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When Too Many CEOs Spoil the Stew — CEO Daily, Thursday, 5th October

Good morning.

CEOs love to have other CEOs sit on their boards. And why not? No one knows the pressures they face better than someone else who has held the top job.

But now shareholder advisor ISS has decided, in the case of Procter & Gamble at least, that too many CEOs spoil the stew. That’s one of the reasons it is recommending that shareholders support activist Nelson Peltz’s effort to get a seat on the P&G board.

It’s certainly a blue-chip bunch he is hoping to join—including former Boeing CEO James McNerney, former Home Depot chief Frank Blake, former WellPoint CEO Angela Braly, former Macy’s CEO Terry Lundgren, current American Express CEO Ken Chenault, and HPE CEO Meg Whitman. Who wouldn’t want that collection of corner office talent at their side?

But ISS says too many CEOs may be a problem. “More often than not, CEOs see activists as a threat,” the group argues. But the P&G board “could benefit from additional diversity of thought and experience, and the presence of a stronger shareholder voice.”

ISS is not alone. Glass-Lewis and Egan-Jones also are supporting Peltz’s bid, making next week’s shareholder vote a cliff hanger.

We don’t usually side with activists, since they often seem more interested in finding fast cash than adding long-term value. But Fortune‘s Shawn Tully says this may be a case where activist aggravation could be a helpful tonic. You can read Tully’s analysis here.

More news below.

Top News

“You Can Say Goodbye to That”

The price of Puerto Rico’s bonds plummeted after President Trump indicated he was open to writing off the Commonwealth’s debt. Trump has no authority to take such action unilaterally, and budget director Mick Mulvaney walked back the comments later, but the intervention clearly adds an extra layer of uncertainty to the court-supervised bankruptcy process (Promesa) that was supposed to restructure Puerto Rico’s $73 billion debt load. Trump had indicated he expected the losses to fall on Wall Street banks. The reality is that most of Puerto Rico’s bonds are held by mutual funds with big retail investor bases. Fortune

Google’s Hardware Hardball

Google unveiled its latest hardware products—a second iteration of the Pixel phone and a new web-connected speaker, the “Home Max,” which will support all the major streaming services except, apparently, Apple Music. It also presented a boiled-down version of the Google Home module called the “Home Mini,” which looks designed to compete with Amazon’s Echo Dot. Curiously, it gave no sales targets for the Pixel 2, in what appeared to be a recognition of the risks of the hardware business. Fortune

How Doth Equifax Profit? Let Her Count the Ways

Senator Elizabeth Warren was still loving the smell of the napalm yesterday morning, tearing into Equifax’s ex-CEO Richard Smith with gusto on the second day of a three-day hearing about its data breach. Warren reminded Smith of how Equifax intends to make concerned customers pay for enhanced credit monitoring, and noted that LifeLock, an identity theft protection company whose business has boomed since the breach became public, buys its credit monitoring service from (you guessed it) Equifax. IT emerged yesterday that the IRS signed a $7.25 million contract with Equifax in September—after the breach became public. Fortune

Amazon Sounds Out Leclerc

Leclerc, one of the biggest names in European retailing, said it had been approached by Amazon over a possible partnership in logistics. Europe’s grocery market is fragmented along national lines and there is no obvious analogue to Whole Foods. Amazon had announced a tentative partnership with the U.K.’s Wm Morrisons Plc last November, but Morrisons has continued to lose market share in the 10 months since, according to Kantar WorldPanel. Fortune

Around the Water Cooler

Shareholders Don’t (Necessarily) Get What They Pay For

New research from MSCI shows that CEO pay levels bear no clear long-term relation to stock market returns. A sample of 423 larges U.S. companies over the decade between 2006-2015 found a better correlation over a three- to five-year period. That may or may not strengthen the argument that too many compensation packages are tied to short-term performance targets.  WSJ, subscription required

Catalonia’s Banks Prepare to Flee

The two biggest banks in Catalonia are preparing to move their headquarters to other parts of Spain in order to avoid being cut off from ECB funding. Spanish media reported that Banco de Sabadell will hold a board meeting Thursday to approve a formal relocation to Alicante, while Caixabank (Spain’s third-largest), is reported to be moving to the Balearic Islands. The gulf between the rhetoric of the Spanish and Catalan governments remains as wide as ever, with one side vowing to impose the rule of law, while the other continues to insist on a unilateral declaration of independence. Fortune

China Continues Its Buyout of Russia

A pattern of China profiting from Russia Inc’s overextension in the past  becomes ever clearer. Oleg Deripaska, the Russian oligarch suspected of being a conduit of Kremlin influence on the Trump campaign last year, is selling off part of his flagship holding company to pay down debt through an IPO in London and Moscow. It will be the first big Russian IPO in London since sanctions were imposed in 2014. It’ll will be anchored by Singapore’s AnAn Group, a strategic partner of China’s CEFC. Last month, CEFC had also bought a stake of nearly 20% in Russian oil giant Rosneft. Reuters

Facebook Needs a CRO

Is it time for tech giants like Google and Facebook to start employing Chief Risk Officers? Jennifer Grygiel is an assistant professor of communications at the SI Newhouse School at Syracuse University argues so in a column for Fortune’s Insiders segment. She argues that social media companies have failed to devote enough attention to ‘imagining possible harm’—the bread and butter of a CRO in the finance industry. Stories such as the promotion of fake news after the Las Vegas massacre and the targeting of, for example, “Jew Haters” through Facebook’s ad algorithms, suggest that it is facing a ‘Frankenstein’ moment—that is, when it becomes clear that the monster is out of its creator’s control. Fortune

Summaries by Geoffrey Smith;