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Power Sheet – June 22, 2016

Why is succession so hard? Nikesh Arora’s sudden resignation yesterday as SoftBank’s president and heir apparent to CEO Masayoshi Son, 58, was presented by the company as so harmonious as to be a virtual love-fest, but in fact it was a blown succession, and that’s a bad thing. The key sentence in Son’s statement is “[Arora] should be CEO of a global business, and I had hoped to hand over the reins of SoftBank to him on my 60th birthday – but I feel my work is not done.” Which could easily be read as, “My work is not done because I no longer think Arora is up to the job.” That’s pure speculation, of course, and it may be that the real explanation is an impulsive change of mind by an eccentric genius, which Son has shown himself to be since starting SoftBank over 30 years ago. We just don’t know.

And investors hate that. In any company that isn’t in crisis, they like successions to be planned, reassuring, and uneventful. This stumble at SoftBank is bad enough in itself because the future that investors were betting on will now not be the future. Possibly worse, investors will be skeptical of Son’s next succession plan, whatever and whenever it may be. They may even begin to fear that Son is one of those founder-leaders who cannot bear to let go, ever. A blown succession does more damage than is first apparent.

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Yesterday we noted that on Monday German prosecutors had opened a criminal investigation of former Volkswagen CEO Martin Winterkorn for not warning investors about the impending financial damage from the emissions cheating scandal. Later it was reported that prosecutors were also investigating VW brand chief Herbert Diess on the same issue. Then yesterday Reuters reported that Germany’s financial regulator had filed criminal charges against the whole VW board. Also yesterday, a large global group of institutional investors sued VW in Germany.

What could happen next? Well, VW’s annual meeting is today, so we’ll see. The tempo of news will likely slow for a bit. But it’s remarkable that after nine months, this crisis is still building.

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New horizons in employee motivation: A minor tweetstorm erupted yesterday over video of eight Chinese bank employees getting spanked for poor performance. I try to stay on top of innovative management practices, but I admit I was surprised. The employees were made to stand in front of 200 coworkers and confess why they had fallen short: “I did not coordinate with my team,” for example. “I lacked courage.” Then the trainer, wielding a large, flat stick and shouting “Get your butts ready!,” walked down the line whacking each one hard; he turned back and repeated the process a total of four times. After that (not on the video), the women’s hair was cut and the men’s heads were shaved.

Two bank executives have been suspended by regulators, though the trainer said he had been using this technique “for years.”

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What We’re Reading Today

Tesla offers to buy Elon Musk’s SolarCity
The proposed $2.8-billion deal would combine two Musk companies. SolarCity has struggled in the solar panel industry, but Tesla argues it’s building an integrated energy company that includes cars and homes. Musk will recuse himself from SolarCity’s board discussions on whether to accept the bid.  TechCrunch

Facebook spends over $50 million courting media companies…
…to use Facebook Live. Mark Zuckerberg‘s company has turned to CNN, New York Times, Vox Media, Mashable, other media outlets, and celebrities including chef Gordon Ramsay and comedian Kevin Hart, paying them to create high-end content for Facebook’s video streaming service. The move shows how important Zuckerberg considers live video in building user engagement and selling ads.  WSJ

McDonald’s China restaurants could fetch $3 billion
Steve Easterbrook
‘s company wants to sell its restaurants in China and move them to a franchise model. It has received bids from Beijing Tourism Group, Sanpower, ChemChina, and a number of buyout firms. McDonald’s is China’s No. 2 fast food company, behind Yum Brands (Taco Bell, KFC, Pizza Hut), which is likely spinning off its China restaurants next year. Reuters

Russian hackers hit the Clinton Foundation
Government investigators say a hacking group sponsored by Russia broke into the foundation’s computers last week. Authorities believe the hack originated with the same group that breached the Democratic National Committee’s computers, releasing its playbook for combating Donald Trump, and is part of a larger effort  targeting political groups ahead of the election. The Clinton Foundation denies it has been hacked.  Fortune

Building a Better Leader

If you hire people who want to be stars…
…watch out — they may want to take risks to stand out, possibly endangering the company. INSEAD Knowledge

It’s often better to take a chance on a candidate you like…
…than to hire someone who fits your immediate needs. Consider it an investment in your company’s talent pool. Fortune

If you need to end a work friendship…
…the right way to do it depends on power. If you’re the boss, emphasize that you want to be fair to all employees. Fast Company

Changing Tactics

Donald Trump may self-fund campaign
After campaign finance records showed that Trump has attracted far too little money to run a campaign, the presumptive GOP candidate says he would consider self-funding his run. He blamed Republican leaders for not supporting him. Los Angeles Times

House Republicans offer new healthcare plan
House Speaker Paul Ryan and other representatives today will unveil their plan to replace Obamacare, part of Ryan’s six-part policy agenda. The proposal keeps some of Obamacare but relies on tax credits to encourage individuals to buy insurance. A new report shows the U.S. is spending trillions less on healthcare than was expected when the Affordable Care Act was passed. Washington Post

Spirit Airlines tries to change its ways
CEO Robert Fornaro wants to change Spirit’s ranking as the world’s most hated airline, starting by improving its on-time performance, the worst of any U.S. airlines last year. He also wants to please customers by increasing employee training and improving communication about Spirit’s fees.  Fortune

Up or Out

EBay has added Lyft co-founder Logan Green to its board.  Fortune

Fortune Reads and Videos

The first human trials of a potentially revolutionary…
…cancer treatment, based on gene-editing technology, will move ahead with funding from Napster founder Sean Parker. Fortune

Bill Ackman isn’t backing down against Herbalife
The hedge fund founder is launching another campaign against the company he calls a pyramid scheme, even as settlements between Herbalife and regulators are rumored. Fortune

Men’s massive decline in the workforce…
…is likely due to less need for unskilled workers and high incarceration rates.  Fortune

America’s favorite fast food chain is…
…Chick-fil-A, based on customer satisfaction numbers. Papa John’s ranked second, McDonald’s last.  Fortune

Happy Birthday

Massachusetts Senator Elizabeth Warren turns 67 today.  Biography

California Senator Dianne Feinstein turns 83.  Biography

 

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@ryanderous
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