Power Sheet – February 19, 2016

February 19, 2016, 3:16 PM UTC

Today we release our annual ranking of the World’s Most Admired Companies, which this year poses an intriguing challenge for leaders: What do you do if your company is greatly admired yet has lost billions in value in this year’s stock market plunge? More broadly, what if your lauded organization is getting suddenly and inexplicably hammered by market forces beyond your control?

Produced by Ryan Derousseau

That’s the situation facing the leaders of virtually all the companies in our 50 All-Stars ranking. The top three companies, which give new meaning to the honorific term “triple-A,” have all taken huge hits: Apple is down $67 billion (11.5%) in value this year, Alphabet down $50 billion (9.5%), Amazon down $80 billion (25.1%). (All figures are for the year through Feb. 11.) The biggest percentage loser is Charles Schwab, down $14 billion (32.5%) in just those first six weeks of the year. In all, 44 of the 49 publicly traded firms (Publix Super Markets is private) have lost value.

When the world’s opinion of an organization’s future changes so sharply, how should a leader respond? The basic advice is simple: Show, don’t tell. You can insist that your company is just as strong as it was in December, but it’s all a big shrug. What else would you say? Effective leaders let their actions speak. The prime example of the past six weeks is JP Morgan Chase CEO Jamie Dimon spending $25 million of his own money to buy company stock, which is down 20%. The stock bumped up slightly on the news, but more important is that employees, customers, suppliers, and other constituents got the message that Dimon is genuinely confident.

Another way to show confidence is to issue a boatload of stock options to employees who get that form of compensation. To them, it says, “We believe that today’s ridiculously low price is a bargain and that you’ll make a lot of money if you stick around for a few years until these options vest.” General Electric followed that strategy when it issued options at $9.57 a share near the market low of March 2009; recent price: $29.

Times like these can also bring an opportunity to make attractive acquisitions. It shows that you’re smarter than typical corporate acquirers, who tend to buy when stock prices are booming, not when they’re low, and it shows confidence in the future; you’re willing to make investments when many others are retrenching, fearful that the market’s expectations of bad times may be right. In the same vein, this can be an opportune moment to steal excellent employees from companies that are demonstrating fear rather than courage, since those employees may be losing confidence in their employer.

There can be a couple of exceptions to the “show, don’t tell” rule. One is when the leader describes concrete growth plans. A key leadership task is to give hope for the future, and specific plans do that far more effectively than vague assurances do. The other exception is when you can report outsiders’ opinions of your organization. That happens to be just what the World’s Most Admired Companies ranking is – the result of a poll of 4,000 executives, directors, and security analysts. So even for those 44 of the All-Star companies whose stocks have been pounded down, it’s a credible vote of confidence.

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What We're Reading Today

Ted Cruz's "natural-born" citizenship status will go to court 

A Chicago judge will listen to arguments from an Illinois voter who argues that Cruz isn't a natural-born citizen of the U.S. and therefore should be removed from the primary ballot. Cruz's status has been questioned repeatedly by Donald Trump, and Democratic Rep. Alan Grayson has threatened to take the issue to court if Cruz wins the GOP nomination. Cruz was born in Canada, but his mother was born in the U.S. USA Today

IPO market in a tailspin

More than 70% of the nearly 175 companies that went public in 2015 are now priced below their IPO price. James Park's Fitbit is down 20% since its June offering, while Sergio Marchionne's Ferrari has dropped 25% since October. Downbeat investor sentiment has depressed the entire market, but the newest companies seem hardest hit. WSJ

Big banks recognize the need to get smaller...

...but can't figure out how to do it without being hobbled by today's regulations. Minneapolis Fed chief Neel Kashkari said earlier this week that banks are still "too big to fail" and should be broken up. While bank executives don't want forced break-ups, new regulations meant to reduce systemic risk have become burdensome, current and former bank leaders say. Reuters

Citigroup CEO gets a big raise

CEO Michael Corbat got a 27% raise in 2015, earning about $16.5 million, which includes $4.5 million in deferred shares. Citi more than doubled its net income in 2015. Bank of America raised Brian Moynihan's pay by 23% in 2015, and JPMorgan Chase gave Jamie Dimon a 35% increase. Fortune

Building a Better Leader

Walmart to launch fixed-shift and flex-shift scheduling

It's an effort to give employees more control over when they work. Washington Post

The World's Most Admired Companies also understand...

...the need to adapt to the changing workplace. Finding ways to build talent from within remains paramount. Fortune

Billion dollar startups have avoided hiring a CFO

That could change for companies like Uber and Slack as the IPO market grows uncertain and venture funding dries up. Inc.

Political Battles

Republicans host a town hall

Donald Trump strongly attacked George W. Bush's record as president, criticizing the decision to fight in Iraq, even though Buzzfeed reported that Trump said he supported the move in 2002. Trump also tried to de-escalate an argument he had with Pope Francis over building a wall on the Mexican border. John Kasich highlighted his past and hugged an attendee, while Jeb Bush admitted he's an introvert. CNN

New poll signals Trump's diminishing lead in South Carolina  

The WSJ/NBC News poll finds that Trump's lead has fallen from 16 points to 5. He has 28% support among South Carolina GOP voters, while Ted Cruz has jumped to 23%. Hillary Clinton maintains a large lead in the state over Bernie Sanders. But her lead in Nevada has evaporated; she has 48% of the caucus vote vs. Sanders's 47%, according to another poll.  WSJ

Spanish Prime Minister accidentally announces elections 

Acting PM Mariano Rajoy got caught on a camera phone while speaking with British PM David Cameron. Rajoy said that the country will "most likely" hold new elections on June 26. The Spanish parliament was fractured in December when four parties won seats with none holding a majority, and a coalition hasn't formed. Fortune

Up or Out

ConocoPhillips named Don Wallette, Jr. CFO, replacing the retiring Jeff Sheets. OE Digital

Nicole Seligman has stepped down as president of Sony Entertainment and Sony Corp. of America. Variety

Fortune Reads and Videos

France lawmakers want to pass a "right to disconnect" 

They seek to end late-night panic emails or Slack updates.  Fortune

FCC signals support for cable cutters

It voted to move forward on a proposal that would open the set-top box business to competitors of cable operators. It will make a final ruling in a few months. Fortune

Twitter and Facebook back Apple's FBI fight

Twitter CEO Jack Dorsey thanked Apple CEO Tim Cook for his leadership. Fortune

Richard Branson weighs in on Brexit

The Virgin Group founder said it would be a "very, very, very, very sad day." Fortune

Happy Birthday

Roger Goodell, commissioner of the NFL, turns 57 today.  Biography

Digg founder Kevin Rose turns 39 on Sunday.  Biography

David Geffen, media billionaire and co-founder of DreamWorks, turns 73 on Sunday.  Biography

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