Sunday, October 7, 2012

The Danger of a Single TED Talk

AFRICA IS A COUNTRY

Africa.com have made a movie that's going to change the way you think about Africa. If the trailer is any indication of what the film's about, then we've reached only one conclusion: Africa is officially boring. We've blogged about this kind of boosterism before, including Vogue Italia's special "Rebranding Africa" issue earlier this year, which decided UN General Secretary Ban Ki-Moon should be the continent's new face, salivated over Nigeria's notoriously corrupt oil minister, and scrupulously avoided any mention of anything "sad, trashy or poor".

To cut a long critique short, we're pretty sure Africa isn't a brand and we find the clamour for "positive news" from Africa inane and condescending. Plus if Africa.com's movie really does go on for an hour, as has been threatened, it's going to be unbearable.

Who exactly is the audience for this kind of thing? It seems to be about attracting investment, but the style of the film is more likely to appeal to the development crowd — people who likely already consider themselves availed of a "positive" idea of Africa — than to hard-nosed capitalists. It will also appeal to all those Nigerians who were so outraged to see Lagos' poor turn up on MTV the other day through the offices of Rick Ross, apparently making them look bad.

In the old days we got starving (or sometimes smiling) children and Bono. That was the age of aid. Nowadays it's all about trade and what you get is this weird neoliberal romance where everybody's middle class and desperate to show you their mobile phone.

The Africa.com initiative is very much a project conceived in, and aimed at, the United States (their CEO used to be a Goldman Sachs banker) and I can only think that on some level it arises (belatedly) from an anxiety at the way the Americans have been unceremoniously elbowed aside by the Chinese in recent years when it comes to making money in Africa.

The movie promises the usual "pro-Africa" cast of characters, and of course that means sitting through yet another viewing of Chimamanda Ngozi Adichie's "The Danger of a Single Story". (It would be nice if Adichie did another one called "The Danger of a Single TED Talk" because the army of online disciples who force everyone to watch "The Danger of a Single Story" over and over again show no sign of letting up in their exuberant rejection of her central argument in that video.)

We also get Nigeria's neoliberal finance minister Ngozi Okonjo-Iweala (Diezani Allison-Madueke's invitation to appear in the film must have got lost in the post). Okonjo-Wahala cracks a joke about investment in telecoms, the point being that Nigeria has a lot of investment in telecoms but "nobody" knows about it. The joke isn't all that funny because actually loads of people already know about Nigeria's telecoms boom. Even Arsenal FC seem to be aware of it.

No doubt there's plenty more of this sort of stuff to come, but this "new" way of looking at Africa already feels like it's out of date.


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African economies rising – but are they taking the people with them? – By Richard Dowden

African Arguments

How long before Africa's demographic dividend becomes a disaster - scaring away investors for another generation?

After 26 years of the most horrific war, Liberia seems to have settled down despite noisy disenchantment with the rule of Ellen Johnson Sirleaf, now in her second term. I recently attended a conference on Liberia for some 300 investors and potential investors. During this, I heard very many positive statements from companies that have already invested in the country and praise for the remarkable recovery it has made since the war finally ended in 2003. The biggest ventures are in mining and palm oil plantations, though there was also talk of housing projects and even tourist beaches.

President Johnson Sirleaf was originally on the billing but pulled out. Many people would have liked to have heard her speak, and I would have welcomed the opportunity to ask her why she appointed three of her sons as ministers. Maybe in such a fragmented country they were the only people she really trusted. But this nepotism has damaged her previously glowing reputation – though she has recently suspended one of them, along with 46 other officials, for failing to declare their assets.

The conference was held in the sumptuously grand rooms of the Drapers Hall in the City of London. Its full glorious title is "The Master and Wardens and Brethren and Sisters of the Guild or Fraternity of the Blessed Mary the Virgin of the Mystery of Drapers of the City of London" and its origins go back to 1180. On the wall of the main meeting hall is both a clock and a weather vane (connected, I assume, to a device on the roof). Traders in the 18th Century really had to know which way the wind was blowing.

