The federal government has made sizeable investments in several private companies and is steering inbound foreign investment — the most significant U.S. government involvement in the private sector outside of wartime economies. Mick Mulvaney, first-term Trump White House chief of staff and former director of the Office of Management and Budget, joins Skadden M&A partner Ann Beth Stebbins to explain what this means for corporate boards.

Although some companies are actively seeking government capital, Mulvaney point to potential dangers as he views the government as “dramatically less disciplined than the private sector.” He predicts the trend of government as a source of private capital will continue regardless of which party controls the White House, representing a fundamental shift in how both Republicans and Democrats view the government’s role in the economy.

Mulvaney warns companies to think carefully before taking government money. Do businesses truly understand what it means to have Uncle Sam as a co-owner on their board? What happens when administrations change and policies shift, he asks? 

Ann Beth points out that none of the deals to date include redemption features, so companies cannot easily buy back government stakes. Even if there were a redemption feature, Mulvaney adds, it could be difficult to exercise that if the government does not want to be bought out. “How would you feel about it — when you have to have a relationship with the government in your business — how would you like to [be] at that point?” he asks.

Having policies to promote national and economic security makes sense, Mulvaney says, but there are “other things the government can do that do not involve the actual ownership of the means of production.”

Mulvaney supports the Trump administration’s negotiating with countries such as Japan and South Korea to direct investment into the U.S. in exchange for access to the U.S. market. 

He says that we have only seen the first moves on all these fronts. “They’re going to continue to pursue government ownership of private companies and at the same time are also going to continue to try to encourage more direct foreign investment and then look for places for Americans to invest overseas…. [W]hat you’re seeing now, you’re going to get for the last three years and three months of this administration…. because they are absolutely committed.

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Name: Ann Beth Stebbins

Title: Partner at Skadden

Connect: LinkedIn

Featured Guest

Name: Mick Mulvaney 

Title: Senior Advisor, McLarty Associates

Connect: LinkedIn

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From Skadden, you’re listening to The Informed Board, a podcast for directors facing the rapidly evolving challenges of a global market. A complement to our newsletter for directors, our aim with this podcast is to help flag potential problems that may not be fully appreciated, explain trends, share our observations and give directors practical guidance without a lot of legal jargon. Join Skadden Partners who draw on years of frontline experience inside boardrooms to explore the complex issues facing directors today.

This is Ann Beth Stebbins, host of The Informed Board. I am joined today by Mick Mulvaney. Among other positions, Mick was a four-term congressman from South Carolina, director of the Office of Management and Budget, chief of staff to Donald Trump during the first Trump administration, and special envoy to Northern Ireland. There is no one who has played more roles inside the government that I’m aware than Mick Mulvaney.

Marco Rubio maybe.

Okay. There’s a close second.

I think he’s gaining on me, Ann Beth. I think he’s up to three or four. I’m at five, so.

You might need another gig Mick.

Well, he’s going to count the Senate as more important than the House, because that’s how senators are, but I don’t look at it that way.

Well, these are unprecedented times, but today we’re going to focus on one aspect of these unprecedented times and that’s the administration’s unprecedented approach to government involvement in the private sector. Not something that I’ve seen in my career, and I think you have to go back to almost wartime or post-wartime economies to see the level of government involvement that we’ve seen in the last nine months. So let’s start with your take on the administration’s America First agenda. What are the priorities? What sectors are in focus and how do you see this all playing out in real time?

Let’s start with that specific part of the agenda, which is this involvement in the private sector, because you said something very interesting. In fact, I think I’m going to steal it.

We haven’t seen anything like this since we were in a wartime economy. Certainly not under Republican leadership. I think what the administration would say, their logic would be, “Oh, well, we’re in a battle. This is like wartime. We have to have a wartime mentality or else the Chinese are going to beat us.” You’re going to see it more and more. This is not going away. Intel was not a one-off. U.S. Steel’s golden share was not a one-off. The deal in the mining operation is not a one-off. I cannot tell you the number of people who call me, email me, text me every week going, “Hey, can you help me have the government buy a piece of my business?”

