Friday, 14th July

By Alan Murray and Geoffrey Smith
July 14, 2017

Good morning.

Who is the world’s leading economic power?

My former colleagues at the Pew Research Center have released their latest poll asking that question of publics in 38 nations. They found a median of 42% pick the U.S., while 32% name China. But it depends on where you ask.

Across Latin America, most of Asia, and sub-Saharan Africa, the U.S. is still seen as the stronger economic power. And by a 51% – 35% margin, Americans name their own country before China. U.S. esteem is highest in South Korea (66% to 27% for China), Japan (62% to 19%), Israel (52% to 33%) and Vietnam (51% to 17%).

But in seven out of 10 European Union nations, China comes out on top. It leads the U.S. by 47% to 37% in France, where President Trump is spending Bastille Day. The polls show neither Xi Jinping nor Donald Trump rank particularly high in global esteem. A median of 53% say they don’t have confidence in the Chinese leader to do the right thing in world affairs, while 74% express little or no confidence in the U.S. president. The Pew poll is the gold standard in global opinion measurement; you can find the full report here.

And speaking of polls, I received a flood of feedback about Monday’s post on a survey asking top executives whether the main purpose of their company was to maximize shareholder value, bring value to customers, create value for employees, or create value for a broad set of stakeholders. One CEO of a well-known company wrote that he had recently debated this question with his own board. He argued that “stakeholders” were the right focus, while several of his board members insisted “shareholders” had to take the lead.

At an Aspen Institute event last night, I interviewed my friend and author Rick Wartzman of the Drucker Institute, whose fascinating new book “The End of Loyalty” traces changes at four iconic American companies—GE, GM, Kodak and Coca-Cola—over the last century. He argues those companies, like most in the U.S., went from a model that focused on a broad set of stakeholders in the decades after World War II, to one that emphasizes shareholders today. Wartzman says his institute’s namesake Peter Drucker was firmly in the stakeholder camp. But he says the rise of CEO pay tied to stock price has driven most CEOs into the shareholder camp – regardless of what they may tell pollsters.

More news below, including new CEOs at Vanguard and at Tiffany. Enjoy the weekend.

Alan Murray
@alansmurray
alan.murray@timeinc.com

 


Top News

The Rise and Rise of Influencer Marketing

E-commerce isn’t the only way that the Internet is disrupting the consumer sector. Social media platforms are playing an increasing role in the business of marketing, as companies turn to celebrities (and, indeed, their pets) to tout their products on Instagram, Snapchat, Twitter et al. Such strategies offer a laser focus on targeted groups of consumers, albeit at the risk of fiascos like the recent Fyre Festival. As with other forms of disruption, innovation also creates headaches for regulators (in this case the FTC, which polices advertising standards). For a fascinating glimpse into a powerful phenomenon, see Fortune’s Anne Vandermey interview Mike Heller, CEO of Talent Resources.  Fortune

Choose Your Trade Weapons

President Donald Trump will get a range of options to choose from in making a final decision on whether and how to restrict steel imports, Commerce Secretary Wilbur Ross said. Trump has said himself that he’s looking at both tariffs and quotas, comments that have spooked allies and trading partners from Canada to Korea via Europe, who all fear fallout from a move ostensibly targeted at the glut of Chinese steel on world markets. The G20’s weekend statement acknowledging the scope for “legitimate” trade defense measures was widely seen as accepting the inevitability of unilateral U.S. action. Given that retaliatory measures will be equally inevitable, the only question is how much restraint the fear of a global trade war will impose on each player. Fortune

London Blinks on Brexit

The U.K. government admitted for the first time that it will have to pay to settle long-term liabilities to the EU. It’s the first of what is likely to be a lot of concessions from London as negotiations over Brexit play out. Elsewhere the publication of Theresa May’s bill for withdrawing from the EU yesterday was met with pledges of “guerrilla warfare” from opposition parties who can exert much more pressure since making gains at last month’s election. Meanwhile, Labour leader Jeremy Corbyn said the U.K. should not leave the nuclear energy body Euratom, a shift that may yet be the start of a journey that ends in Labour calling for a second referendum on Brexit by the time the full implications of the separation become clear in 2019. FT, metered access

Australia Takes the Lead on Weakening Encryption

Australia became the first major western democracy to introduce legislation obliging companies to provide national security services with access to encrypted messaging. The need to be seen as doing something about terror threats has trumped the tech sector’s arguments that the creation of such backdoors will fatally undermine the security of all online life. The bill is likely to be debated in August, making the country a testing ground for one of the defining controversies of the modern age. Fortune



Around the Water Cooler

 

Can Vanguard’s New CEO Herd Bears?

Bill McNabb, who oversaw the growth of Vanguard into the world’s second largest asset manager, is stepping down as CEO, to be succeeded by chief investment officer Tim Buckley. He’ll be only the fourth CEO of Vanguard in 42 years. It’s hard to argue with the case for continuity, given the inexorable rise of its low-cost passive investing model. However, if Buckley spends as long in the job as his predecessors, he and his model will have to cope with the challenge of a bear market, at a time when Vanguard’s increased weight in the markets has upped the risk of ‘herding’ behavior (it now owns an estimated 7% of the whole S&P500).  Fortune

Tiffany Taps Bogliolo, Teva Tempts Soriot

There were more comings and goings in the CEO world elsewhere on Thursday. Tiffany said Alessandro Bogliolo, formerly of Bulgari and Diesel, will take up the vacant CEO seat in October (his predecessor Frédéric Cuménal, was ousted after only five months in February). And shares of pharma giant AstraZeneca are falling for a second straight day as the company fails to contradict an Israeli media report that its CEO Pascal Soriot will defect to generic drugmaker Teva. The loss of $4 billion in market value is a nice illustration of the Cult of the Star CEO in action. Fortune

Fantasy Merger Bows to Antitrust Reality

DraftKings and FanDuel called off their planned merger under pressure from the Federal Trade Commission. The FTC had been concerned that the merged company would control over 90% of the paid daily fantasy sports market. The tie-up was aimed at cutting costs as both companies lobbied for the legalization of fantasy sports in states that have outlawed it. Without a merger, the companies will have to go back to outspending each other to win customers.  Fortune

Norwegian and the Freddie Laker Shuffle

Norwegian Air Shuttle, which has led the charge of trying to make the discount airline model work on transatlantic flights, is struggling. Days after losing its CEO Frode Foss, it announced a bigger-than-expected loss of $125 million in the first half. Heavily in debt and facing higher-than-average operating costs due to its dependence on leased aircraft, it’s also been hobbled by copycat tactics from companies such as International Airlines Group (owner of BA, Vueling and Iberia), which have deeper pockets. Its shares lost 10% Thursday, another 2% this morning and are now down over 50% from last year’s peak. The Times, subscription required

Summaries by Geoffrey Smith Geoffrey.smith@fortune.com;

@geoffreytsmith

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