Good morning.
Business leaders may take some comfort from the fact that Hillary Clinton chose Tim Kaine as her running mate. He was one of only 13 Democrats who pushed for fast track authority to approve the Trans-Pacific Partnership. And in last night’s 60 Minutes interview, he spent an inordinate amount of time praising Republican House Speaker Paul Ryan, setting the stage for a chance at constructive governance after the election.
But while Clinton said last night she wanted a candid vice president who “would tell me, ‘Hey, I don’t agree with you,’ or ‘Could you think about it somewhat differently,’” her camp was quick to spread the word that Kaine had agreed to abandon support for the trade deal – a switch that was confirmed by his staff. So much for independence.
The bigger problem is that the Democratic party assembling in Philadelphia this week is far more liberal than the one that nominated Bill Clinton back in 1992. The Wall Street Journal has a good article this morning documenting the change. Only 30% of Democrats considered themselves liberal then; nearly twice as many do today. And support for capitalism among Democrats has sharply declined.
That new Democratic party is already making noise on the streets of Philadelphia, protesting for Sanders, against Clinton and Kaine, and against fracking, trade, and a host of other perceived ills.
Meanwhile, the Republican nominee Donald Trump, tweeted out an attack on Kaine for supporting the “job-killer” trade bill – which, of course, was also supported by his own vice presidential choice, Mike Pence – further evidence that there is no home for business in this election.
More news below. Also this morning, we are launching a new podcast series, Fortune Unfiltered, hosted by digital editor Aaron Task, that will include conversations with business leaders about their journeys to success. First up: General Electric’s Beth Comstock, Baseball Commissioner Rob Manfred, and entrepreneur and marketing guru Gary Vaynerchuk. You can download from iTunes.
[ceo_attribution author=”Alan Murray” email=”alan.murray@fortune.com” twitter=”alansmurray”
Top News
• The Best Paid CEOs Perform the Worst
The more the CEO is paid, the worse is likely to be the return to shareholders. That’s the main takeaway from a new study due out today from MSCI. MSCI found that $100 invested in the 20% of companies with the highest-paid CEOs would have grown to $265 over 10 years, while the same money invested in the bottom quintile of companies for CEO pay would have grown to $367. Similar results were obtained even when adjusting for sector or for market capitalization. The Wall Street Journal reported MSCI researcher Ric Marshall as saying that the results are a clear argument for stock awards to management, which account for 70% of CEO pay, to be more conservative. WSJ subscription required
• Endgame for Yahoo (Marissa Wins)
Yahoo’s board has agreed to sell its legacy businesses to Verizon for $4.8 billion, less than 4% of the company’s peak valuation at the time of the dot-com boom. Around $1.8 billion of that appears to be attributed to the company’s real estate. The Wall Street Journal said Marissa Mayer, who has led the company through its last years of independence, stands to make more than $50 million in compensation if she is terminated as a result of the sale, adding to the $100 million she has already been given in cash and equity. A $625 million write-down on Tumblr, the blogging site that Mayer bought for $1 billion in 2013, had been the main reason for the $439 million second-quarter loss that the company announced last week. Fortune
• Democrats Reel From Wikileaks Exposures
You thought last week’s was a divided convention? Try this one for size. The head of the Democratic National Convention, Florida Congresswoman Debbie Wasserman Schultz, resigned after the leak of 20,000 e-mails detailing how the DNC had skewed the race for the party’s nomination in this year’s election. The e-mails both substantiate Bernie Sanders’ accusations of bias against him, and bolster Donald Trump’s claims that his opponent in the White House race is working a ‘rigged’ system. The e-mails appear to have been accessed first by Russian hackers linked to the country’s government. They were distributed by Wikileaks, which has worked closely in the past with Russian government media to get its disclosures maximum publicity. Wikileaks has indicated it will stagger the disclosures, with a view to keeping the story alive as long as possible. Fortune
• Bloomberg’s Skin in the Game
Michael Bloomberg, who ran New York City on the Republican ticket, is set to endorse Hillary Clinton in a speech tonight at the DNC, according to the New York Times. It’s another high-profile slight from the business community to Donald Trump, and comes a day after the GOP nominee threatened to pull the U.S. out of the World trade Organization in case his plan to use tariffs to repatriate jobs from Mexico were challenged. In a column today, Time Inc’s vice-chairman Norman Pearlstine explains that Bloomberg has some serious skin in the game himself, if Trump’s war on global trade and investment comes to pass: his own financial information company Bloomberg LP has been a huge beneficiary of globalization, and its best growth prospects are in Asia. Fortune, NYT
Around the Water Cooler
• IOC Passes the Buck on Russia
Russia’s national team will be allowed to compete at the Olympic Games after all, after the International Olympic Committee decided against a blanket ban in the wake of the World Anti-Doping Agency’s damning report. The WADA report found evidence of endemic state involvement in a doping program across at least 30 sports. The IOC passed the buck to the world governing bodies of all the individual sports. Russia’s track and field team will miss the games, having been banned from international competition by the IAAF. But it remains to be seen whether other sports bodies have the same willingness to risk offending the Kremlin. The International Tennis Federation, for one, has already cleared all seven Russian entrants. Fortune
• Ericsson Ousts CEO Vestberg
Ericsson AB CEO Hans Vestberg is leaving the company with immediate effect after failing to sustain profits against the background of a slowing market and increasingly severe competition. CFO Jan Frykhammar will take over on an interim basis. The news comes only days after maker of telecom network infrastructure reported net profit fell 24% from a year earlier in the second quarter. Those results cost Vestberg the support of his two biggest shareholders, Investor AB and Industrivärden AB, according to media reports. The wireless network industry is in a difficult spot at the moment: the need for heavy investment in upgrades to 5G is apparent, but carriers are trying to put off capital spending due to squeezed revenues and—at least in Europe and the U.S.—high uncertainty over the outlook for future margins given regulatory resistance to industry consolidation. The shares are up 5%, adding insult to Vestberg’s injury. Fortune
• Crude Oil Hits 2-Month Low
Crude oil prices have fallen below $44 a barrel for the first time in two months, due mainly to data released Friday showing another rise in the U.S. rig count. U.S. oil explorers boosted the number of rigs in action by 14 to 371 for the longest run of gains in nearly a year. Oilfield services giant Schlumberger had called a bottom to the market last week, but with the highly-flexible U.S. shale sector now effectively the world’s ‘swing producer’, the market may return to balance more quickly than in past cycles, raising question marks over how long it will be before June’s peak of $51.23 is revisited. Final demand also appears to be growing more slowly than expected: U.S. stocks of gasoline are at 241 million barrels, 11% up on a year earlier, while China is also refining more than its drivers want: Chinese gasoline exports hit a near-record high of 1.1 million tons (over 8 million barrels) in June. Reuters
• Nintendo Slumps After Saying What Was Common Knowledge
Shares of Nintendo tumbled as much as 18 percent early on Monday after the company reminded everyone that it doesn’t actually have the rights to all the money that Pokemon GO will churn out. Nintendo said that the game’s impact on earnings would be “limited”, something that professional investors were—at least according to efficient market theory--well aware of. Nintendo owns 32% of the Pokemon Company and only an estimated 7% of Niantic, the two companies that developed the game and to whom the biggest windfalls will accrue. All told, Nintendo has an effective economic stake of 13% in the game, according to Macquarie research quoted by the Financial Times. The shares are still up by around 60% from before the game’s release. FT, metered access
