Responsive Corporate Leadership

1. What impact do vision, values, and getting to value added have in achieving an edge on corporate citizenship? What are the underpinning themes of citizenship and systems thinking? Provide examples and research to support your thinking.

2. MANAGERS OF THE GRAY ZONE

DECEPTIVE APPEARANCES
In this way Ukraine and other former communist countries are fully in line with the Soviet tradition where the Communist Party's dominance was exercised largely outside formal institutions and aside of, or even against, written rules. The peculiarity of these systems, D'Anieri explains, is not just that they lack rule of law, but that they are run under rule by law, in which the law is a weapon to be selectively applied against one's adversaries. In this regard, he maintains, "the 'absence of the rule of law' is not simply something that just exists like bad weather. Rather, it is something that results from the accumulated efforts of interested actors to ensure that decisions support their political interest."
The pursuit of political goals by going outside the established rules — the author's definition of "power politics" — is in Ukraine heavily concentrated in the executive branch and includes selective law enforcement, regulation of the economy, influence over the media, and other measures. The use of money as well as the use of, or threat of, violence are important aspects of power politics. "At crucial times in Moscow, Kyiv, and elsewhere, vital institutional decisions have been determined by the ability of different actors to apply physical force."
So, the author sums up, "to understand post-Soviet Ukrainian politics we need to understand 'power politics' as well as institutional design. Institutional design will help us understand the effects of different arrangements. Power politics will tell us why certain rules have been adopted and why the rules do not apply equally to all actors."

ROOTS OF POWER POLITICS
D'Anieri, an American scholar and university administrator who specializes in analyzing the region's political and economic institutions, asserts that the concentration of power in the hands of the executive is the key to understanding politics in post-Soviet Ukraine and elsewhere in the former Soviet Union. No separation of powers had ever existed in the system where the Communist Party held a total/totalitarian monopoly on everything. In practical terms it means that neither legislature nor judiciary had been ever perceived as independent bodies designed to check and, if necessary, to curb the executive from abusing power.
The second important aspect of that burdensome legacy is the remains of party-state control of the entire economy, which laid the foundation for the eventual mutual reinforcement of political and economic power in the post-Soviet states and, as D'Anieri aptly remarks, for large-scale corruption that both supports and is supported by this vicious circle:
"Political authority was a necessary and sufficient condition for acquiring economic power and wealth [in post-Soviet countries], sometimes on a fantastic scale. Simultaneously, economic power was necessary and nearly sufficient to obtain political power ... To put it simply, political power is highly concentrated in Ukraine because it started out that way, and because the system tends to reinforce that concentration rather than to disperse it."
D'Anieri recognizes, however, that the system did not necessarily have to move in that direction. Ukraine could have avoided the consolidation of authoritarianism had reformers pushed through institutional changes more vigorously. This would have been no easy task, of course, since they had rather limited support in the society at the time and could barely muster a strong pro-reform majority in the parliament.
The main constraint, though, was probably psychological. So long as the new state's independence was not secured, the reformers tried not to antagonize the local, rather territorial than national, nomenklatura who opportunistically supported Ukraine's pro-independence drive. This inevitably placed them in a much weaker bargaining position vis-à -vis the ancien regime than was the case in other post-communist countries. Nevertheless, this segment of the political class could certainly have been much more active and purposeful in their demands for early parliamentary elections immediately after independence, for adoption of a new constitution (not passed until 1996), and for other institutional changes like judicial reform, a new electoral law, and new regulations to promote the role of political parties in coalition-building and government-making.
In brief, their main goal should have been to strictly separate powers and, in particular, to strengthen the legislature as the main counterbalance to the executive that had been traditionally overpowered since Soviet times. Instead, as D'Anieri notes, Ukraine "built its new institutions very much within the institutional framework constructed by the Soviets (and with almost all of the same personnel)." In a sense, this was part of the cost incurred by prizing national independence over political revolution. Predictably, the old system fought back. "Ukraine's slide to authoritarianism," D'Anieri contends, "was a result of fundamental imbalance in the distribution of political power ... The system was very vulnerable to a chief executive who sought to use the state apparatus to control both the economic and political spheres in the country."
It was true that "Leonid Kravchuk did not seem to be such an executive, [n]or initially did Leonid Kuchma," but this mattered little in view of a broader and much more powerful institutional logic. The logic of power politics implies, in particular, that any ambitious leader tends to amass his power and expand his prerogatives, and any powerful institution tends to convert its de facto power into legitimate power and vice versa. Therefore, D'Anieri notes, "we should not necessarily conclude that the politicians themselves are different — that Western politicians are inherently honest and that others are not. The difference seems to be in how far politicians can go in different countries before something or somebody pushes back. ... In liberal democracies, politicians who become increasingly powerful tend to engender increasing opposition. In electoral authoritarian systems, in contrast, political and economic power tend to centralize, such that those who initially gain an advantage can then use that leverage to create further advantage. This self-reinforcing cycle is limited only by the competence and lifespan of the ruler."
Thus, separation of powers and mutual checks among the different parts of government and different interests in society is the only way to prevent usurpation of power by the strongest player. The institutions, D'Anieri suggests, should be crafted in such a way that the personal virtue of politicians is irrelevant.
The "benign" behavior of Kravchuk, president from 1991 to 1994, and the early Kuchma hardly stemmed from their benign law-abiding nature or sheer good will. At many times and occasions each proved to be a rather typical post-Soviet man with a profoundly uncivic political culture and a deeply entrenched belief that ends justify means, winners take all, and any law is inferior to political and/or economic expedience.
It looks more likely that neither Kravchuk nor the early Kuchma had yet accumulated enough political and economic resources to effectively implement power politics. Not until the end of his first term could Kuchma accrue the needed resources and acquire the needed skills to combine masterfully coercion and manipulation, bribery and blackmail, intimidation and cooptation.

