Meeting in the Muddle

JOURNAL REPORT

Follow The Experts An Online Conversation DETAILS, R2 Meeting in the Muddle At the annual meeting of The Wall Street Journal’s CEO Council, the disconnect between what’s going on in Washington and what corporate leaders are asking for was as sharp as ever

BY JOHN BUSSEY and health insurance, among other things. Demo- tions with nations in Europe and Asia. And they crats and Republicans at the conference once again heard how innovation in online education is reach- decried a “failure of leadership”—by the other guy. ing thousands of new students. IF YOU NEEDED EVIDENCE of the disconnect be- President Barack Obama, speaking to the group, But the urgent need to find political compromise tween business and Washington, it was on display did make one overture. Breaking some news, he said seemed to hang over the two-day conference. The at the annual Wall Street Journal CEO Council last he’s willing to address immigration reform piece- CEOs even offered their own olive branch. After week. meal—an approach favored by many House Republi- breaking into task-force sessions to address key pol- In the business world, companies are growing cans—rather than as one sweeping plan, an ap- icy matters, they issued five top recommendations, again. Earnings are up, so too employment. proach the president has favored. Business wants including this one: But what the chief executives want, before they reform that lets more skilled workers into the U.S. “Business and government should build better flip the switch on more business investment, is pol- On other topics, like the Affordable Care Act, bridges to each other—rather than viewing each icy clarity: What will health-care costs be 12 months there was little consensus. That worried one CEO in other as adversaries—to advocate for free enter- from now, and tax rates, and borrowing costs? Will finance. “We’re just at the start of the problems prise and shared prosperity.” the country change its immigration policy? How will with the rollout,” he said. “They aren’t businesspeo- energy regulation affect supply? And will politi- ple. They don’t understand the bad effects down the Mr. Bussey is an assistant managing editor and cians tackle the long-term deficit problem? line of what they started.” executive business editor of The Wall Street Journal. But what they heard in Washington was more Of course, there was plenty of upbeat news, too. He can be reached at [email protected] or on stalemate—on the budget, the debt ceiling, taxes The CEOs were briefed on big new trade negotia- Twitter @johncbussey.

‘People like the idea of ‘Nobody in this city corporate tax reform talks to each other in theory.’ anymore.’ President Barack Obama Gov. Chris Christie

‘The president’s ‘The president’s agenda today is very budget is something much aligned with the he still sticks by.’ business Jacob Lew community’s.’ Penny Pritzker

‘If this becomes about ‘Growth creates a raising taxes, we’re not virtuous circle, which going to get anywhere.’ creates more growth.’ Rep. Paul Ryan Lawrence Summers Ralph Alswang/Dow Jones (6)

INSIDE

President Barack Obama Gov. Chris Christie on Rep. Paul Ryan on where Jacob Lew on how likely it Penny Pritzker on the Gen. Martin Dempsey on on the HealthCare.gov why both Republicans and the Republicans in is that meaningful priorities of the Obama the trouble spots in the rollout, the budget deficit, Democrats deserve a share Congress are willing to economic reform will take administration, and how Mideast—and what sets immigration reform and of the blame for the failure negotiate in the current place in China—as well as they are aligned with the military leaders apart from how to change the to get things done in round of budget talks—and the prospects for change in interests of the business leaders in the corporate corporate-tax code, R4 Washington, R6 where they aren’t, R6 the U.S., R7 community, R8 world, R8

Michael Froman on the Jim Yong Kim, Glenn Lawrence Summers on The CEOs list their top CEO Task Forces offer PLUS: Amy Gutmann, prospects for free-trade Hubbard and Stanley how Washington has to priorities for action on their top recommendations William E. Kirwan and agreements in Asia and Fischer on the economic stop focusing only on some of today’s most for action on health care, Daphne Koller on where Europe, and what outlook for emerging deficits, and start thinking pressing public policy and energy, cybersecurity, U.S. higher education is businesses might expect markets, Europe and about the power of business issues. No. 1: competitiveness and the heading, and the need for from those pacts, R9 elsewhere, R10 economic growth, R11 immigration reform, R2 future of capitalism, R4 innovation

PLUS Flashbacks from Timothy Geithner, Rob Portman and José María Aznar at the 2012 CEO Council annual meeting R2 | Monday, November 25, 2013 THE WALL STREET JOURNAL. JOURNAL REPORT | CEO COUNCIL

