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Erschienen in: Public Choice 3-4/2016

11.04.2016

Blair disease? Business careers of the former democratic heads of state and government

verfasst von: Alexander Baturo, Slava Mikhaylov

Erschienen in: Public Choice | Ausgabe 3-4/2016

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Abstract

Examining the careers of democratic heads of state and government from 1960–2010, we find that one in every seven turns to the private sector after office. Distinguishing between the factors that attract leaders to business and those that render leaders attractive, we find that the global CEO compensation rates, cultural norms, having served in office in Anglo-Saxon countries as well as their personal background matter. We also find that certain economic outcomes and policies in office such as economic growth and reduction in state spending are often associated with post-tenure business careers. We do not find evidence, however, that leaders are able to implement policies with future careers in mind, which would in turn raise concerns over accountability.

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Fußnoten
1
See Simon Kuper, “Another Outbreak of Blair Disease,” Financial Times Magazine, 21 March 2014. On Sarkozy, see Anne-Sylvaine Chassany and Hall (2013) “Nicolas Sarkozy’s Road from the Elysee to Private Equity,” Financial Times, 28 March 2013.
 
2
For example, Prime-Minister Mario Monti of Italy (2011–2013), the author of ambitious austerity measures, was a former senior advisor to Goldman Sachs, similar to several European leaders and top civil servants. See Stephen Foley, “What Price the New Democracy? Goldman Sachs Conquers Europe,” The Independent, 18 November 2011.
 
3
First, anticipated career concerns in the business industry may affect behavior while in office (Leaver 2009). Second, concerns over significantly higher salaries in post-public service roles may influence the type of people seeking public employment in the first place (Caselli and Morelli 2004; Keane and Merlo 2010).
 
4
See http://​www.​epi.​org/​publication/​ceo-pay-2012-extraordinarily-high/​. Accessed 7 July 2015. We additionally estimate that the total CEO compensation of the Top 100 firms increased from 3.5 to 14.1 million from 1992–2014 (authors’ estimates from the S&P ExecuComp database that is the executive compensation industry standard source).
 
5
On average, in 2005 directors made USD 97,000 while in 2014 the figure was 215,000 (authors’ estimates from the S&P ExecuComp data).
 
6
Ernesto Zedillo (1994–2000) of Mexico joined the boards of Alcoa Inc., Procter & Gamble, Union-Pacific and Citigroup. See http://​www.​bloomberg.​com/​research/​stocks/​people/​person.​asp?​personId=​1148781&​ticker=​PG. Accessed 15 June 2015.
 
7
Anne-Sylvaine Chassany and Hall (2013) “Nicolas Sarkozy’s Road from the Elysee to Private Equity,” Financial Times, 28 March 2013.
 
8
We are grateful to an anonymous reviewer for pointing it out.
 
9
Individuals are prone to exaggerate the effects of personal factors and underestimate the role of context. This bias, i.e., the fundamental attribution error, is largely driven by errors in perception so that more salient personal factors are more “visible” while context is easier to relegate (Taylor and Fiske 1975). As a result, competence or lack thereof can be erroneously attributed to leaders under whose watch the economy has improved, whether or not such leaders had any sway over these changes (e.g., Patty and Weber 2007).
 
10
Such as President Carter (1977–1981) of the USA who opened the Carter Center instead of seeking private sector employment (Brinkley 1996). We are grateful to the anonymous reviewer for highlighting this argument.
 
11
Additionally, the private sector may also recruit leaders as a reward (Mattozzi and Merlo 2008). Eggers and Hainmueller (2009, p. 531) argue that politicians who help firms while in office accrue wealth via “lucrative employment opportunities provided to politicians after retirement.” Tenure in office of national leaders, however, coincides with all kinds of economic, financial and social policies implemented at the time; it is not necessarily correct to attribute causality between policies implemented by leaders’ governments in certain sectors of the economy and their employment by firms in those sectors. Furthermore, ex-leaders typically work for several companies and run their own business consulting interests in retirement (e.g., Schweizer 2015). The identification of post-tenure careers as possible rewards is extremely difficult even at the lower levels of government or specific branches thereof. For instance, the movement of former military generals into the boards of military contractors may simply indicate that the former have the required experience gained from the public job (Etzion and Davis 2008). Therefore, we do not pursue the reward hypothesis in a cross-national setting. Still, in further and supplementary analyses we briefly examine whether economic performance and “pro-business” policies in office are associated with future business careers and whether leaders can be shown to influence such policies.
 
12
Fully retired leaders are also excluded. Retirement is defined as when a leader retires from public life altogether and there is no record of such leader pursuing any kind of career in retirement. It is conceivable that some leaders are mis-categorized because of the lack of available data. In the supplementary analyses we conduct sensitivity tests.
 
13
“Tony Blair businesses amass £13 m cash after surge in profits,” Guardian, 5 January 2014, Katie Allen.
 
14
The quote is from Harry McGee, “Few Surprises in Much-leaked Budget,” The Irish Times, 9 December 2009. On employment, see Conor Ryan, “Cowen Appointed to Board of O’Brien’s Topaz Energy,” Irish Examiner, 3 May 2014.
 
15
We thank an anonymous reviewer for this suggestion.
 
16
Note Predicted probabilities of business careers are estimated following a series of interaction models, using margins in Stata. Graphs in the left column display probabilities of business career when Spending \(\triangle\) is fixed at −2 standard deviations below the mean, over the range of four different indicators for constraints in office, separate estimations. Similarly, graphs on the right display probabilities when Growth over tenure is fixed at +2 standard deviations above the mean, over the range of four indicators. First row reports Models 4–5; Table 2, second to fourth rows display results estimated from auxiliary models in supplementary materials
 
17
“No previous European ex-leaders made this kind of dough. Just 20 years ago the British ex-prime minister Harold Wilson was showing up at the House of Lords stricken with Alzheimer’s, led by his nurse, because he needed the daily attendance fee” (Kuper, op. cit.).
 
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Metadaten
Titel
Blair disease? Business careers of the former democratic heads of state and government
verfasst von
Alexander Baturo
Slava Mikhaylov
Publikationsdatum
11.04.2016
Verlag
Springer US
Erschienen in
Public Choice / Ausgabe 3-4/2016
Print ISSN: 0048-5829
Elektronische ISSN: 1573-7101
DOI
https://doi.org/10.1007/s11127-016-0325-8

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