Today's weather vanes are the big consultancy firms such as Ernst and Young. Its 2011 report It's Time for Africa said that the continent "has one of the fastest economic growth rates, enjoys the highest returns on investment in the world and is making strong progress towards political reform, macroeconomic stability and social development". It urged investors to pile in, though it did feel the need to mention the company's ability "to navigate successfully through the complexity (of Africa) that our clients are experiencing…"

The report had a huge impact. Suddenly other big business beasts – and not just mining companies – began to set sail for Africa. Just a few years ago, in many London-based companies, the very mention of Africa would have set eyes rolling and provoked a quick change of subject. Now they are falling over each other in the scramble for the new El Dorado.

Africa is the world's last great untapped resource landmass, but there are two big questions: why hasn't it fulfilled the potential that these resources promised? And what has changed that makes them accessible now? I still cannot quite find the answers, but in the process I developed a set of rules for reporting the continent. The first one is, don't make continent-wide generalisations. Africa is the most diverse continent on the planet – it has more than 2000 languages for example. Unqualified generalisations are useless. Every time you reach a conclusion you find several cases where the opposite is true. Ernst and Young at least mention the complexities of Africa, but then go on to make sweeping statements such as: "Africans themselves are leading the growth in investment across the continent, and display an overwhelming optimism…"

The second rule is to rely mainly on African informants. The Ernst and Young survey, however, did not rely on African perceptions. It was based on interviews with 562 businesses of whom 59 percent were European, 18 percent North American and 18 percent Asian. Sixty-one percent had operations in Africa, and many of those businesses hired Africans, but there is not much input from other Africans there. That is not to say the perception is wrong, but rather that I would treat it with caution. It comes from inside the air-conditioned bubble that expat and African professionals inhabit in every African city. From home to car to office and back to home they rarely, if ever, leave that bubble or listen to ordinary Africans in the street.

The third is to treat all figures with deep suspicion, especially if they are precise. I had always accepted World Bank figures as gospel until I realised that the Bank relies on African governments for most of its data. Remember Ghana in 2010?  That year the Ghana Statistical Service "improved their national accounts series by incorporating new data sources and better estimation methods, classifications and standards" said the World Bank. That led it to "re-base" the estimates and revise the level of GDP for 2006 upwards by a modest 60 percent. Yes, SIXTY PERCENT richer than we had been told. Overnight it became a middle income country. And Ghana has one of the best bureaucracies in Africa. God knows how they add up the figures elsewhere, but one thing is certain – Africa is a lot richer than the development lobby and aid agencies would have us believe.

Another recent report from McKinsey and Co called Africa at Work, Job Creation and Inclusive Growth suffered similar problems of generalisation. It says Africa is the second fastest growing region of the world and the continent's GDP is expected to grow at 4.8 percent this year. Good news, but worryingly drawn from only 14 countries, most of them the more successful ones. Their employment figures seem to have been extrapolated continent-wide and that is worrying because there are some big "buts" hidden among the optimism. Firstly, natural resources extraction is the single biggest contributor to Africa's growth. There is not much sign of adding value to those resources or manufacturing in Africa. Secondly the report claims poverty is falling and poverty figures are notoriously short term and unreliable.

The report says that 90 million Africans had joined the world's consuming classes by 2011 and that the continent is about to reap a "demographic dividend" by 2020 as there will be another 122 million people in the job market. Then comes the killer fact that makes the so-called dividend look more like a disaster: only 28 percent of the current labour force has stable wage-paying jobs. So technically Africa – were it one country – has a 72 percent unemployment rate. And where will new jobs come from? Resource extraction – namely mining, oil and gas – are notoriously low employers these days.

Without work, millions of poor and poorly educated young Africans will sit at home trying to make sense of why they spent so long in school and why their parents made huge sacrifices to send them there. Why did they bother? But this huge rising generation will be connected, linked to each other by the internet and global social media. My guess is they will become angry. How long before an explosion of that anger blows away investors for another generation?

