Glenn Hubbard, dean of the Columbia Business School and former Jeb Bush adviser, came by Fortune’s offices yesterday. And for those of us who care more about governance than politics, he offered the most optimistic prediction I’ve heard yet on the outcome of this year’s dispiriting elections.
Like many, he believes either Donald Trump or Ted Cruz will win the Republican nomination, but neither can win the general election. That probably puts Hillary Clinton in the White House, but also likely leaves Republican Paul Ryan as leading power broker in Congress. Hubbard suspects Clinton, Ryan and the whole political class of 2016 will be chastened by the angry voters who powered Trump and Sanders this year, and will feel compelled to work together to fashion a response. Doing nothing—the preferred solution of the last half decade—won’t be an acceptable answer.
The possible result: A grand bipartisan compromise that pairs support for American workers—an expanded earned income tax credit, improved worker training programs, new infrastructure investment—with support for American business, including corporate tax reform and approval of new trade agreements.
Sound far-fetched? Perhaps. But that’s at least one scenario in which the strong message being sent by voters this year could lead to a productive outcome next year. Hope springs eternal.
I’m off to D.C. this morning, where I’m moderating a panel at the Committee for Economic Development on the short-term focus of American companies and what’s behind it. If I find the answer, I’ll report back tomorrow.
More news below.
• Theranos founder faces regulatory ban
Theranos founder and CEO Elizabeth Holmes may be forced out of her company after federal regulators proposed banning her for at least two years after she didn’t fix major problems at its California laboratory. The Centers for Medicare and Medicaid Services sent a letter to Theranos on March 18th that said it would ban Holmes and Theranos President Sunny Balwani from owning or operating any lab for at least two years. The agency also said it could take away the company’s federal license for its existing California lab, according to a Wall Street Journal report. Theranos responded, saying it was hopeful the CMS wouldn’t impose sanctions but if they did, would work to address all of their concerns. Fortune
• Chipotle’s board feels the heat
CtW Investment Group, which works with union-backed pension funds that hold some 55,000 Chipotle shares, wants the fast-casual Mexican-food chain to shake up its board in the wake of the company’s food safety crisis. In a letter to shareholders, CtW called Chipotle’s group of directors “one of the least diverse, least independent boards among the S&P 500.” CtW adds that 100% of the directors are white and only one is a woman. Meanwhile, Chipotle’s pay structure has been under scrutiny since CtW pushed for shareholders to vote against the company’s executive compensation in 2014. Fortune
• 5 banks warned they are still too big to fail
The nation’s top bank regulators, the Federal Reserve and the Federal Deposit Insurance Corporation, said on Wednesday that five of the nation’s largest banks did not have “credible” plans for how they would wind themselves down in a crisis without sowing panic. In the event of another crisis, the government would need to prop up the largest banks if it wanted to avoid financial chaos. The banks listed were JPMorgan Chase, Bank of America, Wells Fargo, State Street, and Bank of New York Mellon. Citigroup, was given a passing grade by both agencies, though it too was told that its plans needed improvements. Goldman Sachs and Morgan Stanley received passing grades from only one of the two agencies. New York Times (subscription required)
• Verizon clear favorite to buy Yahoo
Verizon Communications is the clear favorite in the upcoming bidding for Yahoo’s core Internet business, according to Wall Street analysts, in large part because the telecommunications company’s efforts to become a force in Internet content have gone relatively well under the leadership of AOL Chief Executive Tim Armstrong. Verizon acquired AOL last June for $4.4 billion—its first big foray into the advertising-supported Internet business. Reuters contends that a Yahoo-AOL combination could make Yahoo a major player in Internet advertising, with Armstrong at the helm. Reuters
• Burberry hurt by drop in tourist spending
British luxury fashion brand Burberry said tough conditions would hit profit in the year ahead after a drop in tourist spending in continental Europe and weak demand in Hong Kong depressed sales in recent months. Comparable retail sales fell 5% over the last three months, resulting in a worse-than-expected 2% fall for the second half period as a whole. Burberry’s luxury rivals are also suffering from the economic slowdown. Sales at industry leader LVMH missed forecasts on Monday, while China weakness drove quarterly profit down 27% at Italian fashion house Prada. Reuters/Fortune Editors
Around the Water Cooler
• Walmart’s plan to catch Amazon
Walmart has collabored with ChannelAdvisor, a company that brings together stores and brands in online marketplaces, to significantly increase the merchandise it sells online. As of now, Walmart’s online assortment has about 9 million different kinds of items. That’s up from 7 million in June and just 700,00 a few years ago. But it is a far cry from the 200 million products for sale on Amazon. The partnership with ChannelAdvisor is meant to make it easier for the thousands of retailers and vendors working with that company to get their products sold on walmart.com. This move is critical to Walmart, which has reported steady but declining e-commerce sales. Fortune
• GoPro hires veteran Apple designer
GoPro wooed an Apple veteran to head its design efforts, sending shares of the action-camera maker to their best day in almost two years. Danny Coster, who has worked for Apple for more than 20 years and holds more than 500 design patents, will become GoPro’s vice president of design starting at the end of April and report directly to Chief Executive Officer Nick Woodman. It’s a rare defection from the elite and secretive industrial design team at the iPhone maker. Investors praised the news, as GoPro’s shares rose more than 20% on Wednesday, the biggest intraday jump since July 1, 2014. Bloomberg
• Facebook hires Google exec to run lab
In other notable tech hiring news, Facebook has hired Regina Dugan away from Google to lead its new “Building 8” unit, a project that will aim to combine potentially mind-bending research with the more pragmatic world of product development. The idea of Building 8—part of Facebook’s just-outlined 10-year plan—is to build stuff to better connect the world. While connecting people has always been Facebook’s mantra, the advent of billions of connected devices that comprise the Internet of things adds a whole new dimension going forward. Most notably, building hardware for that mission will be a big chunk of Dugan’s job. Fortune
• How Adidas plans to cut down on waste
German athletic-gear maker Adidas unveiled a series of six sustainability priorities it hopes to achieve over the next several years, including a move to get apparel material suppliers to reduce water usage by 50% and completely switching to sustainable cotton usage by the end of 2018. Other targets were meant to reduce paper and energy usage. “Sustainability” is a word that is hard to define, as companies define their goals differently. But Adidas says that’s why it was important to set metrics, which the company made public on Thursday. Fortune