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CEO Daily: Tuesday, June 14

June 14, 2016, 10:55 AM UTC

World stock markets continue to slide this morning in response to polls showing the British may vote June 23 to exit the European Union.


Brexit is also dominating Fortune’s Most Powerful Women International Summit, taking place in London this morning. “This country is sleep walking toward disaster,” Miriam Gonzalez, a Spanish lawyer who is married to former Deputy Prime Minister Nick Clegg, told the group. “In my life, I have never gone through another moment like this.”


Yesterday, Brexit was the top topic at a discussion I moderated among 35 women who sit on the boards of major global corporations. The session was off the record, so I can’t report specific comments. But the group was broadly representative of global business, and the general view was that uncertainty over Brexit has already led many companies to cut back global investment plans. The uncertainty is not confined to the U.K. and Europe. And it is unlikely to end June 23, regardless of the vote’s outcome. A number of the women expressed broader concern about rising nationalism across the globe, and several referenced the graduation speech given last month by GE’s Jeff Immelt, signaling an end to seventy years of globalization. (CEO Daily reported on the speech here.)


Underlying these trends is a general revolt against the elite – with business leaders as well as political leaders included in that tent. That’s the real lesson of the Brexit vote, as well as the rise of Donald Trump and Bernie Sanders in the U.S. And it’s probably the biggest challenge leaders of large global companies face in the years ahead. They need to find a way to restore the public’s trust in their businesses and in the global economic system, or see that system continue to erode. No small task.


More news below.


Alan Murray

Top News

Satya Just Endorsed You for Creating Shareholder Value

Microsoft agreed to pay $26.2 billion, in cash, for LinkedIn. It’s the company’s biggest ever acquisition and one of the biggest ever deals in tech—and it was 50% more than the market thought the company was worth at the weekend. The acquisition of a professional social network appears aimed at keeping its flagship Office software and its growing Cloud-based services at the heart of business people’s lives. As such may be a better use of its cash pile than, for example, Nokia’s dying mobile phone business. It had better be: the purchase price represents over a third of that total net cash.   Fortune

 Trump Bars the Washington Post 

Donald Trump revoked the press credentials of the Washington Post to his presidential campaign, calling the publication ‘phony and dishonest’ in its coverage of his reaction to the Orlando shooting. Trump had appeared to hint earlier Monday that President Barack Obama was somehow connected to the incident: he told Fox that Obama’s response to the shooting, which omitted to reference Omar Mateen’s declared commitment to Islamic State explicitly, meant that “either he doesn’t get it, or he gets it better than anyone understands.” The Post’s Editor Marty Baron responded that the move “is nothing less than a repudiation of the role of a free and independent press.” Trump has already banned several other publications from his campaign in response to negative coverage, but has only enforced them erratically.   Fortune

Apple's Play for Drivers

Apple unveiled advance details of the latest version of its iOS operating system, which will launch later this year. One of the most notable was the announcement that it will open up its digital assistant Siri to third-party developers, facilitating the development of apps tied to specific services, and allowing better interaction with CarPlay, the in-house app that integrates iPhones with cars’ infotainment systems. Other driver-focused enhancements include upgrades to its mapping apps to anticipate traffic problems. Rivals such as Amazon, Microsoft and Google already have AI technology that is open to developers, so the step is to some degree an exercise in catching up. In a separate development at the WWDC, Apple said it will also in future allow users to uninstall the pre-loaded Apple apps that they don’t want.  Fortune Fortune

The Fight for Virtual Reality Gets Real


Sony will show us whether it can still compete at the cutting edge of entertainment hardware October 13. That’s the date it has set for the launch of its virtual-reality headset that will be going, if you’ll pardon the phrase, head-to-head with Facebook’s Oculus Rift product. It debuted the product with a demo of the action-horror game Resident Evil at the annual Electronic Entertainment Expo in LA yesterday (Microsoft, the owner of Minecraft, also talked up its ambitions in the VR sector at E3, although with less detail). While Sony’s product will require you to have a $350 PlayStation4, it won’t require you to have a powerful personal computer, which may give it an edge over Oculus in the younger, less cash-rich segment of the market. Why anyone would pay north of $750 to recreate action-horror scenarios when the real world is generating more than enough free, gratis and for nothing faster than you can process them, is a topic we’ll return to another day.  Fortune



Around the Water Cooler

 Deal-Based Organic Growth

The latest twist in Big Food’s attempts to stay in tune with changing consumer trends involves General Mills and Organic Valley, the U.S.’s largest organic farmer-owned cooperative. The two announced a partnership Monday under which farms will supply organic milk to General Mills’ yogurt operating unit in the U.S., which is behind brands such as Yoplait, Annie’s and Mountain High. This trend has a long way to run: demand for organic foods is set to rise at between 12%-15% a year through 2018, and only 1% of total U.S. cropland is devoted to organic agriculture, according to the USDA.  Fortune

Hiring the Best Man for the Job

American boardrooms remained over 80% male last year, as the “overwhelming” majority of new directorships at the country’s largest companies continued to be filled by men. Research by Catalyst showed that men held 80% of board seats at S&P 500 companies in 2015, unchanged from 2014. Women, who represent 44% of S&P 500 employees, thus took only 19.9% of available board seats. The proportion of women in CEO positions was even more dismal, at barely 4%. Fourteen companies in the sample had no women directors at all, while just under a quarter had only one. Catalyst is due to present its research at a White House-sponsored conference in Washington Tuesday. Financial Times, metered access

China's Fakes Problem, Exhibit B: Baidu

Baidu, China’s largest search engine, cut its quarterly revenue forecast by around 10%, quantifying the effect of new regulations on the online ad market after a scandal that erupted after the death of one of its users earlier this year. Regulators have ordered Baidu to cut back on sponsored ads and do more vetting of advertizers after the ill-fated user paid over $30,000 for a snake oil cure for a rare form of cancer. Healthcare ads account for over 20% of Baidu’s search income, according to some estimates. The company’s New York-listed ADRs fell over 5% in after-hours trading.  Fortune

 The Smartest Guys and the Oldest Profession

A Goldman Sachs executive footed the bill for prostitutes and the bank paid for a lavish trip to Dubai for the brother of a decision-maker at Libya's sovereign wealth fund, a lawyer for the fund claimed Monday in his opening statement at a trial at London's High Court. The Libyan Investment Authority (LIA) is attempting to claw back $1.2 billion from nine trades it carried out with Goldman in 2008, arguing that the U.S. investment bank took advantage of its financial naivety by first gaining its trust, then encouraging it to make risky and ultimately worthless investments in equity derivatives. Goldman’s lawyers haven’t yet had time to respond to the allegation, but the bank has so far denied them. The LIA's claim hinges in part on its allegations that the trades were procured under "undue influence". It specifically cites an internship that Goldman Sachs provided for Haitem Zarti, the brother of Mustafa Zarti, the LIA's former deputy chief and a key decision-maker at the fund. Fortune