Thursday, February 26, 2009

Public perception versus economic reality
  Economics piece by John David Powell

A friendly conversation the other night about politics and the economy underscored the great gulf between perception and reality.  The old saying is true that perception is reality, but, in reality, only if one doesn’t delve deeply into the subject in question.

Here’s what happened.  The after-dinner conversation turned to those Detroit CEOs who flew on corporate jets to tell a congressional committee they need taxpayer money to survive.  Our guest was incensed at the audacity of these automotive swells, the personifications of corporate greed.

I agreed their choice of transportation was boneheaded at best, and another reason why folks living at the C-level should listen to their public relations people whose job is to keep well-paid fat out of the fire.  This also was a fine example of how public perception can eclipse economic reality.

Many of us who qualify as pedestrian in our jobs and lifestyle look with more than a tad of resentment upon executive transportation, whether it is a car and driver, an express elevator to the corporate suite, or a company jet.  We work long hours to make our bosses look good, yet we drive ourselves to the next meeting or to the airport where we jostle our way through the lines only to wait for a flight that’s delayed.  What a waste of time, we say to ourselves as we anxiously watch for the next flight update.

And that’s the point.  If standing around in airports is a waste of our time, just think of the waste of company time and money for those highly paid C-suite suits.  Convert your pay and their pay to hourly rates and determine the most efficient use of investor or taxpayer money.

I used to write speeches for university presidents.  Every now and then someone would ask why my boss would have a full-time speechwriter.  My answer was simple.  It takes about an hour to write each minute of a speech.  As a taxpayer, who would you prefer to spend 40 to 50 hours a week researching and writing speeches?

Then, there’s the economic stimulus argument for corporate jets.  First, let’s establish the premise that the creation of jobs is one of the top reasons for the federal bailout money.  If so, then why eliminate jobs simply because of envy?

“Excuse me, but your corporation gets economic stimulus money, so you’re gonna have to jettison your jet, which means you’ll have to fire the pilots, flight attendants, and mechanics, and cancel your contracts with fuel suppliers and the fixed base operator, who, in turn, will make personnel adjustments based on lost revenue.  There, I feel better, because your CEO now has to ride a mule to his next meeting.”

President Obama continued this Us-versus-Them attitude in his this-is-not-a-State of the Union address to a joint session of Congress this week.  He told the giddy crowd he will hold banks fully accountable for their bailout money.  “This time, CEOs won’t be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet,” he said, adding, “Those days are over.”  I guess that means you folks who sell fancy drapes and design and sew fancy drapes and supply raw materials that make up fancy drapes can start looking for other work, because fancy drapes, along with private jets, are no longer allowed.

Same is true for those bacchanalian conventions and conferences hosted and attended by companies and organizations across the land.  Mr. Obama doesn’t like them.  He said so in Elkhart, Ind.  Companies can’t go to Las Vegas or to the Super Bowl “on the taxpayer’s dime,” he said.

In the last several weeks, Las Vegas hotels saw the cancellation of 30,000 hotel room nights at an estimated loss to the city of $20 million, according to the Las Vegas Convention and Visitors Authority.  Goldman Sachs, which took $10 billion in bailout money, cancelled its technology conference and State Farm dropped its October convention expected to have 17,000 attendees.

But why stop at Las Vegas?  Who needs conferences and conventions anyway?  Not businesses looking for clients, or managers looking for better ways to do business, or city leaders who keep telling us convention business is essential to their economic development.

By the way, Goldman Sachs said it was leaving Las Vegas because of the company’s “best efforts to operate according to the requirements of the new landscape of our industry.”  It didn’t mention, however, the $600,000 cancellation fee to the hotel or the other costs associated with moving a big event at the last minute.

Some may think the move was to control public perception.  And it was, because it had nothing to do with economic reality.  Mundus vult decipi

John David Powell

Posted by John David Powell on 2/26/09

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