The government now perceives itself as a source of capital and the markets perceive them as a source of capital. It’s not going to stop. What I tell folks is that any industry, any business that either sells a lot of stuff to the federal government or gets a lot of subsidies from the federal government is going to be a target. It just is. I think it’s extraordinarily dangerous and the reason I think it’s not going to go away is that regardless of the outcome, I think this is where the Republican Party is, and it’s where the Democrat Party has wanted be for a long time.

You guys did Intel, all the green energy stuff that they just lent money to or subsidized last time, they’re going to actually go ahead and try and invest in and own so that it cannot fail. I think it’s one of the biggest stories, one of the biggest market moving types of developments that just not enough people are talking about because it’s not going to change, I don’t think, in our adult lifetimes.

It’s interesting to me, Mick, that you described these companies as targets and what companies might be targets because you also talked about clients calling you and saying, “How do I get some of this government money?” So it’s also an opportunity, isn’t it, for a source of capital from a source of capital that hadn’t previously been available?

And a source of capital that is dramatically less disciplined than the private sector. That’s the whole problem. The whole reason that Republicans are supposed to dislike investment in the private sector is that it’s an inefficient allocation resources. We’re not nearly as good as the market at taking winners and losers. Let’s call Uncle Sam. Let’s see if he wants a piece of this action.

The institution itself doesn’t have that background. A friend of mine sent me a client and said, “We’d really like to get some of this money.” And I’m like, “Look, do you really want AOC [Representative Alexandria Ocasio-Cortez] on your board?” And they said, “Well, she’s not in government.” I’m like, “Yeah, she’s not in government right now. What if she’s the Secretary of Commerce in the Newsom administration and now she’s sitting on your board? How do you feel about the government investment now?” There’s a lot of people who haven’t t,hought a lot of this through, on both sides.

Let me ask from a different angle, and that’s the thesis that economic security is national security. Are there some situations where government investment is appropriate and actually is a good idea because we have national security interests at stake?

Sure. National security is economic security and vice versa, and I get that. I would point out that one of the reasons we have one of the greatest levels of economic security in history is because of our markets, our private markets and not government intervention into the private sector. One of the reasons we can afford the greatest actual national security is because our economy is so healthy. We didn’t get that way by having the government take 10% of Intel.

I get the importance of rare earths. I understand that. I get the importance of the chips. I get it, okay? Couldn’t we achieve the same thing in another fashion? And here’s the example I draw. Food security is national security. If we don’t have enough food, we have a national security problem. That doesn’t mean the government runs out and buys 10% of all the dirt that we grow stuff out of. We do it in other fashions. We will provide price floors. We’ll have off-take agreements.

There’s other things the government can do that doesn’t involve the actual ownership of the means of production. I don’t disagree that there’s the government role in doing this, and I don’t disagree that a healthy American economy, just like a healthy American farm belt, is good for national security, and good for overall American interests. That doesn’t necessarily, in my mind at least, translate to having to own pieces and parts of the means of production, or own golden shares, or have special agreements with the government.

What about encouraging foreign investment into sectors which are important for national security, economic security? And I’m thinking about the quid pro quo on trade deals with Japan, with South Korea, the quid pro quo for enhanced diplomatic ties with Saudi Arabia, and that money being invested in the US. How do you think about that and is that an appropriate path?

It is, and I think it’s one place that the administration has spent a good bit of time and will be doing more. I think what you’re seeing is a philosophical approach. I’m working on this thesis, which is that the administration has taken the position that over the course of the last 70 years in the post-war era, what we’ve done in order to develop our relationships overseas is by giving people stuff. Either you give them money or you give them access to our markets, et cetera.

And I think what the Trump administration is saying, “No, let’s try something different. Let’s have them invest here. Let’s have them develop the relationship that way. Let’s have Japan invest more here. Let’s have Saudi invest more here, and maybe let’s have us invest more in Saudi.” Though that private sector relationship can build the relations in the same way that government intervention has in the past. The administration is going to keep pursuing this as well.

Yes, they’re going to continue to pursue government ownership of private companies and at the same time are also going to continue to try to encourage more direct foreign investment and then look for places for Americans to invest overseas. It’s all part and parcel of the same thing. I really like one plank of the platform. I don’t like another, but that doesn’t make any difference. What makes a difference is they are going to pursue both of those angles moving forward.