ELECTORAL AUTHORITARIANISM
The system Kuchma created was certainly not unique: there are a great many countries characterized as partial (delegative, illiberal, imitative) democracies — i.e., countries that, being basically authoritarian in terms of unchecked concentration of power in the executive, yet make extensive use of democratic rhetoric and employ seemingly democratic institutions and procedures. The main goal of these hybrid regimes, as D'Anieri aptly remarks, is to "yield some degree of democratic legitimacy without succumbing to democratic control." In other words, they strive to achieve undemocratic goals through quasi-democratic means, to avoid genuine political competition without overt political repression and dictatorial brutality that might evoke international condemnation.
To this aim, three broad categories of resources are employed: "control over law and administrative enforcement, control over large sectors of the economy, and patronage (control over government jobs)." The concentration of these resources in the hands of the executive had been, by and large, predetermined by the initial imbalance of power inherited from the Soviet state, and the inability of civil society and the democratic opposition to fix the problem.
Two major factors facilitated the process in the 1990s: societal fragmentation and what D'Anieri defines as the "nonrevolutionary nature of political change in Ukraine." The first factor made virtually impossible any consolidation of political opposition and enabled the post-Soviet elite to wield divide-and-rule tactics to good effect. The second factor resulted in slow, incoherent, and often confusing reforms that provided an excellent opportunity for the elite to pursue power in a highly ambiguous legal environment.
Partial reforms created an economic gray area between plan and market that "allowed well-placed actors to get richer than they could either in a fully planned or fully marketized system." Rather predictably, these rent-seekers did their best to "halt further reform in order to 'freeze' the economy in this highly lucrative intermediate position."
One might argue also that a gray zone emerged and was deliberately frozen in a legal sphere where a great many laws were either missing or overlapping, contradictory, incomplete, confusing, arbitrarily interpreted, or poorly enforced. This was a kind of no-man's land, an unmarked territory up for grabs, a place where might makes right and the strongest players can broaden their holdings by sheer force. The institutional logic is simple: "partial reform of a system with concentrated power leads to continued concentration of power." Hence, "given the original distribution of power in Ukraine in 1991, the partial opening of the system made it easier, not harder, for those with power to consolidate it. ... As a result, the powerful become more so, and those with lack of access to resources find themselves increasingly shut out."
By the mid-'90s the situation had become ripe for a large-scale privatization now that the main players in Ukrainian politics and the economy had accumulated sufficient resources to carry it out in the most beneficial way. The blessing, however, was mixed. The dubious sources of their wealth and murky course of privatization made them potentially easy targets for the surveillance and law-enforcement agencies subordinated directly to the president. All of them appeared to be on the hook, and it was up to President Kuchma now to decide who would be punished and when, and who would be generously granted an extended probation.
Selective application of law became a powerful instrument of official, albeit informal, blackmail employed by the president and his associates. It allowed them to reestablish a kind of order throughout the country, making the state institutions work and seeing that taxes were paid and the oligarchs stayed obedient. But the side effect of this relative success was a gradual elimination of pluralism — since it was "pluralism by default" (so described by the political scientist Lucan Way): pluralism accompanied and supported by state fecklessness, rather than democratic norms, traditions and institutions.
The kind of authoritarianism that flourished in Ukraine, one that builds legitimacy through seemingly free elections and other ostensibly democratic procedures, differs substantially from the traditional one that maintains power primarily through ideology or coercion. But the effectiveness of this system, as D'Anieri aptly remarks, has clear limits. The executive's power is significant but not total. Elections are manipulated in multiple ways but not thoroughly rigged. The authorities can tip the balance in their favor in a close race but "it is much more difficult to use such methods to overcome a very large deficit in popular sentiment."
And this is exactly what happened in 2004 when the incumbent Kuchma picked out a highly unpopular prime minister, Viktor Yanukovych, to succeed him in the presidency. To make Kuchma's bad situation worse, the opposition unexpectedly united, civil society proved to be stronger than was assumed, and elites defected from the president's camp much more massively than anybody could have foreseen. All these factors combined with the international pressure made the defeat of the electoral authoritarian regime inevitable. One should not forget however, that "Kuchma failed not because he was constrained by institutions but because, in the end, he was confronted by superior power." The Orange Revolution marked rather a departure from authoritarianism than the arrival of a full-fledged liberal democracy. "This is so not only because in Ukraine there are still retrograde and corrupt political forces that have no intention of admitting defeat. It is also true because the institutional basis for liberal democracy is still incomplete."

