From the New York Times
America’s companies have a message for Washington. It’s just not being heard. That’s why they’ve resorted to a new method: Shouting.
You can hear the bafflement, the anger, on the just-completed run of company earnings calls. Typically scripted and banal, the calls have become an unexpected public platform for chastising Democrat and Republican alike for what’s become of our way of governing. A “fiscal cliff” that will reset tax rates looms on Dec. 31, while a presidential election has only sharpened the divide on virtually every major policy issue.
Agence France-Presse/Getty ImagesIn recent months, business-survey results from the St. Louis region have shown ‘bipartisan frustration,’ says bank CEO Robert G. Jones.
“There’s way too much partisan politics,” said John Ambroseo, CEO of laser-tools company Coherent Inc. COHR -1.20% on his July 26 conference call. “People should be focusing on improving the economy instead of just bashing each other.”
The exasperation showed up in the June 12 call of Kevin Grant, chief executive of specialty lender CYS Investments Inc.CYS +0.36% “There is a political climate where there is just pushback, and a bifurcation of politics in this country is making some of this very difficult,” he said.
These CEOs were just the start. I read and sifted through about 500 earnings call transcripts using the CapitalIQ database, and found a surprising number. At least 35 CEOs publicly vented about Washington.
Alas, there was something missing from their public remarks: Any sign that they, too, might actually try to address those underlying problems. How many CEOs pledged, for instance, to withhold campaign contributions and PAC money until Congress passed a competent tax and deficit plan? Or march with the deficit-reduction duo Alan Simpson and Erskine Bowles? Zero.
A few CEOs railed against President Barack Obama. Only 10 even mentioned the name of Mitt Romney. Most spread the blame on the broader culture of Washington itself. Its dysfunction, they say, is having real-world effects as many companies plan fiscal years that began July 1.
In separate interviews, the executives made a simple point: Washington is itself trapping much of the energy needed to repower the economy. Find a smidge of common ground, set clear rules, end policy triggered by “cliffs” and brinkmanship, and business will unleash that energy back.
“If you can’t plan, you don’t spend. And if you don’t spend you don’t hire,” said Paul J. Diaz, chief executive of nursing home and rehabilitation-center Kindred Healthcare Inc.,KND +1.41% in an interview. “It’s just hard to do budgets.”
On his Aug. 3 investor call, Mr. Diaz resisted analysts’ requests to project 2013 performance, saying he didn’t know whether Washington would slash health-care spending or not as part of the “sequestration” budget cuts that will kick in Dec. 31.
“We can recover, and the only thing holding us back is the inability of these guys to compromise,” Mr. Diaz said in the interview. “It sort of breaks your heart.”
Of course, it’s easy for CEOs to blame Washington and the Europe debt crisis for flagging business results. Search for the word “uncertainty” among earnings calls of the S&P 500 companies, and you will find it cropping up in nearly half of them. There is a long, if ignoble, tradition of casting responsibility on regulators, Congress, and the weather.
But the remarks from the last two months do show something different. Call it a collective ache.
Robert G. Jones, chief executive of Old National Bancorp in Evansville, Ind., spoke up on his July 30 investor call. Lack of guidance from Washington, he said, was pushing his clients—typically farmers and industrial companies throughout southern Indiana—to postpone making “good, sound, long-term capital investments.”
Mr. Jones also sits on the board of directors of the St. Louis Federal Reserve. In an interview, he said that in the last three months business-survey results from the St. Louis region have shown “bipartisan frustration.”
“Business owners are looking for confidence. That’s what leadership is about. We’re really managing from the fringes more than from the middle. And it’s awful hard to come to the middle.”
David Golub sifts through some 300 financial statements every year, weighing whether to lend money to middle-market businesses. He said the feedback to his publicly traded company, Golub Capital BDC Inc., GBDC -0.85% shows “a clear slowdown in profit growth from a year ago to now.” Companies, he adds, are delaying decisions on dividends, capital investments and hiring.
And he, too, singled out Washington for what he said was rampant dysfunction on his Aug. 6 chat with analysts and investors.
Mr. Golub said in an interview he has been a long-time Obama supporter. He gave more than $30,000 to the Democratic National Committee last year.
“I don’t think this is just a Republican problem. I think this is a both-party problem,” he said. Watching businesses try to cope, “it makes you want to vote for no incumbents and try again.”
“There are no innocents.”