We’re in early innings here based on some of your earlier comments. What other industries might be on the administration’s radar screen?

I think everybody probably their head goes to the same half dozen places or so. It’s going to be in mining, it’ll be in steelmaking. These are places it already is. It’ll be in defense industries. It’s going to be the places where this administration thinks we’ve got a specific national interest. What you’ve seen is sort of just, to your point, just the first innings. They said, “Okay, we’re going to do semiconductors, we’re going to do mining, we’re going to do steel, and we’re going to go look at other defense stuff.” So that’s where they’re going to look.

What about the administration’s statements about building up our manufacturing capacity, supply chain concerns that came to light during COVID and on-shoring some of that manufacturing and pharmaceutical capacity?

Yeah, they’re certainly taking a look at it. I look at them slightly differently. I put supply chain in one category and then I put the manufacturing capacity in another, to the extent those aren’t mutually exclusive. I do see them with the ability to have some success on supply chain, getting stuff back, especially as you point out in pharmaceuticals. That’s a classic sort of example of where they’re going to go. The old-fashioned manufacturing, bending steel, that kind of stuff, I don’t see it. That is a cultural change that I’m not sure they can fix with the wave of a wand or the signing of an executive order.

There’s some interesting polling data out about large majority of Americans think that America needs more manufacturing jobs and a small minority think that they would like a job working in a factory. Those two things just don’t go together. That would be a dramatic shift to try and rebuild the manufacturing base, and so I don’t think they’ll have much success there. I do think they have a great deal of interest in both. I don’t think they’ll much have success in rebuilding the manufacturing base, but I think they will have a great deal of success in moving back pieces and parts of supply chains that doesn’t involve bending metal.

You spend a fair bit of time outside of the U.S. advising clients outside of the U.S. What have you heard from companies, governments outside of the U.S. about this policy?

Yeah, it’s been fascinating to see the change, the evolution. They went through a shock. I was touring — I gave a series of speeches right before the election and I was in the Scandinavian countries and Central Europe, and I would ask people at the beginning of the presentation to raise their hands if they thought Donald Trump actually had a chance to win. And without exception, I gave this half a dozen times, it was less than 10% of the people present. After the election, many of those overseas companies had to get over a state of shock that this had happened.

Once they got over that shock, then the question was, “Okay, is this real? And is it going to continue?” I’m going to answer that as yes. What you’re seeing is ... The working title of my speech is, “What the hell is going on? How long is it going to go on for, and how does it affect me?” So what you’re seeing now, you’re going to get for the last three years and three months of this administration. You’re going to see this up to the very end because they are absolutely committed.

It’s a fascinating thing, Ann Beth. People ask, “Why are they going so much faster in the second term than they did in the first term? Why are they doing so much more?” I’m like, “Look, it’s almost unprecedented that the two extremes that Donald Trump has gone through on his two election wins.” In 2016, they didn’t expect to win, so they had done very little of the ordinary preparation that an administration would do. I mean, Trump hadn’t met most of the cabinet. I hadn’t met Donald Trump until after the election. I think I met him in a hallway one time for 30 seconds. They were learning how to do executive orders during the first week of work.

Fast-forward to 2024, it’s only happened once in our history. They had four full years to do nothing but prepare for this win. They were working on all of this for four years, and so they were able to hit the ground running in a way that nobody has. No one has done that before since I can’t remember who it was 100 years ago or 120 years ago.

Ordinarily, whoever gets elected president has been doing another job for at least a period of time before they take office. Donald Trump was getting ready to be president again, and that was his full-time gig. So that’s one of the reasons you’re seeing this dramatic change in output and this dramatic change in speed, and it’s not going to stop.

As far as the foreign folks overseas, the one thing I just tell them is, “Look, they’re deadly serious. If you’re wondering whether or not they want you to invest in the U.S., the answer is yes, period, end of story. And if you want to continue to have the unfettered privilege of selling into the American market, you better set up shop there.

