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CEO Daily: Wednesday, 28th September

Good morning.


Consider this eye-opener from the Internet marketing firm BloomReach: According to a September poll of 2,000 people, 55% of U.S. online shoppers begin their product searches on Amazon. Let that figure swirl around in your head for a moment. Now think of all the retailers on the web…yes, cute Etsy, too—and imagine 55% of consumers bypassing every one of them and heading straight to Amazon (at least, initially).


But this morning’s offering isn’t a tale about ecommerce. This is, rather, a posting about business horizons.


Amazon founder and CEO Jeff Bezos, as my colleague Adam Lashinsky wrote back in March in a spot-on profile for Fortune, is a “preternaturally consistent” preacher of customer focus and long-term thinking. Since starting the company in 1994, Bezos has been consumed with making Amazon bigger and better—fine-tuning operations, forever expanding its capacity to store a gazillion items and deliver them speedily—even as, for years, those investments and reinvestments have largely erased quarterly profits and occasionally led to blow-out losses.


While Amazon’s bottom line is finally in plus territory—In July, the company reported its third straight quarter of record profit—it’s still determinedly gunning for the horizon. Judging by the company’s heady $387 billion market cap, shareholders seem to be just fine with the Bezosoic timeline.


So, it would seem obvious, then, that the lessons of Amazon have been copied and internalized by corporate leaders everywhere.


Not hardly. In fact, a new study released this morning—conducted by McKinsey Quarterly for FCLT Global—suggests the opposite: Short-termism is winning handily over long-termism. In a survey of more than 1,000 C-level executives and board members around the world, nearly two-thirds (65%) said the pressure to generate short-term financial results had intensified in recent years—and the overwhelming majority of these corporate leaders felt significant pressure to show financial success within two years or less.


FCLT (the initials stand for “Focusing Capital on the Long Term) is a fascinating experiment set up by McKinsey & Co., the Canada Pension Plan Investment Board, and three, perhaps, less-expected partners—BlackRock, the world’s biggest money manager, Dow Chemical, and Tata Sons, the holding company of the India-based conglomerate, Tata Group. It’s a high-wattage, not-for-profit, global organization that’s attempting to change corporate behavior from the top down—working to liberate executive ranks, boardrooms, and institutional investors from the tyranny of quarterly earnings guidance and, instead, getting them to embrace more meaningful metrics of success: from long-term return on capital to 10-year projections of economic value added.


The message isn’t a do-goody one. It’s about sustainable growth. It’s about incorporating the lessons of Amazon.


“There are companies that are not making the investments that would make sense over the long run because of these short-term pressures,” says Sarah Keohane Williamson, FCLT’s new CEO. “Short-termism, effectively, assumes that the world in five years will be the same as the world today. And in most industries, that’s a pretty bad assumption.”


L’Affaire Pantsuit: Finally, a correction from yesterday’s note: I said that Hillary Clinton was wearing a red “dress” during the debate. It was, of course, a pantsuit. I am deeply chagrined. My thanks to the many readers—and to my 12-year-old daughter—who pointed that out.


Clifton Leaf

Alan Murray is on vacation this week. Fortune’s Deputy Editor Clifton Leaf is filling in.


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Top News

Wells Fargo Board Shows its Claws

Wells Fargo said CEO John Stumpf will forfeit some $41 million in unvested stock awards and will forego his salary while the bank’s board investigates its sales practices. The bank has the opportunity to set something of a corporate governance landmark by ‘clawing back’ large sums from managers responsible for the debacle, which created a false impression of Wells’ underlying profitability and has now left investors nursing substantial losses. In addition, the bank said Carrie Tolstedt, who ran the retail bank division, has left the company ahead of her scheduled Dec. 31 retirement date, will forfeit $19 million in equity awards and will get no severance. Neither will get a bonus for this year. Back in Washington, Janet Yellen will likely face questions from the House Financial Services Committee later today on why the Fed didn’t intervene earlier to stop the abusive practices at the bank. Fortune

Wal-Mart Flirts With Amazon Rival in India

Wal-Mart Stores is in talks to invest up to $1 billion in Flipkart, the biggest online retailer in India, Bloomberg reported Wednesday. It’s not clear how much of Flipkart that would buy: the company was last valued at around $16 billion but it seems unlikely that the Bentonville company would be happy with a stake of only 6%. The potential investment, which is another bold statement of Wal-Mart’s e-commerce ambitions after the acquisition of, sets up an epic struggle for the next great frontier in global retail, given the size of India’s market and its projected growth rates, which reflect how far it still lags behind China in per capita income. Amazon CEO Jeff Bezos has earmarked another $3 billion for investment in the country. Bloomberg


