“The war between business and Washington” was the topic of my last moderating task before leaving the Aspen Ideas Festival yesterday. No one questioned the premise. Relations between business and the federal government during the Obama years have been easily the worst in the three decades I’ve covered them. And the election debate between Donald Trump, Hillary Clinton and Bernie Sanders destroyed what comity remained. Business lobbyists may still get their way on small issues that fall below the public radar. But on the big stuff – trade, immigration, education, tax reform, patent reform, regulatory rollback, etc. – they can’t get heard. (Read Tory Newmyer’s February Fortune story on the topic here.)
Who’s to blame? That debate could go on for years. Our lunch discussion – which included a couple dozen leaders from business, labor, think tanks, and NGOs – focused instead on whether there’s any chance of improvement. And the good news is, in Aspen at least, there’s a hint of a possible path forward – a bipartisan effort to create a “new social contract,” which as articulated by Senator Mark Warner would combine increased support for displaced workers and new benefit arrangements for those without full time jobs and benefits, along with trade, tax and immigration agreements that would fuel economic growth. Also on Warner’s agenda: policy changes that would encourage long-term shareholders over short-term traders.
The problem, of course, is that there’s no functioning forum for hashing out the details of such a grand bargain. Could that change after the election? Hope springs eternal.
In the meantime, Fortune again this year will honor those employers who have built a strong social contract with their employees in its 100 Best Companies to Work For list. To be considered, companies have to register no later than July 29 on the Great Place to Work website, which you can find here. Corporate leaders tell us the application process helps improve employee engagement. And in a business world where talent is the key differentiator, that’s no small thing. So take the time to apply.
More news below.
• Hershey Rejects Mondelez Bid
Hershey rejected a $23 billion bid from Mondelez, the snack business that was spun out of PepsiCo. The deal would have brought the makers of Kisses, Oreos and Cadbury under one roof. The Milton Hershey Trust that controls 80% of voting stock ensures that going hostile would be futile, so Mondelez is going to have to pay up handsomely if it wants to proceed—all the more so if a competitor like Nestle were interested in forcing consolidation of the global chocolate market. The stock market is clearly expecting an improved offer from one of the other angle: Hershey stock closed up 17% at $113.46, above the $107 offered by Mondelez. Fortune
• Pound Dives as BoE Stimulus Looms
Bank of England Governor Mark Carney said in a speech he’ll have to loosen monetary policy as the risks he warned about before the Brexit referendum start to harden into facts. The pound hit a new 30-year low against the dollar but the FTSE100 (denominated, of course, in devalued pounds) rose back to where it had been before the vote. The new favorite to succeed David Cameron is Home Secretary Theresa May, but whoever takes over is almost certain to abandon the government’s target of balancing the budget by 2020. The febrile atmosphere in the country may cool down for 24 hours today as it commemorates the 100th anniversary of a real crisis: the WWI Battle of the Somme, which cost it over 400,000 dead and wounded. Today’s Brexit ripple effects include an interest rate hike in Mexico to shore up the peso, and more nerves in Austria, where the Constitutional Court has ordered a rerun of the Presidential election that was nearly won by the far-right candidate. BBC
• A Fatal Tesla Autopilot Crash
Tesla Motors said a driver using the autopilot function of its Model S car has been killed in the first accident of its kind. The incident is a major challenge to the reputation of the company which, since it launched the software in October, has routinely denied claims from drivers that it didn’t work reliably. The accident happened when a tractor trailer cut across the highway on which the Model S was traveling: neither the software nor the driver saw it and the car drove under the trailer, crushing the windshield and front seat areas. Tesla specifically tells drivers to keep their hands on the wheel and to remain engaged when Autopilot is on. The software is meant to be an aid to driving, and not to take over driving completely. But the very least, it might want to stop using a name for its software that encourages drivers to think they can switch off. Fortune
• The Unicorn With the Disappearing Horn
HR software startup Zenefits, under pressure from a scandal related to misconduct by its co-founder and ex-CEO Parker Conrad, slashed its valuation by more than half to $2 billion from $4.5 billion. The company is repricing existing stock to benefit later investors at the expense of earlier ones. Under the agreement, investors in the Series C funding round last year will see their stake increase from 11% to around 25%. Investors in earlier rounds will get some marginal compensation for being diluted. It’s not yet clear whether all of the earlier investors will agree to the dilution. Not all have signed the accompanying waiver of claims against the company. Fortune
Around the Water Cooler
• Oracle’s Losing Streak
Oracle’s bad run of luck in the courts goes on. A California jury ordered it to pay Hewlett-Packard Enterprise $3 billion in damages in a case over HP’s Itanium servers (made by Intel) going back to 2012. Oracle decided to stop developing software for use with HP’s Itanium-based servers in 2011, saying that Intel, had made it clear that the chip was nearing the end of its life and that it was consequently shifting its focus to its x86 microprocessor. But HP said it had an agreement with Oracle that support for Itanium would continue, without which the equipment using the chip would become obsolete. The ruling comes only a couple of weeks after it Oracle’s appeal to get $9 billion in damages from Google for infringing intellectual property rights related to its Java programming script was thrown out by a federal court. Oracle said it would appeal the HP verdict and is expected to take the Google appeal to the Supreme Court. Fortune
• Apple Eyeing Tidal?
With its own music service struggling to make the transition from the era or downloads, Apple is reportedly interested in buying the streaming service Tidal, according to The Wall Street Journal. Tidal operates as a sort-of quasi-collective of musicians and entertainers including Beyoncé, Rihanna, and Kanye West, making it attractive to a company like Apple that needs to keep its catalog properly stocked. But the company, whose owners made a big deal of their intention to treat artists well, has been rocked by a series of lawsuits in recent months, including one that alleged failure to pay royalties. Separately, the Financial Times reports that Spotify has accused Apple of discriminating unfairly against third-party apps sold on the iPhone and iPad, in a demarche that has more than a passing similarity with the EU’s probe into Google’s alleged abuse of the Android system. Fortune, FT, metered access
• Armstrong Emerges Victorious at Williams
Half of the directors at the venerable pipeline operator Williams Companies resigned, as CEO Alan Armstrong rode out a challenge to his leadership after Energy Transfer pulled out of its takeover bid for the company. Activist investors Keith Meister and Eric Mandelblatt were among those to quit, as did Chairman Frank MacInnis. Armstrong, who never wanted the merger in the first place and was reluctant about ceding control to ETE’s cavalier founder Kelcy Warren. The deal would have created one of the biggest oil and gas transportation companies in the U.S. but offered few operational synergies given the complete lack of geographical overlap. Williams now has to work out a strategy for surviving on its own in a world where many of its customers, notably shale oil and gas producer Chesapeake Energy, are fighting to stay alive. WSJ, subscription required
• Tim Cook Rises at Nike
Nike said Apple CEO Tim Cook has become the lead independent director on its board, succeeding the sports gear maker’s co-founder Phil Knight, who is retiring under a transition plan that was unveiled a year ago. Cook, who has been on Nike’s board since 2005 and chairs its compensation committee, is assuming greater prominence at a time when Nike is showing signs of faltering commercially (fiscal 4Q figures this week fell well short of expectations) and is also on the defensive over its relationship with the International Amateur Athletics Federation, which is experiencing major corruption and doping-related scandals. Fortune