Carly Fiorina Had a Pretty Bad Business Record, But Does That Even Matter?

Carly Fiorina Business Record

Carly Fiorina’s impressive performance at Fox News’ “matinee” debate earlier this month helped boost her standing in the crowded Republican presidential field. As her poll numbers have improved, she has refined her core message of bringing a keen private sector sensibility to the federal government.

But as her poll numbers go up, the scrutiny of her business record has sharpened – and it isn’t pretty.

But does it really matter?

That’s a good question to ask, whether or not Fiorina gets a crack in the next debate (unlikely, thanks to CNN’s rules), because she isn’t the first candidate to do cite business experience as a political positive, even in this campaign (have you heard of Donald Trump?), and she likely won’t be the last.

Carly Fiorina’s corporate record is a bit iffy…

As New York Times’ Dealbook editor Andrew Ross Sorkin has pointed out, Fiorina could be asking for trouble with lines like “I come from a world outside of politics, where track records and accomplishments count.” But, if that’s the case, Sorkin asks, then what should voters make of the fact that Fiorina was fired as Hewlett-Packard CEO after “presid[ing] over such a sharp decline in one of America’s great companies”?

She has defended herself, to be sure. Pointing to a “boardroom brawl,” the dotcom crash at the turn of the century, and the fact that many historic businessmen (e.g., Walt Disney, Steve Jobs) were let go by employers who just didn’t understand them, Fiorina insists her record is one of solid leadership and financial success at HP.

The numbers, spun as they might be, don’t really back that up. Both Sorkin and Washington Post fact-checker Glenn Kessler clarify that Fiorina’s assertion that she “took a company and doubled it in size to almost $90 billion” is actually due to a huge merger between HP and Compaq in 2001. That, of course, increased revenue. But it was also very controversial, both at the time it happened as the product of a proxy fight won by Fiorina (and lost by Walter Hewlett, son of the company’s founder), and in its messy aftermath that saw HP’s stock price tank.

Fiorina’s campaign strongly rebutted Kessler, but conveniently ignored the bigger issue: much of the success the candidate touts seem directly tied to HP’s acquisitions, primarily that of Compaq. Saying “I added thousands of jobs and doubled the size of the company” implies that your decisions created new jobs and new business, rather than just adding an existing business to your own.

But HP wasn’t Fiorina’s only experience at the top of a corporate food chain. Before taking over the venerable computer firm, she was president of telecommunications company (and AT&T spinoff) Lucent Technologies. Re/Code has a deeper look at Fiorina’s tenure at Lucent, which included a record of extending hefty lines of credit to customers so they could purchase Lucent’s equipment (which was, it should be noted, a common practice back then).

Here’s a key part of the story:

Fiorina would have been deeply aware of these deals. But, by the summer of 1999 she was on her way to HP, and at was at a safe distance when the reckoning came. By 2000, Lucent was on the ropes, having extended nearly $7 billion to customers, even as it continued to make risky vendor loans. Winstar and PathNet were both out of business by 2001.

So, by 2002, Lucent had emerged as one of the enablers of the great Telecom Crash, which eclipsed the bursting of the late-1990s dot-com bubble for its size.

Lucent’s share prices cratered, dipping all the way down to $2 from an $84 high.

There were certainly many factors in play around this time, but as the chroniclers of the HP and Lucent fiascos point out, both of those firms were big enough to have an outsize influence themselves. But there were also plenty of problems specific to the companies, with the financial difficulties arising from HP’s Compaq merger and Lucent’s credit program.

Fiorina, however, has not been in business for over a decade. While her record should – and will – be scrutinized, the real question is how relevant it is to the job she now wants.

…but would business experience really tip the presidential scales?

Let’s ask Fiorina herself.

“A major corporation is not the same as being president or vice president of the United States. It is a fallacy to suggest that the country is like a company.”

Of course, that was in 2008 when she was stumping for Sen. John McCain during the presidential race. Now a candidate herself, she has a slightly different interpretation, saying earlier this year that she’s “the best person for the job because I understand how the economy actually works. I understand executive decision-making, which is making a tough call in a tough time with high stakes.”

Fiorina has lately boiled down the country’s problems to a simple matter of asking the people what they want and then doing it. “A lot of this isn’t complicated,” she has said, while outlining a sort of direct democracy solution:

Fiorina said she would gather 10 or 12 veterans in a room, including the gentleman from the third row, and ask what they want. Fiorina would then vet this plan via telephone poll, asking Americans to “press one for yes on your smartphone, two for no.”

