Power Sheet - March 18, 2016

By Geoff Colvin and Ryan Derousseau
March 18, 2016

Like the rest of us, leaders have good days and bad days, only the beta is bigger, as Wall Street traders say – the ups rise higher and the downs plunge lower. Yesterday was a bad day for three leaders:

Mitch McConnell may be putting himself in a corner. The Senate majority leader reiterated his pledge that the Senate would not consider Judge Merrick Garland or any other nominee for the Supreme Court until after the election. That position is starting to look shaky. Many Republicans have expressed admiration of Garland over the years, and most voters think the Senate should hold hearings and vote on his confirmation. At least a few Republican Senators who face credible challengers this year, including Judiciary Committee Chairman Chuck Grassley of Iowa, have said they’re open to meeting privately with Garland, which McConnell has pointedly refused to do. Things could get worse. If Hillary Clinton is the Dem nominee and looks headed for victory in the fall, a plausible scenario, Republicans may decide they’re better off confirming Garland than leaving the matter to a new president, as they’ve advocated doing on principle. But then they’d look either spineless or unprincipled. Or they could stick to their position and let a President Clinton nominate someone. Not good options.

-At the other end of the Capitol, Paul Ryan’s job is getting even more demanding. He told reporters yesterday that he believes the Republican convention could very well be contested. As House Speaker, he’s not just the most powerful Republican in government, he’s also the convention’s chairman, a fact he reportedly didn’t know when he reluctantly accepted the Speaker job last fall. And while he has promised to support the party’s nominee, yesterday he rebuked Donald Trump for the fourth time in the campaign, this time for Trump’s warning that “you’d have riots” if the convention gave the nomination to anyone but him. When asked, Ryan also insisted firmly that he would not accept the nomination if the convention deadlocks. Though didn’t he say something like that last October about becoming Speaker? Ryan is doing an excellent job of remaining statesmanlike and playing the hand he’s been dealt. But this is a lot more than he signed up for.

Lula can’t get a break. The former Brazilian president, dutifully identified by U.S. media as Luiz Inacio Lula da Silva, was detained and questioned by federal police and his home searched a couple of weeks ago in a widening government corruption investigation. State prosecutors charged him with money laundering and asked that he be jailed to prevent his fleeing. Then his protégé, President Dilma Rousseff, offered him a post as a government minister, which just BTW would shield him from prosecution. This past Wednesday, a judge released almost 50 recordings of phone conversations between the two, which arguably confirmed the obvious suspicions and sparked more mass protests. Yesterday, a judge issued an injunction to block Lula’s being sworn in, but he got sworn in anyway. Net, I’d say things are getting worse.

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What We're Reading Today

Apple engineers say they won’t unlock the iPhone 

As CEO Tim Cook and the FBI argue the legalities of forcing Apple to build a backdoor system into the locked iPhone of a San Bernardino shooter, the company’s engineers signal they may quit rather than help. Apple argues in court filings that the FBI’s request violates free speech by forcing employees to do something they consider offensive. Loss of a paycheck may not sway the skilled engineers to concede, since their skills are in high demand. NYT

Michigan Governor to Congress: “We all failed the families of Flint”

Governor Rick Snyder told a House committee that failures at all levels of government contributed to Flint’s water crisis. He said he did not know about the issue until last October 1. Committee member Elijah Cummings likened the Governor’s failures to those of a CEO who would have been charged criminally. Democratic committee members urged Snyder to resign; Republican members urged EPA head Gina McCarthy, who also testified, to resign.  CBS News

Viacom reports major interest in Paramount

Three dozen companies have expressed interest in buying a minority stake in Viacom’s Paramount Pictures unit since CEO Philippe Dauman solicited offers three weeks ago. Dauman said he’s seeking a partner that can expand the company internationally and build its digital presence. Viacom wants to complete a deal by the end of June. WSJ

Two Porsche execs cleared of manipulating share price

Former CEO Wendelin Wiedeking and former CFO Holger Härter won a seven-year battle in a German court over criminal accusations that they manipulated Porsche’s stock price in an attempt to take over Volkswagen. Hedge funds including Elliott Management and D.E. Shaw continue to seek $5.6 billion in  damages in civil cases.  Fortune


Building a Better Leader

Chipotle ordered to hire back employee it fired…

…over a tweet on his personal account about Chipotle’s pay. A judge said the company’s social media policy violated federal labor laws. Seattle Times

No pay gap here…

…unless you’re a man. Women working in data centers made 17% more than their male counterparts across all titles. Fortune

Some companies bend on March Madness 

Many small businesses have found it’s better to let employees watch the games because it makes for a happier workplace. Associated Press


The China Chronicles

A billionaire’s shot at China’s President catches on 

When real estate tycoon Ren Zhiqiang spoke out against President Xi Jinping‘s insistence on absolute loyalty, the party shut down his sites and called him a capitalist traitor. But others have joined Ren’s cause, potentially threatening Xi’s demands for  obedience to the Communist Party. Xi has required increasing shows of loyalty to him and the government from billionaires and media. NYT

Mark Zuckerberg takes a jog through Beijing…

…and the Internet erupts over concerns for his health because of the city’s notorious smog and cries of hypocrisy because Facebook is censored in China. Zuckerberg has recently tried to expand Facebook’s presence in China. He posted a photo of his run on his Facebook page, which somehow got past China’s censors.  Fortune

U.S. says China has increased South China Sea activity

In a lead-up to a decision over a disputed reef between the Philippines and China in an international court, the U.S. Navy says China is increasing activity in the region. Admiral John Richardson said the U.S. is concerned that the decision could prompt Beijing to declare the busy area, through which 30% of global traded passes, an “exclusion zone.”   The Guardian


Up or Out

J. Walter Thompson CEO Gustavo Martinez resigned following the filing of a lawsuit that highlighted a potentially racist and sexist culture at the advertising firm.  Ad Age

Qualcomm named Mary Gendron CIO.  WSJ


Fortune Reads and Videos

Salesforce says it will reduce investments in Georgia…

…if Governor Nathan Deal signs an “anti-gay bill” that is currently on his desk. Other business leaders have joined CEO Marc Benioff in criticizing the bill. Fortune

Trump’s decision to delay releasing his tax returns…

…could prove disastrous. Waiting until after getting the nomination did not work out well for Mitt Romney in 2012. Fortune

Aéropostale up for sale

The teen clothing retailer said comparable store sales fell 6.7% during the holidays. Fortune

Ex-Turing General Counsel: We advised against the drug price hikes

Howard Dorfman called former CEO Martin Shkreli‘s strategy of hiking a drug’s price 5,000% “certainly unjustified.” Fortune


Quote of the Day

“There is no doubt in my mind that if a corporate CEO did what Governor Snyder’s administration has done, he would be hauled up on criminal charges…. The board of directors would throw him out. And the shareholders would revolt.” —Rep. Elijah Cummings during a hearing in which Michigan Governor Rick Snyder testified about the Flint water crisis.  US News & World Report

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Produced by Ryan Derousseau
@ryanderous
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