Good morning.
Starbucks CEO Kevin Johnson has had a busy couple of days, apologizing profusely and repeatedly for the incident in a Philadelphia store where two black men were removed by police after a call from the store manager. The video of the men, who hadn’t purchased anything and were sitting quietly, went viral and prompted instant outrage.
Johnson’s response is likely to become a case study in how to handle such situations. There is no evidence that the company’s policies were at fault, and plenty of precedent for non-customers being asked to leave stores. Nevertheless, Johnson was the picture of contrition—apologizing personally to the two men arrested, calling their treatment “reprehensible,” and apologizing to his customers and partners. He took full responsibility— “I am accountable.” And he promised to fix the problem, whether it required policy changes, additional store manager training, or unconscious bias training. He rejected calls to dismiss the manager who made the call to police, saying, “I believe that blame is misplaced. In fact, I think the focus of fixing this—I own it. This is a management issue, and I am accountable.” (Starbucks said Monday that the store manager “is no longer at that store.”)
This is just the latest example of how dramatically corporate leadership has changed in the social media era. The incident, while clearly objectionable, would likely have passed with little notice in earlier days. But today, every Starbucks customer has become a potential citizen-journalist, and every social media user feels empowered to react as if he or she had witnessed the event first-hand. It’s up to the CEO to provide the antidote.
Does it help that Starbucks has established a record of attention to social issues—even if it has sometimes done so ham-handedly? I think so. In an age of instant moral outrage, CEOs are well-served by having built a reservoir of good will.
Coincidentally, I’m off this morning to the speak to the Geno Auriemma Leadership Institute, named after and led by the University of Connecticut’s iconic basketball coach. My topic: The Changing Nature of Business Leadership. Thanks to Johnson for an opening anecdote.
More news below.
| Alan Murray | |
| @alansmurray | |
| alan.murray@fortune.com |
Top News
Russian Hackers
For the second time this year, the U.S. and U.K. have accused Russia of being behind serious cyberattacks—this time, Australia is also joining in the fun. The attacks have apparently been going on since last year, around the world, with targets including public and private-sector organizations, as well as critical infrastructure providers. "We call on all responsible nations to use their resources—including diplomatic, law enforcement, technical, and other means—to address the Russian cyber threat," said Homeland Security cybersecurity chief Jeanette Manfra. Fortune
Trump Pauses Sanctions
After Ambassador to the United Nations Nikki Haley said the U.S. was preparing fresh sanctions on Russia, in relation to the alleged chemical weapons attack in Syria, President Donald Trump did a U-turn. According to the Washington Post, Trump told his national security advisors he was "upset the sanctions were being officially rolled out because he was not yet comfortable executing them." WaPo
China Reforms
China will allow full foreign ownership of car manufacturers within the next five years, its government has promised. The lifting of the restrictions means global automakers will no longer need to partner with a local, state-owned company in order to access the Chinese markets. Such arrangements force international companies to share their technology with companies that might end up competing with them. Associated Press
Sterling Performance
The British pound has reached its strongest level against the dollar—$1.4363—since the Brexit referendum result. Sterling had lost a tenth of its value in the wake of that result. It's still below where it was before the referendum, but is apparently strengthening on the supposition that the Bank of England will raise rates due to strong economic performance. Of course, Brexit hasn't happened yet. CNBC
Around the Water Cooler
Facebook Pay
The median pay package at Facebook was more than $240,000 last year, with CEO Mark Zuckerberg getting more than $8.8 million, the company revealed in its annual proxy. Zuck's pay was around 37 times higher than the median, Facebook said. That's pretty much all security and travel costs, though, as his base salary is a mere $1. Twitter's median salary last year, by comparison, was a relatively modest $161,860. Wall Street Journal
Netflix Figures
Netflix's latest subscriber numbers have beaten forecasts, and the U.S. firm now expects its international sales to overtake those on its home turf. CEO Reid Hastings said the company will spend $10 billion over the next year on content and marketing, and $1.3 billion on technology. Its lack of reliance on advertising separates it from other tech firms who are increasingly vulnerable to privacy regulation, he said. Financial Times
Sorrell Probe
The leader of the U.K.'s Liberal Democrat party has called on WPP to disclose more about the misconduct probe that apparently brought down CEO Martin Sorrell. Vincent Cable said there was a "real lack of transparency" about the claims and the probe, which WPP said has concluded. "Any investigations done by the company should be made public," Cable said. BBC
Rothschild In the U.S.
Alexandre de Rothschild, who will become the next chairman of the family's bank, plans to push hard into the U.S. He told the Financial Times that, while Rothschild currently only has a relatively small New York office, he wants to expand there in order to diversify the bank's core Franco-British advisory business. "In the past we've probably made some casting mistakes in the U.S. and in our culture it takes a little bit longer to correct those," he said. FT
This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.
