In 2012, then-President Barack Obama gave a speech in which he referenced government investments in infrastructure. It was the kind of stump speech that might have gotten a day of coverage and then slipped from the collective consciousness, but for one simple line: “If you've got a business, you didn't build that.” A debate ensued as to whether business or government is the architect of American prosperity.

The phrase “you didn’t build that” became a rallying cry in the fight between those who want to invest in government and those who advocate corporate tax reductions. Lost in the noise were questions about the responsibility of the private and public sectors to help each other thrive.

The notion of putting the best interests of the country at the top of the pecking order could be called “patriotic capitalism.” This concept has been batted around for years but has taken on new life as boards and business leaders take a broader view of stakeholder capitalism and value creation. The question of what corporate America and the government owe each other is especially relevant in light of current challenges that have real impacts on the bottom line, including crumbling infrastructure, a near-constant wave of crippling cyberattacks and rebuilding a post-pandemic economy.

Should a U.S. corporation refrain from doing business with countries that are in conflict with the U.S. government? For example, as cyber incursions, including those by hostile nation-states, continue unabated, do companies have a responsibility beyond their own risk mitigation to help protect the United States from these attacks? In other words, are the country and the corporation dependent on and responsible to each other?

Lynn Schenk has served on boards for nearly 40 years and was a U.S. congresswoman and California’s secretary of business, transportation and housing. She says she sees both sides of the equation.

“American companies may have some international footprint, but they're basically American companies, and I have always thought of them as like an American citizen. Do American corporations owe anything to the country? Heck yes. I believe company boards have a responsibility to make sure that companies are good corporate citizens.”

The price of patriotism

It is hard to argue with the idea of being a good corporate citizen, but what does “good” look like under the rubric of patriotic capitalism?

“Companies have an obligation to provide a tax base to pay for the benefits they derive from the country in which they are based,” says Tom Leppert, who served as mayor of Dallas from 2007-2011 and has served on more than a dozen boards, including Fluor Corporation.

The government bears responsibility too, namely to create a tax structure that is “competitive and does not place an undue burden on the company,” says Leppert, who is also the former CEO of educational services provider Kaplan.

While Congress argues over whether or not the current corporate tax rate of 21% is sufficient, others point to companies that use offshore tax shelters to effectively pay no taxes at all. The New York Times reported on a large pharmaceutical company that used the tactic to reduce its corporate tax rate from 25% in 2011 to negative 7% the following year. A 2016 report released by economist and former Trump Treasury Department official Kimberly Clausing found that offshore tax shelters cost the U.S. government nearly $100 billion annually. Treasury Secretary Janet Yellen scored a victory in the administration’s quest to discourage the practice, as finance ministers from the G7 agreed to support a global minimum tax, but the policy faces skepticism from congressional Republicans who have signaled they may block it in the United States.

Companies can also contribute to the country in ways that don’t involve dollars and cents. “Operation Warp Speed,” a public-private partnership to accelerate development, manufacturing and distribution of COVID-19 vaccines, therapeutics and diagnostics, demonstrated how corporate America can improve — and even lengthen — citizens’ lives, says Dante Disparte, chief strategy officer and head of global policy for global financial technology firm Circle.

“If you remove the government demand and backstop, it's not likely we would have anything close to the results we have seen so far with these vaccines,” says Disparte, who chairs the Business Council for American Security. “The same holds true for how the internet was created and how GPS satellites were created.

“The space program is another great example. Absent long horizon, large capital injections from NASA and from the federal government, we likely wouldn’t see a company like SpaceX, because there wouldn’t be sufficient private sector capital and risk appetite to take that bet. But when you merge the two, you get some compelling breakthroughs and you mobilize the private sector. You create jobs and a national strategy.”

But that kind of strategy hinges on taking an investment approach that both the public and the private sectors have eschewed, says Norman Augustine, retired chairman and CEO of Lockheed Martin.

He says two of the main ingredients — educating young people and conducting research that might lead to new products — can take decades to generate returns.

“Two of the most important drivers of the future wellbeing of our country are very long-term payoff items,” says Augustine. “And yet our political system and our business system are aimed at short-term returns.”

The new age of infrastructure

Jan Tighe, a former cybersecurity expert for both the Navy and NSA who now sits on the boards of Goldman Sachs, Huntsman Petrochemicals and Progressive Insurance, also sees how that short-term thinking seriously hinders U.S. companies’ collective ability to stay competitive.

“Whether you're talking about 5G, quantum computing or various AI implementations, we really could use an influx of dollars to even keep us in the game,” she says, adding that China’s success in these areas should be a wake-up call. “Right now, the Chinese are driving the standards bodies in their favor for 5G. We need to be equally competitive and knowledgeable and offer solutions that are U.S. solutions. We have not been competitive in that space over the last few years.”

Most business leaders see investment in infrastructure as another critical role of government. Leppert agrees, but he echoes a debate playing out nationally: defining what constitutes infrastructure. “When I say infrastructure, I mean roads, bridges, railway systems and airports,” Leppert says. Yet, he adds, “It’s important to evolve our definitions as the environment evolves and so I would absolutely put broadband in that category.”

