Its public approval at record lows, Congress this week returned to popular and comfortable territory: flogging CEOs.
You might think that after eight months of passing no major legislation that members of Congress would exercise some humility in pointing out shortcomings of other people’s leadership. But humility doesn’t win votes or media adulation.
So there they sat, in committees on both sides of the Capitol on Tuesday, mustering bipartisan outrage, lecturing business executives on best business practices, preening for the cameras, and venting cheap populism.
In front of the House Commerce Committee’s Digital Commerce and Consumer Protection Subcommittee, former Equifax CEO Richard Smith took a beating for security lapses that allowed hackers to access financial information on an estimated 145 million customers. The Wall Street Journal reported:
From the Washington Post:
The Senate Banking Committee, meanwhile, put Wells Fargo CEO Tim Sloan on the hot seat. The San Francisco-based bank has been unable to put to rest a scandal, first reported in 2013, that it created more than 3 million credit-card and deposit accounts in the names of customers who did not want them.
On Tuesday, Sen. Elizabeth Warren (D-Mass.) told Sloan, according to CNN Money: “At best, you were incompetent, and at worst, you were complicit. Either way, you should be fired.”
Nearly a year ago, senators led by Warren succeeded in ousting Sloan’s predecessor, John Stumpf. At the time, Warren told Stumpf, to his face: “You should resign. … You should be criminally investigated.” He stepped down weeks later.
Political leaders as far back as Roman emperors have recognized the value of entertaining public spectacles. At least then, Christians presumably tried to fight back against the lions. Today, business executives before Congress mostly mumble contrition, like schoolchildren hauled before the principal.
In some cases, it is true that they have made mistakes. Wells Fargo permitted a culture that valued opening accounts at all costs and was slow to acknowledge and address the scope of the problem. Equifax failed to update its software to prevent hacking, then seemed ill-prepared to work with affected customers when it finally acknowledged the breach six months later.
They are paying prices for those mistakes: Wells Fargo last year was slapped with $185 million in fines and says it has fired 5,300 employees. It is heading toward settling a $142 million class action lawsuit and has paid back the small number of customers who actually experienced financial harm. The company dropped from No. 7 to No. 100 on an annual list of most respected brands.
Equifax ousted Smith last month and faces about two dozen class-action lawsuits. Its sins are more recent, and damage to the company will surely be severe. Smith goes before congressional panels Wednesday and Thursday.
Of course, Congress can’t be fined or sued for mismanagement. But a recent Quinnipiac poll showed its public approval rating at 10 percent, the lowest figure in more than 40 years.
Business executives report to their boards of directors. They are accountable to their customers and to their shareholders. They have an obligation to obey the law and to listen to regulators.
Members of Congress have a duty to oversee federal regulators. They are free to receive information from many sources to help them write legislation, and there are actual important policy questions related to banking and consumer privacy laws. However, they are not elected to micromanage businesses—a task for which they are spectacularly ill-equipped.
Many of these members of Congress lack managerial and business experience, to say nothing of expertise in cybersecurity. The number of representatives who have led companies the size of Wells Fargo or Experian probably approaches zero. Even fewer have headed large companies in the middle of a crisis.
So why would businesses follow advice, or even accept criticism, from members of Congress?
The simple answer, of course, is power. Head to Washington, prostrate yourself before Congressional overlords, and perhaps they’ll spare you from harmful legislation. Despite the huge distraction to running their businesses, that’s the plan many executives have followed. As we saw Tuesday, they follow it at the cost of negative press and emboldening scalp-hungry demagogues.