CEO COUNCIL MEMBERS The CEOs’ (Chief executives except as Brian P. Kelley, Paolo Scaroni, Eni noted) Green Mountain Coffee Mark Schneider, Roasters Inc. Fresenius Group Richard C. Adkerson, Declan Kelly, Teneo Holdings Mary Lee Schneider, Freeport-McMoRan Copper Christopher J. Klein, Follett Corp. Top Priorities &GoldInc. Fortune Brands Home & Stephen A. Schwarzman, Hamid Akhavan,Unify Inc. Security Inc. Blackstone Nicholas Akins, American Klaus Kleinfeld, Alcoa Inc. DavidT.Seaton, MORE THAN 100 CHIEF EXECUTIVES of large companies assembled at The Wall Street Electric Power Henry R. Kravis, Co-Chairman Fluor Corp. Journal’s annual CEO Council conference to discuss some of today’s most pressing public Joel T. Allison, Baylor Health and Co-CEO, KKR & Co. Gregg M. Sherrill, Care System T.K. Kurien, Wipro Ltd. Tenneco Inc. policy and business issues. Mukesh Dhirubhai Ambani, Marc B. Lautenbach, Pitney Ralph W. Shrader, Booz Allen The CEOs divided into five task forces and debated pri- Chairman and Managing Bowes Inc. Hamilton Inc. orities in the following areas: staying competitive, health- Director, Reliance Armand F. Lauzon Jr., Gary B. Smith, care innovation, the future of capitalism, cybersecurity Industries Ltd. Sequa Corp. Ciena Corp. George S. Barrett, Cardinal René Lerer, Frederick W. Smith, and energy. Each task force presented its recommenda- Health Inc. Executive Chairman, FedEx Corp. tions, and the full conference then voted these as the top Dominic Barton, Global Magellan Health Services Sir Martin S. Sorrell, five overall priorities: Managing Director, Richard I. Lesser, Boston Group CEO, WPP Group McKinsey & Co. Consulting Group Edward W. Stack, Dick’s JeffreyL.Bewkes,Time Michel M. Liès, Group CEO, Sporting Goods Inc. IMMIGRATION REFORM process, particularly at state perity. Ensure that experi- Warner Inc. Swiss Re AG John T. Standley, The U.S. needs immigra- and local levels, through enced businesspeople serve John P. Bilbrey, Hershey Co. Gerardo I. Lopez, AMC Rite Aid Corp. 1 Leon David Black, Apollo Entertainment Inc. Shivan S. Subramaniam, tion reform to retain tal- youth apprenticeships, tech- at top levels of government. Global Management LLC Peter S. Lowy, Co-CEO, FM Global ented foreign workers who nical training, STEM and Samir Y. Brikho, AMEC PLC Westfield Group Joseph R. Swedish, have been educated in the continuing education. FOCUS ON HEALTH- Glenn A. Britt, Time Warner Rob Lynch, VSP Global WellPoint Inc. U.S., attract talent to the CARE QUALITY Cable Inc. Ajit Manocha, Anthony R. Tersigni, 5 Lynn Britton, Mercy Health GlobalFoundries Inc. Ascension U.S., and allow a freer flow TAX REFORM Government and industry Kevin Burke, Consolidated Frank R. Martire, Tidjane C. Thiam, Group CEO, of people into and out of 3 The U.S. tax code should seek better health- Edison Inc. Fidelity National Prudential PLC the U.S. Immigration policy needs an overhaul; the cur- care outcomes, safety and Gregory W. Cappelli, Apollo Information Services Inc. Robert Thomson, News Corp should mirror labor needs. rent system hurts U.S. com- service and aim to reduce Group Inc. Timothy J. Mayopoulos, Adewale Tinubu, Group CEO, Gregory C. Case, Aon PLC Fannie Mae Oando PLC petitiveness and encourages error and harm. There Terrence W. Cavanaugh, Erie Liam E. McGee, Hartford Fredric J. Tomczyk, EDUCATION REFORM companies to move abroad. should be agreement on de- Insurance Group Financial Services Group TD Ameritrade Holding 2 The U.S. needs to in- Close loopholes and simplify sired-outcome metrics for R. Marcelo Claure, Larry J. Merlo, N.V. Tyagarajan, vest in education to train the system. quality and evidence-based Brightstar Corp. CVS Caremark Corp. Genpact Ltd. Peter John Coleman, Stephen D. Milligan, Western Bernard J. Tyson, Kaiser employable workers, starting practices. Government and Woodside Petroleum Ltd. Digital Corp. Permanente at the K-12 level, with a fo- BUSINESS- industry should eliminate Steven H. Collis, Wick Moorman, Norfolk Myron E. Ullman III, cus on and respect for mul- 4 GOVERNMENT waste—estimated at $765 AmerisourceBergen Corp. Southern Corp. J.C. Penney Co. tiple pathways. These in- COOPERATION billion annually—including Michael D. Connelly, Catholic Denise Morrison, Campbell Vincent R. Volpe Jr., Dresser- Health Partners Soup Co. Rand Group Inc. clude vocational training, Business and government unnecessary services and Roger W. Crandall, Rupert Murdoch, Executive Timothy R. Wallace, Trinity apprenticeships and com- should build better bridges administrative inefficiencies. Massachusetts Mutual Life Chairman, News Corp Industries Inc. munity college—not just to each other—rather than And both should employ a Insurance Co. Pierre Nanterme, Mark R. Walter, Guggenheim four-year university degrees. viewing each other as adver- national data network to Fred Crawford, AlixPartners Accenture PLC Capital LLC Kevin S. Crutchfield, Alpha Shantanu Narayen, Adobe Gregory D. Wasson, Businesses should actively saries—to advocate for free create transparency for con- Natural Resources Inc. Systems Inc. Walgreen Co. engage in the education enterprise and shared pros- sumers and payers. H. Lawrence Culp Jr., Indra K. Nooyi, PepsiCo Inc. Mark Weinberger, Ernst & Danaher Corp. John H. Noseworthy, M.D., Young Richard J. Daly, Broadridge Mayo Clinic Edward H. West, Education Financial Solutions Inc. Rodney O’Neal, Delphi Management Corp. D. Scott Davis, United Parcel Automotive PLC William Winkenwerder Jr., Service of America Inc. James F. O’Neil, Quanta M.D., Highmark Inc. Doug DeVos, President and Services Inc. Yang Yuanqing, Lenovo Co-CEO, Amway Corp. Dinesh C. Paliwal, Harman Paul J. Diaz, Kindred International Industries Healthcare Inc. Neal Patterson, Cerner Corp. PARTICIPATING GUESTS Francisco D’Souza, Cognizant Joseph R. Perella, Perella Chris Christie, Governor of Technology Solutions Weinberg Partners New Jersey Eric Elliott, Prime Stefano Pessina, Gen. Martin E. Dempsey, Therapeutics LLC Executive Chairman, Chairman, Joint Chiefs of Scott D. Farmer, Cintas Corp. Alliance Boots GmbH Staff Thomas F. Farrell II, Dominion Douglas L. Peterson, Stanley Fischer, Former Resources Inc. McGraw Hill Financial Governor, Bank of Israel G. Steven Farris, C. Michael Petters, Michael Froman, U.S. Trade Apache Corp. Huntington Ingalls Representative Lex Fenwick, Dow Jones & Co. Industries Inc. Amy Gutmann, Ph.D., Russ Fradin, SunGard Data Nicholas T. Pinchuk, President, University of Systems Inc. Snap-on Inc. Pennsylvania Mark P. Frissora, Hertz Global Eduard Potapov, Former CEO, Glenn Hubbard, Dean, Holdings Inc. Metalloinvest Management Columbia Business School, Jeffery R. Gardner, Thomas J. Quinlan III, Columbia University Windstream Corp. R.R. Donnelley & Sons Co. Jim Yong Kim, M.D., Ph.D., The Wall Street Journal Robert C. Garrett, Hackensack Robert L. Reynolds, President, World Bank would like to thank University Health Network Putnam Investments Group Richard Gelfond, Carlos Rodriguez,Automatic William E. Kirwan, Ph.D., the 2013 sponsors for their generous support IMAX Corp. Data Processing Inc. Chancellor, University of the CEO Council annual meeting. Seifi Ghasemi, Rockwood James P. Rogers, Eastman System of Maryland Holdings Inc. Chemical Co. Daphne Koller, Co-Founder Carlos Ghosn, Renault-Nissan Kasper B. Rorsted, Henkel AG and Co-CEO, Coursera Alliance Frédéric Rose, Technicolor SA Jacob J. Lew, Secretary of the Daniel S. Glaser, Marsh & Dan Rosensweig, Chegg Inc. Treasury McLennan Cos. Gisbert Rühl, Klöckner & Co. Barack Obama, President of Greg J. Goff, Tesoro Corp. Stephen H. Rusckowski, the U.S. Robert Greifeld, NASDAQ Quest Diagnostics Inc. Penny Pritzker, Secretary of OMX Group Inc. Ravi K. Saligram, Commerce James Hagedorn, Scotts Former CEO, OfficeMax Inc. Paul Ryan, U.S. Representa- Miracle-Gro Co. Robert Sanchez, tive (R., Wis.); Chairman, Patricia A. Hemingway Hall, Ryder System Inc. House Budget Committee Health Care Service Corp. Peter A. Sands, Standard Lawrence H. Summers, Paul Hermelin, Capgemini SA Chartered PLC Charles W. Eliot University Lance Hockridge, Aurizon E. Scott Santi, Illinois Tool Professor and President Holdings Ltd. Works Inc. Emeritus, Harvard Univer- Joseph L. Hooley, State George Scanlon, Fidelity sity; Former Secretary of Street Corp. National Financial Inc. the Treasury Thomas Horton, American Airlines Inc. Drew Houston, CEO Council Videos>> Dropbox Scan this code for the full lineup of CEO Council Robert J. Hugin, video interviews with President Barack Obama, Celgene Corp. Gov. Chris Christie, Commerce Secretary Penny John D. Johns, Pritzker, Treasury Secretary Jacob Lew and others, Protective Life Corp. or go to WSJ.com/LeadershipReport.

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Copyright © 2013, Oracle and/or its affiliates. All rights reserved. Oracle and Java are registered trademarks of Oracle and/or its affiliates. R4 | Monday, November 25, 2013 THE WALL STREET JOURNAL. JOURNAL REPORT | CEO COUNCIL If You Fix Health Care, YouFix the Deficit President Obama talks about the disastrous rollout, solving fiscal woes and reforming corporate taxes

Well into the second month of the ill-managed rollout of ‘What we probably HealthCare.gov, tough problems needed to do...was to persist for both the central website of the federal health-insur- blow up how we ance marketplace and the man procure for IT, ultimately responsible: President Barack Obama. especially on a system Speaking before The Wall this complicated.’ Street Journal CEO Council a few blocks from the White House, President Barack Obama Mr. Obama said the website will be working by the end of this month “for the majority of people who are using it.” In an in- line, pay their back taxes—but terview with Gerald Seib, the giving them a mechanism Journal’s Washington, D.C., bu- whereby they can get right by reau chief, the president also our society. And that’s reflected discussed the state of the econ- in the Senate bill. omy, corporate tax reform and Now I actually think that the possibility of another govern- there are a number of House Re- ment shutdown in the new year. publicans—including Paul Ryan, Edited excerpts of their conver- I think, if you ask him about it— sation follow. who agree with that. They’re suspicious of comprehensive Rollout Fallout bills. But…if they want to chop MR. SEIB: You’ve indicated that that thing up into five pieces, as the rollout has been difficult. long as all five pieces get done, I

