What a terrible day yesterday was for at least three big-deal leaders. And how instructive the resulting case studies in crisis leadership could be.
-Oscar Munoz suddenly became CEO of United Continental after CEO Jeff Smisek resigned and left the company. The problem is a federal corruption investigation involving the airline and the Port Authority of New York and New Jersey, which operates Liberty Newark Airport, a major United hub where 70% of departures are United flights. It’s intriguing that the investigation has somehow reached Smisek, a highly regarded Houston lawyer at Vinson & Elkins before he joined Continental as general counsel in 1995. But he’s not the leader in crisis now. Munoz is.
He must shepherd the company through a potentially damaging crisis of integrity. We don’t know how bad it could be, but several months ago the company retained the law firm Jenner & Block to conduct an investigation, which is never a good sign. That’s the firm that produced the report on Lehman Brothers’ finances after it collapsed and that General Motors hired to investigate its ignition-switch disaster.
Until yesterday, Munoz was CEO of CSX, the giant railroad; he was also, and remains, a United director. Now he must keep this potential scandal from becoming a distraction for managers and employees, even though it is apparently getting worse.
-Some 24 hours after saying she had no need to apologize for her use of a private email server while Secretary of State, Hillary Clinton apologized for it. “That was a mistake. I’m sorry about that,” she told ABC News. It’s safe to say that her campaign is now in crisis mode. Consider that also yesterday, the New York Times reported that a second intelligence review of her emails found that they contained highly classified information.
Plus, you may recall that former Clinton staffer Bryan Pagliano, who set up her email server, told Senate investigators last week that he would assert his Fifth Amendment right to avoid self-incrimination and would not answer their questions. This is not good, and yesterday it got worse when the two key committee chairmen involved, Senators Charles Grassley and Ron Johnson, offered him immunity.
But wait, there’s more. Reuters reported yesterday that the State Department is adding 50 staffers to the existing 50 who are sorting through the 30,000 emails that Clinton sent back to State, and helping with a deluge of Freedom of Information Act requests, many of them related to the emails.
The election is 14 months away, an eternity. Clinton could certainly get through this long before then. Or it could be devastating. She’s in a crucible now.
-And then there’s New Jersey Governor and presidential candidate Chris Christie. The federal investigation that brought down Smisek also involves former Port Authority chairman David Samson, a Christie appointee who resigned last year after news broke of a separate federal investigation involving him. He is still reportedly a Christie confidant. Another corruption story is the last thing Christie needs after the ridiculous Bridgegate affair, also involving Samson and the Port Authority, had died down. Not that Christie has much left to lose as a presidential aspirant. The latest poll shows him with 2% support, ranking 10th among Republican candidates.
What We’re Reading Today
United Airlines CEO steps down amid investigation
Jeff Smisek left abruptly amid a federal investigation into corruption when negotiating with Port Authority of New York & New Jersey Chairman David Samson. The incident centers around United adding a flight from Newark, NJ to Columbia, SC – near where Samson vacationed – shortly after Samson became chairman and ended days after he left office. Oscar Munoz will replace Smisek as president and CEO. Chicago Sun-Times
The largest hostile takeover attempt ever…
…continues to unfold. Generic drug manufacturer Mylan has offered $35 billion for Perrigo, a maker of generic versions of Tylenol, Mucinex, and other over-the-counter favorites. Perrigo CEO Joseph Papa and his board have rejected the bid. But Mylan CEO Robert Coury will take his case directly to Perrigo investors. The bid is triple the size of the average successful hostile takeover attempt. Fortune
Hillary Clinton apologizes for email fiasco
Just 24 hours after Clinton said she didn’t need to apologize for her use of a private email server as Secretary of State, she apologized. The statement comes as Democratic strategists have grumbled about their annoyance with Clinton’s slow response to the scandal. ABC News
European Commission President calls for migrant help
The EU would allow 160,000 migrants to pass into Greece, Hungary, and Italy under Jean-Claude Juncker‘s plan, which he unveiled in his first State of the European Union speech on Wednesday. Conservative EU leaders shunned the idea, balking at enforcing quotas on the number of migrants European countries would welcome. NYT
Building a Better Leader
The cost of cybersecurity attacks on businesses…
…rises to $400 billion a year. But companies prefer to remain quiet about the attacks for fear of bad PR. Inc.
Bath & Body Works to end on-call scheduling
Owned by L Brands, Bath & Body Works becomes the latest of the 12 retailers warned by New York Attorney General Eric Schneiderman that he doesn’t believe on-call scheduling is legal. Victoria’s Secret, also owned by L Brands, ended the practice earlier this year. WSJ
Assigning blame to a few hurts you in the long-run
Instead it’s better to make broad changes focused on why the few made the mistakes. Fortune
Tackling the Unexpected
Yahoo reconsiders spinoff
Marissa Mayer‘s company will halt plans to spin off its $23-billion stake in Alibaba after the IRS said it won’t provide guidance on the tax implications of such a move. Yahoo tax advisers believe the spinoff would be tax-free, since it would bundle the 15% stake in Alibaba with a small business division, forming a new company. NYT
Trials and tribulations of the vegan egg
Hampton Creek, maker of vegan mayonnaise and “eggs” made from plant proteins, has called for an investigation into the American Egg Board and USDA, according to CEO Josh Tetrick. His announcement comes a week after emails from the AEB indicated an effort to halt Hampton Creek’s growth. Wired
McDonald’s transitions to cage-free
Over the next decade, the fast food giant helmed by Steve Easterbrook will begin to use only eggs from cage-free hens. That’s 2 billion eggs a year and rising, with the company’s launch of all-day breakfast service starting Oct. 6. Buzzfeed
Up or Out
MillerCoors has named Gavin Hattersley CEO. He has served as interim CEO since July. MarketWatch
Docker, a startup business software company, has hired former Twitter CFO Mike Gupta for the same position. WSJ
Jeff Lasher, CFO of the shoe company Crocs, has stepped down to join West Marine in the same role. Crocs senior vice president for finance Mike Smith will fill Lasher’s spot until a permanent replacement is found. Denver Business Journal
Fortune Reads and Videos
Facebook tweaks business pages…
…to challenge Yelp. Mark Zuckerberg‘s company wants the business pages to be the go-to source for consumers who need information about small businesses. Fortune
An activist investor obsessed
The incredible inside story of Bill Ackman‘s three-year odyssey to bring down Herbalife. Fortune
At the Apple event today…
…expect CEO Tim Cook to unveil a thinner, lighter iPhone with “Force Touch.” Fortune
Trump, Clinton face new, highly secure competition
John McAfee, the eccentric creator of anti-virus software, entered the presidential race. He has created the Cyber Party to bring attention to the government’s handling of cybersecurity. Fortune
“I’ve said publicly that if we are successful in getting this company shut down, it will be one of the most philanthropic things we’ve ever done. I will tell you, this is the most important story I’ve ever been involved with on anything ever. Okay? This is it.” – Bill Ackman, founder of hedge fund Pershing Square, discussing Herbalife and his belief that it’s running a pyramid scheme.
“If you’d worked your tail off for years and years and years to build something—something you believe strongly in? Along comes a guy with half-facts and half-truths and a jaded point of view and starts not just shorting your stock but trying to totally demonize me and demolish the company. It’s like, really? Who the hell does he think he is?” – Michael Johnson, CEO of Herbalife, responding to Ackman. Fortune
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|Produced by Ryan Derousseau|