CEO Daily: Tuesday, 6th June
The way CEOs view their role in society, I believe, has changed dramatically over the last two decades. That’s why you see a man like Disney’s Bob Iger taking a stand against President Trump’s decision to pull out of the Paris climate change accord, or why so many businesses got involved in fighting the bathroom bill in North Carolina.
There are a number of reasons for this change: rising demands from socially-conscious employees and customers; increased transparency resulting from ubiquitous social media; the accelerating pace of technological change and its effects on the practice of management; declining trust and confidence in business; and the general failure of federal government, to name a few. But for whatever reason, today’s CEOs are taking on social issues in ways that would have been unthinkable a decade or two ago.
There’s evidence of the change in our new poll of Fortune 500 CEOs. A solid majority—58%—agreed with the statement: “as a CEO, it’s important to take a stand on some public issues,” while only 42% said it’s better “to focus on issues that directly affect the bottom line, and avoid controversial public issues.” That’s an increase over the last two years, when only 52% (2015) and 48% (2016) of Fortune 500 CEOs agreed on the importance of speaking out.
Moreover, in a new question this year, only 4% agreed with the Milton Friedman-esque statement: “I believe my company should mainly focus on making profits, and not be distracted by social goals. “ Instead, the majority—52%—said they believed their company had “a responsibility to address social problems through charitable activities, but not as a part of our core business strategy.” And 43% said they believe their company “should actively seek ways to address major social problems as a core part of our business strategy.”
It’s that last group—still a minority, but growing—that’s the focus of Fortune’s Change the World list, which spotlights companies making progress addressing social problems by putting them at the center of their strategy. The list, which is produced with the help of Michael Porter and Mark Kramer of FSG consulting, will be published in September, but we are taking nominations now and welcome your suggestions.
By the way, if you want to take the survey we gave to Fortune 500 CEOs, you can do so here.
More news below.
• Risk Aversion Returns as Markets Wait for Comey
The dollar hit a seven-month low as risk aversion returned to markets ahead of ex-FBI Director James Comey’s testimony before Congress. Various reports have suggested that Comey will say the President leaned on him to drop his investigation into National Security Advisor Michael Flynn. The dollar has been under pressure since the June employment report failed to live up to expectations, causing markets to reassess the future interest rate trajectory. Stocks are also under pressure, while oil prices slid to their lowest in six weeks on fears that the diplomatic spat in the Persian Gulf could undermine the OPEC-led deal on output restraint. Reuters
• DoJ Charges NSA Contractor After Russian Election Hack Leak
The Department of Justice charged a federal contractor to the National Security Agency after she leaked classified materials detailing Russian efforts to penetrate the U.S. voting system ahead of last year’s elections. An hour earlier, The Intercept had published the materials, which detail evidence that Russian military intelligence (and not the ‘patriotic’ free-lancers Vladimir Putin had referred to last week) had launched a cyberattack on at least one supplier of voting software, and sent phishing e-mails to over 100 local election officials in early November. Initial analysis by U.S. intelligence agencies had concluded that, while Russia had tried to influence the outcome of the election, it had not actually tried to tamper with the voting process. Fortune
• The Siege of Qatar
Qatar asked the Emir of Kuwait to mediate between it and the six Arab countries that broke off diplomatic relations with it over the weekend. The country, which imports nearly all its food and drink, is effectively in a state of siege after its neighbors closed the land border and broke off all transport links. Banks in Qatar are also struggling to conduct cross-border business as a result of the spat. Secretary of State Rex Tillerson has asked both sides for calm, but his reference Monday to “irritants” in the region has been widely interpreted as sympathizing with the Saudi/Egyptian position. Qatar’s neighbors haven’t said publicly what it would take for them to restore relations. Reuters
• Trump Aims to Privatize Air Traffic Control
President Donald Trump unveiled his plans to privatize the air traffic control system. Under Trump’s proposal, the air traffic control system would be separated from the FAA into a new entity, which the White House says is crucial for eliminating flight delays, saving fuel, and increasing safety measures. Trump’s announcement is one of several events the White House is touting as part of its ‘infrastructure week.’ Congressional Democrats who had initially been cautiously optimistic about Trump’s plans for infrastructure have grown more critical as the prospect of major government-funded investment has faded. Fortune
Around the Water Cooler
• Honey, I’m Home Pod
Apple previewed the Home Pod, a wireless speaker integrated with its Siri digital assistant that will compete with Amazon’s Echo and Google’s Home products when it hits the market in December. As with the iPhone, it will be priced at a premium to competing devices, at $349. In addition, Apple unveiled its first details about iOS 11, which will feature a Safari browser that blocks auto-play ads and disables user tracking. One of the side-effects of iOS 11 will be to make the iPhone 5 and 5C effectively obsolete, which may give a slight pep to sales in an environment where replacement cycles are lengthening—by 10% over the last four years, according to Kantar research. Fortune
• Moore’s Law Gets a New Lease of Life
IBM, Samsung, and GlobalFoundries said they have found a way to make thinner transistors, which should enable them to pack 30 billion switches onto a microprocessor chip the size of a fingernail. The discovery may allow chipmakers to halve the size of processors to 5 nanometers within a few years, offering big improvements in computing power and energy efficiency. The payoff may be especially important for Samsung, which has pivoted to away from smartphones to chips for its profits in the last couple of years. Fortune
• Fast Fashion Takes Its Toll on J Crew’s Drexler
Retail guru Millard “Mickey” Drexler has decided to step down as CEO of J. Crew after 14 years at the helm of the clothing store. He will be succeeded in July by James Brett, currently president of Williams Sonoma’s furniture retailer West Elm, according to WWD. J. Crew hasn’t been able to escape the torments of the retail sector in recent months—cutting jobs, restructuring its debts and losing a string of high-profile executives. Drexler, the man who drove the Gap phenomenon, had recently admitted that J. Crew needed to cut prices and cultivate a more accessible image. Fortune
• Barra Set to Ride Out Challenge From Einhorn
GM shareholders get to vote today on fund manager David Einhorn’s proposals for splitting its stock structure and replacing three of its directors. GM’s shares have lost 1% over the last 12 months while the S&P 500 has risen 16%, and Einhorn argues that it “has no plan to address the discount to its intrinsic value.” CEO Mary Barra is expected to ride out the storm, after proxy advisors ISS and Glass Lewis recommended rejecting Einhorn’s plans. Einhorn’s Greenlight Capital is GM’s third-largest shareholder but only holds a 3.6% stake. It has eased back on the dual-stock plan after ratings agencies warned that it could endanger the company’s credit rating. Fortune
Summaries by Geoffrey Smith; email@example.com @geoffreytsmith