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Power Sheet – October 7, 2015

News this morning highlights the issue of the leader who won’t let go, as the WSJ reports in a piece about Sumner Redstone, the 92-year-old chairman of CBS and Viacom. The issue arose separately last week when Ralph Lauren Corp. announced that former Old Navy chief Stefan Larsson would succeed Ralph Lauren as CEO — only for Lauren to send employees a letter the following day stating emphatically that he was still in charge, undercutting Larsson’s authority on day one.

Redstone remains firmly in control of Viacom and CBS because both companies issue two classes of stock, voting and non-voting. He owns about 80% of Viacom’s voting stock, so it doesn’t trade much; investors mostly buy and sell the non-voting stock. The WSJ reports that many investors are growing concerned about Redstone’s ability to remain in charge, noting that he is now entirely silent on the company’s earnings calls and has suffered several mini-strokes. But he has passed several mental competency tests, says the WSJ, one just a month ago.

The larger issue is how a company can attract and keep the best managers when they know the real boss isn’t going anywhere, and when he does, a family member may have the inside track to taking over authority. Redstone’s daughter Shari Redstone is vice chairman of CBS and Viacom. Redstone has kept an excellent CEO at CBS, Leslie Moonves. Viacom has performed less well, and the WSJ says some investors believe its stock would rise if CEO Philippe Dauman were replaced. Both chiefs are frequently on lists of the highest paid CEOs.

These situations are especially common at media companies. Rupert Murdoch’s companies have long issued dual-class stock. That’s the case at 21st Century Fox, where Murdoch, age 84, and son Lachlan are executive co-chairman, while son James is CEO. At News Corp., which also uses dual-class stock, Murdoch is executive chairman and Lachlan is co-chairman. At Comcast, another dual-class company, CEO Brian Roberts succeeded his father Ralph as chief.

On average, companies with dual-class stock tend to underperform, and the reason seems to be that the leaders aren’t subject to effective governance; they control the voting stock. That’s all perfectly fine so long as investors understand that they’re just going along for the ride; if the company performs badly, they can’t vote out the managers who are supposedly working for them. The leadership problem is that this effect cascades down through the organization. Up and coming leaders know that their bosses aren’t entirely subject to the performance discipline that markets impose on other leaders, and so performance may not be the criterion on which they’re measured. Plenty of employees are okay with that situation, but it can be dispiriting to the very best. A related issue is that ambitious leaders may avoid companies where the top job seems forever unavailable.

That’s why leaders who can’t let go are a problem.

What We’re Reading Today

Fiat Chrysler workers threaten strike

United Auto Workers threatened to strike at Fiat Chrysler if a labor deal isn’t agreed to by tonight. Fiat Chrysler CEO Sergio Marchionne and his team continue to pursue a deal, but there are reports that the UAW pulled negotiators from the bargaining table last night. It’s also possible that UAW President Dennis Williams has used the strike threat as theater in order to rally his members after they rejected a previous labor agreement he championed. Detroit Free Press

A-B InBev makes $104 billion offer for SABMiller 

It’s at about a 44% premium to the stock’s closing price on Sept. 14, before a possible bid was first reported, and the third proposal that Carlos Brito‘s Anheuser-Busch InBev, the world’s largest brewer, has made to the world’s second-largest. The tobacco company Altria Group, SABMiller’s largest shareholder, supports the offer and encourages the board to begin constructive talks.   WSJ

Volkswagen CEO warns of deeper cuts 

Matthias Müller said the $7.3 billion the company set aside to deal with the emissions scandal will not suffice to bring vehicles into compliance. He also warned that job cuts would likely follow. Today, the company is expected to explain how it will bring vehicles into compliance. NYT

Bill Ackman: Bloomberg will run in 2016

The hedge fund manager predicts that Michael Bloomberg will run and win. Ackman said Bloomberg has qualities that Donald Trump possesses plus  experience in office as New York City’s three-term mayor.  Fortune

Building a Better Leader

The downside of work-from-home policies

It turns out the more people work from home, the more the office environment suffers. Quartz

Most employees have no idea how well they’re paid

But most believe it’s under market value. Harvard Business Review

If you didn’t book Thanksgiving holiday travel yesterday…

…then do it today. And look for Christmas tickets on October 9 to get the best deal. Fortune

Legal Troubles

NY Attorney General to probe daily fantasy sites

AG Eric Schneiderman has requested data from FanDuel and DraftKings over allegations that employees used inside information to win money by playing on the sites. DraftKings CEO Jason Robbins and FanDuel’s Nigel Eccles have also been asked to aggregate the success of players that compete on their sites. Bloomberg

Former UN President charged with corruption

John Ashe, who served as United Nations General Assembly President from 2013 to 2014, was arrested by U.S. authorities for taking $1.3 million in bribes from Chinese real estate moguls. It’s part of a larger inquiry into whether bribes are common within the UN ranks.   Reuters

Justice Department to release 6,000 inmates

In a sweeping change in how the U.S. handles non-violent drug offenders, Attorney General Loretta Lynch‘s Justice Department is preparing to release 6,000 inmates starting at the end of the month. It’s one of the largest releases of inmates from federal prisons ever, as President Barack Obama tries to roll back harsh sentencing laws of the 1980s and 1990s that have led to prison overcrowding.  NYT

Up or Out

Wendy’s CEO Emil Brolick will retire in May 2016. CFO Todd Penegor will succeed him. MarketWatch

Curt Garner, Starbucks CIO, plans to step down in November. No replacement has been named. Gerri Martin-Flickinger, formerly Adobe Systems’ CIO, has joined Starbucks as chief technology officer.  WSJ

Former Twitter CEO Dick Costolo, who stepped down in June, has begun contributing as a writer to the HBO series Silicon Valley. Bloomberg

Fortune Reads and Videos

Toyota invests in self-driving vehicles

It’s ramping up development of autonomous cars, intending to have them on the roads by 2020. Fortune

The on-demand economy’s newest friend

Presidential candidate Marco Rubio said he will fight for the likes of Uber and AirBnB.  Fortune

Amazon beefs up domains for IoT purposes

Jeff Bezos‘s company has registered a number of domain names with Internet of Things in the URL, leading up to its Amazon Web Services customer conference. Fortune

Childcare now costs more than rent

Sometimes a babysitter can run more than college tuition. Fortune

Birthday Wishes

Russian President Vladimir Putin turns 63 today. Biography

Former deputy director of the National Security Council Oliver North, who was implicated in the Iran-Contra Affair, turns 72. Biography

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