Today is another big day – in a bad way – for Volkswagen. In Germany, the board of Audi, Volkswagen’s luxury brand, is meeting with CEO Rupert Stadler. The meeting will surely be tense because Audi admitted last week that some of its cars carried the “defeat devices” that deceive emissions testing equipment, after belligerently denying it three weeks earlier. Like most luxury auto brands, Audi is the profit machine for its corporate owner. And in New Orleans today, plaintiffs’ lawyers from across America are converging for a massive scrum to determine where the U.S. lawsuits against VW – 480 filed so far – will be consolidated and heard. Getting the cases consolidated in a law firm’s hometown could be worth millions, since local firms are likelier to be assigned lead roles in this guaranteed massive, multi-year festival of litigation.
Regular Power Sheet readers know we’ve been tracking the VW scandal since it broke in September because it has looked from the beginning like a classic case study of poor leadership before the revelations of emissions cheating, under Martin Winterkorn, and of either good or bad crisis leadership in the aftermath. The verdict on the aftermath is becoming clear: VW’s leadership has been disastrous.
We don’t yet know how to apportion blame between CEO Matthias Müller and the VW board; Müller certainly looks bad, but maybe he is being constrained or directed by the board. What we can say for sure is that in the 11 weeks since news of the cheating first appeared in the U.S., VW has been living in a previous decade. Like big, old industrial companies caught misbehaving in the past, it has assured the world of its good intentions while issuing obtuse, legalistic statements when forced to acknowledge yet another deception, as has happened repeatedly. A Bernstein Research analyst observed, “The press releases from VW seem almost purposefully designed to infuriate further investors — and probably regulators — with their obscure language.”
In its defense, the company argues that it must go slowly in order to be thorough. But then it commits a significant blunder, insisting that Audis did not carry defeat devices – directly contradicting a statement by the U.S. Environmental Protection Agency – only to admit later that actually, they did. In the midst of this debacle, VW announced that it had discovered an entirely separate deception involving carbon dioxide emissions on European models, and even then, reports the Financial Times, revealed crucial information about which models were involved only under questioning.
Union Investment, a major VW shareholder and Germany’s No. 3 asset manager, has called publicly for Müller, other top managers, and the board to be replaced by outsiders. “It’s all about trust,” a senior portfolio manager told the FT.
What a mess, and it becomes harder to fix with each passing day. This could have been a story about inspiring leadership and culture change. Instead, employees, customers, suppliers, communities, and investors are still wondering how bad it will get.
You can share Power Sheet with friends and followers here.
What We're Reading Today
Viacom shareholder calls for Redstone’s mental health information
Mario Gabelli, the billionaire investor and second-largest owner of Viacom voting shares, asked Viacom to disclose records detailing 92-year-old chairman Sumner Redstone‘s mental capacity. Redstone faces a lawsuit by an ex-girlfriend in which the court recently ruled that no mental competency test is required after physicians have attested to his well being. Gabelli believes the board should be more transparent about the health of the company’s chairman.
Fed Chair: “Looking forward” to rate hike
Federal Reserve chairwoman Janet Yellen made the statement in a speech at the Economic Club of Washington in which she spoke about her confidence in the U.S. economy. Her comments signal a strong likelihood that the Fed will raise rates at its meeting in two weeks.
EU opens a tax investigation against McDonald’s
A growing investigation of corporate tax agreements by EU countries aims to find out whether McDonald’s received unfair advantages in Luxembourg. Amazon, Fiat Chrysler, Starbucks, and others have received tax breaks that the EU and antitrust chief Margrethe Vestager believe to be illegal. Investigators say Steve Easterbrook‘s company hasn’t paid taxes to Luxembourg or the U.S. from its European franchising unit’s profits since 2009.
Marissa Mayer’s risk aversion
When Marissa Mayer joined Yahoo three years ago, she knew the company’s problems. It had become an also-ran for advertisers and needed a new identity. But has she so far failed because she hasn’t taken enough risks to save the troubled web company? Some analysts argue that her strategic ideas have been too conservative. Yahoo’s board is considering selling the company’s core web business.
Building a Better Leader
Avoiding the retirement crisis
TIAA-CREF CEO Roger W. Ferguson Jr., says companies have to ask whether their employees are “appropriately literate and informed” about their savings options.
If you want a spot as a board member…
…TaskRabbit COO Stacy Brown-Philpot advises telling everyone you meet, especially CEOs. The strategy landed her on HP Inc.’s board.
Avoiding the job hopping syndrome
It’s easier than ever to change jobs, but before doing so, make sure you’re not just trying to fix short-term problems.
14 killed in San Bernardino shooting
It’s the 354th and largest U.S. mass shooting this year; a total of 462 deaths and 1,314 injuries have resulted so far. President Barack Obama has reiterated his call for Congress to pass “common sense gun safety laws.” Former Republican Congressman Jay Dickey, who was instrumental in passing a law nearly 20 years ago that essentially banned the government from funding gun violence research, said he now regrets the decision and called for the Centers for Disease Control and Prevention to investigate.
More Fifa officials arrested
Two Fifa vice presidents, Concacaf president Alfredo Hawit Banegas and Conmebol president Juan Angel Napout Barreto, were arrested in Switzerland on suspicion of accepting bribes. The U.S. Justice Dept. requested the arrests. Swiss authorities said that bringing suspended Fifa President Sepp Blatter to court would take at least five years, but there’s still a chance that he won’t face formal charges.
Elon Musk calls for carbon tax
Innovation alone won’t move the world to cleaner energy, says Tesla and SpaceX founder Elon Musk. In addition, he advocates a carbon tax, saying “the fundamental problem is the rules today incent people to create carbon.” He encouraged students to press their politicians on the issue.
Up or Out
Fortune Reads and Videos
Zuckerberg’s charitable twist
The Facebook founder’s foundation, through which he intends to give away 99% of his $45-billion fortune, is set up as a limited liability corporation rather than a charitable trust. The structure gives him more flexibility and control and could also give his family greater tax benefits than a trust.
AB-InBev confirms plans to sell…
…SABMiller global beer brands Grolsch and Peroni.
SpaceX will try landing rocket on solid ground
Two previous attempts to land a rocket on floating platforms have failed.
Pandora’s CEO argues against free music
The online radio CEO Brian McAndrews says free streaming services, like Spotify, enable consumers to avoid ever paying for music, hurting musicians.
“I’m a woman CEO and I have five children, and I realize that’s different. On the other hand, at a business conference talking about business, the questions should be about business. Men never get asked about work-life balance. Implicit in the question for women is that it’s your job to be at home taking care of your kids, so who is at home taking care of things while you are working?” – YouTube CEO Susan Wojcicki speaking at the FortuneMost Powerful Women Next Gen Summit in San Francisco.
Share Today’s Power Sheet:
|Produced by Ryan Derousseau|