What do you think you’ve Ralph Alswang/Dow Jonesdon’t (2) care what it looks learned from this experience? like.…What we don’t want to do PRESIDENT OBAMA: I think we 36,000. It was less than 1% nomic team, have consistently a multiple series of negotiations ple like the idea of a simpler tax is simply carve out one piece of probably underestimated the signed up in that first month, maintained that there is a way with John Boehner talked about, system until it’s their particular it…but leave behind some of the complexities of building out a partly because buying insurance to reconcile the concerns about the so-called grand bargain. We loophole that’s about to get tougher stuff that still needs to website that needed to work the is a complicated process for a lot debt and deficits with the con- couldn’t quite get there in the closed. What we can’t afford to get done. way it should. of people. cerns about growth. end, mainly because Republicans do is to keep all the loopholes The way the federal govern- There’s no doubt that we’ve When we talk about our defi- had a great deal of difficulty that are currently in place and Another Shutdown? ment does procurement and lost some time. But the website cit and debt problems, it is al- with the idea of putting in more lower the corporate tax rate. We MR. SEIB: We’re heading toward does IT is just generally not very is getting better each week. By most entirely health-care revenue to balance out some of would then blow another hole in showdowns again: January bud- efficient. In fact, there’s proba- the end of this month it will be costs.…And if we’re able to bend the changes…on entitlements. the deficit that would have to be get, February debt ceiling. Your bly no bigger gap between the functioning for the majority of the cost curve, we help solve the filled. And what I’m not willing Treasury secretary said he private sector and the public people who are using it. problem. Now one way to do Corporate Taxes to do is to have higher rates on thought maybe the system sector than IT. What’s also been expressed as that is just to make health care MR. SEIB: Another way to make the middle class in order to pay crossed the threshold in October So what we probably needed a concern is the mix of people cheaper overall.…That’s what some of that happen would be to for that. and realized it doesn’t want to to do on the front end was to that sign up.…We’ve got to moni- we’ve been doing through some fix the corporate tax code. go through that again. Are you blow up how we procure for IT, tor that carefully. We always an- of the measures in the Afford- PRESIDENT OBAMA: Both my ad- MR. SEIB: Some of the CEOs here confident it won’t happen again? especially on a system this com- ticipated, though, that younger able Care Act. ministration and Republicans addressed the question of how PRESIDENT OBAMA: The way our plicated. We did not do that suc- folks would be the last folks There are some other provi- have talked about corporate tax do you stay competitive. Their system is set up is like a loaded cessfully. Now, we are getting it in….It’s been a while since you sions we could take that would reform.…We put forward a very first priority was this: immigra- gun, and once people thought, fixed. But it would have been and I were young, but as I recall, maintain our commitment to se- specific set of proposals that tion reform. The Senate has “we can get leverage on policy better to do it on the front end, you don’t think you’re going to niors, Medicare, Social Security, would lower the corporate tax passed a comprehensive bill the disputes by threatening default,” rather than the back end. get sick at that time. the disabled and Medicaid, while rate, broaden the base, close House won’t even agree to take that was an extraordinarily dan- We’re going to have to, obvi- still reducing very modestly the some loopholes. And in terms of up. Can you make it happen? gerous precedent. That’s a prin- MR. SEIB: Is it possible you’ve ously, remarket and rebrand, and cost of those programs. international companies and PRESIDENT OBAMA: We should ciple I had to adhere to, not just lost enough time and enough po- that will be challenging in this If we do those things, that competitiveness, what we’ve want to immediately say to for me but for the next presi- tential customers that you’re not political environment. solves our real fiscal problem, said is rather than a whole young people who we’ve helped dent—that you’re not going to going to reach the critical mass and we could take some of that bunch of tangled laws that in- to educate in this country, “You be able to threaten the entire of sign-ups that you need to MR. SEIB: Larry Summers was money, a very modest portion on centivize folks to keep money want to stay? We want you U.S. or world economy simply make the marketplace work? here earlier talking about the the front end, and invest in in- overseas, let’s have a modest but here.” because you disagree with me PRESIDENT OBAMA: It’s some- economy and said one of the frastructure that puts people clear global minimum tax, get And we do have to deal with about a health-care bill. thing we have to pay attention problems is that the system can’t back to work, improve our re- rid of some of the huge fluctua- about 11 million folks who are in I’d like to believe that the Re- to. But keep in mind that this do two things at once. It can’t search and development. tions that people experience. this country, most of them just publicans recognize that was not model of marketplaces was cut deficits and spur growth. He So the idea would be do some People like the idea of corpo- seeking opportunity. They did a good strategy. And we’re prob- based on what was done in Mas- said now it needs to spur things in the short term that fo- rate tax reform in theory. In break the law by coming here or ably better off with a system in sachusetts. And the experience growth. Do you agree? cus on growth; do some things practice, if you want to make the overstaying their visa, and which that threat is not there on of Massachusetts was that in the PRESIDENT OBAMA: Actually in the long term that deal with corporate tax reform deficit-neu- they’ve got to earn their way out a perpetual basis. I do not fore- first month, 153 or 163 people Larry and I and most of my eco- the long-term debt. That’s what tral, then you actually have to of the shadows, pay a fine, learn see what we saw in October be- signed up out of an ultimate nomic team, in fact, all my eco- my budget reflects. That’s what close some loopholes. And peo- English, get to the back of the ing repeated in January.

THE FUTURE OF CAPITALISM The Task Forces’ Business-Government education. ensure long-term stability. 1 Cooperation Business and government Better Immigration CO-CHAIRS should build better bridges 3 Policy Joseph L. Hooley, rather than viewing each other Encourage a freer flow of peo- Chairman, President and as adversaries, to advocate for ple into and out of the U.S., CEO, State Street Corp. Priorities free enterprise and shared particularly for educated and Joseph R. Perella, Founding prosperity. Ensure that experi- skilled workers. Immigration Partner, Chairman and CEO, enced businesspeople serve at policy should mirror labor Perella Weinberg Partners top levels of government. needs. Allow foreign students Myron E. Ullman III, CEO, CEO Council executives split up into five groups to to stay in the U.S. economy. J.C. Penney Co. Promote Education and debate priorities in the following areas. Here are 2 Training Control Government SUBJECT EXPERT Businesses should actively en- 4 Debt Justin Wolfers, Ph.D., their top recommendations. gage in the education process, Government, with support of Professor of Economics particularly at the state and business, needs to address and Public Policy, local levels, to encourage job- the unsustainable increase in University of Michigan STAYING COMPETITIVE ready talent, including youth spending on benefits and gov- apprenticeships, technical ernment debt to minimize Immigration Reform and seek ways to innovate in to work to better align them- training, STEM and continuing short-term disruptions and 1 The U.S. needs immigra- education. selves to common purposes. tion reform to retain talented Business and government workers educated in the U.S. Ta x Re f o r m cannot be antagonists; they and attract talent to the U.S. 3 Overhaul the U.S. tax need to be partners. HOW BEST TO TACKLE CYBERSECURITY Immigration reform could pro- code, as the current system vide an instant jolt to the U.S. hurts U.S. competitiveness CO-CHAIRS Change Our Culture be rolled out in other coun- collusion issues. This requires economy, which we need. and encourages companies to Klaus Kleinfeld, Chairman 1 Companies need to change tries. a clear regulatory framework. move abroad. Close loopholes and CEO, Alcoa Inc. the mind-set of all their em- Education Reform and simplify the system. Shantanu Narayen, ployees through education International Policy Plan CO-CHAIRS 2 The U.S. needs to invest President and CEO, and training. There is an ur- 3 Cybersecurity must be re- Francisco D’Souza, CEO, in education to train employ- Alignment of Interests Adobe Systems Inc. gent need to raise the level of garded as an intergovernmen- Cognizant Technology able workers, starting at the 4 It shouldn’t be easier for Mary Lee Schneider, understanding, starting with tal policy issue, akin to trade Solutions K-12 level, with a focus on and companies to do business in President and CEO, basic security procedures such or commerce. There should be Frank R. Martire, Chairman respect for multiple path- other countries. The U.S. gov- Follett Corp. as guarding against phishing a new framework for estab- and CEO, Fidelity National In- ways—such as vocational ernment needs to provide attacks. lishing global rules, either formation Services Inc. training, apprenticeships and business with clarity and cer- SUBJECT EXPERT through a new intergovern- Stephen D. Milligan, community college—not just tainty about policies and back Hal Sirkin, Senior Partner, Corporate Action Plan mental body or within an ex- President and CEO, four-year university degrees. its rhetoric on economic Boston Consulting Group 2 Companies should come isting framework, e.g. the Western Digital Corp. Business should get involved growth with action. Busi- together within industry World Trade Organization. at the state and local level nesses and government need groups to share information SUBJECT EXPERT and set new U.S. standards Make Collaboration Safe James Mulvenon, Ph.D., for cybersecurity. The process 4 In order to address cy- Vice President, Intelligence should be fostered by the U.S. bersecurity issues across in- Division, Defense Group Inc. HEALTH-CARE INNOVATION government, with government dustries, companies need to representation, but not gov- be able to collaborate without Reform Payments services and administrative in- Create incentives for the con- ernment control. Model could worrying about antitrust or 1 Modernize and reform efficiencies, among others. sumer to do preventive and Medicare and fee-for-service Utilize national data network maintenance health care. Find payment systems to pay for to create transparency for ways to encourage medication high-value health care: better consumers and payers. and therapy adherence. Build THE U.S. ENERGY BONANZA outcomes at affordable costs, trusted data sources and tools rather than volume. Boost col- Team-Based Care so consumers can find infor- Develop Infrastructure winners and losers in the mar- regulation. Needs to be driven laboration between providers 3 Create incentives for mation and understand their 1 Facilitate energy infrastruc- ket. by science and economics and through regional health net- team-based health care, tele- choices. Involve employers in ture development by placing minimize the politics. works, sharing of best prac- health and other innovations educating their employees. time limits on approvals. Re- Balanced Energy Mix tices. Align incentives between to address preventive care, move restrictions on oil and 3 Government should en- CO-CHAIRS providers and payers. Address chronic-disease management, CO-CHAIRS gas exports. Environmental courage a balanced energy Nicholas Akins, President payment for appropriate alter- population health, serious ad- Patricia A. Hemingway approvals also need to be ex- portfolio based on market and CEO, American Electric native services, such as tele- vanced illness and end-of-life Hall, President and CEO, pedited. Invest in upgrading pricing that reflects the true Power health and e-visits. care. Ensure that health pro- Health Care Service Corp. aging infrastructure to accom- value and cost of all resource Kevin S. Crutchfield, fessionals including nurses John H. Noseworthy, modate new resources. alternatives for customers. Chairman and CEO, Alpha Focus on Quality and physicians’ assistants can M.D., President and CEO, Maximize North American oil Natural Resources Inc. 2 Focus on quality of care: work to their fullest capacity Mayo Clinic Innovate Energy and gas production while us- Wick Moorman, Chairman better outcomes, safety and and level of certification. Ad- Mark Schneider, President 2 Technology ing less energy and developing and CEO, Norfolk Southern service. Reduce error and dress future workforce short- and CEO, Fresenius Group Invest in technology to im- alternatives. harm. Agree on desired-out- ages and misalignments. prove efficiency and reduce SUBJECT EXPERT come metrics for quality and SUBJECT EXPERT carbon emissions, including Regulatory Consistency Michael A. Levi, David M. evidence-based practices. Engage Consumers Helen Darling, President carbon capture and storage. 4 Regulatory consistency Rubenstein Senior Fellow for Eliminate $765 billion in 4 Engage and educate con- and CEO, National Business Encourage R&D investment driven by a long-term biparti- Energy and the Environment, waste, including unnecessary sumers on cost of their care. Group on Health without government picking san energy policy. Avoid over- Council on Foreign Relations THE WALL STREET JOURNAL. Monday, November 25, 2013 | R5 R6 | Monday, November 25, 2013 THE WALL STREET JOURNAL. JOURNAL REPORT | CEO COUNCIL A Pox on Both YourHouses Gov. Chris Christie on why there’s plenty of blame to go around in Washington