RAS recently launched a book on this very topic: Alcinda' Honwana's The Time of Youth. She defines the situation of most young Africans as "waithood" – a never ending time waiting for life to begin when they will have a job, can get married and have a family. Dr Honwana concludes that the Arab Spring might spread across Africa. She writes: "Could this represent the beginning of an era in which young people will no longer allow themselves to be manipulated by the elites into fighting ethnic and religious conflicts but instead choose the fight for their own socioeconomic and political rights? Could this mean that the waithood generation in Africa is shifting the battlefield from identity–based conflict into class inequality and rights-based conflict?"

You won't read that in the business prospectus, but business in Africa needs to know about it too.

***

My comment last week that Andrew Mitchell, Clare Short and Lynda Chalker really cared about the job when they were overseas aid minister, brought a sharp response from many who pointed out that Hilary Benn also cared. That is true. I am sorry I did not mention him.

Richard Dowden is Director of the Royal African Society and author of Africa; altered states, ordinary miracles. For more of Richard's blogs click here.

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Possible Economic Bubble In Ethiopia?

Bankelele
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A guest post by @Kahenya

Ethiopia has a very positive economic outlook and yes, it has a lot of development going on, but is this sustainable, now that the linchpin (Meles Zenawi) is gone? The one thing that is universal about the entire continent is that the poverty line seems to grow every year, sometimes it shrinks, but only for a moment. The cliché remains, that the rich are getting richer and the poor are getting poorer and there is no true middle class -  and if there is, its only based on people who don't want to imagine that they are less than middle class.

Africa is the kingdom of billion {insert any local currency here} projects. Ethiopia also finds itself in the same quagmire, except for one thing. They are actually making it work for their benefit. In Ethiopia, construction and infrastructure development are at an all time high. It was necessary for this to happen until Meles Zenawi and his beloved Ethiopian People's Revolutionary Democratic Front (EPRDF) went their separate ways, much to the disadvantage of EPRDF. Zenawi's rule transited between dictatorship and benevolence and it was working for him and Ethiopia. Love him or hate him, from being out in the rebel trenches to donning a suit, Meles was every bit a tactical genius. He grew Ethiopia from a war torn country to one of Africa's fastest growing economies. Only Meles could conjure up infinite possibilities. - sometimes by sheer cunning and sometimes by sheer fear.

Hotel cautions on using skype
EPRDF needed Meles to live long enough to get to his end game which would have allowed EPRDF to focus on less ambitious but more people driven development. That did not happen. With him gone, and an open democracy in the horizon (since every linchpin's death or retirement is followed by internal crisis and eventual dissolution, with less political tolerance by the citizens), with a lot of projects still incomplete, and with Ethiopia still facing many financial challenges, the positive economic outlook has quickly shifted from "going to happen" to "may happen".

EPRDF has moved from the strong offensive, to a sullen offensive-defensive. Push-Pull. Addis, like Luanda, Angola, defies Economic Science. If you buy a vehicle in Ethiopia, when you sell it, even years later, the value generally appreciates. Rents and property rates are astronomically high, coming close to rivaling Luanda – a huge developmental Achilles heel.

Lunch at the  Sheraton in Addis
The key driver of such high rates is the presence of Diplomats and NGOs who have an unending well of money – and this is where the very living ghost of Isaias Afewerki (President of neighbouring Eritrea) comes to haunt Ethiopia. Eritrea, despite being poor, is not dependent on Foreign Aid or NGOs. They have that to pride. For Eritrea, there are no illusions. Poor is poor so the only way is to go upwards - on their own. Ethiopia lacks that. Instead, they have to endure a very faint cushion, one that is rarely successful except in dire times. Unless Ethiopia starts equal distribution of development in the small business sector and begins to really crack the whip on poverty alleviation and shakes off its dependency on NGOs, EPRDF could find itself in a lot of trouble - just like the ANC is, despite them trying to conjure all sorts of ghosts, from Jacob Zuma's incarnation of Umshini Wami to the very living ghost of Nelson Mandela. Nonetheless, Ethiopia's economy is about to get a very shocking reality check.
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'We let them starve'

Global development news, comment and analysis | guardian.co.uk

The former UN food envoy explains his claim that we are all accomplices in creating a world where children starve to death – in a confrontational interview with Swiss media

Jean Ziegler was until recently (2000-2008) the United Nations Special Rapporteur on the Right to Food, and subsequently, in a similar function, he served on the Advisory Committee to the UN Human Rights Council. He is also a vocal critic of global capitalism's effects on the developing world, especially Africa.

