What Does the Trump Presidency Mean for the Economy?

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Joseph Brusuelas

The upset presidential election victory of Donald J. Trump and the Republican party’s victory in races for the House of Representatives and the Senate signal major changes ahead in both the federal government’s approach to growth and the Federal Reserve’s approach to monetary policy. Most evident among forthcoming policy changes will be a return of supply-side tax cuts, large operating fiscal deficits, and a move back toward more traditional monetary policies that, over time, should lead to higher short and long-term interest rates.

Below is an outline of my views on the implications of a Trump presidency for economic growth, taxes and infrastructure, central bank policy, and interest rates and trade.

Economic Growth

My firm anticipates that the Trump administration will attempt to achieve the economic equivalence of a strategic breakout with respect to the pace of economic growth. In other words, with the economy mired in a long-term sluggish growth path below 2 percent, the administration will turn to deficit spending, infrastructure, and fiscal stimulus to achieve stronger economic growth. The administration will also seek to reform Dodd-Frank in a significant way, which would be a boost for Wall Street, and will also move to inject private competition into the health care system.

While there will likely be a faster pace of growth in the near term, uncertainty about the role and status of the U.S. in the global economy may combine to create longer-term issues, particularly involving free trade that, ironically, act as a drag on growth.

Taxes and infrastructure

From a purely economic point of view, it will be difficult to lift the long-term growth trend much above 1.5 percent without significant tax reform and productivity-enhancing changes related to tax investments and improving national infrastructure. Given the major demographic challenges associated with the aging of the Baby Boomer generation, and the gradual entry of the Millennial generation into the workforce, the underlying conditions of the post-Great Recession economy are not conducive to a quicker pace of growth unless there is major tax and entitlement reform.

In our estimation, based on visits to policymakers in Washington, the order of operations for the first two years of the Trump Administration will likely proceed in the following fashion.

  • A move to engage on comprehensive tax reform will likely be one of the primary orders of business in January 2017. We expect the Trump administration to work with Congress to craft a deal that would revolve around lower individual and business tax rates along with an end to corporate tax inversions. Under these conditions, an attempt to lower individual tax rates based on the framework set out in the House Republican blueprint released in June of this year of 12, 25, and 33 percent, would be the most significant tax reform since 1986.At the heart of Trump’s tax plan is the intention to reduce taxes on pass-through entities (eg, sole proprietorships, limited liability companies, S Corps., and so on) to 15 percent, which would decisively favor the middle market, which accounts for 40 percent of GDP and employs one-third of the labor force.
  • The probability that a bipartisan bill on a multi-year infrastructure project will pass is high. The glue that would hold this together would likely be parallel legislation that would seek to tax the $2.6 trillion in corporate profits being held abroad. There is growing realization in both political parties that the infrastructure around the country has been allowed to slip into such disrepair that it has become something of a national embarrassment.

It is important to note that a robust infrastructure is not an economic panacea. It is a long-run productivity-enhancing policy that is more of a legacy issue, as opposed to something that will jump start economic activity in the near-term. If there is no tax reform, then growth will remain decisively in the sub 2 percent range.


Joseph Brusuelas is chief economist of RSM US.

Bust the Holiday Job Search Myth: Career Partners International’s Brian Hinchcliffe Shares the Facts

Job seekers hear an array of stories about job seeking through the holidays, many of which are false.  The predominant myth is that nothing is going to happen between now and the end of the year.  A whole month where there is no business activity!  Really?  No business worth working for is going to waste one-twelfth of its year.  Just as production does not stop, the need for key people does not go away just because of the Holidays.

Holiday

The key to success is how hard and how smart you work at your job search.  Challenge conventional wisdom, and you might find the reality is a whole lot different than the myth!  Here are six reasons why the holidays are a great time to accelerate your job search.