As Republicans scan their Nobody in this city talks to ranks for presidential contenders ‘I think the most each other anymore. Or if they in 2016, many like the chances of important thing we did do, they don’t speak to each New Jersey Gov. Chris Christie. other civilly. They don’t develop The governor recently won a sec- [in New Jersey] was relationships. They don’t de- ond term in a landslide election change the velop any sense of trust between in which he showed strong ap- each other. peal among voters key to the Re- conversation.’ publican Party’s future, such as MR. BAKER: Who’s to blame? women and Latinos. He also is Gov. Chris Christie GOV. CHRISTIE: First and fore- often seen as someone unafraid most, it’s the president. Because of working with politicians from if you’re the executive, you’re both sides of the aisle. the person who is in charge of In an interview with Gerard Jersey and attempt to turn making that happen. Baker, editor in chief of The Wall around the Queen Mary in the When I’ve developed these re- Street Journal, Mr. Christie Delaware River. lationships with Democratic leg- spoke about his record as gover- When I took over as governor, islators, it means you have to nor and his views on national we were rated the state with the compromise at times, you don’t political issues. Edited excerpts least business friendliness in walk away with everything you of their conversation follow. America. You’re not going to want. But man, if I walk away turn that around in four years with 70% of my agenda, New Crossing Boundaries completely. But we have cut Jersey’s 70% better than it MR. BAKER: You won 50% of the Ralph Alswang/Dow Jones (4) business taxes $2.3 billion, cut would have been otherwise. Latino vote. You won over 20% regulations by one-third and cre- of the black vote. You won 58% view was, that was just nowhere the next 30 years, all in the face the education system in our ated 143,000 new private-sector MR. BAKER: Do you think Obama- of women, running against a near good enough. So we started of stiff public-sector union oppo- country, while there are suc- jobs. It’s going to take us longer care can survive? Or does it have woman Democratic candidate, working with those groups, giv- sition. But I think the most im- cesses, is in the main failing because we were in the deepest to be just completely scrapped all in a state where President ing them a serious seat at the portant thing we did was change many, many millions of families. of deep holes. and start again? Obama won 58% of the votes a table, knowing that they weren’t the conversation. So many of It is the defining issue of our GOV. CHRISTIE: Obamacare is year ago. How did you do it? always going to agree with my these things were considered time, what we’re going to do MR. BAKER: What would you wrong. It’s a failure. It’s the GOV. CHRISTIE: The first thing is, policies but that they were going givens in New Jersey that could with the education system. change in Washington right most extraordinary overreach of you do your job. I often think to be listened to. not be changed. And our posi- now? government power in the history that folks make political leader- tion was, “I’m a Republican in Economic Performance GOV. CHRISTIE: Well, the people, of our country. ship too complicated. Second MR. BAKER: What was the most New Jersey. I’m playing with MR. BAKER: Your opponents will predominantly. Both parties have What do we need to replace thing is, we made a concerted important thing you’ve achieved house money.” say, “Well, you may have equal blame in what’s going on it? We need a robust debate effort from the time I got into so far? Most importantly, we took the changed the conversation, but here. Listen, I have a completely among both sides, unlike last office to say that we got only GOV. CHRISTIE: We’ve cut busi- teachers union on. The teachers you didn’t change the economic Democratic legislature in New time, where the president about 30% of the Latino vote in ness taxes $2.3 billion, we’ve re- union is the most powerful performance very much.” Why Jersey. How do you do all these jammed this down everybody’s 2009, about 7% of the African- formed the pension and benefit union in our state. They have hasn’t New Jersey produced things that don’t appear to be throat and got not one Republi- American vote in 2009. And my system to save $120 billion over 200,000 members and get an- more jobs in the last four years? traditional Democratic things can vote because he was unwill- nual dues of $140 million. They GOV. CHRISTIE: Yeah, and I call with a Democratic legislature? ing to make any compromise, in- do not pay anything on teachers’ those critics to come to New It’s about human relationships. cluding tort reform. VOICES FROM THE CONFERENCE salary, pension or health care. It’s essentially a $140 million slush fund to reward their Consensus Is Still Popular ‘We need to provide high- friends and punish their ene- quality education at a lower mies. So, we took them on fron- Most Americans see at least some value in both major parties' positions. cost. If at the end of the tally, early, and I think they u When it comes to your viewpoint of the u When it comes to your viewpoint of the never expected any politician in Democratic Party, which of these statements comes Republican Party, which of these statements day, this means there New Jersey to do that. aren’t as many universities closest to your point of view? (Asked only of comes closest to your point of view? (Asked only of And the public reacted ex- Republicans and Independents) Democrats and Independents) or some people don’t have traordinarily well. That was re- jobs, you know, this is not ally the moment that changed While I disagree with many of the While I disagree with many of the the conversation and made a lot 18% Democratic Party’s ideas and policies, it 22% Republican Party’s ideas and policies, it a welfare business. We of the other things we did possi- has several good leaders and quite a few good policy has several good leaders and quite a few good policy have the interest of the ble, because we showed we were areas with which I agree. areas with which I agree. nation at stake. And this is willing to take on the biggest While I disagree with many of the While I disagree with many of the what we all have to keep bully in the schoolyard. 45% Democratic Party’s ideas and policies, it 49% Republican Party’s ideas and policies, it focused on—high quality has some people and a couple of policy areas with has some people and a couple of policy areas with MR. BAKER: That’s hard to do at which I agree. which I agree. and containing costs.’ the national level, isn’t it, because teachers are organized on I disagree with almost everything the I disagree with almost everything the William E. Kirwan, 33% Democratic Party stands for in their 28% Republican Party stands for in their ideas Chancellor, University a local basis and are paid by lo- ideas and policies and I do not like any of their leaders. and policies and I do not like any of their leaders. cal authorities. System of Maryland GOV. CHRISTIE: Source: NBC News/Wall Street Journal telephone poll of 800 adults Yeah, but you’re conducted Oct. 25-28; margin of error:+/-3.46 percentage points The Wall Street Journal talking about setting a tone. And Where House Republicans Stand Paul Ryan on why the current round of budget talks will not lead to another government shutdown

