CEO Daily: Wednesday, 19th April

Roger Lowenstein has written an interesting commentary for the May issue of Fortune magazine on reining in CEO pay. Needless to say, this is not a popular topic among all CEO Daily readers. But I suspect even many of those who prefer to ignore it recognize it is a problem. For reasons Lowenstein outlines, the marketplace for CEO talent is a distorted one. And even if skyrocketing pay levels did reflect true value, it would be hard to ignore the fact that they have been accompanied by plummeting trust in business. The two are not wholly unrelated. You can read Roger’s piece here.

Separately, President Trump yesterday signed an executive order directing federal agencies to implement his “Buy American, Hire American” strategy. Included was language suggesting reforms to insure H-1B visas—which are given to skilled workers coming to work in the U.S.—be given only to the “most skilled or highest paid” petitioners, rather than by lottery. This is not an unreasonable reform. For the May issue, we’ve taken a graphical look at the H-1B visa program, which you can find here.

Also yesterday, I spent a fascinating hour at the Council on Foreign Relations interviewing Daniel Kahneman, the Nobel prize-winning economist and author of Thinking Fast and Slow. Kahneman is filled with insights about how people make decisions, and the biases that permeate our thinking. He also offered one very practical piece of advice for organizations trying to combat those biases. Before making major decisions, he suggested, conduct a pre-mortem—imagining it’s a year or two down the road and the deal has gone bad, and then imagining the reasons it happened. The exercise gives people an opportunity to air doubts they might be hesitant to share otherwise. And while it probably won’t change the decision, it could help spot problems before they arise.

More news below.

Top News

• Stocks Suffer After Goldman, IBM Disappoint

World stocks fells as earnings disappointments from heavyweights like Goldman Sachs and IBM led market participants to rethink the “reflation trade” that Donald Trump’s election victory inspired. IBM, whose shares fell nearly 5%, posted a 20^th straight quarter of falling revenue, despite a 12% gain in revenue from its new businesses, or “strategic imperatives”. That included a 33% rise in Cloud-hosting revenue. Goldman shares also fell 4.6% to a three-month low after a muted trading performance that contrasted with strong reports from JPMorgan Chase and Citigroup last week. Fortune

• Akzo Nobel’s Defense Fails to Convince

Akzo Nobel, the Dutch paints and chemicals company trying to fend off a bid from PPG Industries, unveiled its defense plans Wednesday. It will spin off the chemicals arm and return an extra €1.6 billion in dividends to shareholders this year. It also upped its 2017 operating profit guidance by €100 million, but the shares stayed stuck nearly 14% below the second offer from PPG, which values it at $26 billion. As such, pressure from Elliott Management and other big shareholders to engage with PPG is unlikely to ease. However, as with Unilever, Akzo management stressed its attachment to other corporate governance criteria to persuade shareholders to stay loyal. These included becoming carbon neutral by 2050 and sustaining a high level of research and development spending (€1 billion by 2020). Reuters

• IMF Raises Forecast for Global Economy

The International Monetary Fund raised its forecast for global growth this year to 3.5%, from an earlier estimate of 3.4%. China, Japan, the Eurozone and the U.K. all had their outlooks raised due to what the IMF called a “cyclical upturn,” but the Fund stuck by its estimate of 2.3% GDP growth for the U.S. this year, having already factored a substantial acceleration in the economy into its last estimates in January, shortly after Donald Trump’s election victory. IMF managing director Christine Lagarde had warned last week that protectionism continues to hang over the world economy like a Sword of Damocles. The Fund is also worried that a succession of quick interest rate rises in the U.S. could trigger financial instability in emerging markets. Fortune

• O’Reilly Heads for Fox Exit

Fox News is preparing to cut its losses with anchor Bill O’Reilly, according to a flurry of reports citing unnamed but informed sources. Allegations of sexual harassment have dogged the company and its biggest star for weeks. O’Reilly’s lawyers hit back Tuesday saying he was being subjected to a “brutal campaign of character assassination,” and Fox has publicly supported the presenter so far. However, 21^st Century Fox’s biggest shareholders, the Murdoch family, are under pressure to present themselves as morally unimpeachable as they seek regulatory approval for a $23 billion merger in Europe. With memories of both Roger Ailes’ departure and the U.K. phone-hacking scandal still fresh, the Murdochs have to convince British regulators that they are “fit and proper” people to run a TV network. Fortune

Around the Water Cooler

• Climate Change Makes Strange Bedfellows

The White House postponed a meeting to thrash out whether the U.S. should withdraw from the Paris Climate Accord, ostensibly because some key players were away. Bloomberg reported that an unlikely coalition of energy companies including Exxon Mobil and Royal Dutch Shell have aligned with Jared Kushner and his wife Ivanka Trump to lobby President Trump to stay signed up to the deal. That pits them against figures such as EPA head Scott Pruitt and, it would seem, Trump himself. For Exxon, Shell and companies like Cheniere Energy, an exporter of liquefied natural gas, the accord’s incentives to transition to the use of cleaner fuels is a key factor underpinning the value of their existing investments in gas. Fortune

• Facebook Talks Big on AR, Workplace

At its annual developer conference, Facebook played up its plans for Augmented Reality, a new partnership with Spotify, and its ambition to beef up the business applications of its network. Facebook Workplace is a radical departure from the network’s personal origins, which presents new challenges in the realm of controlling the use and distribution of materials put on it. The uptake so far has been modest. Elsewhere, Steve Stephens, who live-streamed himself committing a murder on Facebook, committed suicide. CEO Mark Zuckerberg told the family of Stephens’ victim that “we will keep doing all we can to prevent tragedies like this from happening,” a curious statement given that Facebook has no power to stop people killing, and that the word “tragedy” hardly applies to the broadcasting process that Facebook does control. Fortune

•  China Inc.  Rues Beijing Clampdown

The days when you could hope to get rich quick by selling your business to a Chinese company desperate to diversify its geographical risk seem well and truly over. China’s second-richest man, Dalian Wanda founder Wang Jianlin, told the Financial Times that official pressure from Beijing had killed his effort to buy Hollywood’s Dick Clark Productions (although he also noted that resistance from unnamed U.S. officials had also contributed). China’s pile of foreign reserves has edged back above $3 trillion this year, but the government is still determined to approve only ‘strategically important’ outflows of capital. Even in a world led by Donald Trump, beauty pageants don’t quite clear that bar. Wang’s admission comes a day after insurer Anbang dropped its $1.6 billion bid for Fidelity & Guaranty Life. Fortune

• JPMorgan Fingered for Picking Blackberry

JPMorgan Chase’s advisory business got off to a strong start in 2017, but this won’t help its reputation. The bank has been accused of pushing its client Good Technology, a provider of security software, to sell itself to Blackberry at an artificially low price, hoping to ingratiate itself with the Canadian company and win (presumably larger) advisory mandates from it in the future. JPMorgan denies wrongdoing. The trial is due to begin in Delaware in June. FT, metered access