Do Business Leaders Make Good Governors?

16 May, 2018

IMPACT

Do Business Leaders Make Good Governors?

May 2018

And if so, why and how? In search of answers, researchers from the University of Munich studied the performance of governors of U.S. states between 1960 and 2009 — 446 in all, 48 of whom were in business before they entered politics. These governors were compared based on a range of economic indicators.

By way of background, the research team reports, 10 of the past 20 U.S. presidents (pre-Trump), 55 of 100 senators and 21 of 50 governors fit a pattern. They had law degrees but sought political office at a young age, which meant they racked up extensive public sector experience but almost no private sector experience. (The reverse is true, of course, of our current president who is also a non-lawyer who based his campaign for the presidency on the supposed strength of being a nonpolitician.)

Among the findings:

  • “CEO governors”— the study’s term for those with business backgrounds — typically take office “in times of economic and fiscal strain.” They tend to be elected when income growth rates are low, unemployment rates and income inequality are high, and the levels of public debt and deficit spending are high.
  • CEO governors “exert a statistically significant and economically relevant impact on a state’s economy.” Income inequality, for example, decreases under their leadership.
  • Under Republican CEO governors, there was a statistically lower rate of unemployment than under their Democratic counterparts.
  • Economic improvement under CEO governors seems driven “by an adoption of liberalizing economic reforms,” with the tenures of these officeholders “associated with a reduction in government size and a deregulation of labor markets, both of which are found to boost economic activity.”

The bottom line: It is plausible to expect that governors with a business background “will be more successful when it comes to economic policymaking” and that economic conditions will improve during their tenure. CEO governors succeed because they differ from “career politicians” in their respective economic policy competence.

A business background can enable a governor to know “what is key to growing businesses and jobs” and “make more sensible economic policy choices.” Finally, CEO governors differ from those with only public-sector experience not just because they can recognize “economy-boosting policies, but in their willingness to adopt them.”

Want More Information on This Topic?

Contact Kristin Brackemyre, manager, PAC and advocacy practice, Public Affairs Council

Additional Resources

K Street Embraces KPIs

Ex-CEOs in Congress Increase Their Clout