It’s the biggest question in pressed optimism about this bud- MR. GIGOT: You’re negotiating U.S. politics: Can Washington get get round, in particular avoiding with the Senate Democrats. One its act together to solve the bud- a repetition of the late unpleas- of their positions is that all you get debate? antness. Can you tell us right need to do to get a deal, or at For insight, The Wall Street now that there will not be an- least to get them to move on en- Journal’s editorial-page editor, other shutdown or debt-limit titlements, is to eliminate some Paul Gigot, spoke with Paul brinkmanship? tax expenditures, tax subsidies, Ryan, the Wisconsin Republican MR. RYAN: I’m comfortable say- they call them. Why not put to- who serves as chairman of the ing that. Whether we come to a gether that kind of a deal? House Committee on the Budget. budget agreement or just have a MR. RYAN: They’re not saying Here are edited excerpts of continuing resolution that keeps they’re willing to do entitlement their discussion. going, either one of those sce- reform of any significance what- narios will prevail. Therefore, we soever. If this becomes about Sealing the Deal will not have a government shut- raising taxes, we’re not going to MR. GIGOT: The president ex- down. The debt limit is later on. get anywhere. We’re very serious about tax reform. The Ways and Means Committee is moving tax- Down This Road reform legislation, and that’s where taxes should be dealt The Congressional Budget Office sees the federal debt as a percentage with. On the spending side, we of gross domestic product declining slightly over the next few years, are willing to trade spending assuming current laws generally remain in place--but then rising to cuts that are across-the-board 100% of GDP in 2038, even without accounting for the effects of the and crude, the sequester, for growing debt on the economy. Increasing interest costs and rising smarter cuts in the other part of spending on Social Security and government health-care programs are the budget that is unreformed— projected to fuel the climb in debt, the CBO says. the entitlement side. That’s what dard-bearer that can go the dis- u Federal debt held by the u Total spending and we’re discussing now. an intelligent way with people tance. I believe this country has public, as a percentage of revenues, as a percentage of who are undocumented. That’s ‘This country has just MR. GIGOT: You’re willing to ease just a handful of years before we gross domestic product gross domestic product probably seven or eight different the sequester limits in the near pieces of legislation. There’s not go down the European path and a handful of years 100 30% term? enough time to do it this year. become a social-welfare state. before we go down the 90 Spending MR. RYAN:Ifwecangetsomeen- We’ve got to turn the growth en- 25 titlement reforms. MR. GIGOT: There’s a lot of dis- gine back on. To fix what needs European path.’ 80 Revenues 70 cussion among Republicans that fixing is going to take somebody 20 MR. GIGOT: Paul Ryan 60 Is there any progress the next nominee for president who knows how to do it. Who on that front? has to be a governor. Do you are they? What are their ideas? 50 15 MR. RYAN: We’ve made progress, agree with that? What are their gifts and abili- 40 MR. RYAN: 10 but we do not have an agree- No. There, next ques- ties? That’s what matters to me. 30 ment. We’re still going to try and tion. cannot let my mind be clouded 20 MR. GIGOT: 5 work out our differences. You did say that you with personal ambition. I’m go- 10 MR. GIGOT: Why not? would look closely at making a ing to make those decisions later. 0 0 The Immigration Issue MR. RYAN: The résumé is not as run yourself. What’s your mental I’ve got a job to do on behalf of 2003 ’08 ’13 ’18 ’23 ’28 ’33 ’38 2003 ’08 ’13 ’18 ’23 ’28 ’33 ’38 MR. GIGOT: Where do you stand important as the person, their checklist? the people who elected me, on on immigration reform? Is it ideas, their track record. I would MR. RYAN: If I’m going to do a job behalf of the responsibilities I’ve u Components of total spending, as a percentage of gross something we can see getting liketomakesurewegetaper- as chairman of the Budget Com- been given. I’m going to focus on domestic product done with maybe starting some son who is going to be a stan- mittee, as a leader of my party, I that. votes in the House this year? Net interest Other noninterest spending Social Security MR. RYAN: I’m for the House ver- Federal Spending on Major Health Care Programs* sion of immigration reform. FLASHBACK: 2012 12% We’re denying our country intel- lectual capital, people who are 10 being educated here to help us ‘To restore fiscal sustainability, to be careful create jobs. If we do immigration of what you do to the long-term growth 8 reform right, that is pro-growth policy. It’s got to be actual and prospects of the country and to make sure 6 verifiable on border and interior enforcement before other things we’re not adding to the burden on middle- 4 can be triggered. We want to move from a chain-migration class Americans, you’re going to have to do 2 system to economic-based immi- so with a mix of higher rates and deduc- gration, so people come here for 0 talent and skills to create and fill tions. I think that’s what the political con- 2003 2008 2013 2018 2023 2028 2033 2038 jobs. We want to make sure that * Spending on Medicare (net of offsetting receipts), Medicaid, the Children's Health Insurance sensus ultimately will be.’ Program, and subsidies offered through new health-insurance exchanges we have a system that does not Note: Figures do not reflect the impact on the economy of the policies behind these projections. grant amnesty or create a moral Timothy Geithner, former U.S. Treasury Secretary Source: Congressional Budget Office The Wall Street Journal hazard and that helps respect the rule of law while dealing in THE WALL STREET JOURNAL. Monday, November 25, 2013 | R7 JOURNAL REPORT | CEO COUNCIL The Odds of Change, Here and Abroad Treasury Secretary Jacob Lew on how likely economic reform is in China—and the U.S.

It’s been a busy few months omy to get the growth rate they MR. LEW: They understand we for Treasury Secretary Jacob need. The global economy needs went through a noisy political ‘[China knows] Lew. First came the debt-ceiling for them to do that as well. process but at the end we did showdown with House Republi- what we had told them we they’ve got to get more cans and the subsequent federal MR. BAKER: What will it mean would do, which is make sure market signals into government shutdown, then a for global and U.S. business? that we would stand by the full trip to China after leaders there MR. LEW: Take the Shanghai faith and credit of the United their economy to get announced possible further eco- free-trade zone. It is one of the States. They did ask about how the growth rate they nomic reforms. Now, back in initiatives they announced just we saw things unfolding. Washington, another round of a few months ago, after our stra- need.’ debt-ceiling deadlines and bud- tegic and economic dialogues MR. BAKER: They’re our principal Jacob Lew get negotiations is looming. here in Washington. They have creditor after all, right? In an interview with The Wall not yet determined all the de- MR. LEW: It was not with a high Street Journal’s editor-in-chief, tails of what that is going to en- degree of anxiety or pressure. It Gerard Baker, Mr. Lew spoke tail. If it opens up their finan- was a very small part of the con- about some of the economic cial-services markets, that’s a versation. And I was kind of re- reform and replacing the seques- challenges ahead. Edited ex- big deal. assuring. ter. It would give the economy cerpts follow. One of the things that they’re the kind of certainty and tail- talking about is taking some Budget Maneuvering wind that it needs to grow. Signals From China profits from state enterprises MR. BAKER: Congress has more To do the kinds of entitlement MR. BAKER: You met with Presi- and pumping it back in the econ- looming deadlines in January reforms in the president’s bud- dent Xi Jinping. How serious are omy, through the government and February. Are you saying get would require moving on tax the reforms announced? Can you and dividends to shareholders. we’re not going to have another reform and raising some addi- give us a sense of whether this We’re just going to have to experience like in October? tional revenue. If that’s not a MR. LEW: will represent radical change in continue to work with them. One If you look at the possibility for Republicans, then Ralph Alswang/Dow Jones (2) China’s economic structures? thing that really impressed me things Republican leaders have something large is not likely. But MR. LEW: I definitely had the was how important the U.S. rela- said since October, it’s clear that there’s other ways for these con- process. It’s one of the few this conference goes. sense they’re very serious about tionship is to them. this was not a good experience ferees to work things out. And I things that doesn’t come to the economic reform. What I didn’t for the country or for them po- really would leave it to them. president to be signed. The MR. BAKER: We had our stron- get a good sense of was the se- MR. BAKER: China has said some litically. They should just extend House and the Senate agree on a gest employment growth in Octo- quence or pace of change. I sus- critical things about the U.S., in the debt limit way in advance MR. BAKER: Back in October, to budget resolution, and it sets ber for quite a while despite the pect they’re looking at several particular over fiscal issues, in and not have any sense of crisis. some extent, it looked like the their internal governance of how government shutdown, which led years of change. I think they recent months. Did you get much administration was sitting back they’re going to handle appro- some to suggest maybe we know they’ve got to get more pressure to do something about MR. BAKER: What is the right and letting the Republicans dig priations and budgetary matters. should shut it down more often. market signals into their econ- getting our fiscal house in order? way forward? Trading off the se- their own hole. Are you going to The president’s budget is MR. LEW: I hope nobody learns quester for entitlement reforms? be more proactively involved this something he still sticks by. It the wrong lessons from the MR. LEW: The president’s budget time? Is the president? represents what he offered to numbers. The economy would VOICES FROM THE CONFERENCE lays out a very clear path with MR. LEW: The budget conference the speaker at the end of last have done even better if we had both tax reform and entitlement is an intrinsically congressional year. But we’ve got to see where not had that debate.

Work to Do Among the challenges facing the U.S. economy: Household income and home prices remain well below their peaks of the past decade u Median household income, u S&P/Case-Shiller U.S. National Home Price Index adjusted for inﬂation

$60,000 200 180 50,000 160 140 ‘We’re moving into a world where knowledge, base 40,000 120 content, is a commodity, which allows anyone who 100 is smart and motivated and passionate to make 30,000 80 something of themselves and open doors to oppor- 60 tunity. But at the same time, the much deeper cog- 20,000 40 nitive skills that are taught in the face-to-face inter- 20 action—they’re still going to be a differentiator. The 10,000 0 best place to acquire those is by coming and get- 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 0 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q ting an education at the best universities.’ 2003 ’04 ’06 ’08 ’10 ’12 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 ’13 Daphne Koller, Co-Founder and Co-CEO, Coursera Source: Census Bureau Source: S&P Dow Jones Indices The Wall Street Journal R8 | Monday, November 25, 2013 THE WALL STREET JOURNAL. JOURNAL REPORT | CEO COUNCIL A Bridge to the Business Community Commerce Secretary Penny Pritzker on why the administration really is in tune with commercial interests

