Apologies for a shorter note than usual. I was out last night at a beer-tasting dinner with Carlos Brito, CEO of AB InBev, then up early for a flight to San Diego, where Fortune Brainstorm Health starts this afternoon. I’ll provide a fuller report tomorrow.
In the meantime, thanks to all who wrote in support of The CEO Initiative, designed to shine a spotlight on companies that are pursuing purpose beyond profits. Several of you pointed out that this isn’t a new development, but rather a return to the teachings of Peter Drucker, the Austrian native acknowledged as the founder of modern management. Dick forwarded two Drucker gems, the first of them published in the year I was born:
“It is management’s public responsibility to make whatever is genuinely in the public good become the enterprise’s own self-interest.”
The second came later, in 1986:
“The proper social responsibility of business is to tame the dragon – that is, to turn a social problem into economic opportunity and economic benefit, into productive capacity, into human competence, into well-paid jobs, and into wealth.”
I’m happy to endorse both. News below.
• Fed Expected to ‘Look Through’ Weak 1Q
The Federal Reserve’s policy-making committee starts a two-day meeting and is expected to leave interest rates unchanged. That means the key variable will be how clearly (or not) it hints at a further interest rate rise in June. The other point of note is communication about how, when, and how fast the Fed will try to shrink its balance sheet. The Fed will likely look through the weak first-quarter GDP report, but yesterday’s ISM survey also showed the manufacturing sector cooling, albeit staying at a level that reflects healthy expansion.
• Fox’s Shine Pays for Inaction Over Harassment Claims
Sexual harassment scandals at Fox News Channel claimed another victim. Bill Shine, the network’s co-president with responsibility for programming, resigned a month after contributor Julie Roginsky (a Democratic political consultant) accused him of failing to act when she complained of harassment by then-CEO Roger Ailes. Andrea Tantaros, another on-air personality, had made similar allegations against Shine in a lawsuit last year. Elsewhere, it emerged that the channel’s parent company 21st Century Fox is in talks to buy Tribune Media, exploiting a new freedom to expand after the FCC lifted some restrictions on TV station ownership last week.
• Trump Stirs the Too-Big-To-Fail Pot
President Donald Trump caused flutters on Wall Street, reviving the discussion about breaking up the country’s biggest banks. His comments, in an interview to Bloomberg, did little more than reiterate what he had said last year on the campaign trail, but come after more recent public support for a “21st century” version of the Glass-Steagall Act from Treasury Secretary Steven Mnuchin and Gary Cohn, the president’s top economic advisor. Bank stocks recovered after an initial dip, suggesting that the market is learning to differentiate between Trump’s throwaway lines and his more substantive comments. However, they are a reminder that, for all of the deluge of new post-crisis regulation, the too-big-to-fail issue still isn’t resolved.
• Big Oil’s Big Rebound
BP’s key measure of profit almost tripled year-on-year to $1.5 billion in the first quarter, adding to evidence of a long-overdue rebound in the fortunes of Big Oil. Exxon Mobil, Chevron and France’s Total had also both reported strong first quarters last week, while Royal Dutch Shell is expected to join the party later this week. However, BP’s net debt rose again to $38.6 billion. The company, which has said it needs a crude price of over $60 a barrel to cover its long-term capital expenditures and dividend and interest payments, has approved a number of new projects in the last quarter, which will add to short-term pressures on cash flow but may at least lock in low prices before the recovery feeds through to the global market for oilfield services.
Around the Water Cooler
• San Francisco Settles With Airbnb
Airbnb and San Francisco settled a landmark lawsuit, with the home-rental company agreeing to require landlords to register with the city before taking guests. The ruling raises questions of how San Francisco will police the registration process and also arguably chips away at the principle of the federal law that protects Internet companies from liability for content posted on their websistes. Airbnb has already agreed many similar settlements with other local authorities as it tries to clear up legal gray areas ahead of a possible IPO next year, but San Francisco is one of its biggest markets.
• Infosys to Hire American
Outsourcers are increasingly going the way of foreign carmakers. Indian-based IT firm Infosys said it plans to hire 10,000 U.S. workers over the next two years and open four technology centers in the U.S. (one of them in Vice President Mike Pence’s home state of Indiana). Reuters’ sources suggest Infosys has drastically cut back on applications for H1B visas this year, to around 1,000 from 6,500 last year and 9,000 in 2015. Infosys and others have routinely flooded the annual lottery for H1B visas in the past to ensure they had enough staff available to be flown in to serve U.S. clients.
• Greece Debt Relief Talks Loom After Athens Folds Again
Greece reached an agreement with its Eurozone creditors over further budgetary measures to unlock the next 7 billion euros in bailout loans. As such, there’ll be no reiteration this year of the usual pantomime brinkmanship that the world has come to expect. More importantly, talks about relieving Greece’s debt burden can now start. The Eurozone has hinted a deal could come as soon as this month, which would give the less charitably-minded segment of the German electorate, which may not like the looming deal, time to cool down before they vote for a new government in September. Greece’s economic decline continues, meanwhile – manufacturing shrunk for the eighth straight month in April, according to IHS Markit.
• Twitter Bets Big on Video
Shares in Twitter rose another 6.4% to a three-month high after the company announced 16 new partnerships in video, which will see it stream content from Bloomberg, Buzzfeed, Vox Media, Viacom, the WNBA and the PGA. The announcement underlines how much the company is staking on video for its future, a move that will by necessity force it to move well beyond the core micro-blogging service which remains stubbornly hard to monetize. Some of the details it released yesterday included a morning news show called MorningFeed (part of the Buzzfeed partnership), and a weekly program on tech gadgetry called Circuit Breaker (done together with Vox’s tech news site The Verge.)
Summaries by Geoffrey Smith; email@example.com @geoffreytsmith