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Specter, Bank of America, Chrysler: A Bad Week for Business


Jack and Suzy Welch say a recent series of events bodes ill for U.S. competitiveness

You know how sometimes you have a week where Monday starts out on the mediocre side, Tuesday's pretty lousy, Wednesday's worse, and it goes downhill from there? You know how sometimes you have a week so foreboding that you wonder if you're starting to see a trend that you wish you didn't?

There's just been one of those weeks—that is, if you support business. Because if you do, three recent events should make you worry. Each suggests a rising tide of union influence and the concomitant lowering of American competitiveness, just when our country can least afford it.

Are you thinking: "Here they go again, bashing organized labor because of its higher wage rates?" Not so fast, please. For the record (and to repeat), we are very much in favor of healthy wages and employee voice, from the shop floor up, in winning companies. But we object to union work rules, which tend to be rigid and adversarial, and almost always inject needless, gummy bureaucracy into organizations.

Work rules kill productivity. We've seen it in industry after industry. Which brings us back to the three events in recent days that concern us.

The first is Senator Arlen Specter's defection to the Democratic Party. Of course, with all his politicking over the decades, Specter was never a staunch Republican. In 2003, he co-sponsored the Employee Free Choice Act, legislation that, by eliminating the secret ballot and installing "card check," would facilitate unionization efforts, to put it mildly. The Act died in 2007, but its revival this year was going strong. However, just a few weeks ago, in the midst of Pennsylvania's Republican primary, Specter reversed his support of the bill, dealing what appeared to be a deathblow to its 2009-2010 passage.

Who knows what Specter will do next? But with him on board and an Al Franken win likely in Minnesota soon, Senate Democrats could have the filibuster-proof 60 votes they need to push the Employee Free Choice Act into law. Given his support of the legislation on the campaign trail, Barack Obama can be expected to sign it.

Hello, then, to unionization efforts everywhere, and not just in blue-collar places but in banks, insurance companies, and every corner of the service sector. Hello all over again to the possibility of the slow-moving, workers-vs.-management America that existed before globalization. Except that global competition now exists, and it's fierce.

The second worrisome event occurred in North Carolina on Apr. 29, when Bank of America shareholders, galvanized in part by strong union advocacy, voted CEO Ken Lewis out of his post as chairman. What's so bad about that, you wonder? Nothing—in terms of shareholder voice. We're all for that. But ultimately, we don't support the splitting of the two top executive roles because it can encourage dysfunctional, productivity-sapping "decision shopping," wherein managers go to the leader who's most likely to support their initiatives. The split roles also tend to cut into something companies desperately need today: clarity. When there are two bosses, you can often get two messages, and that's too bad.

And then there's the car industry, which the government basically proposed to hand over to the UAW last week. How ironic. The unions, which had a hand in killing Chrysler, now own half its equity, and GM looks to be going in the same direction. As one of us (Jack) put it on Twitter: "Even France wouldn't do this."

Look, we don't know how the Washington-Detroit negotiations played out. But the ease with which the large bank lenders appeared to cave to a pennies-on-the-dollar deal might suggest that TARP was involved; the government was wielding a big stick, and it wielded it in favor of the unions over the conventions of bankruptcy law. Is such a radical upending of the economic system good for business confidence and capital formation? It's hard to imagine how.

And so, we are beginning to feel afraid—very afraid. We believe America needs to be more competitive than ever to get out of this recession.

It looks like not everyone agrees.

Jack and Suzy Welch look forward to your questions. You can e-mail them and view their new website at www.welchway.com For their podcast, go to www.businessweek.com/search/podcasting.htm.

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