and was an effective leader in responding to the crisis of Superstorm Sandy, holding a very long (2 hours) press conference to state how sad and sorry and disappointed he was. That is, that members of his staff and a key appointee inconvenienced tens of thousands and probably posed a threat to human safety with their behind-the-scenes actions.

The central figure of the crisis is Governor Chris Christie, who is considered a front runner in the 2016 presidential sweepstakes on the Republican ticket.  He is well-known as being outspoken and not afraid to get in your face if you and he disagree.  Or if he thinks you are stupid.  And ask stupid questions (in his view). And in all of this he is not a bully, he protests.

The New York Times in the aftermath of the immediate September traffic crisis created by his trusted colleagues — but before the revelations in the headlines — published a story (half news, half commentary) about the governor’s record of bullying and political payback in recent years.

Then, shortly after the report the reputation crisis was on and being widely reported by other media — and subsequently detailed by release of 2,000 pages of documents this past week.  At the center of the critical event was the governor’s deputy chief of staff and his appointee to the bi-state Port of New York and New Jersey Authority.  Roads leading to busiest bridge crossing in the USA – the George Washington Bridge — were ordered closed. This is also a vital link (Route 80, Route 95) in the Interstate Highway System.

This four-day action late last year was said to be in retribution for the mayor of the town (Fort Lee) at the foot of the bridge for having backed the governor’s Democratic opponent (and for not backing Governor Christie).in the November race.  Which, political pundits point out, was to be viewed as a stepping stone toward success in 2016 as the presidential nominee of the Republican party. (Of course, not all Republicans agree with that assessment.)

Questions hang in the air — what were the aides thinking?  Were they trying to please the governor that they served?  Was this “payback” mode something that is quietly condoned or taken for granted in the administration – whether the governor knows about the details or not?  I’ve been there – i have worked for a powerful governor and probable presidential candidate and saw numerous instances of people doing things in his name. A great invoking, I called it.  “The governor wants…” works miracles at times. I know – I did it myself. Worked wonders, I remember, when people attempted to put obstacles in the way of plans.  But it’s high-risk game, too.  I became more careful as time went on about what would say the Great Man “wanted.”

Of course, if things go wrong there is also the plausible denial of the leader that can be employed.  Remember President Richard Nixon and the Watergate crisis?  President Ronald Reagan and the Iran-Gate crisis (arms traded by the USA, the Great Satan, to Iran, but the all-powerful leader of the free world did not know what was going on?).

In October 2010 with my fellow author, Mark W. Sickles, we published a guide for managers — Strategic Governance – Enabling Financial, Environmental, and Social Sustainability.  This was a book designed for the private sector but there are lessons as well for the public sector.  We wrote:  “The universal purpose of [corporate] governance is to integrate ethical, professional and industry values and standards into firm-level cultures that enable winning strategies, manage risk, meet the needs of the firm’s stakeholders, and fulfill responsibility for a sustainable world.”

We could substitute “firm” with “the public office or agency,” and corporate governance with public governance.  And stakeholders…that includes everyone involved in the public sector and its processes.

What values and standards, then, are appropriate for the public sector?  Much of the same – ethical behavior, professional values, managing (and avoiding) risk, meeting the needs of the people you serve…all are applicable.  So – in my view, as we wrote throughout the book, culture is central to success or failure in organizations, public or private or social sector..

Culture is the heart of effective governance.  Professor Mervyn King, former head of the Global Reporting Initiative and a prominent banker and business leader in his native South Africa, observed that organization are “incapicitated people” requiring leaders to act as their “hearts, minds and souls.” Think of the leader as the brain and the spinal cord of the enttity, which then is connected and extends to all of the nerve endings, which are connected to every cell of the organism.  What values and standards are instilled by the brain extends then to every part of the organization from the brain to the nerve endings..

That is in effect how institutional culture is shaped and instilled.  Mark and I shared this thought: The governance system is the network of interdependent components working together to achieve the stated goals of the whole [organization].

What are the lessons coming out of the dramatic dust-up in New Jersey?  We will learn more about the setting (the culture) in which senior colleagues of the highest elected official in the state conducted their affairs.  The thought is inspiration for the deed, someone observed. What were they thinking (those involved in the “stupid” affair, as the governor himself characterized). Who were they trying to please?  What gave them the idea that disrupting lives, threatening public safety, and causing in the end great embarrassment was a pretty nifty idea at the start?

At the start…I think we begin with culture…and from there we move to setting, tone, hatching ideas and putting them into action. Guided by culture. And then, at times, part of the culture can be to cover up and stone wall the media…and deny all.  And in the end…it is all about…the culture.

