CEO Daily: Friday, 9th June
Any leader of a large organization pondering how good companies go bad needs to read Geoff Colvin’s perceptive piece untangling the scandal at Wells Fargo. The bank once ranked near the top of many “most admired” lists; a recent Harris survey finds it now one slot from the bottom—beating only Takata, the killer air bag maker.
What went wrong? Colvin documents the key mistakes—a sales-obsessed culture, an overly decentralized structure, and top leadership that badly misinterpreted clear warning signs. Colvin quotes ex-CEO John Stumpf in an email to then-COO-now-CEO Tim Sloan downplaying firings for sales abuse: “Do you know only around 1% of our people lose their jobs [for] gaming the system . . . Did some do things wrong—you bet and that is called life. This is not systemic.”
The story is in the Fortune 500 issue of our magazine, but you can read it online today here. And by the way, the kicker is that the scandal, while badly damaging the bank’s reputation, seems to have done little to undermine its profitability. Wells Fargo was the fourth most profitable company in the Fortune 500 last year, trailing only Apple, JP Morgan Chase and Berkshire Hathaway. And the streak continued in the period ending in March, which was the 18th consecutive quarter in which the bank had profits exceeding $5 billion.
I started the day in London, where page one headlines are announcing that President Trump has put his plans to visit here on ice, because of concerns about large protests. Labor Leader Jeremy Corbyn, an avowed socialist whose standing has risen after his success in the election, said Trump’s cancellation “is welcome, especially after his attack on London’s mayor and withdrawal from Paris climate deal.”
Traveling this morning to Munich, where I will moderate a panel of German and Chinese executives on “Industry 4.0,” as part of the run up to the Fortune Global Forum in Guangzhou in December.
• Uber’s Board Approves Changes
At a Sunday meeting that lasted six hours, the Uber Technologies board approved all of the recommendations stemming from the investigation it commissioned, led by the law firm of former U.S. Attorney General Eric Holder. In addition to the approved changes, which will be announced to employees on Tuesday and rolled out during the week, is the reported appointment of an independent board member, Nestlé executive Wan Ling Martello. There is still no official word on two other potentially major changes that could come out of the hours-long meeting, as the company’s board was reportedly set to decide on the fates of CEO Travis Kalanick (who could face a possible leave of absence) and his confidant, Uber SVP Emil Michael (who may be asked to resign). Kalanick and Michael have recently come under fire again as the result of incidents that were part of the investigation, including last week’s revelation that company executives mishandled the medical records of a rape victim in India. Bloomberg
• Sessions Testimony Coming on Tuesday
U.S. Attorney General Jeff Sessions will testify on Tuesday before the Senate Intelligence Committee, the same group of lawmakers who heard former FBI Director James Comey’s testimony last week. After Comey’s hearing dominated headlines for much of the past week, attention will now turn to Sessions, whose alleged dealings with Russia during President Trump’s campaign have returned to the spotlight. Sessions, who previously was forced to recuse himself from the Justice Department’s probe into Russia’s efforts to meddle in the 2016 presidential election, will appear before the committee at a time when the White House is hoping to shift focus this week from the Russia investigation to the administration’s efforts to bolster the U.S. workforce. Wall Street Journal (subscription required)
• Grocery Wars: Aldi to Spend $3.4 Billion on U.S. Expansion
German discount grocery chains Aldi and Lidl are bringing their rivalry to U.S. shores this year. While Lidl previously announced plans to open 100 U.S. stores, starting this month, Aldi has now said it will spend $3.4 billion to grow its store base here to 2,500 locations (from the current tally of 1,600) by 2022. That comes after Aldi said earlier this year that it would spend another $1.6 billion to open 400 new stores by next year and to remodel 1,300 of its current locations. The two chains’ U.S. expansion could disrupt the U.S. grocery market, which has seen a rash of bankruptcies in recent years, at a time when Walmart is trying hard to maintain its place atop the low-price market and even Whole Foods Market is expanding the presence of its lower-price 365 chain. Reuters
• New GM Bolt Coming Sooner to Compete with Tesla
The electric car wars keep heating up, as General Motors now says it will move up the release of its Bolt electric car by a month, to August. That move could certainly be seen as a counter to Tesla’s much-anticipated, lower-cost Model 3, which is expected to ship in July. Both cars cost around $35,000 after tax credits with ranges of over 200 miles. GM’s official stance is that the Bolt rollout was moved up because staff training and inventory for the new electric vehicle are ahead of schedule. But, the giant automaker might also be hedging its bets that it might be able to siphon off some spillover demand for the Model 3 with its own well-reviewed new model. Fortune
Around the Water Cooler
• Amazon’s Newest Venture Could Test Walmart
Amazon may have been making a play for what has been a very lucrative business for Walmart when the e-commerce giant said last week it will offer a discount to Prime subscribers who received U.S. government aid. Walmart dominates the market for low-income customers, with roughly $13 billion in Supplemental Nutrition Assistance Program (SNAP) benefits spent at the massive retailer last year, according to Morningstar. Amazon wants to win over customers who are receiving government assistance and make them Prime customers for life. Fortune
• Bitcoin Breaks $3,000
If you’re in the camp that thinks the cryptocurrency market is in a bubble, well the bubble got even bigger this weekend. Bitcoin, perhaps the most recognizable name in the growing space, reached new heights on Sunday to cap a stunning rise in recent months that has added to concerns of over-inflation. By briefly reaching the $3,000 mark, Bitcoin more than doubled its value at the beginning of its recent surge, in May, when the cryptocurrency was worth almost $1,400. Fortune
• U.S. Chamber of Commerce Elects New Chairman
The country’s largest business lobby has elected Allstate CEO Tom Wilson as its next chairman, succeedingJohn Hopkins, CEO of NuScale Power. Wilson will take on a one-year term as chair of the U.S. Chamber of Commerce, which represents more than three million businesses of various sizes, including small, privately-owned shops to Fortune 500 leaders. Under the leadership of current president Tom Donohue, the group has become a powerful backer of GOP initiatives, spending millions per year supporting Republican nominees in important Congressional races. Fortune
• Wonder Woman to the Rescue (for Warner and Hollywood)
The female-led superhero blockbuster Wonder Woman continues to allay longstanding Hollywood concerns about the box office viability of female superhero movies. Also directed by a woman (Patty Jenkins), the movie won the domestic box office for a second weekend in a row, easily defeating Universal’s latest The Mummy reboot, while improving its overall tally of domestic ticket sales to $205 million in under two weeks. Wonder Woman has been a godsend for Time Warner’s Warner Bros. studio, which had seen previous releases from its huge DC Comics-based cinematic universe fail to live up to expectations with critics and audiences alike. The film’s success is also good news for Hollywood overall, as the movie industry had been struggling through its worst summer box office season in nearly a decade before Wonder Woman showed up. Fortune
Summaries by Tom Huddleston, Jr. email@example.com;