Capitol and California – Governor 2010

By David Siders
dsiders@sacbee.com
Published: Sunday, Sep. 19, 2010 – 12:00 am | Page 1A
Last Modified: Sunday, Sep. 19, 2010 – 11:31 am

Former eBay CEO Meg Whitman has built her campaign for governor on the premise that her experience as a business executive – even one with no government background – is needed to lead California out of recession.

“I think it’s going to take someone with a business background to restore, fundamentally, the economic health of this state,” she said at a recent campaign stop in Folsom.

Whitman points to her record of effective leadership as she took eBay from a startup to an international phenomenon, creating jobs and shareholder wealth. It is that style she says will help her address systemic governance problems in Sacramento.

The Capitol, however, presents some serious impediments to command and control by a chief executive, from a rare two-thirds requirement for budget votes to an initiative process that lets voters decide spending and policy issues.

Former Gov. Gray Davis told the Legislature without success to “implement my vision.” Gov. Arnold Schwarzenegger has lamented that courts and lawmakers have blocked budget-cutting efforts he’s made.

High-profile business leaders throughout the country have met with mixed success when they’ve run for public office.

Jon Corzine, the former Goldman Sachs executive, senator and one-term governor of New Jersey, told Newsweek this year that he, like Whitman, thought “the managerial skill set would be helpful.”

It wasn’t, he said.

“The idea that you’re accountable to a bottom line and to a payroll in managing a business – it gives voters the confidence that you have the right skills (to govern),” Corzine told Newsweek. “But it’s 20,000 people vs. 9 million. I don’t think candidates get the scale and scope of what governing is. You don’t have the flexibility you imagined. There’s no exact translation.”

As governor, Whitman would have to work with a Legislature controlled by the opposite party and the labor unions that represent the state work force. She didn’t have to contend with unions at eBay, and has offered a variety of answers to say how she’d persuade lawmakers to act.

When asked in Folsom how she would address the state budget impasse, one of the most persistent problems in Sacramento, Whitman said, “I would have chained them (legislative leaders) to the desk to get this done.”

“This is about leadership,” she said.

Whitman proposed in March that she would create legislative teams to address her top priorities. Lawmakers dismissed the idea, noting the Legislature already is organized by committee.

Whitman has said what she doesn’t know about government she could learn from Cabinet members and other appointees. She is a practiced hirer of executives.

“I want to find some people who’ve worked in government in Florida, in Texas, in New Jersey,” Whitman said. “I’d love to get a few Chris Christie people out here.”

Christie, the Republican governor of New Jersey, has sought to crack down on labor union clout and institute controversial budget-cutting measures. Whitman said, “He’s doing very well back there.”

Business to politics

In 2000, George W. Bush became the first president to hold an MBA.

A year later, Michael Bloomberg, founder of Bloomberg LP, was elected mayor of New York, becoming perhaps the most visible example to date of the business executive who became a political game changer.

The political ambitions of the country’s business elite have not since abated.

Besides Whitman on California’s ballot this year is Republican U.S. Senate candidate Carly Fiorina, the former Hewlett-Packard CEO.

In Connecticut, former wrestling executive Linda McMahon is competing for a U.S. Senate seat, and the campaigns for governor of Michigan and Florida include a former Gateway CEO and a former health care executive, respectively.

In New York, Bloomberg, whose spending of $109 million of his own money in last year’s re-election bid was a national record – until Whitman last week eclipsed that mark – has proved effective in government.

Others with business backgrounds have been less so.

When he was elected in 2003, Schwarzenegger touted his own status as a political outsider and his experience managing his acting career and investments. He believed he could reshape California politics. Seven years later, he hasn’t significantly succeeded.

Voters are mixed on whether they think a business background is valuable in politics. According to a recent Field Poll, 41 percent of likely voters say they are more likely to vote for someone who has many years of business experience. About as many likely voters say they appreciate political experience.

