By DAVID MOON, Moon Capital
November 23, 2003
In my business, I work with a number of physicians. While members of
their profession suffer the reputation as poor businessmen, rarely is the
reputation deserved. (How is that for sucking up to my clients?)
However, they might completely lose this dubious perception based on the work of
one of their most high-profile brethren: Senator Doctor Bill Frist.
If you were starting from scratch creating an entity that generated $6.8
billion in annual revenue, employed 13 thousand people and was about to face
real competition for the first time in its history, there is no way you would
recreate the current executive structure of the Tennessee Valley
Authority. Add in trying to manage more than 20 billion in debt and you
have an entity that requires the executive and management expertise of a company
like General Motors.
Senate Majority Leader, Bill Frist, is right on target with his plan to
reorganize the TVA board to look and operate more like a real corporate board -
complete with the responsibility for hiring a full-time chief executive.
Although workable and not without some political benefits, a three-headed
triumvirate office of the chief executive is not the most effective way to run
any organization, much less one as demanding and complex as TVA. Although
one of the three directors is the greater among somewhat equals, I can't think
of any successful entity without a single clear leader. And I certainly
can't think of a business as large and complex as TVA that doesn't have some
sort of outside advisory group - even if it isn't formally called a board of
Created by the TVA Act of 1933 and conceived by Franklin Roosevelt as one of
the solutions to the Great Depression, TVA serves three broad and potentially
conflicting missions: supplying power, supporting economic development and
managing the river system. One former chairman lamented the idea of
running TVA like a private corporation, because of the fear it might lead to
thinking like a private corporation. The fear of a private mindset
certainly makes sense with respect to the environmental management mandate for
TVA and maybe even for its economic development purpose. We are not about
to experience an explosion of interest in businesses wanting to take over the
management of the river system in the Tennessee valley.
But there are plenty of people who want to supply electricity to the area's
power distributors. These would-be competitors don't carry the additional
weight of TVA's economic and environmental mandates. These are businesses
hell-bent on making money. These are companies that relish in thinking
like a private corporation - with shareholders, boards of directors and the
constant scrutiny of Wall Street. That's who TVA faces in the coming
years. A business mindset is critical in dealing with this changing
Preventative medicine is more effective than treating an illness after it
spreads. The doctor's orders to change the governance structure at TVA is
just what this patient needs.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).