“Andrew Redleaf is the CEO of Whitebox Advisors, a highly regarded investment advisory service. Redleaf has had a long career running investment funds. He argues that crony capitalism isn’t just unfair, it is a serious threat to our economic system, because “crony capitalists do not depend upon the general success of the economy to achieve their larger goals … The crony capitalist is instinctively satisfied with the notion of a zero-sum game, which, for his purposes, is better than a rising tide that lifts all boats. What good is it to the crony capitalist to see all boats lifted?”11

The crony-capitalist system is self-perpetuating. When they leave office, politicians become cronies of their former colleagues. Consider this simple statistic concerning the number of government bureaucrats and ex-politicians serving on corporate boards. In 1973, only 14% of Fortune 1000 companies had people with “government service experience” on their boards. By 1992, it had jumped to 39%. Since 2002, it has been over 50%. These numbers are even more stunning when you discover that during the same period the average number of outside directors on corporate boards has shrunk from 16 to 9.”

“Researchers who have studied politicians and bureaucrats who retired and then joined corporate boards have found that government officials usually accept board seats within a month or two of leaving office. However, when a former government official’s political party is out of power, “he or she [is] significantly less likely to gain a board appointment.” In other words, this is about access, not about experience. James Kristie, editor of the Directors and Boards Journal (yes, there is such a thing), says that ex-politicians on corporate boards are “very prevalent.” What they offer is “knowledge of how government works, and access to a high-level network of leadership structure that many of the other board members do not.” Sarah Teslik, executive director of the Council of Institutional Investors, notes that former politicians “have not brought any particular expertise that we can measure from the outside.” She also finds that they are less likely to speak up at corporate board meetings and less likely to challenge CEOs than other directors.”

Excerpt From: Schweizer, Peter. “Throw Them All Out.” Houghton Mifflin Harcourt (www.hmhco.com). iBooks.

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