Jerry Brown, the Democratic nominee for governor, has disputed Whitman’s claim that her business experience qualifies her to govern. “The Legislature is not like employees at eBay,” he said while stumping in Manteca over Labor Day weekend, noting that the governor can’t fire lawmakers.

The eBay years

Without a background in governance, business acumen is the asset Whitman continues to bank on as the campaign enters its final weeks.

Whitman’s tenure at eBay, which began in 1998 and lasted 10 years, is widely considered a success.

The Harvard MBA was praised for her devotion to the company’s growth, for her attention to customer service and for her reliance on detailed metrics to measure performance.

In business, as in government, bureaucracy can “gum up things and make them inefficient and ineffective,” said Kip Knight, a former eBay marketing executive. Whitman did not allow that, he said.

Knight recalled a meeting at which Whitman and about 50 executives ran out of chairs. Whitman took them outside.

“We literally sat down in a circle on the sidewalk and just started to sketch out what we wanted to do,” Knight said. “It’s hard to imagine most business tycoons being that humble.”

Despite protests when Whitman raised user fees, she also maintained a following among buyers and sellers, people critical to the company’s success, said Joe Meyer, a former eBay manager who is now CEO of HopStop.com.

“She would walk through a convention center and, you know, there would be people flocking to her, and she would sign autographs,” he said. “She was a very strong, highly effective operator.”

Startup or turnaround?

Whitman’s success at eBay was in growing a startup. California, she acknowledged, is in need of a turnaround.

“I don’t have as much experience with turnarounds,” Whitman said.

She said two of her positions before eBay qualify, at the toy company Hasbro Inc. and at the flower delivery company FTD.

Whitman was a marketing executive at Hasbro, where she oversaw the Playskool and Mr. Potato Head brands. Alan Hassenfeld, chairman and CEO of Hasbro at the time, said Whitman made key hires and boosted revenue as the company faced competition from Fisher Price.

Whitman “really set us back on the path,” Hassenfeld said. “Meg really grounded people and really began to focus and do the basics to get us back.”

At FTD, in her one CEO position other than at eBay, Whitman said, “It didn’t work out as well.”

When she left FTD in 1997, having failed in two years to meet profit goals, Whitman said in her autobiography that she told the company chairman, “This company is not fixable, at least not by me.”

She said in an interview that it was a learning experience.

“It was the first time I was a chief executive officer, that’s the first thing,” Whitman said. “And secondly, we didn’t go after the cost structure, I don’t think, as fast as I would do if I had to do it again.”

Nor did eBay in Whitman’s final years match its early success.

In January 2005, eBay missed Wall Street estimates for the first time since it went public, and shares plunged more than 20 percent in one day. Later that year, many analysts were flummoxed by eBay’s acquisition of Skype, the online telephone service on which eBay would take a $1.4 billion write-down in 2007.

Safa Rashtchy, a former analyst who followed eBay for Piper Jaffray, said Whitman demonstrated “tremendous focus” early at eBay, a quality he said was significant to the company’s meteoric rise.

But he said Whitman later failed to adequately position eBay for competition from Amazon and Google.

“To my view, she did miss the boat on re-engineering eBay early enough so that you wouldn’t lose the momentum that the company had,” Rashtchy said.

Motivated to leave legacy?

Whitman says what she learned about technology during her eBay years would be useful in government. More generally useful, she said, would be her innovative frame of mind.

To Robert Stern, president of the Center for Governmental Studies in Los Angeles, Whitman has demonstrated an entirely different characteristic, both at eBay and in her campaign.

“She’s very ambitious,” Stern said. “And that’s a good thing. You want a legacy. You want to accomplish something.”

Stern said Brown was effective in his first two terms as governor, from 1975 to 1983, in part because he wanted to be president. It was the same when Brown was secretary of state, Stern said.

“The office was completely different with somebody who was ambitious, and I thought in a good way,” he said.

Ronald Riggio, a professor of leadership and organizational psychology at Claremont McKenna College, doesn’t understand the appeal of electing business executives to government posts.

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