Power Sheet: Here’s How Samsung Didn’t Bungle The Galaxy Note 7 Recall

September 16, 2016, 3:07 PM UTC

Did Samsung really bungle its Galaxy Note 7 recall as badly as conventional wisdom has quickly concluded? I’m not so sure. The U.S. Consumer Product Safety Commission issued its recall notice only yesterday, and the company should have coordinated its efforts with the CPSC in order to make a joint announcement earlier. But overall the company appears to have been ultra-cautious in its handling of the crisis. Allow me to make one other point that I haven’t seen elsewhere, if I may say the unsayable: The danger of being harmed by a Galaxy Note 7 isn’t very great, as customers have decided on their own.

Here’s how the crisis unfolded. The first reported case of a phone exploding arrived from China on August 25. Eight days later, with 35 cases reported worldwide, Samsung announced a recall, halted sales, and said all affected devices would be replaced. A week later, on September 9, the CPSC issued an official warning advising consumers to stop using the device. Each of these events, plus additional reports of explosions or burns, received intensive worldwide media attention. Not much more could have been done to alert consumers that the Galaxy Note 7 was dangerous.

The company has been rightly criticized for being slow with a specific, clear procedure for how and when phones would be replaced. That came yesterday, when Samsung announced that replacement phones would be available in U.S. stores starting next Wednesday – a logistical feat considering that about a million U.S. phones are being recalled.

As for the risk of owning a Galaxy Note 7: Samsung absolutely had to recall the phones, obviously. No reputable company can let you keep a phone that might explode. But based on data received so far, your chances of owning a Galaxy Note 7 that explodes or just overheats are about the same as your chances of being struck by lightning in your lifetime (.009% vs. .008%). You’re far likelier to freeze to death (.02%) than to be burned by your Galaxy Note 7. Users seem to realize this. The Apteligent mobile analytics firm reported on Tuesday that “the usage rate of the phone among existing users has been almost the exact same” since the company’s first recall announcement on September 2.

My guess is that a month from now, any reputational damage to Samsung from the handling of the recall will have evaporated. Heads should nonetheless roll at the company – not because of the recall’s handling but because of the battery blunder, which will cost billions in direct losses and unknowably more in a tarnished reputation. That’s the real crisis at Samsung. Addressing it will require corporate soul-searching, and the outcome remains to be seen.

You can share Power Sheet with friends and followers here.

What We're Reading Today

Deutsche asked to settle mortgage securities suits for $14 billion
The bank's stock fell significantly yesterday on reports that the Justice Department wants John Cryan's company to pay $14 billion to settle mortgage-securities investigations. The bank said it does not intend to pay anywhere near that much. The number is significantly higher than previous settlements with other banks; Deutsche paid $1.9 billion to settle similar claims in 2013. CNBC

Unilever eyes Honest Company
Paul Polman's company is negotiating to buy the startup founded by Jessica Alba. The offer on the table is reportedly above $1 billion but well below the $1.7-billion valuation Honest commanded during its last round of funding. Going public remains an option for Honest if the deal falls through. Fortune

Mylan steers efforts to protect EpiPen price tag
Dr. Leonard Fromer, a clinical professor of family medicine at the University of California Los Angeles, has advocated adding EpiPens to the federal list of preventive medical services. In an article in the American Journal of Medicine he acknowledges that the article was "drafted and revised" by a firm paid by Mylan and that he had recently worked for Mylan as a consultant. Heather Bresch's company has helped pay for the campaign to push for EpiPen's spot on the federal list, which would ensure families could get the medicine without a copay. That would enable Mylan to hold prices steady or even increase them without angering as many patients.  Boston Globe

Exxon accounting practices under investigation  
New York Attorney General Eric Schneiderman is questioning why ExxonMobil didn't write down asset values as oil prices plunged over the past two years. Schneiderman is already investigating whether Rex Tillerson's company remained silent about climate change's potential impact. Exxon did not comment beyond saying it follows standard accounting practices. WSJ

Building a Better Leader

Is it best to fit in or stand out?
The best strategy is to fit in on one dimension and stand out on another. If your lack of a cultural fit stands out through your affinity for bowties, then you'll want to fit into your organization's structure well by having close allies. Stanford Insights

There's a problem with the gig economy trend
No one knows if it's actually a trend. While the number of people with multiple jobs is increasing, the percentage of multiple-job holders among all employees has fallen over the past 20 years. Fortune

Most-effective board members worked 41 days a year
On less effective boards, that number dropped as low as 28 days in 2015. McKinsey

Strong Statements

Ford CEO: Trump is wrong about Mexico
Mark Fields
 defended his company's plan to open a manufacturing plant in Mexico. Donald Trump cited the plant as an example of U.S. corporations firing U.S. employees and moving south, but Fields says Ford won't fire a single employee in connection with the move. CNNMoney

Larry Ellison: We're taking on Amazon
Oracle's cloud business performed well, with revenue up 59% from last year. But in the Infrastructure-as-a-Service segment of cloud computing, Jeff Bezos's Amazon Web Services reigns. On an earnings call, Ellison hinted at a new offering to take on Amazon. Fortune

Fiat Chrysler recalls 1.9 million vehicles
Sergio Marchionne
's company said airbags might not deploy in a crash. GM  recalled 4.3 million vehicles last week because of faulty software. Reuters

Up or Out

Former House Speaker and longtime tobacco industry advocate John Boehner has been voted onto the board of Reynolds American.  Fortune

Salesforce has named Tony Prophet its chief equality officer.  USA Today

Fortune Reads and Videos

As Target tries to revive slowing sales...
...it will highlight low-cost offerings rather than chic products. But the company doesn't expect a quick turnaround. Fortune

T-Mobile warns customers not to install the new iOS update
iPhone users who have installed the new software have had problems connecting to T-Mobile's network. Fortune

Apple says it isn't buying the Tidal streaming service
Despite rumors that Tim Cook's company was interested in acquiring it. Fortune

Airbnb is starting to let trusted hosts...
...manage services for other hosts who don't have time to greet guests and respond to complaints. The "superhosts" earn a cut of the pay. Fortune

On this day...

...in 1908, General Motors was formed by William Crapo Durant as a holding company for Buick Motors.  History

Produced by Ryan Derousseau

Share Today's Power Sheet: 

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.

Read More

Great ResignationDiversity and InclusionCompensationCEO DailyCFO DailyModern Board