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Power Sheet – December 11, 2015

December 11, 2015, 3:10 PM UTC
Fortune

Our topic this morning is crisis leadership, with a couple of excellent “do-this-not-that” examples helpfully arranging themselves in this morning’s news.

The first example is really hard to beat because both sides of the lesson are in the same company, Chipotle Mexican Grill. You’re well aware of the company’s problems with food safety over the past several weeks, which are repelling customers and have pushed the stock down over 20% since the first outbreak was reported. And as you may know, Chipotle has co-CEOs, Monty Moran and founder Steve Ells. On Tuesday, Moran demonstrated how crisis leadership is not done. Speaking at an industry conference for investors, he seemed to blame the Centers for Disease Control and the media for the severity of the crisis. “It’s been fueled by the sort of unusual and even unorthodox way the CDC has chosen to announce cases related to the original outbreak in the Northwest,” he said. And: “Because the media likes to write sensational headlines, you’ll probably see, you know, when somebody sneezes … ‘Ah, it’s E. coli from Chipotle’ for a little bit of time.” Moran may even be right about all that – but this is not how you win back the world’s confidence.

You do that the way Steve Ells did yesterday. He went on the Today show, an excellent venue for reaching consumers, and apologized. He described the company’s extensive efforts to find and fix the problem. And then he made an audacious promise: “The procedures we’re putting in place today are so above industry norms that we are going to be the safest place to eat.” That statement is a high-stakes gamble that will make any future food-safety problems far worse than past ones. But it’s the right way to go. And the stock jumped 5%.

Our second case study examines Volkswagen and General Motors. VW chairman Hans Dieter Pötsch and CEO Matthias Müller yesterday announced, sort of, the results of an internal investigation into the massive emissions-cheating scandal that has already cost the company billions, with more damage sure to follow. The findings, if you could call them that, were mostly bland and non-specific. “There was not one single mistake, but rather a chain of errors that was never broken,” Pötsch said. You don’t need an investigation to figure that out. And what were those errors? He didn’t say. Who ordered the deceptive software installed, and when? Who covered up the deception for almost a decade? Unanswered.

Contrast that with GM’s response to its ignition switch scandal, which broke just days after Mary Barra became CEO at the beginning of last year. It included commissioning a report, which GM released publicly, by an outside law firm. Though a few names of non-GM people were blacked out, the 315-page document is packed with names, dates, damning detail, and withering comment on how the scandal happened. In addition, GM announced early yesterday that it had paid compensation on 128 claims for incidents that occurred before GM’s 2009 bankruptcy; a court has ruled that GM cannot be sued over such incidents, but the company offered the payments anyway.

Do this, not that. The difference in crisis leadership doesn’t get much clearer than it is in this morning’s news.

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What We're Reading Today

Dow and DuPont agree to merge

The deal values the combined company at $130 billion, but it will likely break into three separate businesses - agriculture, material sciences, and specialty products - after the merger is complete. Dow Chemical CEO Andrew Liveris will become executive chairman of DowDuPont, while DuPont CEO Edward Breen will serve as CEO. Whether antitrust regulators will approve the merger is unclear. The deal caps a more than 10-year effort by Liveris to merge with DuPont. WSJ

China's Warren Buffett disappears

Guo Guangchang, chairman of the Fosun conglomerate, hasn't been heard from in over a day. Witnesses say police ushered him into a vehicle at the Shanghai airport. The Chinese government and President Xi Jinping have cracked down on corruption in the financial industry since the markets tumbled this summer. It's not unusual for Chinese investigators to hold witnesses, or he could be the target of an investigation, among other possibilities. Trading in two of Fosun's companies was halted Friday because of the disappearance. Fortune

Democrats, Republicans change tune on Trump

On Sunday, Hillary Clinton chuckled at the mention of Donald Trump's name. Now, at campaign stops in Iowa, she's condemning his tactics that prey on "prejudice and paranoia." Republican National Committee Chairman Reince Priebus and Senate Majority Leader Mitch McConnell have met with Republican power brokers who argue that if Trump wins a number of primaries, a coalition should form around an alternative candidate at the GOP convention. Washington Post

Saddam Hussein's hand in ISIS's rise

A number of leaders and tacticians who have aided ISIS's growing strength in Iraq and Syria once worked in the army and intelligence forces of former Iraqi President Saddam Hussein. That has increased the level of coordination and intelligence gathering within ISIS's spy network and in its on-the-ground military tactics. Reuters

Building a Better Leader

When struggling between job and parenting...

...sometimes the answer is to parent a little less. Low intensity parenting can still be good parenting. Fast Company

Your jerk of an employee probably isn't more creative... 

...but likely has a strong ability to pursue ideas in the face of criticism. It doesn't mean he or she will succeed, though. Fortune

S&P 500 CEOs' use of share buybacks...

...often pays them more, despite company performance. Over 280 companies use some form of per-share metric to reward executives, which can be boosted by buybacks. Reuters

Worth Considering

Florida, Ohio backing Uber's designation for drivers

The two states are working to pass laws that would designate all drivers of ride sharing services via apps, like Uber, as independent contractors. North Carolina, Arkansas, and Indiana have already passed similar laws. Such rules would limit the impact if Travis Kalanick's company loses a California class-action lawsuit claiming Uber drivers should be treated as employees. Reuters

Climate accord draft materializes

In the late stages of the Paris COP21 discussions on climate change, an accord looks likely. The draft proposal would require countries to meet every five years to develop stronger benchmarks for reducing emission. French Foreign Minister and summit chair Laurent Fabius will submit a revised draft by Saturday, which is likely to be adopted. NYT

Ford turns focus on electric cars

CEO Mark Fields outlined a plan to invest $4.5 billion in developing 13 new electric vehicles. His goal is to increase electric offerings to 40% of all company models by 2020. Ford will also increase research funding for electric batteries. The 2017 Ford Focus Electric will begin production next year and will have a battery range of 100 miles. Fortune

Up or Out

AIG CFO David Herzog will retire in early 2016. Chief Risk Officer Sid Sankaran will succeed Herzog. WSJ

Tom Wind has been named president of U.S. Bank Home Mortgage, replacing Rick Aneshansel. BusinessWire

Trucking company J.B. Hunt Transport Services has hired Tempur Sealy International CIO Stuart Scott for the same position. Scott will replace Kay Lewis, who's retiring. WSJ

Fortune Reads and Videos

Building air-traffic controls for drones

To ensure drones don't crash into each other, Stanford researchers are developing a conflict-avoidance algorithm. Fortune

Seattle shuts down a Chipotle restaurant...

...for“repeated food safety violations.” It had previously been shuttered after an E. Coli outbreak.  Fortune

23% of homes won't have traditional cable by 2019

People who have never had cable service are also increasing. Fortune

Adidas's strategy to gain cred in the U.S...

...includes new materials and 3-D printing.  Fortune

Happy Birthday

Secretary of State John Kerry turns 72 today. Biography

Former Federal Reserve Chairman Ben Bernanke turns 62 on Sunday. Biography

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