CEO Daily: Friday, 9th June
While the rise of technology companies is the biggest story behind this year’s Fortune 500 list, skyrocketing health company growth is an equally impressive theme. The big-three drug distributors stand out, with McKesson grabbing the number 5 spot on the list, AmerisourceBergen taking number 11, and Cardinal Health clocking in at 15.
But as those companies’ revenues and profits have skyrocketed, so too has another set of statistics, documenting the nation’s opioid crisis—causing 30,000 deaths in 2015, or approximately 91 lives every day. That has led some to say the big drug distributors must take responsibility for the crisis. A Pulitzer Prize winning series in the Charleston Gazette Mail last year highlighted the sheer volume of opioids being pumped into West Virginia—433 pills for every man, woman and child. “In my thinking,” says Martin West, who is both sheriff and treasurer of McDowell County, W.Va.—one of the hardest hit by the crisis—drug distribution companies are “no different than drug dealers selling on the street.”
The distributors insist they are just middlemen, following all relevant laws and regulations. But even if true, is that sufficient? That’s a question that leaders of companies of all stripes must ask themselves in today’s world, where a social-media-stoked public is quick to assign moral responsibility to companies that they believe have gone astray.
Fortune’s Erika Fry has done a fascinating, in-depth look at McKesson’s effort to deal with this quandary. Her story shows that the company was slow to accept responsibility. “I’m sure there was no malevolent desire to flood the streets with narcotics,” says assistant U.S. attorney Alan McGonigal. But “there was just too much emphasis on sales numbers and not enough with keeping an eye on suspicious orders.”
More recently, the companies—prodded by various lawsuits and regulatory efforts—have begun to get religion. Last year, McKesson CEO John Hammergren put together a task force that is circulating a white paper in Washington calling for, among other things, a high-tech Patient Safety System that provides real time data to physicians and pharmacists to help identify at-risk patients. That’s overdue.
Erika’s story on McKesson—a case study that every business leader needs to read—is in the new issue of Fortune magazine, and can be found online here.
I’m at the Fortune Most Powerful Women London summit, where supermodel Naomi Campbell captivated the group with a discussion of her philanthropy over dinner last night. You can read full coverage from the summit here.
• New Treasury Proposal Would Reshape Wall Street Rulebook
In a report from the Treasury Department on Monday, the Trump administration proposed a wide-ranging overhaul of rules governing the U.S. banking sector. The proposed changes would pare back, if not fully eliminate, many of the regulations put in place by the Obama administration and the 2010 Dodd-Frank Act in the wake of the financial crisis. The proposals, which have been expected for some time, have the support of the GOP and the financial sector, though they have been widely criticized by Democrats and consumer groups. The Treasury’s report calls for a re-examination of many capital and liquidity rules meant to limit lenders’ risk-taking, as well as changes that limit the power of the Consumer Financial Protection Bureau. Wall Street Journal (subscription required)
• This Is the GE That John Flannery Takes Over
General Electric CEO Jeff Immelt surprised everyone with Monday’s announcement that he will step down in August, with GE Healthcare head John Flannery taking the reins of the Fortune 500 stalwart. When Flannery officially steps into the CEO Role in less than two months, he will take over a company that often struggled during the 16-year tenure of Immelt, who was never able to match the legendary growth of his predecessor, Jack Welch. GE’s stock price sits at nearly 30% below the point it was when Immelt took over, and the company dropped to 13th on this year’s Fortune 500 list (it’s lowest ranking of Immelt’s run as CEO). Now, it will be Flannery’s turn to take a crack at the massive expectations that come with running the 127-year-old conglomerate. Fortune
• Uber Investigation Fallout Claims Emil Michael
On Tuesday, Uber Technologies is expected to announce to employees the company changes resulting from an hours-long Sunday meeting in which the Uber board approved all of the recommendations stemming from the investigation led by the law firm of former U.S. Attorney General Eric Holder. That probe into numerous allegations of sexual harassment and a frequently sexist workplace environment at Uber has already resulted in the departure of senior vice president Emil Michael, a close ally of CEO Travis Kalanick, which comes a week after the company dismissed more than 20 staff members following a separate investigation into more than 200 employee complaints. Meanwhile, Kalanick himself may also still be asked to take a temporary leave of absence from the company he founded, which could send shockwaves through the world’s most valuable venture-backed private company. Reuters
• Alliance of 175 CEOs Makes Diversity Push
Roughly 175 CEOs signed on to the CEO Action for Diversity and Inclusion, a new alliance aimed at advancing diversity and inclusion in the workplace. First proposed by Tim Ryan, the U.S. chairman of PwC, the list of business leaders signing on includes numerous Fortune 500 mainstays such as Cisco, Dow Chemical, HP, The Home Depot, Merck, Morgan Stanley, Staples, Target, and Walmart. With a CEO Pledge that makes the business and moral case for diversity, the alliance is focused on creating work environments that are amenable to dialog, mitigating unconscious bias, and sharing both best- and worst-practices. Fortune
Around the Water Cooler
• The Next Industry Amazon Could Dominate
From retail to entertainment, Amazon has become a leader across multiple industries. The latest space that could end up being dominated by the e-commerce giant is online lending, with Amazon saying recently that it loaned $1 billion to merchants on its site in the past 12 months. While fellow tech companies Square and PayPal have seen similar strides in their own growing lending businesses, Amazon is in an especially strong position with two million potential lending customers already established as sellers in its online marketplace. Fortune
• Goodbye, Hello: Sleep Tracking Startup to Shut Down
Hello, the startup that makes Sense sleep tracking devices, is shutting down operations after a proposed sale to Fitbit reportedly fell through. Hello founder and CEO James Proud said in a blog post that the company will continue to look for buyers for its remaining assets. Meanwhile, the company recently laid off most of its staff. After launching a popular Kickstarter campaign that successfully reeled in more than $2 million, Hello went on to raise more than $40 million in venture funding that most recently valued the company as high as $300 million. The company seems to have suffered from a failure to live up to outsized hype, especially when it comes to a product that some have said did not actually work all that well. Fortune
• Goldman and Citigroup CEOs Fall Victim to Email Scam
Goldman Sachs CEO Lloyd Blankfein and Citigroup CEO Michael Corbat are the latest bank leaders to be tricked by an email prankster who is targeting big-name Wall Street execs. By masquerading as a top bank executive, the hoaxer was able to get Blankfein to respond to emails purportedly congratulating the Goldman head on a snarky political tweet he posted. Meanwhile, at Citi, the prank ensnared both Corbat and global consumer banking CEO Stephen Bird. Barclays CEO Jes Staley and Bank of England Gov. Mark Carney were also fooled by the same prankster last month. Fortune
• Instagram Tries Removing Spam from the Picture
Instagram, the popular photo and video app owned by Facebook, is cracking down on annoying marketing spam by blocking services that aim to boost users’ follower totals by automatically liking and commenting on other users’ posts. Automated services like Instagress charge monthly fees to swarm other users’ posts with likes and comments, and they respond so quickly to posts that they often slip past Instagram’s anti-spam and bot detection technology. Instagram says it views services that let users create bots geared toward artificially increasing followers as spam. Fortune
Summaries by Tom Huddleston, Jr. email@example.com;