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Power Sheet – February 23, 2016

Who’s your friend and who’s your foe? For business leaders the answer is often fluid, as three developments in this morning’s news illustrate.

-Facebook chief Mark Zuckerberg and Apple’s Tim Cook could be enemies on several dimensions. They compete to hire top tech talent, and as Facebook envisions new ways to profit from its 1.6 billion active users it could easily encroach on Apple’s territory by selling music or offering payment services. But yesterday they were friends, with Zuckerberg declaring his support for Cook’s refusal so far to obey a court order in the case of the FBI and a San Bernardino gunman’s cell phone. That stance took courage, since Cook’s position is not strongly popular with the public, and Zuckerberg didn’t have to say a thing. Google chief Sundar Pichai, another Cook rival in some ways, has also publicly supported him. They all share a desire to resolve privacy and encryption issues along similar lines, and a united front of technology’s highest-profile, most valuable companies helps them all.

-Yahoo CEO Marissa Mayer and Starboard Value Fund chief Jeff Smith would seem to be flat-out enemies, plain and simple. Mayer wants wants more time to turn around Yahoo, which has been struggling and retrenching for well over a year, its stock price propped up only by the value of Yahoo’s valuable stakes in Alibaba and Yahoo Japan. Smith has been arguing for months that Mayer has had her chance and now it’s time for Yahoo to sell its operating businesses ASAP before they lose more value. He’s even waging a proxy fight against the company and is set to announce his slate of competing board candidates soon. Could Mayer and Smith ever be allies? Only in the sense that Smith, to the extent he’s successful, could be saving her from herself. Every day it becomes more difficult to envision how Mayer’s turnaround strategy, or anyone’s, could work. Would Yahoo shareholders have fared better if Mayer and the board had regarded Smith as a potential ally from the start? Yesterday a special committee of the board officially hung a For Sale sign on the company’s operating businesses, but whether it will accept any offers it may receive remains to be seen.

-CNBC revealed yesterday that Honeywell CEO David Cote has been trying to persuade United Technologies chief Greg Hayes to merge their companies. Cote apparently hasn’t threatened to go hostile, so the two bosses remain fierce competitors in aircraft tech systems and commercial building technologies who could in theory be the best of friends if they could combine and prosper. It’s hardly a new idea; United Technologies tried to buy Honeywell in 2001 but was outbid by General Electric (Cote’s old employer), and European antitrust authorities then prohibited the deal. This time Hayes has reportedly concluded that antitrust doom would await the deal again, so he’s refusing to participate. But the mere report of the possible acquisition by Honeywell caused UTC’s long-declining stock to pop yesterday.

As the British statesman Lord Palmerston famously said in 1848, “We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow.” Successful business leaders believe the same thing.

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What We’re Reading Today

VW CEO attempts a cultural makeover 

In an effort to upheave VW’s hierarchical culture, CEO Matthias Müller has hired outsiders to key positions, promoted younger executives who have proven results instead of sticking to a next-in-line strategy, and cut three senior-level roles. He also leaves his door open, unlike his predecessor Martin Winterkorn, and promotes dialogue between his reports. WSJ

Valeant to restate results from 2014 and 2015…

…after discovering that some sales to specialty pharmacy Philidor were misstated. It recognized some sales too soon, marking them as sales when they reached the pharmacy as opposed to when patients bought them. CEO J. Michael Pearson cut ties with Philidor late last year after questions about Valeant’s relationship with the company were raised. Pearson is out on medical leave; the decision to restate results came from acting CEO Howard Schiller Fortune

FDA questions the reliability of Xarelto

After a blood testing device was recalled in 2014 for understating patient bleeding, the FDA has asked Johnson & Johnson if Xarelto’s results during its trials were accurate. The anti-clotting pill has become a blockbuster drug for Alex Gorsky‘s company. While the FDA continues to support the use of the drug, questions about Xarelto’s reliability could persist until new, third-party tests are performed. NYT

EU investigating Google’s ad service

The European Union is re-investigating Google’s ad practices, focusing on whether it favored its own comparison shopping product in its search pages. The news comes as EU Competition Commissioner Margrethe Vestager meets with Google CEO Sundar Pichai this week. Google also shuttered Google Compare, its comparison shopping site for mortgages and insurance products in the U.S. Bloomberg

Building a Better Leader

Companies step up housing subsidies…

…to entice workers who want to live close to the office. It also encourages employees to work longer and later. WSJ

One reason CEO pay has jumped

Boards don’t understand the value of stock options. Since stocks tend to move upward over time, boards don’t realize just how much they’re giving the CEO. Fortune

Know what time of day makes for better decision making

In a study, favorable rulings in parole court dropped off to near zero by dinner time after starting the day at 65%. Researchers attributed the shift to cognitive fatigue. When we’re tired, we go with the status quo. Quartz

Worth Considering

Bill Gates says Apple should concede to the FBI

Apple CEO Tim Cook argues building an operating system solely to unlock the phone would set a wider precedent. Gates disagrees, but says there should be guidelines in place to dictate what authorities can access. Fortune

President Xi Jinping visits China’s media  

The visit coincides with new orders brought by China’s president which states that the media serves as a forum for the Communist Party’s propaganda. Since President Xi took office in 2012, he has worked to tighten control over the media and restrict foreign media companies. Last week, Beijing passed a law that limits publishing content online by foreign media companies, which could ultimately hurt companies like Apple and Amazon. NYT

Bill proposal would limit inversions 

Two Democratic members of Congress, Sander M. Levin from Michigan and Chris Van Hollen from Maryland, will introduce a bill today to prevent American companies from merging with smaller international organizations solely to move their headquarters overseas to avoid U.S. taxes. The bill will limit the amount of tax deductions a company can take during an inversion. Regulators have stepped up efforts to halt inversions since 2014 with little success.  CNBC

Up or Out

Leslie Ferraro, co-chair of Disney’s consumer products and interactive media unit, has resigned. Los Angeles Times

Lamborghini CEO Stephan Winkelmann will shift to Audi to head its performance car division quattro GmbH. Reuters

Cybersecurity startup Tanium announced that Orion Hindawi will be its new CEO, replacing his father David Hindawi, who will serve as executive chairman. Fortune

Fortune Reads and Videos

Viacom needs to sell some assets… 

…or go private, some analysts claim. If it chooses to sell assets, it should start with the movie studio Paramount. Fortune

Wikileaks published NSA docs…

…that show the agency spied on world leaders, such as a conversation about climate change between German chancellor Angela Merkel and UN secretary general Ban Ki-moon. Fortune

The FBI wants Apple’s software for a dozen cases

It’s not just to unlock the San Bernardino shooter’s iPhone.  Fortune

Uber defends its background checks…

…amid revelations that the Kalamazoo, Mich. shooter drove for the share-ride service. Fortune

Happy Birthday

Michael Dell, founder and CEO of Dell, turns 51 today.  Biography

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@ryanderous
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