Flightpaths of wishful thinking

An UnAmerican Business
April 28, 2006

I am sure that if I ever met Donald Kalff face to face, I would find out that we share many common views and values: a preference for balance and equilibrium and abhorrence for excesses, a strong belief in free markets for consumers, an interest in sustainability of business enterprises. We most certainly agree on the statement: "The creation of value has come to depend on the quality of co-operation between top management, experts and battle-hardened middle management."

Despite such likely common ground, I found Kalff's book deeply irritating. First of all, I feel a natural and fundamental dislike for prescriptive models, in this case the "European enterprise", which are as vague in their description as they are long-winded in their presentation and which demand from us an act of faith as a substitute for hard research. And, second, as a fervent European, I find the abuse of the term "European" to give some credibility or supposed superior dignity to someone's pet theory offensive as an unauthorised appropriation of the common good.

Having gained a PhD from Wharton Business School in Pennsylvania, lived and worked in the US, UK and continental Europe and served on the executive board of KLM, Kalff is certainly able to compare US and European business environments. He is also visiting professor at the Leiden University School of Management.

However, I found his examples of European superiority very unfortunate. He seems to propose to us how brilliantly KLM and Alitalia worked with the European Commission and the European Investment Bank in the context of creating in Milan a Malpensa hub and protecting a Linate hub for a future alliance or merger of the two national airlines. I had the misfortune to pass through Malpensa a few days after its opening. To this day, I associate that experience with a travel nightmare. The whole concept of European regional hubs was arrogantly thought through with bad misjudgment of the competition from point-to-point flightpaths.

Kalff names names: "The spectacular failures of some of the high-flying European CEOs who tried to emulate their American counterparts will have a lasting impact." I suspect that what offends the author is the high level of compensation enjoyed by those chief executives. The logic of envy is not a strong foundation for a new normative model of business. Or are we to understand that hubris and arrogance are a prerogative of US business, while everyone in Europe is corporately responsive, prudent and wise?

I resent the implication that working hand in hand with governments and regulators should make a European approach to corporate business more enlightened and/or morally superior. It is exactly that sort of too cosy relationship that leads to cronyism, protectionism and corruption. There should be a natural tension between business and governments or regulators.

Without that, consumers end up paying the price and politics suffers by becoming a vehicle for special interests lobbying, with damaging consequences for European democracy.

The part of the book I have a serious problem with is where it advocates some incredible new mental construct, the "European enterprise", where no one plays corporate politics, everyone is loyal and highly innovative at the same time and where all staff are wedded to a sole objective: creating sustainable cash flow for the shareholders in a corporately responsible way and in harmony with labour, the territory and governments. This is not only utopia, it is a misrepresentation of European history and culture, an attempt to make us Europeans feel superior to others, for which there is absolutely no scrap of evidence. On the contrary, there are hundreds of years of mercantilism and two world wars to prove otherwise.

Perhaps I misjudge Kalff. After all, he does say: "Of course enterprise models are not designed, they develop." And he does believe, as I do, in the positive power of small boards. However, having dropped the "Rhineland" model of postwar German consensus, he does not find it in himself to also jettison the two-tier board and workers' co-determination. The result is something so improbable that I found it hard to imagine. In particular, his idealisation of how major European industrial families think is something many of their members may find difficult to recognise.

Had I browsed this book in a bookstore, I would not have bought it. But I hope that someone might because I would like him or her to explain to me what it is really all about, beyond wishful thinking and the rewriting of history.

Rudi Bogni, a former investment banker, is a corporate director and foundations trustee.

An UnAmerican Business: The Rise of the New European Enterprise Model

Author - Donald Kalff
Publisher - Kogan Page
Pages - 216
Price - £18.99
ISBN - 0 7494 4490 8

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