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CFOs Plan for a Trump Administration

Talking yesterday with a group of Fortune 500 CFOs, I got some insight into what’s on their minds and how they’re responding to the advent of a Trump administration and a unified government, as well as to other large-scale trends. Their concerns and their thinking are instructive for all leaders now:

—Politically, they’re worried most about regulatory uncertainty and protectionism, but they’re hopeful about the possibility of tax reform. Virtually all of them think Trump’s promised protectionism would be bad for their business because virtually all of them represent global companies. Some of their companies manufacture abroad and would be hurt directly by trade restrictions; others export and realize that protectionism would spark a trade war that would hurt them.

At the same time, they figure 2017 is the best shot at tax reform we’ll see in a long time, and while they don’t believe Congress will cut the corporate tax rate to Trump’s proposed 15%, they’d be very happy with a reduction from today’s 35% down to 25%. An important point that’s often overlooked: A rate cut would benefit all companies that operate in the U.S., even if they’re not U.S. companies.

—Hedging is becoming a valuable tool. For example, a U.S. company that does a lot of business in Mexico planned in September for the possibility of a Trump victory, which executives knew would drive down the peso; the CFO hedged against that possibility in the currency markets and is obviously glad he did.

Another CFO, this one in the energy business, hedged against changes in oil and gas prices in light of candidate Trump’s pro-carbon, anti-renewables stance. And a third CFO in a capital-intensive business hedged against lurches in interest rates, which occurred immediately after Trump’s election.

Hedging costs money, but it buys stability, which is worth paying for in this environment.

—They’re struggling to understand how technology will transform their function. For them, as for everyone, the pace of technology change is noticeably faster than it was just two or three years ago. The CFO of one global company now realizes that soon he won’t need people managing accounts payable in offices around the world; software will handle the job instead. Another CFO says it will no longer make sense for employees to do financial analysis in different locations; predictive analytics software will do it better, and locating that function centrally will make more sense. But they also realize with frustration that they’re probably not even imagining how technology will disrupt their function more deeply.

—They’re trying hard to develop people in new ways for new roles. Many specialized jobs of the past are disappearing as technology takes them over. The finance function increasingly needs big-picture thinkers who at least understand the language of technology. That requires moving good performers through a variety of jobs—always challenging because it means putting people into new jobs that, at least initially, they can’t do very well. Those jobs must include low-glamour roles as well as the glamorous ones in M&A, for example.

That’s a glimpse of how CFOs are adapting to an uncertain, fast-changing environment. What’s striking is that at a high level, their challenges are everyone’s challenges. One implication: We should spend more time with people whose world we may know little about. We probably have more to learn from them than we think.

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What We’re Reading Today

VW to cut 30,000 jobs worldwide
The job cuts are part of a turnaround plan by CEO Matthias Müller, who has targeted a 2% to 4% increase in profit margins. He says VW needs to increase productivity by 25% at its German plants to reach the mark. The company will also add 9,000 jobs, by investing into new products. But the job cuts, 23,000 of which impact its German plants, come as the carmaker continues to reel from the penalties incurred from the emission scandal. BBC

Prosecutors charge former Valeant and Philidor execs
Last year, Valeant’s connection to mail-order pharmacy Philidor came under question. Prosecutors now say former Valeant executive Gary Tanner was paid $10 million in kickbacks by former Philidor chief executive Andrew Davenport to advocate for the pharmacy within Valeant’s offices. WSJ

Checking account openings fall 44% at Wells Fargo
CEO Tim Sloan announced the account numbers, compared to previous month’s marks, highlighting the impact that the fake account scandal is having on the bank. It also signals the impact the reduction of cross selling has had on its business. Deposits in checking accounts, however, rose 7%. Fortune

Shareholders approve Tesla, SolarCity deal
The $2 billion deal was overwhelmingly approved, combining the electric vehicle company with the solar roof firm. It comes as Tesla CEO Elon Musk envisions a company built around its batteries, but also at a point where a new president enters office that supports expanding fossil fuel production, which could hinder subsidies for clean energy, like solar.  Los Angeles Times

Building Better Leaders

Only 23% of companies view reorganization efforts as successful
It’s possibly because companies are waiting until a problem becomes unavoidable before reorganizing, as opposed to taking steps proactively.  McKinsey

Reaching inbox zero isn’t a myth
Squarespace CEO Anthony Casalena says he manages his 300 emails per day by treating it as a to-do list, getting rid of items when he sees them in the queue. But he doesn’t check email that often, for a CEO. Fortune

47% of freelancers live in the suburbs
And 18% work in rural areas. With population growth booming in cities, Upwork CEO Stephane Kasriel argues protecting freelancers could encourage more to move to the suburbs, and slow the rising costs of living in the city.  Fast Company

Trump Statements

Trump offers AG post to Sessions
President-elect Donald Trump has offered the role to Alabama Senator Jeff Sessions. While one of Trump’s earliest backers, Sessions is a controversial choice. In 1986, Sessions’s nomination for a federal judgeship failed to move forward due to accusations he had made racially insensitive comments, calling a black assistant U.S. attorney “boy” and the NAACP “communist-inspired.” CBS News

Trump’s pick for national security adviser
Retired Lt. Gen. Michael Flynn has been a vocal critic of the White House and Pentagon since retiring from the military in 2014. He has stated that the U.S. should have a far more aggressive stance against the Islamic State and work more closely with Russia. Fortune

Trump touts saving Ford plant…
…that never had plans to close. In a tweet, Trump said “I worked hard with Bill Ford to keep the Lincoln plant in Kentucky.” Ford has two plants in Louisville, and had considered moving production of one vehicle—the Lincoln MKC—to Mexico, but not cutting any jobs. Ford says it confirmed with Trump that it would not move the production of the single model vehicle to Mexico. Washington Post

Up or Out

Mauricio Restrepo has resigned as Molson Coors Brewing CFO, due to “personal conduct,” unrelated to the company, says Molson. He will be replaced by Tracey Joubert. Denver Post

Fortune Reads and Videos

Uber makes temporary peace with Houston…
…ahead of the Super Bowl in February. Uber has agreed to have its drivers in the city finger printed, although Travis Kalanick‘s company has threatened to leave Houston over the issue. Fortune

Calls to change Obamacare…
…could have major impact on Oscar Health, which was founded by Joshua Kushner, brother to President-elect Donald Trump‘s son-in-law. The $2.7 billion startup says instead of overhauling Obamacare, lawmakers should fix or fund programs that were “designed to help insurers deal with the uncertainty” of the first few years of the law. Fortune

One reason Facebook doesn’t want the media label
The regulation burden would likely grow. Fortune

E-cigarettes might be as bad for the teeth…
…as regular tobacco, according to a new study. Fortune

Happy Birthday

Jack Dorsey, CEO of Twitter and Square, turns 40 on Saturday.  Biography

Former chairman and CEO of General Electric, Jack Welch celebrates 81 tomorrow.  CNBC

Founder of Calvin Klein Inc., Calvin Klein turns 74 on Saturday.  Biography

Vice President Joe Biden turns 74 on Sunday.  Biography

David Einhorn, founder of Greenlight Capital hedge fund, celebrates his 48th birthday on Sunday.  Famous Birthdays

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Produced by Ryan Derousseau