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How Katrina Changed Walmart — CEO Daily, Wednesday 22nd November

November 22, 2017, 12:26 PM UTC

Good morning,

I interviewed Walmart CEO Doug McMillon before the Economic Club of New York yesterday, where he discussed the company’s remarkable turnaround, with 13 straight quarters of increasing same store sales in the U.S. at a time when other brick-and-mortar retailers are struggling.

But the most memorable part of the interview was his discussion of why Walmart has increased its focus on social issues in recent years—a striking change for a company so devoted to cost cutting. McMillon traces it back to 2005, when Hurricane Katrina flooded New Orleans. The company was under intense criticism in those days, having become something of a political lightning rod. Under the leadership of CEO Lee Scott, Walmart decided to go all out to help New Orleans, throwing people, merchandise and money to aid the Big Easy.

“We were so proud of how we’d stepped up in this difficult time,” McMillon recalls. In the days that followed, Lee asked the team “what would it take for us to feel this good all the time?” The result is a Walmart that in the last decade has made a massive commitment to environmental goals, as well a $2.7 billion investment to raise wages for hourly workers.

Separately, I received my own flood of messages from CEO Daily readers who objected to my suggestion that CNN tone down the anti-Trump rhetoric. CNN “is committed to speaking truth to power,” writes J.W. Their coverage “is exactly what’s needed in times like this,” says B.J. And did you “say the same about Fox over the past 10 years?” asked J.K. (I did.)

But R.B. came closest to my sentiment. “It’s not toning down that’s needed so much as it is, how about reporting some news? There is a lot going on in the world that is more important than the latest tweet.” By relentlessly focusing on presidential missteps, CNN has fed the view of many Americans that it is on a campaign against Trump, and helped undercut trust in media more generally. That’s one reason why, for instance so many Alabamans feel free to reject the Washington Post’s thoroughly reported stories on Roy Moore. What CNN is doing may be good for ratings, but it’s one more thing eroding our common ground.

More news below. CEO Daily will be dark for the next two days to give thanks we’ve survived the year.

Alan Murray

Top News

Uber Covered up Massive Data Breach

Uber admitted covering up a breach that exposed the data of 57 million users and thousands of drivers, after being sued for negligence in a federal court in Los Angeles. The company paid off the hackers with $100,000. While it’s a serious embarrassment for a company that likes to flaunt its technological superiority, it has at least provided new CEO Dara Khosrowshahi with the opportunity to continue his post-Kalanick house-cleaning. He has fired former security chief and deputy general counsel Joe Sullivan, along with Craig Clark, one of his deputies. Sullivan’s name had figured prominently in the activities that have generated at least five criminal probes into the company, such as its use of ‘greyball’ technology to hoodwink regulators. Fortune

Whitman Departs—and Neri a Buyer in Sight for HPE’s Stock

Meg Whitman said she’ll step down as CEO of HP Enterprise at the end of January, having largely completed her mission of slimming down an unwieldy conglomerate and adapting its core data center and software businesses to a new model based in the Cloud. Whitman had been in the frame earlier this year to take over as CEO of Uber after the departure of Travis Kalanick. Whitman praised her successor, current HPE president Antonio Neri, as a “deeper technologist” better able to take the company forward. He may also need to develop the ability to fend off takeover interest: the company’s shares fell 6.2% on the news, to their lowest in nearly two years. Fortune

Pai Cuts the ISPs a Bigger Slice

Federal Communications Commission chief Ajit Pai outlined his plans to let Internet service providers create slow and fast lanes for traffic. Pai’s plan also blocks state and local governments from imposing their own net neutrality rules—something that may create significant antitrust issues in many places where competition is limited anyway. Overall, the rules appear to strengthen the hand of players like AT&T, Verizon, and Comcast against Amazon, Netflix and co. who risk being squeezed for the right to send their exponentially-expanding content through an infrastructure that can now be rationed at its owners’ discretion. Fortune

Just Think What It Would Cost if Adults Made It

Apple acknowledged that Foxconn (aka Hon Hai) had employed high-school students working illegal overtime to assemble its new iPhone X. Students told the Financial Times that they routinely work 11-hour days at a factory in Zhengzhou, which is illegal under Chinese law. Apple claimed the work was voluntary. The students claimed otherwise, saying they were required to do an “internship” unrelated to their studies in order to graduate. FT, metered access


Around the Water Cooler

Google’s Data Grab

Google admitted tracking smartphone and tablet users even when they had turned off location services or taken out their phone’s SIM card, Quartz reported. It noted drily that the company consequently had “access to data about individuals’ locations and their movements that go far beyond a reasonable consumer expectation of privacy.” The news will go down extremely badly in Brussels, where the EU is already investigating the company for suspected abuse of its ownership of the Android operating system (even though that investigation is more about antitrust issues than privacy ones). Fortune

Taylored to Perfection (The Marketing, That Is)

Taylor Swift’s Reputation—I know, I know, just bear with me – has become the biggest selling album of the year inside a week, with 1.23 million downloads, according to The Guardian. That’s an impressive vindication of a strategy which saw her keep all but four tracks off the streaming services to which the music industry is increasingly in thrall, and proof that artists still have pricing power. Not the least remarkable detail is a promotion offering fans who buy multiple copies of the album preferential access to upcoming tour tickets. The music may be dire, but the marketing can’t be faulted. Fortune

Elliott and PPG Can Get Ready to Stir the Paint Pot Again

Japan’s Nippon Paint threw a wrench into Akzo Nobel’s defensive strategy with an all-cash offer for paints and coatings company Axalta. Axalta said it had ended discussions with Akzo after failing to reach agreement on their proposed merger. That opens the door for PPG Industries to renew its interest in the Dutch company when a six-month ‘cooling-off’ period expires next month. The company is in the middle of a plan to spin off its specialty chemicals business to keep shareholders happy.  Fortune

The Continuation of Protectionism by Other Means

Is China’s censorship the continuation of protectionism by other means? Microsoft’s Skype service has disappeared from both iOS and Android app stores in China (as have hundreds of other apps running on Virtual Private Networks), but there is no official explanation as to why. While the authorities’ sensitivity to the political potential of messaging systems, Skype doesn’t provide end-to-end encryption, which is banned. One thing is clear: owners of competing Chinese services, such as Tencent (now more valuable than Facebook) don’t suffer from the reduced competition. Elsewhere, in a variation on the theme, Russian senators approved a law requiring U.S. media outlets to register as foreign agents, in retaliation for a similar crackdown on Russian state-owned media in the U.S. Fortune

Summaries by Geoffrey Smith;