The Corporation: MANAGEMENT
LOOK WHO'S TALKING TO NEWT
Dawn had just broken over the Washington Monument when Newt Gingrich, then House Minority Whip, and Golden Rule Insurance Chief Executive J. Patrick Rooney rambled by on a "power walk" in 1992. As they stepped swiftly along, Rooney talked about a scholarship program he had created for inner-city children. He also plugged a new product--the medical savings account--designed to lower health-care costs. Individuals would contribute to the plan and be encouraged to hold down medical expenditures because they could get back any unused balances at yearend.
Three years later, the Republicans have gained control of Congress, Representative Gingrich (R-Ga.) has become House Speaker--and Rooney suddenly finds himself cast in an unlikely role as one of the most influential corporate chieftains in Washington. Rooney and his ideas are often cited by Gingrich and Representative Bill Archer (R-Tex.), chairman of the House Ways & Means Committee. And his medical savings account and school initiatives are now part of the GOP legislative agenda. Both proposals are pending before committees. "He took my ideas and ran with them," 67-year-old Rooney beams.
Rooney is typical of the largely unknown cadre of CEOs Gingrich has tapped for advice in crafting key components of the GOP agenda, from regulatory relief and tax policy to welfare and health-care reform. Some, such as Rooney and Richard M. Scrushy, CEO of Healthsouth Rehabilitation Corp. in Birmingham, Ala., are longtime Gingrich supporters. Others, including CEO Herman Cain of Omaha-based Godfather's Pizza Inc. and James S. Herr, CEO of Herr Foods Inc. of Nottingham, Pa., have only recently come to Gingrich's attention as he trolls for revolutionary ideas. "What I'm doing now is almost like fishing," Gingrich said in a May 26 interview with BUSINESS WEEK. "You keep the ones that sound right."
While the impact of their legislative counsel is just being felt, the rising prominence of Gingrich's corporate Kitchen Cabinet has already shaken up the pecking order within the Beltway. The traditional business elite, dominated by Wall Street and Rust Belt industries, now shares the limelight with a slew of corporate newcomers to the capital. They include small and medium-size companies, and a smattering of big ones, that are often privately held and headed by entrepreneurs who chafe under the yoke of federal regulation.
FRONT LINES. Gingrich's reliance on these new faces doesn't mean he disdains old-line corporate titans. As he looks for ways to shrink government, the Speaker says, he has met with more than 20 CEOs, from John F. Welch of General Electric Co. to John W. Snow of CSX Corp., who have transformed big bureaucracies. "He wants to know how many of the lessons of corporate downsizing, rightsizing, and reengineering are directly applicable to the federal government," says Snow. Gingrich also scouts out Big Business leaders who have adapted to the global market. A case in point: Ford Motor Co., which enhanced its worldwide competitiveness while trimming its workforce. "He's particularly interested in our emphasis on quality and teamwork over the last decade or so," says Ford CEO Alexander J. Trotman.
Still, as he champions the interests of Main Street over Wall Street in fashioning the Newt World Order, Gingrich is uncomfortable with managers whose only vantage point has been the executive suite, the Speaker's advisers say. He prefers to consult business executives who have served on the front lines and taken huge risks by starting their own businesses. Many of Gingrich's corporate confidants, including Scrushy and Herr, are self-made millionaires.
Godfather's Cain, 48, certainly fits Gingrich's portrait of a New Age corporate leader. A former dishwasher and a graduate of Morehouse College, Cain developed a reputation as a troubleshooter after joining Pillsbury Co. in 1977 and sorting out problems at ailing units. As president of one, Godfather's Pizza, Cain stemmed a flow of red ink by downsizing. After Cain and other top managers bought Godfather's for $50 million in 1988, he became CEO of a company that now reports $250 million in sales at 520 outlets nationwide.
