Leadership Override

September 1st

As the election inevitably encourages all of us to think about our democracy, at the same time, organizations throughout the economy are becoming more democratic.  Technology has made it possible for unprecedented participation in even the most sensitive decisions.  But what this is going to do is to open a new set of questions about the times when leaders must override democratic process and how far they should go.

The problem is not that democracy has flaws and is limited in it’s ability to curb factional excess.  This has been well known and debated since the Federalist Papers.  My concern has not been with the limitations of democracy as much as with the things that executives do to correct for them.  Our democracy has been built on the notion that leadership in time of crisis can make up for democracy’s inefficiencies.  There are many examples of great men and women who have stepped forward to lead in spite of the challenges that were put in their way by democratic process and even the Constitution.  Few would debate that Lincoln and FDR should be ranked in among our greatest leaders.  Yet in each case there have been major questions about whether they had violated Constitutional principle.

In our time, the energy crises of the seventies offered examples of massive economic disruptions that had to be answered.  In the energy crisis I saw both the best and the worst sides of executive action.   I had seen Frank Zarb and Bill Simon and the White Houses of Nixon, Ford and Carter acting to save important economic interests by moving far outside of the box.

Before I ever reached the challenges of the energy crisis, I had seen the difficulties that democratic process, our administrative laws and our modern political culture impose on leaders as they try to step up to address national priorities.  I also had been able to take some measure of individuals who I thought were great leaders and therefore I had a sense for the ability of individuals to prevail in spite of the constraints.  I had seen the creation of the Environmental Protection Agency and I knew that the capacity of leaders was severely limited by our customary political process. I believed in Elliot Richardson and William Ruckelshaus and in the integrity of their personal leadership. I had seen Watergate.  But it was in the energy crisis that I began to appreciate leadership and its limitations.

In 1973 I had been working at the Office of Management and Budget on energy and environmental policy when the price of oil jumped overnight from $4.75 ($22.89 inflation adjusted) a barrel to $9.35 a barrel ($40.84 today).  Even more shocking to Americans was the way that the energy crisis began.  When the Yom Kippur War broke out in October 1973, the oil producing nations who had formed OPEC only a few years earlier acted to use an oil embargo to seek to influence the outcome of the war.  The fact that a cartel of oil producing nations could successfully withhold supplies and virtually cripple parts of the U.S., Japanese and European economies, was a surprise of epic proportions.

The ferocity of the impact of the first oil embargo is still surprising years later.  The government was thrown into wild activity trying to respond to its many effects.  I was there when it happened.  In January of 1994, on a few hours warning, I flew to New York City with my boss, Frank Zarb, to go to yet another crisis meeting.  In the car I asked where we were going and I learned that we were headed for City Hall to meet the new Mayor, Abraham Beam.  The diminutive Mayor had been in office for 11 days when Frank and I reached New York to find a City Hall in transition. The drapes on the high windows in the Mayor’s office had left with the previous Administration of Mayor John V. Lindsay.

We were puzzled at first by the Mayor’s urgent request for a meeting.  The conversation took a rambling course through the landscape of energy policy – converting power plants to coal, changing daylight savings to make it permanent.  And then, the Mayor blurted out that he had no gasoline and did we think we could help?

My clearest memory of that moment is of looking up at the high bare windows of the Mayor’s office. To my horror, I saw the first flakes of snow beginning to fall.  I understood why we had been asked to come to New York.

Frank Zarb jumped up and went to a phone on the side of the Mayor’s office and set about making calls, redirecting supplies on their way to New York Harbor.  Our intervention no doubt caused disruptive ripples in the oil supply chain that were litigated for years.  But New York got the gasoline to plow their streets.  I had stood there in the Mayor’s office and watched a classic case of executive leadership in crisis.  I’m not sure it could be done today.

Today, more than 3 decades later, there are again signs of a major energy storm.  The U.S. continues to depend on oil supplies that come from Iran, Venezuela, Nigeria and many other places where our relationships are troubled.   But today there is vastly more demand for supplies as China and other developing economies enter world energy markets.  And there may be less supply.  Indeed, there are many respected analysts of energy policy who argue today that we have reached the point of peak oil supply.

Frank Zarb’s decisive action remains imprinted on my mind as the image of executive action of the old school.  Today the image of the decisive CEO pulling levers is a rare exception to a more common pattern of activist constituencies and negotiated compromises.  Political partisanship and division are far more typical than leaders who believe in the principle of the common – in self interest rightly understood – are rare.

The central problem for me, is not only to be able to create a democratic process that can resolve the tensions between the proclivities of the marketplace with a concern for equity but also to create mechanisms that will guide leaders even when they feel they must lead rather than react.

 

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