  • Competition Decreases: The funny thing about myths is that lots of people believe them.  And, the Holiday Job Search Myth is no exception.  Many job seekers back off from their job search believing that nobody is hiring.  This is great news for you!  Less competition!  It’s time for you to intensify your search and take advantage of the fact that others have slowed down their efforts.
  • Business Travel Slows Down: Why does this matter to you – you’re not traveling?  And neither are those busy executives – the ones who are always on the road and hard to reach – the ones you want to meet with for advice and information.  They’re back in town over the holidays and available to meet with you.
  • People Are More Receptive: ‘Tis the season to be jolly!  Holiday parties with family, friends, and industry associations give you many opportunities to network.  And, decision makers, like everyone else, are in the holiday mood and more accessible.  What’s more, if you play your cards right, they might invite you to that holiday party where you can meet other senior execs for more advice and information.
  • Budgets Drive Decisions: If there is no budget approval, there is no job.  When budgets expire at the end of the year, no manager wants to have to go to their boss and ask for approval to hire next year because they didn’t get the position filled this year.  They need to get that vacancy filled in a hurry!  Target that decision maker and help them to help you.
  • Recruiters Want Their Commissions: If there’s an executive recruiter involved, you can rest assured they want to maximize their year-end commission.  And they don’t get paid unless you – or someone like you – gets hired before the end of the year.  They will be doing everything in their power to fill the job, and you’re well qualified, experienced and prepared.  So, why shouldn’t it be you in that position?
  • You Want to Maintain Your Momentum: Winning that great job does not happen overnight.  You have to work at it diligently and persistently.  Maintaining momentum is key.  The competition, having decided that partying and shopping was more important than job seeking, has dropped back to the end of the line.  And – if you haven’t already won the job – you’re at the front of the line come the beginning of January!  Ready, willing and able!

So, ask your Career Coach to help you change your thinking, adopt a different perspective, and finish up with the job you want, where you can succeed.  Remember that finding employment is a business transaction – you win the job because you demonstrate that you can solve the business problem that keeps the hiring manager awake at night.  Become effective and impassioned in selling a product you know best – YOU!

About Brian Hinchcliffe
Brian Hinchcliffe is Director, Executive Career Transition Services, with Career Partners International in Houston, Texas.  He prepares executives for their next career opportunity.  This article was posted on LinkedIn, Facebook and Twitter in November, 2016.

The Board’s Role In Brand Oversight

Jim DeLoach

Jim DeLoach

Branding is the process by which a company establishes a significant and differentiated presence in the marketplace that attracts and retains loyal, long-term customers. A strong brand has a significant impact on the company’s shareholder value. As such, the board should dedicate some time to oversight of the brand’s reputation and stability.

Several thoughts on the board’s governance and oversight of the company’s branding and brand management follow that are based on my firm’s experience and a recent NACD Dallas chapter roundtable discussion I facilitated in September involving active directors and marketing executives.