Like many businessmen, Gingrich's corporate counselors rail against government interference. After founding a tiny snack-food business in 1946 with an initial investment of $1,750 and expanding it into a $100 million regional business, Herr, 70, says environmental regulations and bureaucratic delays stymied his efforts to build a new warehouse in 1989. It took two years to meet all the federal requirements, he says. Recalling how his young company battled back from a fire that destroyed its headquarters in 1951, Herr says: "If the 1989 regulations had been in place in 1951, we would never have been able to hold our customers and start up again."
Gingrich often calls on his advisers for business solutions to fiscal and social problems that don't create more bureaucracy. "He thinks more like an entrepreneurial businessman than a megacorporate leader," says Cain. "He believes in solving problems from the bottom up, using the limited resources available." And given Gingrich's stature, their suggestions carry weight. When lawmakers rewrote the Clean Water Act in May, the proposal contained suggestions endorsed by Herr at an earlier hearing, including a requirement to weigh the costs of imposing federal regulations against the benefits they might achieve. "Those are exactly the kinds of changes that Newt loves," says Dick DeVos, president of the direct sales giant Amway Corp. and an adviser to Gingrich on regulation and tax reform.
Meanwhile, Scrushy, whose $1.5 billion Healthsouth is the nation's largest provider of rehabilitation services, has emerged as a key adviser on health-care issues. The Speaker in January asked the 42-year-old executive to head a task force to develop a strategy to cut the cost of workers compensation.
Sometimes the advice Gingrich receives goes beyond typical corporate concerns. At a Jan. 9 press conference, Cain and Gingrich, who both favor limiting welfare benefits to force recipients to find work, announced that the National Restaurant Assn. had obtained commitments from 250 food-service CEOs and restaurant owners to employ and train current welfare recipients. The so-called Good Start Project is up and running in all 50 states.
Critics say many of the Speaker's corporate allies make big contributions to Gingrich's causes to obtain access and further their own private business agendas. "He who pays the fiddler calls the tune," says Representative Patricia Schroeder (D-Colo.). Many--though not all--of his CEO counselors donate to his campaigns, the Republican Party, or the Progress & Freedom Foundation, a conservative think tank that promotes Gingrichian ideas about the transition to the Information Age. Golden Rule Insurance and its executives, including Rooney, have provided more than $680,000 since 1985 to Gingrich, his former political action committee GOPAC, and the GOP. Healthsouth's Scrushy helped launch Progress & Freedom.
Gingrich denies that such donations win anyone influence. And his corporate donors insist they're not trying to buy access. "Newt Gingrich has never asked me for a dime," says Scrushy. "Newt never said, `Give me money and I will name you to a task force.' He doesn't do anything for favors."
For Gingrich, talking policy with CEOs is a favorite pastime. "I would rather sit and play intellectually than go to the golf course," he grins. That means his corporate buddies have to meet him in a conference room instead of on the 19th hole. But whatever the venue, the CEOs are getting their chance to help shape a revolution.
Newt's Corporate Kitchen Cabinet
HERMAN CAIN CEO of $250 million Godfather's Pizza chain has helped shape House Republicans' welfare-reform plan that would place a two-year limit on cash benefits. Wants to hold down health-care costs for small businesses such as his Omaha-based company.
J. PATRICK ROONEY Head of family-owned Golden Rule Insurance, a $1.2 billion Indianapolis insurer, inspired GOP's "medical savings account," a tax-deductible savings plan to allow individuals to set aside money for future medical costs. Created model for Gingrich's "school choice" initiative.
RICHARD SCRUSHY Chairman of Healthsouth in Birmingham, Ala., a $1.5 billion company that provides rehabilitation services, counsels Gingrich on ways to create incentives to hold down health costs by using new technologies.
JAMES HERR A prominent voice on government deregulation. Founder and CEO of Herr Foods, a $100 million snack-food company in Nottingham, Pa., he helped shape the GOP's revision of federal clean-water rules, including a requirement for cost-benefit analysis of regulations.
DICK DEVOS President of Amway, the $5 billion direct-sales giant based in Ada, Mich., he weighs in on a wide range of conservative issues, particularly
tax reform and deregulation.By Richard S. Dunham in Washington