That doesn’t mean you have to move your business there, but you have to at least make a token, do something.” I mean, look at the reaction that Toyota got when Donald Trump was overseas. He was encouraging people to buy Toyotas. They didn’t move the headquarters here. They simply have made a major investment, are going to continue to do that. So that’s what I tell folks is that the administration is deadly serious about these policies. If you think they’re joking, then you’re missing something in a big way.

So, Mick, you’ve told clients who’ve come to you to say, “How do I get some of this government money? Be careful what you wish for.” Flip that question. If a company is in an industry that might be of interest to the administration, what should they be doing? Should they be proactive? Should there be outreach? Are they receiving outreach? And can you say No?

The last question is the most fascinating, right? Because I don’t think you can. I mean, if Howard Lutnick knocks on the door and says, “Hi, we’d like to buy 10% of your company,” I think the answer is, “How do you feel about 12?”

I’ve tried to discourage people from it just because I don’t think they’ve thought through what it means to have the government as a co-owner, just because there’s no textbook on it. You don’t study that in the American business schools. You don’t have real world experience with that, and I don’t think you really fully understand what you are getting, or would get, if Uncle Sam sits on your board or picks up the phone at the middle of the week and says that they didn’t like something that they saw about your company on Twitter. That’s the world they’re asking for.

So I do try to discourage people from doing it. Of course, if they say they still want to do it, I encourage them to do direct outreach. It’s an easy call to make. Someone take the call over there and say, “Look, are you interested in doing this?” Either they’ll talk to you, get things started, or they won’t.

Well, one thing that you didn’t mention, but I’ve seen in the deals that have been done to date is there’s no redemption feature. So, if you take private money in a private company, normally you’re able to redeem out or repurchase that interest at some point in time. None of the deals to date have had a redemption or a sunset feature. So, your point earlier on, you’re doing business with this administration, administrations change, policy changes, so just because you know what you’re dealing with now doesn’t mean you know what you’re dealing with in four years’ time.

That’s the AOC on your board when you thought it was Howard Lutnick, but you make an excellent point, let’s take it to the next step. You get a redemption agreement. We’ll buy you out at 200% of whatever you paid. And then the commerce secretary says, “Well, we know you have the right to do that, but you know we really like being one of your owners and we’d really like you not to exercise that.” How would you feel about when you have to have a relationship with the government in your business? How would you like to have that at that point?

Mick, any parting thoughts, words of advice for boards of directors in this political climate as it relates to industrial policy?

I’ll give general advice, because I think it applies to everything including industrial policy. Try, try, try to get back to what you were doing before your industry, your business got politicized. I’m old enough to remember — I mean, goodness, it’s been 15 years now since I was in Congress. And major corporations, people say they play both sides. No, they don’t. Companies have always been involved in stuff that affects their business. And I don’t know why or when or how corporations decided to go into politics more generally. I hope they are now learning the downside of doing that.

The advice I would give is try to figure out a way to get back to where you stick to your knitting and leave the politics to the politicians. If business people were really, really good at politics, then Michael Bloomberg would be president and he’s not. It’s hard to describe. When I was in financial services, I would go up to Wall Street a good bit to raise money and to just get up to speed on the issues and so forth, and I remember sitting with a big wig at some bank and he’s like, “Now, let me tell you how to fix Washington.” Then he gave me an answer for 15 minutes.

And I looked at him, I said, “Sir, so-and-so. If I had spent a couple days up on Wall Street after spending my whole life in Washington and I came up and told you how to run your business, you’d think I was an idiot. And that’s what I’m thinking about you right now. There’s no way for folks who don’t do politics full time can be any good at it or at least as good at it as the people who do.”

That’s the corollary to your earlier observation that the government is no good at private investing. Right?

Bingo. Let’s get back to a system where corporate America makes money, we tax it and we use it to help people out and we’ll move forward from there.

Well, Mick, thanks so much for taking the time. Really enjoyed our discussion.

Thanks, Ann Beth.

Thank you for joining us for today’s episode of The Informed Board. If you like what you’re hearing, be sure to subscribe in your favorite podcast app so you don’t miss any future conversations. Additional information about Skadden can be found at skadden.com. The Informed Board is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.