U.N.’s John R. Bolton, Ambassador in the Boardroom

U.N.’s John R. Bolton, Ambassador in the Boardroom

Originally published to NACD. The natural-born contrarian warns of mirror imaging in the Oval Office or C-suite. President George W. Bush…

Originally published to NACD. The natural-born contrarian warns of mirror imaging in the Oval Office or C-suite. President George W. Bush appointed John R. Bolton the 25th U.S. Ambassador to the United Nations in 2005. In this role, Bolton followed such distinguished American statesmen as Henry Cabot Lodge, Adlai Stevenson, George H. W. Bush, Daniel Patrick Moynihan and Jeane Kirkpatrick. Now a fellow at the American Enterprise Institute, where he focuses on foreign policy, Bolton also serves as a director of EMS Technology and Diamond Offshore Drilling. Bolton’s board work comes after years of distinguished government leadership emphasizing foreign relations and international strategy. The experienced litigator, whose approach The Washington Post once described as “bare-knuckle diplomacy and skepticism,” is just what is needed in today’s boardrooms. In this wide-ranging interview, Bolton shares his insights into global geopolitics and board service with NACD Directorship.

What aspect of your background suggested that you would become the U.S. ambassador to the U.N.?

It would have been a wild prediction, which in some ways is typically American. The Boltons were a blue-collar family, and our virtue was modesty. My father was a firefighter and my mother was a housewife. I was the first person in my family to go to college.

You are a natural contrarian. Even during your Yale years, you were pro-Vietnam War. In a ninth-grade history class

I read Karl Marx’sCommunist Manifesto, and the effect was to push me into the conservative camp, more accurately libertarian, and I became involved in the Barry Goldwater campaign in 1964 as a result. [Editor’s note: U.S Secretary of State Hillary Clinton also campaigned for Goldwater.] This course led me to my beliefs, contrarian as they were then, when I arrived at Yale.

How well informed is the Washington-based media circuit?

If you like to arrive at a conclusion about complex matters using facts and logic, there is going to be some frustration in working with the media in Washington. As a group, Capitol Hill reporters look at everything through a political lens. When they see something as portentous as the outcome of the Supreme Court’s Obamacare decision, they will largely ignore the huge implication for our Constitution, and will be mainly focused on a very superficial political analysis of the decision. And I think that’s very unfortunate.

Speaking of the confluence of politics and business, what do you make of the Keystone pipeline issue?

Given a genuine opportunity to understand the real facts behind Keystone, most voters would be in favor. In the last century, the Progressive movement recognized that the world was becoming more complex, but their remedy was to look to expertise in government for answers. In fact, it’s the exact opposite. When we rely entirely on government to place before the people the actual facts of the matter. The result is often what certain constituents desire and whether they are to the benefit or detriment of society at large.

In the upcoming political season, which party is more likely to have the rhetorical upper hand?

Democrats have managed to shuffle the cards in such a way as to hold a hand that speaks to many of the changing values, and conservatives have not been as effectively articulate. Simply put, fairness, equality and justice resonate more today than questions of liberty and individual freedom and responsibility. Some of this is a reflection of economic circumstances, while some of it could be chalked up to the aging American demographic. If one party frames issues in a way that plays to these desires, I think that almost invariably makes a stronger political statement. And that’s why I think this upcoming election is so consequential.

The world is forever in crisis mode. But is the United Nations the most effective medium to deal with global policy issues?

I could say many great things about the United Nations. There are less-known aspects that are very important and very helpful internationally, but they tend to be the obscure, specialized agencies of the U.N. system—the universal postal union, the international maritime organization and other organizations that are largely behind the scenes. There are some others that I think are helpful in a humanitarian sense—the High Commissioner for Refugees and the World Food Programme. But some of the political decision-making bodies, such as the Security Council and the Human Rights Council, for instance, are just hopelessly ineffective. Because of their politicization, it’s nearly impossible to accomplish anything through those bodies.

What is the major flaw you see in the way Americans handle global geopolitical crises?

There is a well-known but unfortunate temptation—whether it’s for the State Department or even in American multinational business dealings—that when working with international counterparts you look at the guy on the other side of the table and say, “Well, I’m a rational, reasonable person and I think that guy is too,” when in fact he might be just the opposite. It’s a fallacy we call “mirror imaging,” and frankly we are guilty of this time and time again.

Turning our attention to regulation, particularly in the boardroom, are you concerned about overreach?

Regulation creep is something that is taking over business behavior, and it’s certainly become worse with Dodd-Frank under the Obama administration, but I think it extends back to Sarbanes- Oxley. It’s very hard these days for small and midsize companies to be public or to go public. Then you’ve got the EPA just about out of control in the recent dust-up in which a regional director was videotaped saying, “We should do what the Romans did and crucify the oil companies.” What the administration and others fail to realize is not just the effect of each regulation but the cumulative crushing burden.

What about the influence of politics over regulation?

The most isolationist constituency in America today is the labor unions. They’re the ones most against free trade. They’re the ones most in favor of tilting regulatory and tax structures to create disincentives for American companies to engage in international business. They have enormous political clout—you can see it in case after case that is brought before the National Labor Relations Board.

The reputation of business among those in political power is at an historic low. What should business be doing?

In the political process, the landscape is already littered with a bias that business is a big conspiracy of a few wealthy individuals against the great majority. So I think it’s important that companies are equally prepared to participate in the political process to defend their own interests.

Many activists decry the way executive compensation is handled by directors. Do you agree?

Compensation committees of boards have perhaps the most difficult job of all because they’ve got to weigh so many competing factors. They’ve got to make sure that their compensation is sufficient to reward the CEO and the other top officers and make sure they’re not poached by a competitor. But explaining those factors in a very direct and quantitative way in terms of thecompany’s performance can be difficult. I have watched compensation committees repeatedly struggle to make these decisions, yet they are portrayed often by activists as back-scratching colleagues who are not paying attention to shareholders. In my experience, that’s the furthest thing from the truth.

Some criticism would be leveled at boards that they have not maintained adequate risk-management control.

I think that risk management is not separate from the board’s overall obligation. You don’t talk about return management, but risk and return are two sides of the same coin, and if boards are adequately overseeing management, they’re worried about their risks, and they’re worried about missed opportunities, too. When companies fail badly, you can say that a board has not carried through on its responsibilities, but by the same token there are often companies that are too cautious, that get left behind, and that’s the nature of capitalism.

How would you describe what happened at BP, in which the implications of risk failure were underestimated?

Boards operate in a very fast-moving environment, and I think preparation for this kind of contingency needs to be done well in advance and the board needs to think through situations and potential downsides. And what the leak in the Gulf shows more than anything else is that if you’re always acting in response rather than planning ahead, you’re always going to be trying to dig yourself out of a hole.

What kind of insights does a background like yours provide to a board?

I have always learned more from the boards I’ve been on than I’ve brought to them. But I do think I’ve got two things from my background that can be helpful: the experience in government, which for many people in business is a foreign country—how to analyze and understand government decision making and how to best position the company to deal with the government environment. And No. 2, my background in international affairs. For companies of all shapes and sizes, the international market is becoming increasingly important, and I think understanding the political risks and opportunities and having a sense of what’s going on in the international environment is where I try to make a contribution as well.