Dupont CEO Ellen Kullman won the battle, but lost the war. Her hard-fought victory in a proxy fight against activist Nelson Peltz was celebrated in corporate boardrooms around the country (she even got a standing ovation at the annual meeting when results were announced.) But her resignation five months later turns that victory upside down.
A few quick observations:
- She was dumped. Kullman and the company are both doing their best to make this an amicable parting. But the fact she is leaving so abruptly – October 16 – suggests otherwise. The former high school basketball player told Fortune’s Steve Gandel earlier this year: “I give it 100% until the buzzer sounds.” The buzzer had clearly sounded. (Read Gandel’s excellent story on the proxy fight here.)
- Peltz won. Acting CEO Ed Breen’s last act was to dismantle Tyco. At DuPont, he can be expected to push for same, which is what Peltz was advocating all along.
- Activists won. Those who thought Kullman’s victory might mark a turning of the tide were wrong. All eyes now move to Peltz’s latest target, GE CEO Jeff Immelt, whose company has struggled more than DuPont since he took over 14 years ago.
But the most important stake in the DuPont battle is the role of large companies in driving society-improving innovations. I had the opportunity to talk with her about this at length on several occasions, and found her very compelling. (For example, see this conversation last year at the Council on Foreign Relations). Kullman passionately argued that the glue bonding the disparate parts of DuPont was science. The most important innovations, she said, were those at the intersection of different sciences. She fiercely defended the $2 billion her company spent each year on R&D, which the activists attacked. And she skillfully rebutted venture capitalist Vinod Khosla, when he argued all important innovations happen in start-ups. They don’t. Big companies like Dupont bring important skills and resources to the innovation table — which is why it has survived the last 214 years.
If, in the frenzied pursuit of short-term returns, investors force DuPont to pull back its commitment to scientific research, the company, the nation and the world will be worse off.
More news below.
• Trade pact’s winners and losers
The completion of the Trans-Pacific Partnership – a 12-nation pact struck on Monday – carves out some clear winners and losers among the major U.S. industries. The deal won some of the broadest support from the farming industry, which would see tariffs cut on exports of poultry, soybeans and fruit, as well as give U.S. dairy companies greater access to foreign markets. Large manufacturers like Boeing and tech companies were also deemed “winners,” while the pharma, tobacco and auto sectors were more pessimistic about the terms of the deal. WSJ (subscription required)
• Nasdaq back in black for 2015
The Nasdaq composite climbed back into positive territory for 2015 on a 1.6% gain Monday, as stocks broadly rallied as investors viewed a Federal Reserve interest rate hike this year as less likely to occur after Friday’s weak jobs report raised questions about the pace of U.S. growth. However, the Dow Jones Industrial Average and the S&P 500 remain in the red. USA Today
• Can Dorsey silence the critics?
With Twitter co-founder Jack Dorsey again controlling the social networking website, Fortune points out that one of his greatest challenge will be silencing some 300 million critics (AKA – Twitter’s users). Former CEO Dick Costolo faced this challenge on a quarerly basis, losing the confidence of the flock even as revenue grew, though there were few new users and no clear path to profitability. To start out, Dorsey seems to be handling things better, as he and the rest of the Twitter team aim to restart the narrative. Fortune
• Lionsgate, Starz in merger talks
Lionsgate, the studio behind the popular “The Hunger Games” film series, is reportedly in advanced talks with movie channel Starz for a potential merger, a move that could create a new major media company. The companies have held talks for several months, though it is also speculated that a deal may not occur and instead, a partnership could be enacted. Small producers of TV and film may need to merge as major cable and satellite TV distributors consolidate. Los Angeles Times
Around the Water Cooler
• Why Big Pharma raises prices
While Turing Pharmaceuticals earned national media attention for increasing the price of a single anti-parasitic drug by 5,000 percent, it is just one of hundreds of smaller price hikes drug companies make each year in the U.S. Bloomberg points to Pfizer’s move to raise prices on 133 brand-name products this year alone, while rival Merck & Co. raised the price of 38 drugs. Why? To generate more revenue from older medications. And this is a practice that has been going on for years, helping offset the loss of revenue when patents expire for blockbuster drugs. Bloomberg
• General Mills recalls Cheerios
General Mills has recalled 1.8 million boxes of Cheerios and Honey Nut Cheerios after wheat flour contaminated the food maker’s gluten-free production system at a plant in California. The company warned the products could potentially cause adverse health effects for those with celiac disease, or individuals allergic to wheat. Broadly, there has been an upward trend in food recalls since 2012, with the organic food industry hit especially hard. Fortune