“You know how to solve these problems,” she said, “so I’m going to ask you.”

But one audience member at a rally asked her bluntly, “If I press one and you can’t sell your agenda, what’s next?”

And that’s the key question for anyone running for political office, particularly the Presidency, which is an executive position largely beholden to forces outside of a president’s control. A CEO can be in that position, too, but often has a stronger hand to act than anybody in government.

stacked bar chart showing positive and negative presidential traits

In his seminal work on the Presidency, Presidential Power, the scholar Richard Neustadt pointed to the fundamental challenge facing any president:

His political allies in the states need not face Washington or one another. The private groups that seek him out are not compelled to govern. And friends abroad are not compelled to run in our elections. Lacking his position and prerogatives, these men cannot regard his obligations as their own. They have their jobs to do; none is the same as his. As they perceive their duty they may find it right to follow him, in fact, or they may not. Whether they will feel obliged on their responsibility to do what he wants done remains an open question.

In other words, all the checks and balances created by the American Constitution create a massive difficulty for anyone in the White House. Those systemic difficulties are amplified by outsiders, from private interests to public opinion and governments elsewhere in the world. That’s a big reason why presidents – and other politicians – who vow to “change Washington” often don’t. It’s easy to say federal spending needs to be cut, but where should it be cut from? Each budgetary line item has a constituency, and those often cut across party lines. And in a democracy, all of those constituencies get a say in the final outcome.

So just as Fiorina was fired at HP for “challeng[ing] the status quo,” as she says, one might wonder what will happen when she challenges 535 members of Congress, state governments, millions of government workers, and the many interest groups. Not to mention the regular folks who will see reduced benefits, higher taxes, or some other tangible consequence of new policies.

Despite all the railing against the politicians, bureaucrats, and lobbyists, remember this: they all represent large chunks of Americans, and taken together, everybody. Politicians “pander” because there are substantial numbers of voters who agree with those positions. “Bureaucrats” include members of the military and those who support them in civilian roles. And at least some of those dastardly lobbyists likely support and work for positions you agree with, too. They will certainly be out in full force for any “press one” campaign like the kind Fiorina presents.

“Governance is a messy process where coalition-building is required and governors need to be good listeners willing to compromise,” A.G. Block, of the University of California Center Sacramento, told Governing magazine’s Louis Jacobson. “Goals also have social implications that business executives often do not consider when making business decisions.”

In other words, Fiorina’s experience may help her execute the new policies she wants to see, and that is of course the constitutional function of the president. But she will first need to corral enough support from within and outside of government to get those policies enacted. And that kind of buy-in will require a massive political effort.

How business experience does help candidates

Carly Fiorina Politics

That said, politics is a universal of the human condition. Corporate executives practice politics just as surely as folks on Capitol Hill do. Fiorina certainly learned a thing or two during those “boardroom brawls” and she has proven adept at speaking intelligently on policy as well as articulating the concerns of many voters.

And it’s no secret that voters like the idea of business experience, in theory, as a qualification in their politicians’ resumes. It’s a bipartisan thing, too. Herb Kohl was president of Kohl’s, his family’s department store chain, before he became a Democratic senator from Wisconsin. Mitt Romney, of course, had plenty of private sector experience before serving as governor of Massachusetts. And Michael Bloomberg, most recently an independent, founded Bloomberg L.P. and resumed his position as CEO after a twelve-year stint as mayor of New York City. Others include Sen. Mark Warner (D-Va.), Gov. Rick Scott (R-Fla.), Gov. Rick Snyder (R-Mich.), and Gov. Brian Scweitzer (D-Mont.).

The reality is that “business experience” on its own does not make or break a candidate, before or after he or she attains office. Instead, as Governing’s Jacobson concludes, “perhaps the best preparation for government is a combination of private-sector and public-sector experience.”

Success in business is often due to a knack for details, absorbing information from multiple sources, and creating buy-in from all the different stakeholders. But it’s more than that, too: it’s also seeing those changes through by maintaining strategic focus and organizational support from top to bottom.

Carly Fiorina, like Donald Trump and Mitt Romney, is doing an excellent job of seizing the political advantage of her corporate background. To prove she’s ready to govern, she might want to pivot from defending that record to explaining what she learned from its low points and how it informs her current approach to getting things done.

Because whether in government or business, the true calling card of leadership is adaptability.

[photos: Gage Skidmore]

Written by Gene Giannotta

Gene Giannotta is a writer based in Washington, D.C. He reports on economic policy, finance and business news.