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LeadershipCEO Daily

CEO Daily: Monday, 13th March

By
Geoffrey Smith
Geoffrey Smith
and
Alan Murray
Alan Murray
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By
Geoffrey Smith
Geoffrey Smith
and
Alan Murray
Alan Murray
Down Arrow Button Icon
March 13, 2017, 7:42 AM ET
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Good morning.

The heated debate over the fate of the Affordable Care Act, which raged throughout the weekend, says as much about what’s wrong with the U.S. political system as it does about what’s wrong with the U.S. health care system.

Conservatives who claim the House bill is “Obamacare lite” have a point. “Repeal and replace” overstates what is going on here. Republicans are tweaking the system to reduce the heavy hand of government by 1) eliminating the mandate that everyone must buy coverage, 2) increasing the flexibility of insurance companies to offer streamlined and less expensive plans, and 3) reducing the overall cost to government. The basic structure remains intact, as was inevitable.

The real problem is political. A sustainable fix to the health care system will only happen on bipartisan terms. The Affordable Care Act overreached in part because it had to accommodate the demands of all Democrats to make up for the fact it wasn’t going to win support of any Republicans. “Repeal and replace” now faces the opposite problem—Congressional leaders may have to cater to conservative critics because no Democrats will support them. If they give in to conservative demands—and possibly even if they don’t—they run the risk of adopting a bill that deprives GOP voters of benefits and will be rejected at the polls in 2018, empowering a new crop of Democrats committed to repealing and replacing the repeal and replace.

“When you jam something through one party over another, it’s not sustainable. It becomes a point of attack,” the Republican Governor of Ohio John Kasich said yesterday on Meet the Press. “We need to have Democrats involved so that what we do will not only be significant, but will last.”

Which gets back to our broken political system. As I mentioned here Friday, the new issue of Fortune has an interesting and important essay by Katherine Gehl and Michael Porter that uses competitive strategy to analyze the political industry. Their conclusion: it’s a classic duopoly—good for the health of the two parties, but bad for the health of the country. The time has come for reforms of redistricting, the primary process, and elections, to open the process to people in the center.

News below. And apologies to the folks at Ingredion for saying Friday that they make “artificial sweeteners.” They make sugar substitutes, but with natural ingredients.

Alan Murray
@alansmurray
alan.murray@fortune.com

Top News

• Exit Bharara, Leaving Bad Taste

Preet Bharara, the federal attorney for Manhattan, said he was fired by Jeff Sessions after refusing to heed a call to stand down from the new attorney general (a call that also went to 45 other holdovers from the Obama administration). Bharara insinuated in a tweet that he saw the step as infringing the political independence of his position, an uncomfortable thought given that his district includes Trump Tower, which the President claimed had been illegally wiretapped. However, rotation of staff in such posts is nothing unusual: Sessions had himself lost his positions under a similar action by Janet Reno at the start of the Clinton administration. Fortune

• “Help, Help! We’re Being Repressed!” Says…Erdogan

The crisis of liberalism in Europe flared again at the weekend. The Dutch government denied entry to two Turkish ministers who wanted to rally expatriates ahead of a constitutional referendum back home, afraid that the rallies would inflame anti-immigrant sentiment (i.e. draw attention to the size and the 'other-ness' of the resident Turkish population in the Netherlands, thus bolstering the campaign of Geert Wilders’ anti-Muslim PVV party, three days before national elections). Riot police were deployed against Turks in Rotterdam who protested. President Recep Tayyip Erdogan, who has sacked or imprisoned tens of thousands of officers, officials and academics since last year’s coup, and whose troops are fighting a low-level civil war against Turkey’s Kurdish minority, gleefully exploited the chance to attack someone else for their lack of tolerance. Fortune

• Ivanka Sales Gets a Trump Bump

Online sales of Ivanka Trump’s fashion brand spiked in February, which may or may not convince the likes of Nordstrom et al. that they were wrong to discontinue the line. Slice Intelligence, an e-commerce research firm, said sales of the President’s daughter’s products rose 332% from a year earlier in January and February. Lyst, one of the biggest fashion e-commerce sites in the world, said sales spiked 219% the day after White House adviser Kellyanne Conway publicly touted the business in defiance of Nordstrom (and of ethics rules governing the behavior of White House staff). If nothing else, the data reinforce the fact that even comments made in jest have real-world consequences. Fortune

• VW Shareholders Distance Themselves From Piëch

The extended family that owns a controlling stake in Volkswagen Group is trying to lever patriarch Ferdinand Piëch out of his last remaining position of influence. The Porsche SE holding company, which votes the family’s shares, intends to restructure its supervisory board, and has not put the former VW CEO and Chairman up for re-election, according to Bild am Sonntag. The list of family grievances against Piëch Sr. is long and tedious, but the move has a particular spice right now as Rupert Stadler, who used to run Piëch’s private office before heading to Audi, is currently facing accusations of having known about the use of illegal software to cheat vehicle testers years ago. A ruling that upholds those accusations would bring them uncomfortably close to the very top of VW’s power structure. Fortune

Around the Water Cooler

• Bezos’ Space Projects Turns to Satellite Business

Blue Origin, the space venture of Amazon founder Jeff Bezos, has signed up France’s Eutelsat for a future satellite launch, according to CNN. That’s a new departure for the venture, which had previously focused on developing space tourism in low earth orbits. The rocket to be used, the New Glenn, is still in development, and is not expected to launch till 2020. The Eutelsat deal foresees a launch by 2022. The deal makes Blue Origin look more like a serious company, and less like a pet project—but it is a long way behind rival ventures in the satellite launching business. Fortune

• Project Loon Loses Its CEO

Project Loon, Alphabet’s plan to bring low-cost internet connectivity to billions of people in remote (and often extremely poor) parts of the world with balloons, is still struggling to get off the ground. Tom Moore, recruited from ViaSat last August as CEO, is stepping down after a mere six months. He’ll be replaced by Alastair Westgarth, formerly CEO of wireless antenna company Quintel, Bloomberg reported. Loon recently switched its emphasis to rolling out smaller and more localized networks, under pressure from Alphabet to cut cash outlays. Alphabet’s “moonshot” projects are all facing similar pressure, and many have fared worse than Loon. Fortune

• How Sharper Than a Serpent's Tooth It Is to Have a Jobless Child!

The Federal Reserve wants a lifetime ban on working in banking for two JPMorgan Chase executives implicated in the latter's “Sons and Daughters” program. The bank paid $264 million back in November to settle claims that it operated a “systematic bribing scheme” by offering the children of high-ranking foreign officials (mainly in China) internships and other positions in the hope of getting business in return. The two are Fang Fang, who ran JPMorgan’s Chinese investment bank, and Timothy Fletcher, who ran the hiring program. The Fed is not taking action directly against the people paid to supervise Fang. Fortune

• HSBC Taps AIA’s Tucker as Chairman

Shares in HSBC rose after the bank appointed AIA Group CEO Mark Tucker to succeed Douglas Flint as its chairman. Tucker, who had overseen Prudential Plc’s advance into Asia, appears well suited to a strategy that will depend more on wealth management in that part of the world. The other big challenge for Tucker, a former pro soccer player, will be to end the bank’s recurring association with ethics and governance scandals, which have cost shareholders dearly since 2008. Tucker will also oversee the quest for a new CEO at Europe’s largest bank, given that Stuart Gulliver has said he wants to retire in 2018.  Bloomberg

Summaries by Geoffrey Smith Geoffrey.smith@fortune.com;

@geoffreytsmith

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