  • Understand the brand and brand portfolio. While the board’s governance role is rarely involved in the intricacies of managing or communicating the brand, directors should understand the company’s positioning and related brand promise. This baseline understanding is the price of entry into any conversation about a company’s branding. For example, what expectations does the brand inspire in current and prospective customers that differentiate the company’s offerings from competitors’ offerings? Does the company deliver on that brand promise in every customer interaction? Most importantly, how does management know this vital alignment exists? Consider brand implications from other aspects of the business, too: employee relations, supplier interactions, quality processes, research and development, and advertising.
  • Ask management where and when they would value input. Does the board clearly understand the type of interaction management would like to have with respect to the brand management process? Executives and directors should have a mutual objective: engage in dialogue in the right way and at the right time, and focus on the issues that most demand board oversight.
  • Think strategically about branding and brand management. Brand discussions are tied inextricably to discussions about strategy and markets. Therefore, the board’s focus should be directed to strategic oversight rather than to the tactical, day-to-day nuances of managing the brand or brand portfolio. For example, one company conducts a two-day strategy retreat where directors and senior management focus on important questions about what the future looks like, the pain points that present opportunities, what the company is doing to face the future confidently, and the adjustments necessary to the strategy. Debates about strategic direction incorporate discussions about the company’s markets, key differentiators, and brands.
  • Measure the contribution of branding to shareholder value. The level of investment in the company’s brands, the return on those investments, and the process for monitoring each brand’s performance are worthwhile topics on the board’s agenda. How is the company measuring the return on investment (ROI) and sustaining and increasing the contribution of branding to shareholder value? ROI can be difficult to measure because customer loyalty, which helps to promote stable cash flow over time, is an integral component. That said, the math underlying the cost of winning new customers versus that of retaining existing customers is not difficult to understand. Neither is the contribution of effective brand management to reducing the volatility associated with future growth expectations and economic downturns.
  • Be involved in discussions about new branding opportunities and building value from acquired brands. How does management decide whether to build or buy a brand to diversify the brand portfolio? This conversation can evolve into a mergers and acquisitions (M&A)-type dialogue that, if the transaction is significant, should take on all characteristics of board M&A oversight spanning the pre-acquisition, acquisition, and post-acquisition integration phases of the process. If the company is acquisitive, the board should understand the possible strategic contribution of acquired brands when approving the company’s strategic plan. The board may also want to become familiar with the M&A pipeline and the potential targets in management’s line of sight. If brand acquisitions are an integral part of the strategy, directors need to ensure that the management team includes individuals with the requisite skills to execute transactions and integrate acquired brands into the company’s portfolio.
  • Oversee the management of how risks impact branding. There are many risks to consider with respect to brand image. Risk management is an important skill from a branding standpoint because severe unmitigated risks can erode the value of a brand if there are persistent headlines about a high-profile crisis (e.g., data breaches, pervasive quality failures, corruption violations, litigation, and egregious financial restatements). In addition, when there is a re-branding with a new “look and feel” to the brand, a thorough search related to the proposed brand name, word marks, logos, tag lines, and other intellectual property (IP) should be conducted to ensure the new brand is unique and does not infringe on another company’s rights. As the initial years of using a new brand are a period in which opposition can be raised, an effective search process is a prudent investment to undertake before the company spends heavily on the roll out and advertising campaigns. Once a branding architecture is established and protected by trademark, there is a need to monitor and protect the brand from other users to avoid dilution.
  • Periodically evaluate the board’s experience and diversity. Directors with a background in marketing and/or experience with brand-driven organizations are more likely to be comfortable inquiring and raising issues about management’s branding process. Even though industry experience helps, this is an area where perspectives outside the industry may contribute even more value. As in other realms of oversight, the more diverse the board members’ experience and backgrounds, the healthier the debate leading to a more robust branding strategy.

An important closing comment: The board can help temper the propensity of an aggressive management team to develop or acquire new additions to the brand portfolio. Management must have the capacity to manage new and acquired brands to deliver to ROI expectations. The board can help management frame a realistic portfolio diversification strategy. Then, it’s up to management to execute.


Jim DeLoach is managing director with Protiviti, a global consulting firm. 

Directors Assess Long-Term Election Implications

This is the second post in a series addressing the short- and long-term impacts of the 2016 presidential election. Read the first post here.

Directors gathered to discuss the impact of the recent presidential election on November 16, 2016 with audit and risk professionals from accounting firm EisnerAmper. While immediate-term changes were pressing on the minds of directors, they also discussed strategies to address societal and business challenges that coalesced around the following topics.

Can Corporations Bring Back Modern Manufacturing Jobs?

Directors were skeptical that the type of manufacturing jobs that have fueled American economic growth since the end of the second World War would ever return—and asserted that changes in trade agreements may directly impact the ability to create jobs.

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Peter Bible

EisnerAmper Chief Risk Officer Peter Bible outlined how the developing administration of President-elect Donald Trump could affect the ability of American companies to export their goods. The Trans-Pacific Partnership (TPP) “is basically on hold now” said Bible. “He wants tariffs on China and Mexico, wants to renegotiate NAFTA, and reconsider the U.S.’s involvement in international trade agreement.” Bible also pointed out that the president can act unilaterally on trade agreements, thus negating congressional checks on trade decisions.

Jill Wittels, chair at eMagin Corp., voiced concern about the pace at which companies could replace factories to offset the impact of tariffs and build more jobs for Americans. “Imposing currency restrictions and tariffs on goods coming in from China, South America, or other parts of Asia would be highly disruptive,” Wittels said. “You don’t instantly create replacement factories in the U.S. at a comparable cost.”

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Robert Klatell

Robert Klatell, chair of TTM Technologies, concurred. “Realistically speaking, there is not that much flexibility. We cannot create in the United States the scale of manufacturing that exists in China,” Klatell said. “We don’t have the people or the capital to do it. We’ve rarely had a government willing to support manufacturing the same way that China has in the past 10 to 15 years.”