We have seen the increased importance of reliable broadband play out in real time during the pandemic. “COVID-19 put the experiment to the test,” says Disparte. “Companies that thought of remote work as a luxury all of sudden realized we really, really needed our home Wi-Fi networks and our own devices and hardware for anything close to business continuity.” He says such large-scale crises drive a reexamination of how we define both resilience and critical infrastructure. Disparte served on FEMA’s advisory board during Hurricane Maria and saw firsthand how even the best laid contingency plans fail when companies don’t view risk through a broader stakeholder lens.

“The companies had generators and all kinds of contingencies, but no employee could come to work,” he says. “What good is it to be resilient up to the perimeter of your building when your staff, your leadership and other executives in your business and community are underwater or have no lights and electricity? I think there's a bigger business obligation to extend the perimeter of resilience to include the community.”

COVID-19 laid bare that business continuity is reliant on “human infrastructure,” something corporate America may have missed.

“Something that has become very clear in the last year are the challenges that the workforce has had, especially frontline workers who have had to bear an increased burden during the pandemic,” say Andrea Bonime-Blanc, CEO of GEC Risk Advisory. “It’s revealed that the value proposition behind stakeholder capitalism is real.” She points to companies that stepped up across industries and kept staff on the payroll or on company-provided health insurance, even as profits dwindled.

Take, for example, access to childcare. Since the COVID-driven recession started in February 2020, these concerns have grown exponentially as record numbers of women — nearly 3 million so far — have left the labor force. A study by the Federal Reserve Bank of Minnesota showed that while mothers and fathers left the workforce in near equal numbers in April 2020, by November nearly all of the men had returned, but not so for the women. The report cited lack of childcare options as a key factor driving the disparity, disproportionately impacting mothers of young children and single mothers. A 2020 survey of child care centers by the National Association for the Education of Young Children found that 40% of providers expected to close by the end of 2020 without additional public assistance.

This has led some to call for government intervention to avert a crisis. Leppert believes corporate America has a role to play here, but not through use of its tax dollars.

“We’ve seen individual companies provide access to child care for their workers, and it’s been a competitive advantage,” Leppert says. However, in his opinion, “that’s not the role of government.”

Serving the common good

Cyber risk highlights the intertwined fates of the public and private sectors. A study from Statista, a provider of market and consumer data, found that the average cost of a data breach to individual U.S. businesses rose from $3.54 million in 2006 to $8.64 million in 2020. As cyber criminals pivot from simply stealing data to hobbling operations, the risks also morph from individual to systemic. In the SolarWinds attack, for example, an intrusion at one company had ripple effects for thousands more, including the majority of the Fortune 500. When Colonial Pipeline’s systems were breached in April by never-before-seen malware, operations were halted and the gas supply to much of the Eastern Seaboard was cut.

Disparte says every board should be asking what risks are collective and require joint public/private solutions.  

“Take banking, for example,” he says. “The erosion of confidence in any one bank’s cybersecurity erodes confidence in banking. That's a simple audit question that boards could ask: What would erode confidence in the industry that I’m competing in? What types of risks rise to the level of an industry or a societal risk, and how do we stitch together a safety net that props up even competitive companies?”

This approach may upend traditional thinking around competition but can yield more resiliency and reduced risk down the line, Disparte says. Think of it as another way boards and management teams might question old assumptions and take a longer-term view on how to foster value creation in their companies.

One way that companies can “do the right thing” and practice patriotic capitalism when it comes to helping to secure the nation’s cyber perimeter is through information sharing. The government started this process with the formation of Information Sharing and Analysis Centers (ISACs), designed to help critical infrastructure owners and operators share threat information and best practices. While the ISACs have indeed enhanced information sharing, participation is voluntary, and the gaps in the system become more painfully clear with each breach.

“Our security professionals are overwhelmed with the number of alerts of anomalous activity going on in their network,” says Tighe. “If you had that [information] clustered together, we would have the power of all of the analysts sort of working together for our collective defense.”

Retired Admiral James Stavridis, former Supreme Allied Commander of NATO and a director on several boards, including public company American Water, also sees a role for U.S. companies to play in the nation’s interest.

“Do our Silicon Valley technologists have a patriotic duty to participate in our shared national defense? I would argue they do — areas like cybersecurity, artificial intelligence, machine learning. These are going to be vital to our national security.”

This is a place where patriotic capitalism can bump heads with other parts of ESG, specifically the “S.” In 2018, workers at major tech companies, including Amazon, Google and Microsoft, objected to planned contracts that would develop AI and other surveillance technology for the Department of Defense. Stavridis sees room to balance these concerns with other facets of ESG via proactive communication, transparency and bringing employees into the dialogue. “It's like any other leadership dilemma. You begin by providing people accurate information, ensuring they understand what you're doing, why the company would take a contract with the federal government, and illustrate the parameters of it.”

Patriotic capitalism is based on the principle that what’s good for the country is also good for the bottom line, but there may be broader considerations even beyond the financial impact. When consumers see companies skipping out on tax bills or failing to secure critical systems such that gas or food prices increase, public faith in the entire free enterprise system can erode.

That, says Disparte, raises the stakes for everyone. “It gets to this question of privatizing gains and socializing losses, made very evident in the 2008 financial crisis. The enlightened approach for the board is, How do we build goodwill, and what can be done to pre-fund these types of interventions, which will lower their overall costs?”

Erin Essenmacher is a board director, consultant, content strategist and founder of the media firm Feisty Aphrodite. She spent nearly 10 years in executive leadership at the National Association of Corporate Directors, most recently as president and chief strategy officer.