The last few days he has been doing the media circuit promoting his new book, "Mass Destruction: The Geopolitics of Hunger" (the French title) or "We Let Them Starve: The Mass Destruction in The Third World" (the German title). There's no English title available yet.

Ziegler is a well-known Swiss author and politician — his writing is prolific and ever since his first publication (Sociology of the New Africa, 1964), he has taken on the cause of the developing world, against imperialism, capitalism, and injustice. In 1964, as a young academic, he chauffeured Che Guevara around Geneva when the Cuban revolutionary visited the UN.

His combative and at times polemical style has earned him much admiration, but also vilification, and legal persecution. As a socialist member of the Swiss parliament, he particularly attracted the ire of Switzerland's liberal-conservatives, closely related to big business, and of course the major Swiss banks, for denouncing their hiding away of stolen funds, such as those of former dictator Mobutu Sese Seko of Zaire, of those of Jewish people who perished in the holocaust, and of all kinds of dubious origin that ended up in Swiss banks.

While his fighting spirit, his relentless engagement for justice across the world, and his international standing have earned him respect, he has remained a thorn in the side of Switzerland-based businesses (such as Nestlé) who he has accused of active participation in practices that kept developing countries poor and dependent.

With this in mind, it is then quite understandable that business journalist Philip Löpfe's interview with Ziegler for newsnet, the online presence of the Swiss newspapers Basler Zeitung and the Zürich-based Tagesanzeiger, would be a challenging affair. And yet, the combative and perhaps provocative personality of Ziegler and his engagement with poor countries alone do not fully explain the nature of the questions he faced. Rather, Löpfe's questions seem to reflect the same strained arrogance as those whose profiteering from global misery was usually explained away as natural and which has now, as global neoliberalism struggles and inequalities become more glaring, been opened up to closer scrutiny and contestation.

Some excerpts from the interview, which I translated from the German:

Ziegler: According to the UN World Food Programme, there is enough food in the world for 12 billion people. If today people are still starving, then this is organized crime, mass murder. Every five seconds, one child under the age of ten dies, one billion people are permanently and heavily undernourished.

Löpfe: [Your] book's title is "We let them starve". I am not aware that I let anyone starve.

Ziegler: That is true, but we are all accomplices. We allow multinational food corporations and speculators to decide every day who is eating and living, and who is starving and dying.

Löpfe: What should the individual do? Donate money? Eat less meat?

Ziegler: It is mainly about becoming politically active in order to put an end to the murderous activities of food speculators and multinationals. We can do so, we live in a democracy.

Löpfe: Food speculation has existed for thousands of years. What is wrong when a farmer seeks insurance against bad harvests or when a baker ensures that his supply of flour is stable?

Ziegler: Nothing. But that is not the point ... The commodities market was 'financialised'. Speculators are making billions, while millions of people starve to death.

[...]

Löpfe: How could we avoid such speculation?

Ziegler: We could exclude all non-producers and non-consumers from the commodities exchange – in this sense only the farmer and the baker, through the commodities exchange, engage in trade with each other.

Löpfe: However, the experts have agreed that during emergencies, such as droughts and floods, and so on, commodities exchange and trade should remain open. It was disastrous that during the famine of 2008 some countries blocked the export of rice.