Nike Falls Short Again

Nike shares fell 4.4% in after-hours trading after the company’s quarterly update on its outlook disappointed the market for the third time in a row. Margins narrowed (partly reflecting price cuts to its Lebron basketball shoes), inventories jumped 11% and the company forecast future orders over the next three months would be up by only 7% year-on-year—the lowest in five quarters. The company reported a bigger-than-expected bump from the Rio Olympics and still has the blessing of being in a healthy market for leisurewear worldwide, but the company seems to be failing to stop competitors like Under Armour and Adidas eating away at a dominance that its investors had come to take for granted. Fortune

A Dismal Year for Global Trade


The World Trade Organization cut its forecast for global trade growth this year by more than a third, from 2.8% to 1.7%. That means that trade will grow more slowly than the world economy in general for the first time in 15 years. The Wall Street Journal reports that the container shipping business expects to post no growth at all this year, and notes that current freight rates have fallen to levels barely half the $1,400 level seen as sustainable (hence the Hanjin situation). Not all of this development is negative: it’s to be welcomed that more of China’s economic resources will be consumed within China, rather than adding to global macroeconomic imbalances. But WTO head Roberto Azevedo was in no mood to accentuate the positive yesterday, acknowledging the growing political challenges to free trade, and saying that its benefits need to be shared more widely. Fortune


Around the Water Cooler

A Rescue in Sight for Deutsche?

Germany’s government and financial authorities are preparing a rescue plan for Deutsche Bank that may see the government take up to a 25% stake in it in an extreme case, the respected weekly Die Zeit reported Wednesday, without identifying its sources. That’s at odds with an interview given by CEO John Cryan to the mass-circulation Bild-Zeitung saying that “at no point” had he asked Chancellor Angela Merkel for support, and that a request would be “out of the question.” But the two assertions aren’t mutually exclusive: under laws introduced since the last financial crisis, the authorities have much-expanded powers of intervention if they see a bank failing. They may be necessary, given Deutsche’s willful and repeated denial of the new post-2008 realities under Cryan’s predecessors. The German Finance Ministry, unexpectedly, has denied the report. In other news, Deutsche is selling its U.K. insurance business Abbey Life for just over $1 billion, which will give its balance sheet a modest but nonetheless welcome boost. Reuters

Cisco Thumbs Its Nose at Trump

Cisco Systems is planning to spend up to $4 billion in Mexico over the next two and a half years to expand production there, creating almost 350 new positions there. The announcement, at a joint press conference between CEO Chuck Robbins and Mexican President Enrique Pena Nieto, comes only weeks after the telecoms equipment maker said it will cut its global workforce by 5,500. It’s one of the first major investments in Mexico by a U.S. company since Donald Trump rebuked Ford for its plans to open a $1.6 billion small-car factory there. Ford vigorously rebutted Trump’s claims in Monday’s debate that it was moving U.S. jobs south of the border, contributing to the generally negative perception of the GOP nominee’s performance. For Pena Nieto, who was embarrassed by Trump’s visit earlier this month, one guesses yesterday’s moment must have been particularly sweet. Fortune

Elon Musk’s Mars Shot

Elon Musk grabbed headlines with his plan for manned flights to Mars within 10 years and ultimately colonizing the planet—all undertaken with (largely) private-sector funding. The SpaceX and Tesla Motors founder unveiled his vision in a multimedia presentation Tuesday that featured 300-feet rockets powered by up to 42 individual methane-fueled engines, fleets of carbon-fiber spacecraft and much else that seemed to draw more from Ridley Scott and Roland Emmerich than from Adam Smith. We’ve noted before that Musk’s propensity to dazzle with long-term vision is a useful (we can’t say whether intentional or not) diversion away from very material short-term problems, be they with exploding SpaceX rockets or, even more pressingly, with the troubled Tesla/SolarCity merger. For all that, the prospect of seeing science fiction become fact in our lifetime remains irresistibly exciting. Fortune

Etsy and the Gig Economy Conundrum

Etsy, the online marketplace best known for handicrafts and other home-made goods, waded into the very serious debate of how to help the growing numbers of American workers who don’t enjoy the same benefits as many full-time employees. It published a white paper on the ‘gig economy’ envisaging the creation of a new “Flex Portal” run by the federal government. The changes would make it easier for millions of workers—including the thousands of people who sell things on Etsy—to avail themselves of existing programs like flexible health and commuter spending accounts. The two cornerstones of its paper were, first, a rule requiring companies to withhold taxes if a self-employed worker asks them to do so and, second, a rule letting those workers ask companies to withhold additional money and put it into a benefits account run by the government. Anything that improves the outlook for long-term financial provisioning for gig workers is welcome. But the plan doesn’t seem at first glance to have much in the way of improving their access to credit, an issue of increasing economic importance. Fortune