RECRAFTING THE INSTITUTIONS
The Orange Revolution brought about a number of important institutional changes that made Ukraine's return to Kuchma-style authoritarianism rather unlikely. They include, first of all, constitutional amendments which substantially limited the president's power and expanded the prerogatives of the prime minister and parliament. In addition, the mixed proportional-majoritarian voting system was replaced by a pure proportional system that eliminated elections in single-member districts where power politics thrived most. And finally, the rules governing the functioning of parliament were adjusted to the constitutional changes. In particular, they now require the creation of a majority coalition in order for a government to be formed. This provision, alongside with proportional representation, is expected to boost the development of the parties and to strengthen their sense of political responsibility for the government they form.
All these changes, however, were made during the revolution in haste, with numerous inconsistencies and contradictions. Most importantly, no effective barriers were erected against the continued use of selective law enforcement. The "rough-and-tumble nature of Ukrainian politics" remained unchanged. Rather than moving towards a liberal democracy, Ukraine is more likely today to return to the Kravchuk era, "when the division of executive power among president, prime minister, and parliament led to constant infighting and stalemate" — a state of what Thomas Carothers has cogently termed feckless pluralism. Then, the paralysis of key institutions and ensuing political and legal chaos had heavily compromised the very idea of parliamentary democracy in the public's eyes and paved the way for Kuchma's eventual hyperpresidentialism. Now, much deeper, broader, and more coherent institutional changes are needed to secure Ukraine's democratic transition.
The 2004 constitutional amendments have thus far fostered a kind of "overlapping powers" system rather than clearly separating the branches of government and establishing strong checks and balances. Again, as in 1996 when the new constitution was adopted or in 1991-92 when the old Soviet one was patched up in the wake of Ukraine's independence, all the changes reflect far more the existing balance of powers, the bargaining position of participants, than any idealistic drive to create a perfect document and facilitate the development of liberal democracy and rule of law.
In his perspicacious analysis of the 1996 constitutional process, D'Anieri remarks that "the way in which the constitution was adopted was much more important than its content." He refers here to Kuchma's ability to go outside the constitutional process, to use extralegal "raw power" and force the parliament to pass his version of the document under the threat (however dubious from the legal point of view) of dissolution.
"This, not the advent of a constitutional order, was the key outcome. ... While many saw the adoption of the 1996 constitution as a triumph for Ukrainian democracy, because the new document was superior on paper to what it replaced, it was in fact the beginning of the end of constitutional government. ... When the constitution can be ignored by the president, or when he can credibly threaten to ignore it, the quality and details of the constitutional provisions lose their importance."
Ironically, much the same can be said of the 2004 institutional changes and the eventual behavior of all the key actors. On one hand, the Kuchma constitution was substantially patched up during the revolution — just as the Soviet constitution had been in 1991. On the other hand, the amendments neither clearly separated the branches of government and unequivocally defined their prerogatives, nor satisfied the president, the prime minister, and the parliament. Each side calls for further revisions of the document — not for greater efficiency but primarily for personal or corporate gain, and each side undermines, ignores, and compromises various clauses of the existing document in the meantime.
Remarkably, no one who laments the deficiencies of the constitution apparently is concerned for legal reform, an independent judiciary, and strict and uniform implementation of laws. All the major political players seem to be satisfied with a legal gray zone — as long as they can hope to assert their own authority over the disputed area. Sooner or later, the strongest, the smartest, or merely the luckiest player will outplay the rivals and establish his or her own version of "managed democracy" in a poorly managed realm. People would cheer the savior. If only the players would come to terms with a simple truth: that goals do not justify the means, winners should not take all, and political expediency cannot be superior to law. The next step would be to parcel out the gray zone and choose trustworthy arbiters to manage it. This solution looks simple but, as D'Anieri suggests at one point, it depends much more on societal norms than institutions. Starting from the very top, everyone must accept a simple but difficult truth: good or bad, it's the law.
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By Mykola Riabchuk

Read "Managers of the Gray Zone". What can be taken from the understanding and evaluation of the leaders of Ukraine that is applicable to the three spheres? How are the gaps suggested in the political power and informal actions meaningful in understanding the three spheres and the impact this can have on other countries or cultures?