CEO Daily: Tuesday 1st November

Nov 01, 2016

Good morning.

Google has disclosed the existence of a “zero day vulnerability” in Microsoft Windows software – meaning there’s a hole in software that can be exploited by hackers. Google notified Microsoft of the vulnerability on Oct. 21, and then disclosed it publicly yesterday – much to Microsoft’s annoyance. “We believe in coordinated vulnerability disclosure,” the Seattle company responded. “Today’s disclosure could put customers at potential risk.” There is not yet a fix to the problem.

The spat highlights a bigger issue facing business. With cyber attacks on the rise, there is still stunningly little agreement or established protocol on how companies and government agencies should respond to such attacks.

I recently moderated an off-the-record session on the topic, where CEOs of some of the nation’s largest companies stood up and told tales of massive cyber breaches. The one point on which they agreed was this: such incursions can’t be prevented. But there was disagreement on what to disclose, when to disclose it, and how closely to work with government agencies.

This year’s election has further highlighted the problem. While emails found on Anthony Weiner’s computer are generating headlines in the final days of the campaign, it’s the hacked emails released by WikiLeaks that should be the real cause for concern. Whoever wins the election is going to have to deal with the fact that cyberattacks have become one of the top threats facing the nation, and business and government need new protocols for how to respond.

More news below.

Alan Murray
@alansmurray
alan.murray@fortune.com

Top News

•  McDonald’s Sets a Precedent With Labor Settlement
Or at least, that’s what the franchise workers suing it for back pay and damages would have you believe. McDonald’s itself argues that it only stumped up $3.75 million to avoid the continued distraction and expense of a legal action. Staff had claimed McDonald’s was jointly responsible for franchisees’ failure to keep accurate pay records and pay overtime. However, the settlement may well encourage further suits and settlements, all of which would clip away at the cost savings that McDonald’s had planned to achieve by moving to an overwhelmingly franchise-run operation. Fortune
Rays of Light Everywhere! (Except Japan and Greece, obvs)
Manufacturing is picking up around the world. The monthly Purchasing Manager Indexes from research firm Markit showed China’s and Russia’s output rising at their fastest level in five and a half years, Indian activity at a 22-month high, and stabilization even in Turkey, in the throes of a massive disruption from Recep Tayyip Erdogan’s witch-hunt of political opponents. Elsewhere, the Australian central bank decided the economy didn’t need any more interest rate cuts, while yesterday Mexico posted its strongest quarter of GDP growth in over two years. Even Japanese producers were more optimistic than usual, although that didn’t stop the Bank of Japan saying it would need even longer to get inflation back up to 2%. Oh, and Greece’s economy is contracting sharply again, obviously. Markit
Oil on the Skids Again
Oil prices posted their sharpest one-day fall in weeks Monday on growing fears that OPEC and other big producer countries won’t deliver the cuts they mooted last month. (Only a cynic would suggest that Saudi Arabia no longer feels the need to support prices with talk, now that it has got its $17.5 billion bond away.) Meanwhile in London, Royal Dutch Shell posted its strongest earnings statement since its megamerger with BG Group. Its preferred measure of underlying profit rose 18% on the year. BP, however, posted lower profits on the year. Both groups continue to see their debt level rise as cash flow falls short of dividends and (drastically reduced) capex commitments. Reuters
Macy’s Gets Serious About Slimming
The downsizing of Macy’s is underway. The struggling department store chain, which in August said it would close about 100 of its 750 or so namesake stores amid declining sales, sold five of its stores to the second largest U.S. mall developer, General Growth Properties, for $46 million. Macy’s will keep operating its store in Tysons Galleria in McLean, Va., but lease it back from GGP. All the others will be closed by spring 2017. Macy’s had a 2% drop in comparable sales in August, a sixth straight quarter of declines. Fortune

Around the Water Cooler

Facebook Struggles With the Responsibility of Media Power
More than 70 rights groups asked Facebook to clarify its policies for removing content, especially at the behest of governments, alleging the company has repeatedly censored postings that document human rights violations. A letter sent to CEO Mark Zuckerberg raised recent cases where Facebook has deleted content involving police violence, removed iconic imagery from the Vietnam War and suspended the accounts of Palestinian journalists. The problem is not only in the actual suppression of the content, but in the company’s refusal to discuss its decisions or create a platform for appeals, all of which would add to its operating costs. A billion users can generate an awful lot of legally problematic content, and more and more of them are using Facebook to break news rather than just recycle it. Fortune
This Month’s Viacom CEO Is…
…Bob Bakish, a 19-year veteran of the company who will take over from Tom Dooley yesterday. Dooley had taken over on a temporary basis after the power struggle in Sumner Redstone’s empire ended with Philippe Dauman being pushed out. It looks like Bakish is himself only keeping the seat warm for someone else, with CBS CEO Leslive Moonves widely expected to take over at the helm of a combined Viacom-CBS company, once the bankers and shareholders have agreed on how best to do it. Fortune
Wells Fargo Pays $50 Million to Settle Racketeering Claims
With every day that passes, it seems more and more that Wells Fargo’s glowing post-crisis reputation stood on nothing more than a psychological need for the nation to believe that, somewhere, there was still a bank that was both big and decent. On Monday, the bank paid $50 million to settle a racketeering suit in which it was accused of overcharging hundreds of thousands of homeowners for appraisals ordered after they defaulted on their mortgage loans. If approved, it will resolve nationwide claims that the bank exploited borrowers who could least afford it, driving them further into default. Fortune
Pushing Back the Frontiers of Battery Power
Even new energy enthusiasts struggle to make a case for batteries replacing fuel combustion engines in aviation, but what’s this? The Tier 1 Engineering company, together with inventor and entrepreneur Martine Rothblatt, has just successfully tested a manned battery-powered helicopter for the first time. The flight, which featured 1,250 pounds of lithium-ion batteries lifting a 2,500-pound helicopter, lasted five minutes and was “proof of concept”, according to Rothblatt. She’s now talking to helicopter vendors about putting a purpose-built battery pack into one of their products. Fortune

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