(A Populist Capitalist Blog) 

We can always find ways to justify the junket we want to take, the perk of which we are most fond. A recent Wall Street Journal piece (below) focused on the rationale of golf as a method of fostering business relationships. Quite frankly, as a small business person, i found it 95% bull. I’ve managed to build a very nice business over the last 37 years without playing golf.

Yes, relationships and the trust that flows from them are important both in business and the personal arena (see “The Speed of Trust” by Stephen M.R. Covey). But there are MANY ways to build trust, comfort levels, and relationships, and most of them do not involve expensive junkets, high-end hotels, or exotic locales. Businesses do stuff like that ’cause it is fun and it is tax deductible: The government (that’s you and me) picks up a big percentage of the tab and the shareholders pay the rest. It’s someone else’s money you get to spend on yourself. Wheeee!

Interestingly enough, if I tell a Team Member that he may have $1,000 to go to a golfing junket or he may have $1,000 elsewhere in the budget of his choosing, most of the time he will choose to spend it elsewhere. AND if I give him the choice of taking it as a $1,000 bonus, well, the perceived relative value of “building relationships” suddenly drops like a rock. The junket or other perk is usually only that “valuable” when you are spending someone else’s money, either your shareholders’ or the taxpayers’.

Running a corporation is a trust. Officers and directors have a fiduciary responsibility to their shareholders to be prudent, thrifty, and to spend every corporate dollar with the same or greater care as they spend their own money.


The Wall Street Journal, March 5, 2009
Deal Journal P. C4

Members of Congress recently turned on Northern Trust, a recipient of TARP funds, for its sponsorship of the Northern Trust Open golf tournament. Morgan Stanley, another TARP recipient, then said it would suspend most of its activities at the Memorial Tournament, a professional golf tournament in June that it sponsors. Wall Streeters were aghast.

Sure, lawmakers balking at companies stoked with bailout money planning executive trips to spas or casinos, that makes sense. But golf? Golf is for building relationships and making deals.

Deal Journal talked with Jim McNulty to get his take. Mr. McNulty, finance chief at Tampa, Fla., health-care investing firm Hopkins Capital Group, is co-author of the late-1990s book, “Business Golf: The Art of Building Relationships Through Golf,” with Pat Summerall, John Creighton and Will D. Rhame.

Deal Journal: What were your thoughts on the congressional protest over Northern Trust’s golf tournament?

Jim McNulty: I would guess a lot of people in Congress who are not golfers are not going to understand it. If you don’t golf for business, you’re not going to understand it. For Northern Trust, they had a contract, and they had to fulfill their contract. They weren’t out playing golf, they were developing relationships. It’s a basic concept that you develop relationships away from the office. If it’s the difference between picking up a check and being rude and splitting the tab with your client, that isn’t building relationships.

Deal Journal: Is it possible to build relationships without using golf?

Mr. McNulty: You have fishermen and basketball games–all the sporting events of course. Work is about doing your work right, but having fun while you’re doing it. If you’re having fun, you’re going to have a better relationship no matter what sporting event you’re in or around.

Deal Journal: Last week I was talking with someone who said the key to getting out of a recession is psychological–that FDR didn’t help dissolve the cloud of the Great Depression until he started riding in limousines, for instance. Do you agree that is the case?

Mr. McNulty: I think it is. Companies that decide to continue sponsorships will cut back elsewhere before they cut back sponsorships. They’ll have employees pay a 30% insurance premium rather than 25%. They may cut back on the big fancy Christmas party. But you can’t cut it all back. You have to have a life. Companies like Northern Trust have volunteers in the community and the bank that go out and build relationships. That doesn’t cost them any cash, but it makes for a better employee. And look at all the hundreds of volunteers that go to these golf tournaments.