Ziegler: Famines, such as in 2008 and 2011, are additional disasters; they add to the daily massacre of hunger, the so-called 'silent hunger'. It is true that at the time rice exporting countries such as Thailand and Vietnam closed their borders. Governments were afraid of riots in their own countries. That is understandable. But for a country like Senegal, importing 75% of its rice, it was a disaster.

Löpfe: Why is a country like Senegal forced to import rice? The majority of its population are still subsistence farmers.

Ziegler: It remains a fact that in terms of percentage of the population, there are no more starving people anywhere than in Africa. About a third of the population's men, women and children are permanently undernourished.

Löpfe: Could one not argue in a provocative way that Africa is not starving because of the speculators but because it is too poor for the speculators: there is nothing to be earned there.

Ziegler: No, no. African countries have incredible civilisations, based on agriculture, with much knowledge and very fertile soils.

Löpfe: Why is it that Africa is the continent where most people starve and which imports more than a quarter of its food supply?

Ziegler: Because the colonial pact is still enforced.

Löpfe: Isn't this a bit too simple? Colonialism has been over for more than half a century.

Ziegler: But there still is a small upper class, dependent on rich countries, and extremely corrupt. Again Senegal: The country exports peanuts and at the same time imports three quarters of its food requirements.

Löpfe: Why?

Ziegler: Because the colonial pact was never broken. The Senegalese farmers are forced to grow and exports peanuts because the revenue serves to pay for foreign debt. At the same time, Europe sells its food surplus at dumping prices on the African markets. How can a small farmer survive under these conditions?

Löpfe: African farmers are not very productive. Their productivity is less than 10 percent of Europe's agriculture. Are they not just lazy?

Ziegler: On the contrary. Nobody works harder than farmers in Africa. They just cannot thrive because they are not supported: no irrigation, no seed, no draft animals, no tractors, no fertilizer, nothing.

[...]

So there you have it. Like the now jobless Greeks, if only those poor people weren't so lazy...

But there is more to this story. Löpfe's 'provocative' questions — especially his last one — might be seen as a thinly disguised nod to the media owners who have recently acquired one of the papers in which the interview was published. Thus, both papers are now owned by holding companies in which business tycoon Tito Tettamanti controls the majority of shares.

Georges Bindschedler, co-investor in the rather cynically called 'Medienvielfalt Holding' (Media Diversity Holding) makes it clear why it was necessary to acquire the newspaper.

In an interview last year, he elaborated on their 'mission'. He suggests that the 'liberal music' is not heard loud enough in the Swiss media landscape, and hence Swiss voters fail to understand important political issues, and vote the wrong way, one might add. In particular, he was referring to the rejection by Swiss voters of the rationalisation of a national health care system earlier this year, which according to some analysts would have led further down the slippery slope to a two-tier system – one for the rich, and one for the poor.

As everywhere in the world, corporate control of the media is not about safeguarding the diversity of opinions, as he claims, but about propagating more neoliberal, pro-business values and ideas.

Perhaps it is a sign of the times that even in Switzerland, the sheltered island of wealth and prosperity, neoliberal capital feels the need to step up its propaganda efforts.


guardian.co.uk © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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Get the listing

Seth's Blog

Most successful (and honest) real estate agents will tell you that their business is about the listings, and that sales ability comes second. All other things being equal, the agent with a better home to sell will make a better sale. 

The same thing is true for baseball managers—if you have a better lineup you're more likely to win the game. And of course that's true for the sushi restaurant with fresher fish. And the tech company with better programmers, and the college with better professors...

If this is all so obvious, why do we spend all our time trying to find cheap average inputs and then make them special through our magnificent sales and management skills? Why do we industrialize the hiring process, spend very little time on scouting, and seek out the replicatable instead of the special exception? Our ego demands that we spend all day polishing the average instead of seeking out the exceptional.

Better to invest the time and money on special people and raw materials instead.

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Waiting for all the facts

Seth's Blog

"I'm just going to wait until all the facts are in..."

All the facts are never in. We don't have all the facts on the sinking of the Titanic, on the efficacy of social media or on whether dogs make good house pets. We don't have all the facts on hybrid tomatoes, global warming or the demise of the industrial age, either.

