February 6, 2020 / 2:02 PM / 17 days ago

Breakingviews - Democratic caucus mess is crying for an activist

Supporters for Democratic presidential candidate former South Bend, Indiana mayor Pete Buttigieg react at his caucus night rally at Drake University in Des Moines, Iowa, U.S., February 3, 2020. REUTERS/Eric Thayer

NEW YORK/SAN FRANCISCO (Reuters Breakingviews) - What happens when a company fails to deliver on its promises? The likes of activist shareholders Nelson Peltz, Bill Ackman and Paul Singer come banging around. The sorry state of affairs of the Iowa Democratic caucus is screaming for the type of order these cantankerous investors demand at companies.

Democratic voters in the Hawkeye state gathered on Monday to choose from a field of 11 nominees including former Vice President Joe Biden and Senators Elizabeth Warren and Bernie Sanders to challenge Republican President Donald Trump in November. As of Tuesday morning, no winner has been declared because of a hiccup in the technology meant to whittle down the candidates at the network of 1,600 precincts.

Iowa is one of a handful of states and territories that hold caucuses, a comically complex system that almost ensures screwups. The contest requires voters to run around a public designated spot like a school gym and group up in support of a candidate. If a candidate doesn’t receive support of 15% of people in the physical space, they scramble into another group. The process favors mostly older people with the luxury of time to participate in this circus.

To speed things up, the Iowa Democratic Party used new a mobile app, which flopped. The delay prompted candidates to take matters into their own hands. Both Sanders and Mayor Pete Buttigieg claimed “victory,” while Warren argued the three were running neck and neck. The Iowa Democratic Party said on Tuesday it would publicize the outcome “as soon as possible today.”

It isn’t the first time the Democrats have showed utter failure on delivering on important promises. When President Barack Obama’s administration launched a website to sign up for government-supported healthcare, it initially failed. The caucus is especially problematic for the Democrats, not least because Iowa is first out of the gate and has enormous influence.

Activists prey on this type of incompetence, and often they seek to overthrow those who are in charge. Third Point founder Dan Loeb’s assault on Campbell Soup in 2018 – where he took on entrenched family members who owned a large chunk of the stock – is a great example. Peltz’s Trian Fund Management cracked into General Electric in 2015 after decades of poor leadership and a bloated Byzantine structure battered the stock. Last year Singer’s Elliott Management took a stake in AT&T, whose roots date back more than 140 years.

The debacle requires change, like going with a straightforward primary instead or an overhaul of those in charge. The Democratic National Committee was already under pressure after the 2016 race between Sanders and Hillary Clinton. While pushing for a revamp of the nearly 50-year-old caucus could be slow and torturous, the business of politics could use lessons from the corporate world when it comes to accountability.

This item has been corrected to change “government” to “Democrats” in the first sentence of the fifth paragraph.

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