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CEO Daily: Friday, 11th November

Good morning.

As Election 2016 demonstrated, we live at a time of moral outrage. Partisans framed the political choice as between a criminally corrupt politician and a serial sex offender – even though neither candidate had been formally charged with, much less convicted of, such crimes. Social media streams burst their banks with indignity. Everyone stood in judgment.

My friend Dov Seidman, who advises companies on how to build ethical cultures, says this excess of outrage is partly a byproduct of modern technology. The philosopher David Hume wrote that “moral imagination diminishes with distance.” But technology has made us all closer, putting the world at our fingertips and enabling us, in Seidman’s words, to “experience the dreams, frustrations, plights, and behavior of others directly and viscerally.” Moral imagination has exploded as a result.

For business leaders, as with political leaders, the implications of this are profound. Being a “good” corporate leader once meant delivering results to shareholders. Today, that’s necessary, but not sufficient. CEOs being held by their employees, customers and the communities in which they operate to a new and higher moral standard. They need, Seidman believes, “a moral framework and North Star” to guide their thinking and their choices.

That’s one reason we have selected Rome and the Vatican as the site for the 2016 Fortune + Time Global Forum. We don’t necessarily subscribe to all of Pope Francis’s views on business and capitalism. But we do think he is one of the few leaders who still commands moral authority in the world. And there is a lesson there for others.

You can read more about the Forum in the December issue of the magazine. My editor’s note for that issue is online here. And there is more news below.

Enjoy the weekend.

Alan Murray

Top News

Bond Rout Continues as Stocks Pause

Friday morning in Asia and Europe, and the post-election rally is either running out of steam, or pausing for breath, depending on your viewpoint. The rally on Wall Street became more clearly differentiated in late trading on Thursday, with resources, basic materials and health and financial stocks doing best, on hopes of higher infrastructure spending and deregulation. Tech were among the biggest losers. Dividend stocks such as tobacco also suffered as the rout in bonds put the ‘income’ back into ‘fixed-income’. Yields continue to soar on ‘reflation’ trades, and the 30-year Treasury yield looks likely to hit 3% for the first time this year before the end of the day. That is dragging the dollar higher and hitting emerging currencies: China’s yuan hit a six-year low, while the Mexican peso, Brazilian real, South African rand also suffered again. Meanwhile, Sterling hit its highest level in a month, as Brexit-style politics appeared to benefit from association with the President-elect. Reuters

NVidia Masters the Transition

Chipmaker Nvidia reported another blowout quarter, with revenue up 54% and earnings per share nearly double last year’s levels. While other companies have struggled with the migration of so many computing functions and services to Cloud-based infrastructure, NVidia has thrived on it: revenue from its data center business nearly tripled to $240 million. The company’s exposure to other buoyant sectors such as connected vehicles and video gaming (central to its traditional core strength of graphics chips) is also paying off well. Its shares rose 10.2% Fortune

You Don’t Know What You’ve Got Till it’s Gone

Over 100,000 people signed up for health insurance schemes backed by the Affordable Care Act, the biggest day for enrolments this year. The surge reflects a belief that Obamacare plans, for all their faults, are a better bet than what is likely to follow under the new administration and Congress. The fate of the ACA is one of the biggest open political questions of the day, and health insurers such as UnitedHealth and Anthem have been among the bigger winners of this week’s stock rally, on expectations that Donald Trump and a GOP-dominated Congress will look more favorably on them. Fortune

The Princess Has Only One Wart, But It’s Growing

Walt Disney said 2016 would be its best year ever, as blockbuster successes such as its Star Wars, Frozen and Marvel super-hero franchises churned out cash. But the faltering performance of sports network ESPN is threatening to undo much of the company’s goodwill among investors. Although earnings and revenue both hit records in the fiscal fourth quarter just ended, they missed analysts’ forecasts because ad revenue at ESPN fell by over 10% year-on-year. ESPN lost 620,000 subscribers in November, its worst month ever, according to Nielsen (Disney disputes the figures). Costs are rising too, due to increasing competition for sports broadcasting rights from disruptors (evidenced by the new $600 million contract NBA that starts next year). CEO Bob Iger warned that 2017 would be weaker.  Fortune


Around the Water Cooler

FCC Arms Itself for Net Neutrality Clash With AT&T

The Federal Communications Commission told AT&T it has “serious concerns” about whether rivals will be able to compete with its DirecTV Now online video service, and demanded answers by Nov. 21. AT&T, already the U.S.’s biggest pay-TV operator, is planning to launch the new service at a sharply discounted $35 a month, complete with a “zero-rated” app that will exempt in-house content from data traffic fees. The FCC argues that the app, in particular, “may obstruct competition and harm consumers,” because it could cost unaffiliated rivals too much to sponsor competitive data programs. Fortune

Futures Group Looks to the Future

Phupinder Gill is stepping down three years early as head of CME Group, the company that runs the U.S.’s biggest futures and options exchanges. The news was a surprise as he’d only extended his contract last year, and Gill had made sure the group rebounded well from the MF Global scandal, which did for his predecessor. CME gave no reason for his departure, which adds to the mystery, but it’s tempting to speculate that, having built the business to live in the world of Dodd-Frank and ever-tighter trade and financial links with Asia, he thought it might be better to let someone else deal with the next four years. Long-serving executive chairman Terry Duffy will add the role of CEO to his current job. FT, metered access

Hey Alexa, What’s Mom’s Password?

A federal judge on Thursday directed to reimburse parents whose children made in-app purchases without permission, but rejected the Federal Trade Commission’s request for a $26.5 million lump-sum payout. District Judge John Coughenour’s order ends a saga that started in 2014 when the FTC sued, accusing Amazon of making it too easy for children to run up bills (the FTC estimated total unauthorized charges of $86 million). Coughenour rejected Amazon’s request to issue refunds in the form of gift cards, saying that would only recapture some of the profits it made. Fortune

Wells Fargo Admits it May Have Been a Tad Harsh 

Wells Fargo Chief Executive Officer Tim Sloan told workers on Thursday the bank was changing the handling of whistleblower complaints after allegations it fired employees who tried to alert management to abusive sales practices. He didn’t detail how whistleblower complaints will now be handled, but said the bank was also reviewing allegations of retaliation against staff. Sloan still reckoned that “the majority of cases were handled appropriately.” Fortune

Summaries by Geoffrey Smith;