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Trumponomics Daily—Tuesday, February 21

The Trump era has come with its share of upsides for public companies. Among the downsides: The fear of getting singled out as the target of President Trump’s ire, which he’s demonstrated a penchant for expressing in market-moving tweets. Anxiety over the threat is pervasive enough that the law firm Cleary Gottlieb has prepared a memo for clients offering guidance on how to survive a social media attack from the president — or “SMA,” as they shorthand it. Presidents have been jawboning private enterprise for a long time — the memo points to Herbert Hoover’s attempts to compel employers to keep wages high at the onset of the Great Depression — but the speed of social media and the breadth of its exposure present some new challenges. Among the firm’s recommendations:

  • Ensure that management and the board are aligned on a plan. That can be tricky to coordinate in realtime, so boards should consider setting up a rapid-response team of two or three board members that management can consult on the fly.
  • Consider the costs of not responding. A major federal contractor, for example, could see government deals endangered. Others could face the loss of tax benefits or regulatory reprisals. And then there’s the potential for indirect pain, like depressed worker morale.
  • But it could still beat accommodation. If Trump (or any other pol) is making a particular demand, what are the costs of simply acceding to it? It might cost the company other business, bring on a public relations headache, and, again, damage morale.
  • Watch out for conflicts of interest. They could arise from executives serving on an advisory panel convened by the president. A more immediate threat: Those with equity-based compensation packages will be particularly sensitive to short-term movements in the company’s share price around the time that stock option awards are set to expire. So boards should pay especially close attention to management’s decision making if a Trump tweet that moves the stock comes a such a time.
  • Prepare for an attack on executive pay. Trump hasn’t gone there yet. But he could. Companies should be especially attuned to the issue this proxy season.

We’re now seeing that Trump’s tweets aimed at specific companies don’t ultimately damage their stock prices. But the sensitivity that gave rise to the memo indicates his approach is forcing executives to evaluate a whole new set of risks.

Tory Newmyer
@torynewmyer
tory_newmyer@fortune.com

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Number of the day

6

The average number of tweets Trump has sent each day of his presidency over its first month. With 25.1 million followers, his personal account easily outstrips the reach of the official presidential account’s 15.5 million. The missives frequently drive news cycles and can force his own team to scramble to accommodate them into the administration’s formal policymaking process.

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