Is there some particular reason that lots of companies should be in crisis right now? I can’t think of any. The global and U.S. economies are not great but not terrible. Stock markets are holding up well, expressing at least moderate confidence in the future. And yet, while I don’t think anyone keeps track of companies in crisis, the roster at the moment seems large. So let’s take advantage of this opportunity to grade five CEOs being tested in situations that will define their leadership. Four of the five don’t qualify for a grade of A because they were in charge when the crisis-causing behavior happened; the fifth is eligible for an A but doesn’t get one
Michael Pearson, CEO of Valeant: B+ Valeant’s problems became a no-fooling crisis when short-seller Andrew Left accused the company of using its ties to Philidor Rx Services to pump air into revenues. Pearson severed ties to Philidor and on Tuesday admitted mistakes and outlined a general plan for Valeant’s strategy and finances. Investors acknowledged that he allayed some concerns but not all.
Matthias Mueller, CEO of Volkswagen: C- Mueller wasn’t the boss when VW installed emissions-test-cheating software in millions of cars, but he’s behaving almost as if he had been. He has been saying many of the right words – VW has lost customers’ trust and must regain it through behavior, the culture must change, the company will investigate and be transparent with its findings – and the company has indeed released damaging information on its own. But this is the basic playbook for anyone in his situation. He has shown no passion for his most important job, culture change.
Elizabeth Holmes, CEO of Theranos: D The fundamental technology underlying her company’s $9-billion valuation is in question, and she is offering little but assurances that everything will be okay. Give her credit for showing up at last week’s Fortune Global Forum and at an earlier WSJ conference to address the issue, but she admits no errors beyond not doing a good job of communicating. “I’m definitely not a PR person,” she told Fortune editor Alan Murray last week, but others say that, having built a hugely valued medical device company without getting even one peer-reviewed evaluation of her technology, she’s actually a highly skilled PR person.
Nigel Eccles, CEO of FanDuel, and Jason Robins, CEO of DraftKings: ?? Who knows how well they’re managing this crisis? New York’s attorney general has alleged that their business is gambling and therefore illegal in New York; Nevada has already ruled likewise. If their business model is widely outlawed, their only praiseworthy response will be coming up with a new one. And we simply don’t know if they can.
There probably is a particular reason all these CEOs in widely diverse industries are learning crisis leadership at the same time. It’s part of the new normal in a digital economy; even at big, old VW, the crisis involves software. Ones and zeroes can change fast; competitors arise out of nowhere; the world is becoming radically transparent. Leaders had better get used to it: Even if the economy is booming and stock prices are rocketing, crises will only multiply.
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What We're Reading Today
Fortune's Businessperson of the Year: Mark Parker
The unsung hero of Nike's success announced in October that he would grow the company's annual revenue by $20 billion, to $50 billion, by 2020. Despite Nike's size, it continues to grow 8.5% a year. Parker is an introvert and doesn't grab many headlines, yet he and Nike founder Phil Knight have more in common than you might think. You can find the full list of Fortune's best leaders of the year here. Fortune
Charles Koch non-committal on support
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Macy's battles struggling sales
CEO Terry Lundgren announced that Macy's sales had declined 5.2% in the third quarter vs. 2014, a steeper drop than most had feared. In response, Macy's will launch Macy's Backstage, a discount operation that will compete with TJ Maxx and Marshalls. While Lundgren continues to defend the department store's place in the e-commerce world, investors wonder what other tools he can deploy to boost sales. The board has supported Lundgren, but activist investors have begun to circle. WSJ
Ackman attacks Buffett's Coca-Cola shares
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Building a Better Leader
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Intuit CEO Brad Smith's $40 million mistake
It came before he joined Intuit in the late 1990s; he enthusiastically backed a product that achieved total sales of $1,500. But Smith learned from the blunder. Fortune
If you want to become a leader...
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Worth Considering
Volkswagen to offer impunity to employees
As VW and CEO Matthias Mueller investigate the full extent of the diesel emissions cheating scandal, the carmaker will offer employees full immunity for information. The announcement is expected to give employees until the end of November to come forward with details. It comes as an anonymous-tip system has failed to produce much information, while the U.S. Environmental Protection Agency grows impatient with the company's slow progress in the investigation. WSJ
5 candidates pass FIFA's ethics review
After an internal ethics review, FIFA has approved five of the seven candidates who seek to succeed the embattled Sepp Blatter as president of the soccer federation. It rejected the candidacy of Michael Platini of France, who faces a corruption investigation in Switzerland, and Musa Bility of Liberia. Prince Ali bin al-Hussein of Jordan, Jérôme Champagne of France, Gianni Infantino of Switzerland, Tokyo Sexwale of South Africa, and Sheikh Salman bin Ebrahim al-Khalifa of Bahrain were approved to move forward. Blatter has been hospitalized after suffering "a small emotional breakdown," but he will continue to fight his 90-day suspension from FIFA. NYT
EU and Israel battle over wine labeling
The European Union will move forward with labels on wines and other products that identify them as made in Israeli settlements, not Israel. Israeli Prime Minister Benjamin Netanyahu called the move "hypocritical and a double standard," since the EU is not requiring similar labeling of products from territories in conflict elsewhere. Fortune
Up or Out
Former VW CEO Martin Winterkorn has resigned as the company's Audi Group chairman. Business Insider
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On this day...
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