Why CEOs are afraid to support the war.

Why CEOs are afraid to support the war.

Why CEOs are afraid to support the war.

Moneybox
Commentary about business and finance.
April 1 2003 4:00 PM

The Quiet Americans

Why CEOs are afraid to support the war.

The neoconservative think-tank warriors who predicted a cakewalk in Iraq aren't the only group of usually outspoken Americans who have suddenly clammed up. Since the cruise missiles began to fly, chief executive officers of large American companies have barely muttered a word of support for this popular war.

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After 9/11, CEOs couldn't stop talking about the tragedy. They made grand gestures to help the victims—scholarship funds, donated equipment, etc.—and ran ads aimed at getting the country back on its feet (and, not coincidentally, reviving their own staggered businesses). But today, you will search the Web sites of the largest U.S. companies in vain for even the most anodyne statements about supporting the troops (much less supporting the war) or for examples of name-brand companies touting their status as military suppliers. When they appear on CNBC, bosses will discuss how the war's uncertainty damages business but won't say a word about the justice of the cause.

What gives? Some of the silence may be insecurity. Thanks to endless scandals and investigations, CEOs are somewhat less sure-footed these days. But even internally, where they still rule, they are staying away from the war. At a recent employee gathering, Jeffrey Immelt, the blunt-speaking CEO of General Electric, responded to a question about the war by saying, in effect, that he was just a businessman and didn't have any insights on the conflict. (Such lack of expertise has never stopped CEOs from commenting on other matters of public policy such as school vouchers or tort reform.)

There are two reasons why CEOs may be hesitant to wade into geopolitics. The first is temperament. While multilateralists may have been routed in Washington, they still hold sway in the corner suites. Business—where there is no monopolistic superpower (except for you, Mr. Gates)—requires cooperation and negotiation, which may make CEOs more sympathetic to the value of alliances.

More important, American CEOs run international companies. They can't afford to be seen as U.S. patsies. While the United States is tremendously powerful and wealthy, it represents only a small fraction of the world's market, and a mature one at that. If they want to grow, companies involved in technology and infrastructure—General Electric, Boeing, IBM, Microsoft, Halliburton, Caterpillar, Hewlett-Packard, to name a few—simply can't afford to alienate governments around the world the way Donald Rumsfeld can. The Turks and the French may represent thorns in the side of U.S. policy, but they are also enormous economies where state-granted favors can have a big impact on revenues.

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Consumer-product companies have similar reasons not to push the war. Some of the nation's largest and most quintessentially American companies ring up most of their sales and even more of their growth outside the country. Coca-Cola derives just 30 percent of its sales from North America (including Canada). And while unit volume rose 6 percent in the United States last year, it rose 11 percent in Europe, Eurasia, and the Middle East and 14 percent in China. In its most recent year, Wal-Mart tallied $40.8 billion in sales (17 percent of its total) outside the U.S. That business rose 15 percent while the company's overall sales grew by a less torrid 12 percent. In February, McDonald's U.S. sales slumped 2 percent from the year before to $1.48 billion, while sales outside the U.S. jumped 14 percent to $1.38 billion.

In today's climate, branded products such as Coca-Cola, McDonald's, and Budweiser are frequently the most visible—and vulnerable—manifestations of American soft power. And it is they who are most likely to suffer from boycotts or from any violence or anger engendered by the war. Protesters here may rail against the military-industrial complex, but angry foreigners channel their anger toward fast-food outlets and beer. Coca-Cola, for example, is very worried about several Muslim-themed colas that are gaining market share in the Arab world. American CEOs won't risk more backlash by openly supporting a war that is unpopular in many places they do business.

So, it is no surprise that CEOs of giant companies were more hesitant than the public during the run-up to the war. In mid-January, Fortune asked 107 of the Fortune 1,000 whether the United States should go to war with Iraq. The results: 47 percent yes, 36 percent no, 17 percent unsure. In a Gallup Poll taken at roughly the same time, ordinary Americans were asked whether they favored invading Iraq with U.S. ground troops to remove Saddam from power. The response: 56 percent yes, 38 percent opposed, and 6 percent no opinion.

To succeed today, American companies must consider themselves citizens of the world. Getting executives to act globally was one of the chief management imperatives of Jack Welch, who was about as American as the come. So while official Washington may be reading Robert Kagan's Of Paradise and Power: America vs. Europe in the New World Order, I suspect CEOs are still carrying around dog-eared copies of Thomas Friedman's paean to globalism, The Lexus and the Olive Tree. They have no interest in taking sides in this fight: Iraqis, French, Americans—their dollars all count the same.