Penny Pritzker was a billion- aire Chicago business executive before becoming Commerce sec- ‘We need to make sure Selling Abroad retary earlier this year. As the that when we invest in U.S. merchandise exports over the past 10 years, overall and to voice for business in Washing- training that it’s selected major trading partners, in billions of dollars ton, Ms. Pritzker advocates for u Merchandise exports to selected countries U.S. companies both here and toward a job.’ abroad. Canada Mexico EU China Japan Penny Pritzker Matt Murray, deputy editor in $300 chief of The Wall Street Journal, sat down with Ms. Pritzker to 250 discuss her agenda. Here are edited excerpts: Of the 10 million jobs supported 200 by exporting, 1.3 million have Friend or Foe? been created since 2009. 150 MR. MURRAY: Let me start with Skills is another area near the elephant in the room, the and dear to my heart. I met with 100 perception that this administra- hundreds and hundreds of CEOs tion isn’t a friend of business. around the country. And what I 50

How do you see that dilemma? Ralph Alswang/Dow Jones (3) heard from almost every CEO is, MS. PRITZKER: First of all, I don’t “I’m having an issue with work- 0 think the president would have and investing in research and what can you do to help? force. How do I get enough peo- 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 asked me to take this job if he development. The question now MS. PRITZKER: One big major fo- ple with the skills that I need?” didn’t want to have a relation- is how do we get things done? cus for me is trade and invest- This needs to be a priority. u Merchandise exports overall ship with the business commu- ment. Trying to get the trade $1,600 nity that was on good footing. MR. MURRAY: Well, how do we? agreements finished and through The Right Track And I wouldn’t have taken the Part of the frustration is the po- Congress is a high priority. MR. MURRAY: What can you do to job if that wasn’t his attitude, litical dysfunction. How can you Many of the companies in this help on this front? whichIknowitis. help break the deadlock? country are small and medium- MS. PRITZKER: ThewayIseemy 1200 He’s asked me to be a bridge MS. PRITZKER: It requires what I size, and they have come to real- role in this area—and it’s the to the business community in know how to do from my business ize that 95% of customers are first time the Commerce Depart- this job, and I am your chief career. Establish relationships, outside the U.S. They want to be ment has made this a priority— 800 commercial advocate not only in establish credibility, work hard, able to benefit from those mar- is really to help the business the U.S. but around the world. and make your arguments. Then ketplaces. That is something we community and business leaders The president’s agenda today look for common ground to try at the Commerce Department locally. The solutions are local, 400 is very much aligned with the and move the agenda forward. do. We have people domestically they don’t sit in Washington. 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 business community’s, whether and in foreign markets who not The business community it’s about investing in infrastruc- MR. MURRAY: We’ve seen job only we help identify where your knows what kind of curricula u Overall merchandise exports by category ture, immigration reform, corpo- growth the last few years, yet it product is competitive, but then they want people to be fluent in. 600 rate tax reform, getting trade isn’t the amount we would like. we help you in market. They know what kind of creden- agreements in Asia and Europe, What is underlying that and That results in job creation. tials they want. That’s the area Capital goods where the private sector and 500 business leaders need to take a Industrial FLASHBACK 2012 leading role in their regions. supplies We need to make sure that 400 when we invest in training that ‘Let’s make a commitment now: it’s toward a job. And that’s everything from high schools, vo- 300 We will have the current [tax] cational-ed schools, community code in place for six months. At colleges, universities. Consumer 200 goods that time, we will have tax reform MR. MURRAY: What do you think Automotive successful corporate tax reform and entitlement reform to deal Foods, feeds should look like? 100 and beverages MS. PRITZKER: The president has with these bigger issues that we Other goods put forward a plan to reduce have to deal with.’ corporate taxes to 25% for man- 0 Sen. Rob Portman of Ohio ufacturers and 28% for other 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 types of corporations. I think Source: Department of Commerce The Wall Street Journal that is the right track. Leadership in a Dangerous World Martin Dempsey, chairman of the Joint Chiefs of Staff, on the art of leading and the Mideast’s big picture

Leading a corporation is a MR. BUSSEY: Walk us through the challenge. But imagine steering big picture on the Mideast. the world’s largest military dur- ’We accept by GEN. DEMPSEY: Three things I ing a time of economic uncer- becoming a member of would suggest to you. One is the tainty and global unrest. changed relationship between That’s the job of Gen. Martin the profession we live the governed and the governing. E. Dempsey, chairman of the to a certain ethos.’ I think books will be written for Joint Chiefs of Staff. The Wall the next several years about this Gen. Martin E. Dempsey Street Journal’s John Bussey thing that we optimistically de- spoke with Gen. Dempsey about scribed as the Arab Spring sev- what makes for good leaders eral years ago. and got his take on hot spots It’s many things, but it’s cer- around the world. Conflict Zones tainly the relieving of pressure What follows are edited ex- MR. BUSSEY: There were miscal- that was being brought to bear cerpts of their discussion. culations in Iraq and Afghani- by dictators on societies that stan. Was that a failure of lead- had been suppressed for many The Military Difference ership? decades. You have a changed re- MR. BUSSEY: Are the attributes of GEN. DEMPSEY: The book hasn’t lationship between the governed a good leader roughly the same yet been written. and the governing among a pop- between the military, a CEO and At some level, we have to look ulace that doesn’t know what to a schoolteacher? back and acknowledge what we do with it, frankly. It will take a GEN. DEMPSEY: We are a profes- didn’t know and maybe should decade or more to finally settle. sion, which is to say that we have before we took the actions Secondly, it’s being played out commit ourselves to an uncom- we took. in an environment where there’s mon life. And we accept by be- would tell you, and it’s become options, they’re less likely to en- MR. BUSSEY: The academics said On the other hand, once we an internal struggle within Islam coming a member of the profes- apparent to me in my job, is that gage in earnings management, that the study is a further vali- were engaged in it, the leader- for control. It gets at the Sunni- sion we live to a certain ethos. you’re not a profession just be- and they are less likely to use dation of “our use of military ex- ship was demonstrated at every Shiite schism. It’s a fault line, It’s not just about special cause you say you are. You have tax havens perience as a proxy for the re- level—and in particular at the and right now the fault line runs skills and attributes, it’s about a to earn it and re-earn it. And in What is it about the military spect for rules, authority, and lower levels, with those captains from Beirut to Damascus to particular ethos. In our case, it’s particular our relationship with background that caused that societal value.” and sergeants in villages and Baghdad. And players on both serving the people of the United the American people. We have to sort of behavior in the CEOs? GEN. DEMPSEY: I like to think we towns and districts. sides are trying to influence the States and ensuring the common continue to earn it. GEN. DEMPSEY: I don’t want to follow the rules, but on occasion Even today in Afghanistan, actions in their favor. defense. It’s a profession that re- opine about what makes us dif- we don’t. And when we don’t, we where they’ve become so com- The third factor that creates quires certain things of us, con- MR. BUSSEY: There was a recent ferent or what makes you differ- hold people accountable. Sec- mitted, so captured by the expe- is ungoverned space. Or if not tinuing education, a renewal of academic study that says firms ent. It’s more useful to us to see ondly, I do think there’s some- rience of trying to make the ungoverned, governed less than our commitment to that. We’re whose CEOs have military expe- where we have common ground. thing extraordinary about being lives of Iraqi children and Af- we would like it to be governed. an up-or-out organization. rience are less likely to be sued I think where we should—and I given the responsibility for peo- ghan children better. Even if And into that ungoverned space I don’t know how it works in- in class-action lawsuits and re- sense where we do—have com- ple’s lives. That should cause us they do make the odd misstep, migrate extremists. It makes for side of your businesses or your state financial statements, mon ground is in caring about all pause and put everything else it’s hard to be critical, having a very volatile, complex, long- occupations. The one thing I they’re less likely to backdate the future of our country. we do in perspective. seen the effort they’ve made. term challenge.

