AS PREPARED FOR DELIVERY
Friday, November 13, 2009
CONTACT OFFICE OF PUBLIC AFFAIRS
Secretary of Commerce Gary Locke
Remarks at Meeting With University of Chicago Executive MBA Students
Hello everyone. It's great to be here, and I'm very much looking forward to a wide-open discussion with all of you.
I've come to Singapore this week to attend the annual APEC-related meetings and I've had a full few days giving speeches and exchanging views with Asian and American business executives.
I've been to many of these international gatherings before, where countries come together to find common ground on developing global economic policy.
They are always interesting.
But this week seems to have an added significance.
We are just a few months removed from the worst economic calamity of my lifetime.
Like every economic crisis of the past, this one has its own unique cast of causes and villains.
But in one way, this crisis is just like all the others.
It's going to shake up the old order.
In the months and years ahead, we are going to see new industries, new economic powers and new leaders emerge.
Old assumptions are going to be overturned.
It feels like we're at one of those turning points in history, where the decisions we make now will resonate for generations to come.
When these decisions get made, people like you are going to be in the room.
Soon enough, you'll be leading businesses large and small.
The world is going to depend on you to chart a path back to sustainable growth for the global economy.
And they're going to depend on you to drive innovations that solve some of our most serious problems, from climate change to poverty and disease.
Each of these issues on their own would be exceedingly difficult to solve.
But aspiring business leaders like you will face an added challenge.
In too many corporate boardrooms in America and throughout the globe:
- There is an absence of leadership;
- An absence of ethics, and
- A failure to understand the challenges faced by regular people.
You're going to have to fix it.
Now, when people think about bad behavior in the business world, they tend to focus on the criminals that lead the nightly news.
Enron, Bernard Madoff…These are the headline grabbers—but they are not exceptional or unusual. We're always going to have crooks.
The problem runs a lot deeper. And perhaps nothing illustrates the breakdown in corporate ethics better than CEO pay.
Back in 1985, the ratio of the average American CEO’s salary to the average worker's salary was about 40-to-1. By the middle of this decade, it hadgrown to 450-to-1.
And as American CEO pay has exploded by a factor of 11, we have seen CEO pay in Europe and Asia increase significantly as well.
Now, I ask you.
In the last two decades, did the stock market increase by a factor of 11?
Did average wages increase by a factor of 11?
No they did not.
In fact, average wages in America have been completely flat for the last decade.
The issue we have here is not that some people have accumulated great wealth.
It is that many of our corporate leaders have achieved vast wealth without creating economic value for everyone else.
That is not the way capitalism is supposed to work.
You take a look at someone like Bill Gates, who I know well from my days as governor of Washington.
Now, here is someone who is worth tens of billions of dollars—but the way he accumulated his wealth has enriched the lives of countless others.
The company he built, Microsoft, changed the way the world lived and worked.
It directly created hundreds of thousands of jobs and indirectly created millions more by creating technology that could be a platform for innovation.
And now, of course, Mr. Gates has used a large part of his fortune to launch the Gates Foundation, which is doing such amazing work to improve global health and education.
Then you contrast that with the prime engine of wealth generation over the past decade.
What is the long-term economic value that was created by rampant speculation in credit default swaps or subprime lending?
The world has certainly had speculative bubbles before—but at least when America had the railroad boom and bust at the turn of the 20th century, we had thousands of miles of railroad tracks leftover to build a modern transportation infrastructure.
At the turn of the 21st century, the technology boom and bust gave us thousands of miles of fiber-optic cables to continue building a modern IT infrastructure.
What is the legacy of this recent speculation? Foreclosed houses and worthless mortgage securities.
And yet, I'm not quite sure our corporate leaders have learned a lesson.
We've seen that bonuses on Wall Street have returned to obscene levels, even though banks around the world depended on taxpayers to stay alive.
The other day, I read an interview in the London Times with the head of Goldman Sachs, who said companies like his were doing "God's work."
Is it any wonder that people who are struggling to keep their jobs and pay their bills are infuriated about how out-of-touch some our leaders are?
We simply can't afford business-as-usual in the board room any longer.
We need corporate leaders who have integrity, who think for the long-term and who have a sense of responsibility beyond hitting quarterly profit estimates four times a year.
I hope you will all remember that when you leave the University of Chicago.
You have an enormous amount of responsibility riding on your shoulders because your success and your leadership isn't just important to you and your family—it’s important to me and everyone else who cares about fixing the world's problems.
Now, I'd love to hear your thoughts on what you think the most important qualities will be in our next generation of corporate leaders. And I'm happy to answer any questions you have.