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Stranded in the Middle — CEO Daily, Friday, 6th October

Good morning.

It’s feedback Friday, and CEO Daily has stirred up plenty of controversy this week. A sampling:

Guy at “” objected to my reference to the “absurdity” of allowing “civilians to own weapons of mass assault”:

We know that in modern American history, mass murder has been committed with fire, automobiles, government surplus explosives and bathtubs. To designate one means as worse than others is illogical.

My reply: not if the implement has no possible legitimate civilian use.

DL accused me of being too generous to Wells Fargo CEO Tim Sloan:

Sloan and the legacy management team at Wells Fargo need to roast over the open flame of consumer fury, and congressional hearings are the only venue for that to occur… It is one thing to excuse executive leadership if Wells’ fraudulent account generation activity was the work of a rogue troll in the basement. That’s not the case here. This was an outcome of a formal and ridiculously outrageous corporate goal that deliberately fueled an exuberant and low-ethics culture that was endemic throughout the company.

DL was not alone. If my mail is any guide, Sloan still has a steep climb ahead of him.

And NH disagreed with my contention that CEOs like other CEOs on their boards because they understand the pressures of the job:

They want them there to vote in ever higher compensation packages and in return they will do the same on boards that [they] serve.

Separately, my former colleagues at the Pew Research Center put out an interesting report yesterday showing that the partisan divide on issues like immigration, racial discrimination and aid for the needy continues to widen, dwarfing differences by race, gender, age, education, religion or income. We are retreating into opposing political camps. And many CEOs are left feeling, like me, that they are stranded in the middle.

You can read the Pew study here. More news below.

Alan Murray

Top News

Jobs Report to Test Market Exuberance

The employment report for September is due this morning. It may be harder to parse than usual due to the effect of Hurricanes Harvey and Irma, which devastated two of the U.S.’s four biggest states by GDP. The stock market will need something special to avoid profit-taking after a run of six straight all-time high closes—the longest such run in over 20 years—due to confidence in the growth outlook (financials got a fresh boost yesterday from Randal Quarles’ Senate confirmation as head of banking supervision at the Fed). Bonds, meanwhile, are in headlong retreat as the market revises up its expectations for a rate hike in December. WSJ, subscription required

For Sale: 1 Casting Couch. Condition: Used (Heavily)

Hollywood movie mogul Harvey Weinstein has taken a leave of absence from his production company after a barrage of sexual harassment claims from women, including the actress Ashley Judd. The New York Times cited unnamed officials at The Weinstein Company as confirming eight separate financial settlements with women over the years. Weinstein issued an apology, saying “I appreciate the way I’ve behaved with colleagues in the past has caused a lot of pain.” Fortune

Netflix Surges on Price Hike Optimism

Shares in Netflix rose 5.4% to a new all-time high after the company said it will raise prices for the top two of its three subscription tiers. The price for its basic service will stay unchanged at $7.99 a month. Netflix needs to squeeze more out of its subscribers to pay for increasing investment in original content (the announcement comes just a couple of weeks before the second season of the popular sci-fi show Stranger Things is due to start). The market reaction suggests that investors trust it to pluck the customer goose a little more, without provoking too much hissing. Fortune

NRA Open to Bump Stock Ban

The National Rifle Association said it was open to restrictions on the sales of bump stocks, a device that allows semi-automatic rifles to function as fully-automatic ones, after it emerged that Stephen Paddock had used them to increase his rate of fire in his massacre of concertgoers in Las Vegas. Gun enthusiasts have been panic-buying bump stocks since the outrage, while the NRA had been silent until yesterday. The NRA’s statement also included a call for Congress to pass the Concealed Carry Reciprociy Act, which would allow handgun owners with a concealed carry license in one state to bring their weapon across state lines to other states that also allow concealed weapons.  Fortune

Around the Water Cooler

Kaspersky Role in NSA Hack Becomes Clearer

Hackers working for the Russian government were behind last year’s theft and distribution of some NSA hacking tools, The Wall Street Journal reported, citing people familiar with the matter. The report says Russian agents targeted an NSA contractor for the theft through details of his account with Russian antivirus software company Kaspersky Lab: that detail bolsters the arguments of those concerned by supposed links between the company and Russian intelligence. Kaspersky has always denied any impropriety. But the firm gave up recently on trying to win U.S. public sector business, which in hindsight looks like an awareness of how the inquiry was going, and spells big trouble for its business in both North America and Europe. WSJ, subscription required

Amazon Gives Fedex, UPS the Shivers

Amazon is looking at an expanded rollout of its own delivery service by 2018, according to Bloomberg. The news took around 2% off the value of FedEx and UPS, which currently act as Amazon’s partners on two-day deliveries for its Prime service. DHL owner Deutsche Post, another Amazon partner, also saw its shares fall by some 2%. The trade-off between capturing more of the value chain and keeping fixed costs down appears to be changing evolving rapidly. Fortune

Switch IPO Puts Dual-Tier Share Structures Back in the Spotlight

Data center operator Switch will price its IPO Friday in an offering that will make it the second biggest tech IPO of the year (after Snap). The deal, expected to raise around $500 million at a valuation of almost $4 billion, will leave founder and CEO Rob Roy (sic) in control of the company thanks to his control of a special share class—a structure that has fallen into disrepute in recent months, given corporate governance issues at the likes of Uber and Facebook. Both Snap and Blue Apron have come to market with dual-tier share structures, but their travails owe more to the inflating of expectations and ignoring of competition ahead of their respective offerings. Fortune

Honest Loses Its Horn

Honest, the Jessica Alba-backed company that has struggled to live up to its ultra-ethical and non-toxic marketing, turned from unicorn back into horse. It said it was seeking fresh funds at a valuation of less than $1 billion, down from $1.7 billion at its previous funding round. Honest had had to settle two lawsuits over misleading labelling earlier this year, issues that contributed to it being jilted by Unilever in favor of Seventh Generation. Fortune

Summaries by Geoffrey Smith;