William Leidsdorf, director at Icahn Enterprises, offered a different viewpoint. “I think you have to look at how Congress may change or water down the president’s decisions,” Leidsdorf said. Trump “is a businessman. He’s a pretty good negotiator. He’s going to go in [to the presidency] and say he’ll do a lot of things and then negotiate.”

Educating the Workforce

Re-educating the American workforce has been a ubiquitous topic at roundtables co-hosted by NACD throughout 2016. This event was no exception.

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Sharon Manewitz

A vigorous discussion about the modern workforce was ignited when Carol Robbins, principal of financial services strategic advisory group CER Consulting, cited the invention of a garment-sewing robot as a groundbreaking technology likely to replace countless garment manufacturing workers around the world. Sharon Manewitz, principal and executive director at Manewitz Weiker Associates, a firm that consults with struggling companies, responded: “But who will make the robots? Will they be made here? We need corporate America to help educational institutions change the nature of education in America” to meet the demands of a knowledge-based economy.

The ability of the workforce to be retrained for modern jobs, and how automation will continue to disappear unskilled and lower-skilled positions, was discussed at length. Klatell, however, looked to the future. “Some people won’t make the transition, so we should be focusing on their children,” Klatell argued. “Hopefully, we can get their kids through school with a more meaningful education to make them more employable.”

Laurie Shahon, president of Wilton Capital Group, placed a board lens on some companies’ struggle to fill open positions in certain fields. “Human capital is an issue boards have to deal with,” Shahon said. “We see jobs available in financial services and other industries, but they can’t be filled because there aren’t sufficient qualified people to fill them. The board can and should present alternate cases in its strategy planning to address these changes.”

Deregulation Fallout

If Trump makes good on his campaign promises, deregulation is expected under the new administration and the forthcoming Republican majority congress. How long, though, can directors anticipate deregulated policies to last? Bible pointed out that the current administration might attempt to press through lingering Dodd-Frank provisions. However, he warned that deregulation could cause disruption. “These things are deeply rooted, with a lot of capital behind them,” Bible said. “You can’t just say ‘poof—gone.’ It’s impossible.” Practices that companies have implemented as a result of post-financial crisis legislation [such as the Dodd-Frank Act of 2012] are likely not to disappear as governance best practices because companies invested time, energy, and money to comply with them.

Meanwhile, directors in the room considered what impact deregulation might have on enforcement of the Foreign Corrupt Practices Act (FCPA) and other international business policies by the Department of Justice. Andrea Bonime-Blanc, founder of GEC Risk Advisory, reminded attendees that enforcement of the FCPA, the False Claims Act, and other laws has been on the rise lately. “People are asking, ‘What’s going to happen with FCPA enforcement?’” Bonime-Blanc asked. “Companies can’t just say ‘oh, let’s stop worrying about bribery.’”

Bible responded: “I believe that the FCPA will continue to be enforced as a worldwide standard, and that the new administration’s focus is going to be on executive compensation and on market regulation. I don’t think there will be an increase or a decrease in enforcement.” If anything, Bible indicated that directors should be concerned about the risk of tax repatriation from companies that have moved their headquarters offshore. “Is everyone familiar with how the overseas tax issue works?” Bible asked. “There is $2.6 trillion in money offshore, and $500 billion of that is held by tech companies. There are drives to get that money back into the U.S. economy that can be done without addressing the entire tax structure.”

Don’t Give Up on Culture of Inclusion

The social unrest incited or revealed by the vitriolic presidential election was discussed in the context of the culture of inclusion and tolerance that their companies have invested in building for decades. Aside of the moral imperative felt by many attendees, the disruption of hard-won corporate culture by internal or external actors could present a reputation risk to the company.

Wittels noted that a popular American shoe company had been endorsed by an incendiary website littered with forms of hate speech after a senior manager at the shoe company stated that it felt the country was moving in the right direction under the incoming president. While the company released statements strongly stating its commitment to principles of inclusion, “there are comments about boycott,” Wittels said. “This is a real reputational risk, and a risk with consumers, that could instantly in this communication age go viral and affect the bottom line.”

Klatell returned to the question of the board’s responsibility to ensure that the CEO, his direct reports, and management across the organization are responsible for maintaining a culture of respect, dignity, and inclusion. In the face of employees who may be looking to throw principles of inclusion out of the door, Klatell said: “I’d hope that most companies would stand up and say ‘No, this is what we stand for, and this is how we behave.’”