The Measure of Two Giants How people in nations around the world view the U.S. and China u Overall opinion of each country. u What is the world's leading economic power? u Will China replace the U.S. as the world's u How big a problem are territorial disputes Median of ratings in 38 nations leading superpower? between China and your country? China U.S. Japan Unfavorable Favorable Will eventually replace U.S. Very big or big problem 0% 39% Has already replaced U.S. Small problem or not U.S. 18% 30% 44% a problem U.S. Will never replace U.S. 63% Don't know 11% 82% 46% China U.S. 36% 47% 36% 30% 8% China Philippines Malaysia 50% China 58% 13% 33% Britain 11% 1% 53% 24% u Countries with the biggest gaps in Britain 55% 26% 9% 36% favorable opinions of the U.S. and China 90% 34% 41% U.S. China France France 48% 22% 31% 53% 69% Germany South Korea Indonesia Japan 19% 50% 16% 29% 5% Germany 9% 3% 59% 10% Japan 62% 15% 72% 77% 11% 20% Pakistan 67% 28% Japan 81% 20% Russia 35% 15% 31%

Source: Pew Research Center poll of 37,653 respondents in 39 nations, conducted March 2 to May 1 by phone and in person under the direction of Princeton Survey Research Associates International The Wall Street Journal THE WALL STREET JOURNAL. Monday, November 25, 2013 | R9 JOURNAL REPORT | CEO COUNCIL On a Mission to Free Trade Michael Froman on the prospects for pacts with Asia and Europe

Michael Froman, who became reaching this deadline that it thought to engage in. So we have MR. FROMAN: Our goal with TPP U.S. trade representative this could make some concessions to be careful how we link cur- isn’t directed toward any coun- year, has a big challenge: He is along the way. rency to trade rules, because we try. It’s directed at raising the leading Washington’s push to ne- MR. FROMAN: We’re working don’t want to put ourselves in a standards of the international gotiate two massive free-trade around the clock now to close defensive position as well. trading system. It’s intended to deals, one with Asia that aims to out issues, narrow differences, be an open platform, and a num- bring together 12 countries and tee up the issues that require po- MS. BLUMENSTEIN: What is your ber of countries have said they nearly 40% of the global econ- litical input to get resolved, but sense of where business is on the would like to join once we’re omy, and one with Europe that's we aren’t going to agree to a bad trade pacts? Often, you hear they done with the agreement among being billed as a way to boost deal just to hit an artificial dead- are against many of the provi- the initial 12. economic growth on both sides line. The substance of the negoti- sions and deals. of the Atlantic. ations will ultimately dictate the MR. FROMAN: I think business Magnet for Investment Rebecca Blumenstein, deputy timing of the deal. generally is in favor of opening MS. BLUMENSTEIN: With Europe,

editor in chief of The Wall Street markets and creating more ex- the debate isn’t necessarily over Ralph Alswang/Dow Jones (2) Journal, sat down with Mr. Fro- MS. BLUMENSTEIN: There’s a port opportunities. It helps drive tariffs as much as it is over regu- man to find out where the talks growing sense that U.S. compa- job creation and investment here latory frameworks. Could we see We’re not talking about low- stand and what U.S. business can nies, particularly auto makers, in the U.S. What tends to happen a time in which a car made and ering health, safety and environ- ‘We have what many expect from the agreements. want rules against currency ma- is that each business is waiting inspected in Europe is accepted mental standards on either side Here are edited excerpts: nipulations inserted into this. Are until they see what the final deal here in the U.S. without going of the Atlantic. But both the U.S. would view as the most you in favor of that? has in their sector or area before through our regulatory system? and Europe have well-regulated ambitious trade agenda Ambitious Agenda MR. FROMAN: It is a serious issue they declare themselves on it. MR. FROMAN: The biggest oppor- markets that come to slightly MS. BLUMENSTEIN: Is it fair to and one that this administration tunity in this agreement, but also different conclusions, and that in history.’ say that, in a time of political has been very focused on from MS. BLUMENSTEIN: What is really the hardest challenge, is getting creates unnecessary frictions for Michael Froman paralysis, the administration is the start in our bilateral engage- the wisdom and endgame of our hands around the regulatory trade. Our goal is to see what we taking a particularly aggressive ment with China from the presi- keeping China out of TPP talks? and standards piece. can do to eliminate the frictions. tone on trade? dent on down. Every level, we’ve MR. FROMAN: We have what engaged with them on liberaliz- many people would view as the ing their currency and encourag- most ambitious trade agenda in ing them toward a more market- history. The Trans-Pacific Part- oriented exchange rate. In terms nership and the Trans-Atlantic of how it plays in the TPP re- Trade and Investment Partner- mains to be seen. ship—when we’re done with There are really two different these agreements, we’ll have free sets of issues that people are fo- trade with 65% to 70% of the cused on. One is the kind of cur- global economy. The deals will rency policies that China has tra- position the U.S. as a place ditionally pursued. where people want to produce The more recent concern is products and send them around the actions Japan has taken to the world. stimulate its economy that have had an effect on their currency. MS. BLUMENSTEIN: The Asia pact That’s a bit more complicated, known as TPP is very compli- because many of the activities cated. You set a December dead- that the Bank of Japan engages Connect. line. There's some concern that in aren’t dissimilar from that the administration is so intent on which the Federal Reserve is

Trading Partners U.S. trade in 2012 with the European Union, with which it is currently negotiating the Transatlantic Trade and Investment Partnership; with Share. the 11 other countries, as a group, with which it is negotiating the Trans-Paciﬁc Partnership; and with its largest individual trading partners. The 11 other TPP countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Pct. Change u Merchandise imports to the U.S. from 2011 EU $381.65 3.5 Give. TPP countries $843.19 5.6

China $425.58 6.6

Canada $323.94 2.7

Mexico $277.57 5.6 Take.

Japan $146.39 13.5

Germany $108.71 10.2

South Korea $58.9 3.9

Saudi Arabia $55.67 17.3 Solve.

U.K. $54.96 7.2

France $41.75 4.2 India $40.51 12.1 Save. Pct. Change u Exports from the U.S. from 2011

EU $265.67 1.2

TPP countries $689.06 5.9 Canada $292.54 4.0 Smile. Mexico $215.93 9.0

China $110.48 6.2

Japan $69.96 6.5 U.K. $54.85 1.8 Unify. Germany $48.80 0.7

Brazil $43.81 2.0

South Korea $42.28 2.6 Netherlands $40.63 3.6 Introducing Unify. Hong Kong $37.46 3.1 Source: Commerce Department The Wall Street Journal Unifying business communications for the new way to work. FLASHBACK 2012 unify.com

‘It’s extremely important that the U.S. look to Europe. Our feeling in Europe is that this administration is looking only to the Pacific, to Formerly Siemens Enterprise Communications Asia. This is a mistake. We have the opportunity to create in the next months a very important free-trade area between Europe and the U.S. That would send a message of sta- Copyright © Unify GmbH & Co. KG, 2013 bility to the rest of the world.’ José María Aznar, former prime minister of Spain R10 | Monday, November 25, 2013 **** THE WALL STREET JOURNAL. JOURNAL REPORT | CEO COUNCIL Where Is the Global Economy Heading? Jim Yong Kim, Glenn Hubbard and Stanley Fischer on the outlook for emerging markets, Europe and the U.S.

It’s not an easy time to look third quarter. China came in at talking about its disappearance. into the economic crystal ball. an annualized rate of 9.3% in the They have a habit of overcoming Will emerging markets regain third quarter. these difficulties, despite every- their strength? Will the U.S. and There are all kinds of down- thing. So I’m moderately opti- Europe find their way? Just side risks, the biggest one being mistic it’ll happen. what is America’s standing on what’s going to happen in this the world economic stage? country when February rolls MR. WESSEL: What about Japan? The Wall Street Journal’s Da- around. But we think that over They’re kind of rolling the dice vid Wessel discussed these issues the next year, growth in the on policy. with Jim Yong Kim, president of emerging markets is going to be MR. HUBBARD: The change in the World Bank, Glenn Hubbard, over 5%. And we think that’s go- monetary policy has been very dean of Columbia Business ing to continue. welcome. Japan has had persis- School, and Stanley Fischer, for- You’re not going to see the tent deflation that can be ar- mer governor of the Bank of Is- 10-plus-percent growth rates rested. The government, I’m a rael. that you saw prior to 2008. But little more skeptical. Certainly What follows are edited ex- a lot of the fundamentals of the talk from the incoming ad- cerpts of their discussion. these countries are in much, ministration was very promising much better shape than we even at the beginning and continues The Developing World knew. to be, but the real issue inside MR. WESSEL: A couple of years MR. FISCHER: The emerging mar- Japan are structural reforms ago, one would have said that kets have done very well for a that have bedeviled the Japanese

