The CEO’s Dilemma

As ABC News reported, CEO’s are not willing to hire even though they are sitting on mounds of cash.  They have the resources but they haven’t the will to begin producing and hiring.  Why?  Because they fear demand isn’t there.

Investor’s Business Daily claims “consumer spending accounts for 70% of economic activity.”  Of course demand is not there! But it isn’t that people are saving their income waiting for things to pick up.  It is that there are millions of unemployed people—likely soon to be joined by thousands more—looking for work.  Clearly people haven’t an income and they are worried about meeting the very basic of human needs, like food and shelter.

So what are CEO’s doing?  They are doing what any good profit seeking business person would do, pursuing profit growth in the short-term by squeezing all they can out of labor.  And it is working for them…for now!

What this is is a real dilemma. One that is somewhat analogous to the prisoner’s dilemma but with a twist, as one player—the corporate player—has the resources (i.e. the power) to change the conditions by their actions.  The other player (i.e. general public) is restricted in response to the conditions set by the corporate player’s choice.  If the corporate player chooses to seek short-term gain, then the general public has no choice but to opt-out: they cannot co-operate by purchasing what the corporate player offers.  Without resources of their own and without the ability to borrow, people in society must limit their spending.  Hence demand decreases not because there is no longer a need, but because people haven’t the means to satisfy all their needs.  So as long as the corporate player continues with the self-serving short-term strategy of keeping what they have—not co-operating—a mutually beneficial resolution is not possible.

So you see the dilemma: CEO’s must not only show profit, they must show growth in profit.  Otherwise Wall Street will look unfavorably upon them.  But the likelihood of continued growth in profit diminishes the longer that the self-serving short-term strategy of holding on to what they have is exercised.

The Associated Press reported: “People are grappling with unemployment that’s stuck at nearly 10 percent. Dramatic improvement in hiring isn’t expected to happen until corporate executives have more confidence to add workers. And the latest poll of CEOs by Business Roundtable underscores that won’t be happening anytime soon.”   So the dilemma continues.

But on the sideline there is another complimentary player—the government—who can change the conditions by inserting money into the system thus enabling the public to co-operate.  However, the political (read self-serving) concerns make such action limited in scope and thus inadequate.

Develop Understanding

What seems not to be understood is that the economic system can remain viable if and only if money is equitably exchanged for goods and services.  That is if and only if there is energy—in this case in the form of money—freely flowing throughout the system.  An economy can’t function as a one-way street.  When money is hoarded—not exchanged—energy doesn’t flow throughout the system.  This blockage causes an increase in entropy. This means increasing disorder, uncertainty, unpredictability and dis-ease.  When energy is unavailable, then the system can’t possibly function or even continue to exist. Of course there is fear in and about the economic system!

Fear can be greatly reduced, if not eliminated, by gaining a different understanding.  Those in authority must learn that the unit of survival is not the business enterprise but the enterprise plus its larger energy-providing environment.  Accordingly a concern for Me will always cause dysfunction and ultimately the destruction of the system; acting out of such a concern is tantamount to committing suicide.

Viewing the situation with this understanding will actually change one’s view of it and previously imperceptible courses of action will become apparent as a result. Unfortunately management in authority and career politicians haven’t the three things that are so necessary for sustaining the system’s viability: a systems view of the situation; an authentic—not self-interest—concern for the collective We and the willingness to take the long view.

3 thoughts on “The CEO’s Dilemma

  1. Pingback: Hidden Leadership Lesson #16 « For Progress, Not Growth

  2. Pingback: Hidden Lessons in Leadership #16 « For Progress, Not Growth

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