To see the full list of participants, please click here

Here’s What You Missed

This year’s NACD Global Board Leaders’ Summit did not disappoint. In fact, we upped the ante with hard-hitting keynote addresses (including an “orbital” governance perspective, a comprehensive approach to cybersecurity, and a geopolitical-risk outlook), unprecedented networking opportunities, and can’t-get-them-anywhere-else experiences.

Our 1,300 attendees represented just about every state, 15 countries, and nearly 30 percent of the Fortune 1000. And 60 percent were “Summit regulars”—they keep coming back for more.

Couldn’t join us live? We’ve got the ultimate recap (in no particular order). Here’s what you missed.

Dancing With the Start-Ups

We no longer live in the Mad Men era, when several large brands dominated a particular industry. Start-ups are changing the business landscape and the ways in which we live and work. In partnership with KITE and KPMG, Dancing With the Start-Ups was a competition that invited 12 promising start-ups in three industries to pitch their company in four minutes—and the winner received a prize package worth $30,000. Read this press release to find out who won.

The No. 1 Risk Your Company Is Likely Overlooking

Conversations about culture risk dominated the Strategy and Risk Board Committee Forum and other breakout sessions. Discussions focused on red flags, establishing a stronger onboarding process, and concrete methods for fully engaging board members in their duties as directors.

Diversity

Diversity was not only embodied and discussed during its eponymous half-day Symposium—which focused on the realities of unconscious bias, building the twenty-first century board, and unlocking innovation through diversity—but also was enhanced by the diverse industries, attendee experience levels, and types of companies represented at the Symposium, as well as the learning formats, input, and content of each session throughout the entire Summit. 

Who did our attendees represent?               

38% – Female
62%- Male
30% – Fortune 1000
48 States
15 Countries
190 Board Chairs
43 Industries
47% – Audit Committee
35% – Compensation Committee
39% – Nominating/Governance Committee
7% – Risk Committee

Crickets, Divorce, and the Strategic-Asset Board

Supported by programming that ranged from the newest technologies and emerging ideas to compensation challenges and company strategy, we worked hard to ensure Summit struck the right balance of innovation and need-to-know governance guidance. (See more on eating crickets, the future of divorce, and ways to build a strategic-asset board.)

How to Land Your Next Board Seat

Back by popular demand, this session was standing room only. Whether you were seeking your first board seat or your fifth, “Landing Your Next Board Seat” offered practical takeaways for directors at all career levels.

Higher Ambitions

“Society needs financial wealth . . . but it matters how you make the money,” said Rajendra Sisodia, cofounder and cochair of Conscious Capitalism Inc., and director of the Container Store Group. “Businesses not only create—they can destroy financial wealth, as well.” This keynote by Sisodia was followed by lively discussions on how to develop a higher-ambition board.

Exclusive Opportunities for NACD Fellows

To recognize NACD Fellows (479 in attendance!), several special events were held, including a reception that offered a sneak peek of Innovation Nation, exclusive access to content, networking, and a special gift.

Golf Simulation, Virtual Reality, and Georgetown Cupcakes

Our Innovation Nation and Partner Showcase offered attendees a unique environment to practice their swing, check out the latest in virtual reality, sample famous local fare, and network. (If you didn’t want to try the crickets, you could taste a glass of wine—sans sulfates.)

Our Members Are Raving

Here are just a few of the glowing reviews attendees left at the end of Summit.

gblscomments“Summit was the best ever, by a wide margin. This year, you made it a must-attend event!”

“This is the best conferenceI [have attended] every year for four years running—the most innovation, the best new governance ideas, and the best networking. Thank you!”

“Fast paced and exciting! I loved the emphasis on introducing us to innovations happening in the business world today.”

“Thank you for leaning into conscious capitalism and socially responsible business. I’m pleasantly surprised that NACD is so progressive in [its] thinking.”

“NACD has become a thought-provoking forum for the future of business. Governance is important, but is table stakes. Kudos for being on the leading edge of business sustainability and disruptive strategy.”

Like what you’ve heard? MARK YOUR CALENDAR AND JOIN US IN 2017

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