And setting the culture begins with the leadership and tone set at the top.  So..what leadership lessons can we draw from the New Jersey crisis?  (For one thing, bullying or not, tone really matters!)  The best leaders know this and are very careful about the tone they set. Others? Well, we see those results regularly in the headlines.

Your thoughts on this?

Tick, Tick, Tock – The Big Debt Clock

Tick, tick, tick – the debt clock hands move on.  Back in Spring 1985 I wrote a commentary…”Listening for the Debt Time Bomb Clock.”  I was concerned: the U.S. Federal budget was unbalanced (had been since FY 1969 under President Lyndon Johnson); government debt was being liberally issued (by a new era “conservative,” President Ronald Reagan); we were building a significant trade imbalance; and, tax reform was being hotly debated (resulting later in the 1986 tax reform measures, which in part was supposed to figure out to how to pay for government operations).

What troubled me was something not many folks were talking about:  The mounting debt levels of the government of the United States.  As I wrote back then…[pushed aside in the public debate about the above] or ignored is the ticking time bomb of our collective debt…debt of all kinds…Federal government debt (then at $7 trillion)…Third World debt…US household debt…state and municipal debt…corporate debt…and commercial bank and savings and loan debt…

American banks in the 1980s were being encouraged to lend out billions’ of dollars to sovereign borrowers [as public policy] in the developing world (recipients including Thailand, Nigeria, Brazil, Taiwan).  The “big nine” borrowers owed more than US$500 billion, which is more than $1 trillion in constant dollars. (Brazil then was the leader with 20% of the total.).  If the borrowers defaulted, banks could fail…or the US taxpayer could become the backstop. (We skirted that crisis but 23 years later the US government would have to bail the US banks out in spectacular fashion not because of foreign debt but because of the American appetite for debt, including sub-prime mortgage obligations.).

Back in the 1980s US government public debt was fast mounting — the “trillion dollar” level was reached about the time the country celebrated our bicentennial.  A decade later it was at $2 trillion (about $4 trillion in constant dollars).

Historical note – 1969 was an important year.  A former client of mine, Charles Zwick (CEO of Southeast Bank in Miami) used to tell folks that he was in charge in the OMB when the “last” budget was balanced in 1969…in the years after, presidents and the Congress frequently held the line on taxes but not on spending.  Give the folks what they want, Chairman Zwick characterized this…which is the practice of Republicans and Democrats alike.  Big government got bigger and bigger.

And so today we have a new FY Federal budget with US$3.77 trillion in spending and projected income of $740 billion less.  How long could you run your business or household on this kind of shortfall?  Well, with easy credit, maybe a long time.  The Federal government shows us how.  My App debt clock shows $17 trillion Federal debt on the books going into 2014…$61,000 owed for each of us.

How do we close the shortfall?  Issuing bonds.  Who invests in these (safe instruments)?  Here is where we are today — the major debt holders are…us.  40% worth.  The Social Security Trust Fund holds 16%; other Federal units, 13%; the Federal Reserve Banks, 12%; other (foreign) governments, 19%. (China, 8%; Japan 7%). The financial industry’s instruments hold but 6%. The Fed with its “quantitative easing” policy has been buying $85 billion monthly of debt.  Remember the days when we bought US bonds?  (Which is so not the way to invest for most of us.) The traditional US bond accounts for but 1% of the holders today of Federal debt.  (My source for this is Fact

So the question hangs in the air – how and when do we pay down the debt if “we” the government hold 40%?  Higher taxes?  Lower spending?  A combination?  What gets cut?  Wall Street interests are accustomed now to the Fed buying binge and slightly panic when rumors of reducing the “easing” gets going.  Are we all in this country permanently addicted to issuance of Federal government debt?

“Read my lips – no new taxes,” promised candidate George H.W. Bush.  He found out when he assumed the presidency that was not realistic. And he paid the price with a one term presidency. The lesson of that haunts the Republicans and some Democrats. Taxes to pay down debt?  We don’t see the prospect raised when Congress debates the debt ceiling or the national budget.

As I wondered aloud in my 1985 commentary…Our children face the specter of entering the workforce to begin their 40 years of toil carrying the load of national indebtedness…totaling what in their lifetimes? And with what effect?

Question we should be raising:  What dampening effect might the Federal debt have on our recovering economy? That would be a healthy discussion with business leaders lending their voice.

And, what lessons in public governance are we instilling in or passing on to our children?  Thinking about debt clocks, perhaps if we put a number of these in the halls of Congress and corridors of the White House, loudly ticking away the dollar amounts of the rising debt, rationale thinking might return to budget-making and deliberations over realistic tax policies. Like question of the tree in the forest question (does it make a noise if no one is there?), does Federal debt really matter to most folks if no one is really watching?  Tick, tick, tick…

What are your thoughts on this?