The real question isn't whether you have all the facts. The real question is, "do I know enough to make a useful decision?" (and no decision is still a decision).

If you don't, then the follow up question is, "What would I need to know, what fact would I need to see, before I take action?"

If you can't answer that, then you're not actually waiting for all the facts to come in.

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The Tricky Business of Cultural Change

SSIR Opinion & Analysis

"We start where people are, but don't accept that culture is ever an excuse."

That was Mallika Dutt, the founder and director of Breakthrough, an international organization that changes cultural norms through 21st-century public awareness campaigns, speaking at the Clinton Global Initiative last week. She was part of a session, titled Influencing Behaviors and Attitudes, along with Tostan's Molly Melching and Unilever's Miguel Pestana.

The conversation focused on how to change the harmful cultural norms of poor people. Pestana talked about educating people about germs and the simple intervention of regular hand washing. Dutt talked about Breakthrough's highly successful Bell Bajao! campaign, which encourages male bystanders to "ring the bell" when they hear domestic violence afoot, ostensibly disrupting it and, in the process, taking responsibility for gender-based violence that they may previously have considered "personal business." Melching spoke about using on-the-ground organizing coupled with powerbroker persuasion to make FGM (female genital mutilation) history in select African countries.

Audience questions followed about the challenges facing cultural entrepreneurs: How do you measure and communicate your impact? How do you keep things bottom-up, while still scaling out? How do you find the balance between researching and planning, and jumping in and learning?

In the midst of what was otherwise an enlightened conversation about the tricky business of cultural change, a glaring omission occurred. Not once did I hear this room of usual Clinton Global Initiative suspects—heads of state, corporate leaders, celebrities, and NGO leaders—apply these questions to, well, themselves. If real, radical cultural change is the goal, then real rich people are both part of the problem and fundamental to the solution.

Getting back to Dutt's wise declaration: "Where people are," in the case of the wealthy and altruistic, is conferences like CGI, TED, and Aspen Ideas—all of which I've attended in the last few years. While the fervor for good ideas and effective solutions is palpable at gatherings like these, too often there is an absence of self-scrutiny. I have frequently witnessed wealthy donors ask what others might do differently to make the world a better place—how, for example, can we get poor mothers to cook healthier food for their kids or speak and read more to their babies? But rarely have I witnessed them consider what role they might play beyond their pocketbooks—how, for example, might rich parents be perpetuating inequality by paying high end SAT tutors for their teenagers?

The most enlightened of philanthropists talk about their work with "doers" as relationship building, and yet, real relationships require reciprocal honesty and discomfort and growth. Imagine a panel called "Influencing Behaviors and Attitudes," where corporate CEOs scrutinized whether the choices they'd made regarding corporate responsibility programs were effective and authentic or empty brand boosters. Imagine high-worth donors getting 360-degree feedback from their grantees about the ways in which their communication style and expectations, for example, hampered transparency in the process. Imagine a frank conversation about all these conferences and the financial and environmental resources that go into creating them.

It's hard to imagine, I know, but there are wealthy donors who aren't solely concerned with the behavior and attitudes of poor people, but their own as well. Resource Generation, for example, is an organization built by young wealth inheritors who were hungry for spaces to "come out" about their economic status and examine ways that they might share their wealth. New efforts, like the Slavery Footprint, which President Obama mentioned in his address at CGI, is another; you can answer a series of questions online and find out just how intertwined your consumer behaviors are with the modern slave trade.

Breakthrough's model has largely been successful because it engages the privileged group in domestic violence—men—to examine their own behavior rather than putting it off on women. Dutt explains: "There is no attitude or behavior change that can lead to the kind of social transformation that we need at a paradigmatic level if it focuses only on the marginalized group, whether it be women, poor communities, people of color, ethnic or religious minorities."