the developed world was falter- decade. But if you look at the Ralph Alswang/Dow Joneseconomy (3) for decades. And I re- ing, and thank God for the Brics—Brazil, Russia, India, ally don’t see a whole lot of emerging markets. They were China, South Africa—the brick is ‘The Chinese have ‘The Fed is not ‘There is tremendous progress being made there. providing the global demand. We China. The others have not yet produced a plan that responsible for admiration for the in countries like the U.S. and Eu- built a framework that is going MR. WESSEL: What do you hear rope were going to be less and to be very stable. The Chinese nobody understood at structural problems in ability of the United from people around the world less relevant. have produced a plan that no- the beginning.’ emerging economies.’ States to innovate.’ about the United States? In the past six months, there’s body understood at the begin- MR. KIM: If you just look back at been rethinking about that. Is ning. And as time has gone by, it Stanley Fischer Glenn Hubbard Jim Yong Kim what happened in August of the golden age of emerging mar- looks better and better. 2011, the last time we had a kets behind us? For the others, they have to near-miss, we followed the num- MR. KIM: Over the past five or six improve their policies. If you bers very carefully. Stock mar- years, even Africa had over 5% have all the prerequisites in credit has been largely responsi- cies are paramount. There’s so sponsible for structural prob- kets in developing countries growth rates. While there’s been place but you pursue policies ble for an emerging-market much attention now being paid lems in emerging economies. If took a 15% hit. Borrowing costs a slowdown, if you look at some that get worse and worse, you boom, as has China’s own devel- to tapering and Fed policy in the you take China, for example, went up 75 basis points. What- of the biggest countries, it looks get into trouble. opment. U.S. with spillover to the emerg- some of the recent economic de- ever happens here has a very di- like India’s going to have a good MR. HUBBARD: Certainly, the easy Stan is absolutely right, poli- ing world. The Fed is not re- velopments have been good, but rect impact on what happens in it is still a financial sector whose the developing world. policies don’t work. Structural I think there’s still tremen- On the Slow Track People Power reforms, likewise, are needed in dous admiration for the ability Growth rates for real GDP are expected to accelerate modestly world-wide in the The World Economic Forum's Human Capital Index aims India. Around the world, rather of the United States to innovate. next couple of years. to measure how well countries are developing productive than looking at big monetary or Every single country in the workforces that can drive economic growth. The index is macro factors, these are individ- world is thinking about what 2011 2012 2013 2014 2015 based on indicators in areas including health, education, ual policy factors. they need to do to build an inno- vative new generation. World 2.8 2.3 2.2 3.0 3.3 workforce skills and experience, and the legal and social The Old Powerhouses environments people work in. Here are the countries with My experience of running a MR. WESSEL: High-income the 10 highest scores, and the ranking of other selected Let’s talk about a university has come up with al- countries 1.7 1.3 1.2 2.0 2.3 countries: couple of developed countries. most every leader I talked to. Start with Europe. Do they have They’re saying, “What do we U.S. 1.8 2.2 2.0 2.8 3.0 1 Switzerland 7 Norway 43 China any reasonable chance of finding need to do to become more com- Euro area 1.5 -0.5 -0.6 0.9 1.5 their way to a set of institutional petitive? What do we need to do 2 8 51 Japan -0.5 2.0 1.4 1.4 1.3 Finland United Russia arrangements and policies that with the primary, secondary and Kingdom allow them to grow at a rate especially at the tertiary level?” Developing 3 Singapore 57 Brazil that raises living standards? The admiration for that part countries 6.0 5.0 5.1 5.6 5.7 9 Denmark MR. FISCHER: They have a rea- of the United States still remains 4 78 9.3 7.8 7.7 8.0 7.9 Netherlands India sonable possibility of doing that, very strong. There are a lot of China 10 Canada 5 86 but it’s going to take longer than countries—China’s one, Korea Russia 4.3 3.4 2.3 3.5 3.9 Sweden South is politically convenient, and maybe another—who’ve done so 15 Japan Africa Brazil 2.7 0.9 2.9 4.0 3.8 6 we’ll see whether they can main- well at process improvement. Germany tain that balance. Just think But the real, real innovation is India 6.2 5.0 5.7 6.5 6.7 16 U.S. about this. Two years ago, ev- still a bit out of reach. Those South Africa 3.1 2.5 2.5 3.2 3.3 eryone was sure the Euro countries want that, and they Note: 2013 ﬁgures are estimates; 2014 and 2015 ﬁgures are forecasts Source: World Bank Source: World Economic Forum The Wall Street Journal wouldn’t survive a year. Well, know that we have that here in here it is and people aren’t even the United States.

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©2013 Southern Company THE WALL STREET JOURNAL. Monday, November 25, 2013 | R11 JOURNAL REPORT | CEO COUNCIL Deficits, Deficits. What About Growth? Lawrence Summers on how Washington is focusing on the wrong issue

When it comes to fixing the take the longest-run deficit and economy, are we attacking the take the official forecasts, if we ‘If we get the growth wrong problem? Lawrence H. increase the growth rate by two- rate up, the debt Summers thinks so. tenths of 1%, you solve the entire The Wall Street Journal’s Da- identified fiscal-gap problem. problem will stay vid Wessel spoke with the former If we get the growth rate up, in control.’ Treasury secretary and Harvard the debt problem will stay in president about why growth is control. If we continue to be a Lawrence Summers more important than deficits, country that doesn’t increase the how to close the gap between fraction of adults that are work- rich and poor, and other mat- ing, that doesn’t catch up with ters. Here are edited excerpts of its GDP potential, that grows at and the children of the poor has their discussion. 2% or less, we can have all the widened over the last 40 years. entitlement summits in the The gap in the college-atten- The Wrong Approach world, and we’re gradually going dance rates between the children MR. WESSEL: I have been in to accumulate debt and have a of the rich and the children of Washington for 30 years. For serious debt problem. the poor has widened over the much of that time, we have been We should be focusing on last 40 years. obsessed with reducing the defi- growth. Growth creates a virtu- We need to find ways to en- cit. That has been particularly ous circle, which creates more sure that the educational oppor- true in the past few years. You growth. tunities open to every kid are think that’s a dumb idea. Why? In a growing economy, em- like the educational opportuni- MR. SUMMERS: We’ve had 10 bi- ployers work harder to train the ties open to the kids of the peo- partisan budget processes. next generation of workers. In a ple in this room. And we are not We’ve had zero bipartisan growing economy, there are close to that as a country.

growth processes. We’ve had more ladders for kids to get on, We need to make sure that Ralph Alswang/Dow Jones budget summits up the yin-yang. which puts them in a better po- where there are slots to be We’ve had no growth summits. sition to lead 10 years down the given—whether it’s the govern- The Troubled Rollout could to bring about failure by The great danger at a mo- We have gotten the idea that ad- road. ment giving rights to spectrum MR. WESSEL: HealthCare.gov is a starving funds and by objecting ment like this is that you’ll dressing the deficit is the defin- or mining rights or whatever it disaster. How much damage has to the procedures and so forth. promise days when you’ll have ing challenge facing the country. MR. WESSEL: The gap between is—that those processes are that done to the trust that Amer- So it was an extraordinarily results. You’ll try to jury-rig There are three relevant reali- winners and losers in our society open and inclusive and open to icans have in the ability of the difficult task whose difficulty something rather than recogniz- ties. First, on the current fore- is wide by historical measures everyone and are not processes government to do anything? was massively underestimated. I ing that given the depth of the cast, the debt-to-GDP ratio will and has been widening. Should that reward the fortunate. MR. SUMMERS: Many of you don’t think there’s any legiti- hole you’re in, it’s going to be improve over the next decade. we worry about that? And if so, There are a substantial set of know from your own experiences mate excuse for how badly it very difficult. The debt forecasts look just what should we do about it? loopholes, special-interest privi- that the general rule on large IT was underestimated. As difficult as it wastodo about right on line with the way MR. SUMMERS: We surely should leges and the like that distort projects is take what they say, The great danger at a mo- this right in the first place, it is they looked in terms of decline be worrying about it. For 240 the allocation of resources. They double it, and then move to the ment like this, like the danger going to be more difficult to fix. after the 1993 budget deal. For years since George Washington, make the economy function less next higher unit of time. for a football team that’s down But I think it is hugely important 10 years, this problem is in hand. it’s always been true that we be- well and act to reify and to rein- That’struewhenit’sdonein by two touchdowns early in the that it be fixed. Second, basing policy on came a country with more equal force inequality. the private sector, and there’s no fourth quarter, is that they will At the same time, we need a these forecasts longer than that opportunity every generation. Serious tax reform that went organized constituency for fail- abandon their playbook and compact in this country, where is kind of a crazy thing to do. We That is no longer true in the after those inequities could both ure. When it was done in the start throwing Hail Marys in ev- we debate things, and then when do not know what the long-run United States. make a fairer economy and make public sector, there was a mas- ery direction. Usually, that’s a we come to a conclusion, for a deficit is going to be. The gap in life prospects be- an economy that was more effi- sive organized constituency for good way to end up down by while everybody tries to make The third thing is that if you tween the children of the rich cient. failure that organized as best it three touchdowns. them work.

The State of the Economy Real gross domestic product growth, unemployment and inﬂation over the past 10 years u Annual average unemployment rate 10%

2 WSJ

0 2003 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12

u Annual real GDP growth 6%

4 2 MOBILE 0 –2 THIS TIME THE NEWS FOLLOWS YOU –4 2003 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 u Annual average inﬂation rate 6%

–2

–4 2003 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 Sources: Commerce Department (GDP), Labor Department (unemployment and inﬂation) The Wall Street Journal

VOICES FROM THE CONFERENCE

‘We need to direct our financial aid to need- based financial aid. There are too many public colleges and uni- Download WSJ onyouriPad,iPhoneoriPodtouch versities that are pro- for award–winning content anytime, anywhere. viding financial aid to those who can afford it, rather than to those who can’t afford it. Secondly, [we need] loan-forgiveness programs that are based on income. We really want students to be able to afford higher education.’ Amy Gutmann, President, ©2013DowJones&Company,Inc.Allrightsreserved.5WSJC2339 University of Pennsylvania ©iPadisatrademarkofAppleInc.,registeredintheU.S.andothercountries.AppStoreisaservicemarkofAppleInc. R12 | Monday, November 25, 2013 THE WALL STREET JOURNAL.

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