To be clear, I'm not calling for wealthy people to engage in self-flagellation. I'm calling for self-examination and potentially inconvenient behavior change, rooted not in guilt, but in a hunger for a better world. We need the kind of transparency that feels possible only when you care more about having an impact than you do about protecting your own reputation; when you care enough to be transformed by your work. We need radical humility and courageous, cross-class conversation. That would be a cultural shift worth investing in for all of us.

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One-Hit Wonders

The Baseline Scenario

By James Kwak

Meg Whitman is what is known as a superstar CEO. She became CEO of eBay in 1998 and took it public; during her reign, eBay became one of the most successful, most valuable Internet companies in existence (and Whitman became a billionaire). She used her celebrity to mount a high-profile, expensive, and ultimately unsuccessful campaign to become governor of California (losing to career politician Jerry Brown) before being named CEO of HP, the iconic Silicon Valley company.

Why did HP, one of the largest information technology companies in existence, hire Whitman, who preceded her stint at eBay (auction house for random stuff from people's attics) with jobs at Disney, a shoe company, a flower delivery service, and a toy company? Because of the idea of the superstar CEO, with transferable general management skills, who can transform any organization.

Charles Elson and Craig Ferrere have written a new paper about that idea (Harvard Law School Forum blog post; paper at SSRN). The concept of transferable executive skills is the most common justification for outrageous CEO compensation packages: if there really is a single global market for CEO talent, then companies have to pay the going rate for that talent, which is whatever the market will bear. The problem is that the whole theory rests on a myth.

On pages 28–30, Elson and Ferrere cite multiple empirical studies finding no relationship between a CEO's performance at one company and his performance at the next company that massively overpaid to hire him. They conclude: "the empirical evidence suggests a negative expected benefit from going outside rather than pursuing an internal succession strategy, despite the ability to access an enhanced talent pool. In the aggregate, CEOs appear to be at their most effective only when they have made significant investments in firm-specific human capital." Nor does the world of CEO hiring actually behave like a market in which stars move progressively from smaller to bigger firms where their marginal product will be higher (since their skills are applied to more people and assets)

Elson and Ferrere's main argument is that excessive CEO compensation is caused by the ubiquitous practice of benchmarking new CEO packages against those given by "peer group" companies. This practice would only make sense if there really is a liquid market for CEO talent and your CEO could jump ship for a peer at any time. Otherwise, what you really have is a monopoly-monopsony situation where what matters is the CEO's value to his current firm, not the value of other firms' CEOs. Peer group benchmarking (and then setting your CEO's compensation at the 50th, 75th, or 90th percentile of the peer group) is just a mechanism for perpetually ratcheting CEO compensation upward, without any relationship to the value provided to actual firms.

Elson and Ferrere distinguish their position from what they describe as the two main schools of thought on CEO compensation: (a) those who see it as a product of CEO capture of weak boards and (b) those who see it as the natural result of a competitive market for "talent." I would say their analysis is much more consistent with the former. In a world of weak, captured boards, peer group benchmarking is a convenient fig leaf for outrageous pay packages. They are right, however, that simply having an independent compensation committee will not be enough if that committee is hiring the same old compensation consultant churning out the same old market-based justifications for lavish packages.

So why pick on Meg Whitman? Well, she's in the news these days, getting the superstar treatment. ("In all likelihood, this is Ms. Whitman's last great public performance.") But you can't blame her for capitalizing on her fame. The people to blame are the board of HP, which somehow thought that a one-hit wonder was the answer to their problems. This after hiring Léo Apotheker, a man who was hugely successful at SAP, where he worked for two decades, yet bombed at HP. And before Apotheker there was Mark Hurd, who spent more than two decades at NCR before doing a middling job at HP (once praised for cutting costs, now criticized for letting the technology world—Google, Apple, Amazon, Facebook—pass HP by).

The lesson is that successful CEOs are often successful because of the people around them, and to the extent that their individual contributions matter, they are often specific to their companies. Meg Whitman may have been a great CEO of eBay (although, remember, eBay also watched the technology world pass it by, with the arguable exception of PayPal). But that doesn't make her a great CEO of anything else.


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