Howard Schultz, Twitter Pop, Manafort Accusation: CEO Daily for June 5, 2018

June 5, 2018, 10:53 AM UTC

Good morning.

I’ve written here on several occasions about employees putting pressure on companies to do good in the world. But what about employees putting pressure on companies to do something not so good?

That’s my take on Google’s decision to withdraw from working with the Pentagon to apply AI technology to its drone program, first reported Friday. A dozen Google employees resigned over the defense contract, and 4,000 more signed a letter opposing it. The company bowed to the pressure, leaving a lucrative business to Amazon and Microsoft.

But why? Those who lost loved ones in 9/11 or have relatives in the military deeply appreciate the fact that drones in combat have saved American lives. And smart application of AI technology could improve drone targeting and reduce collateral and civilian damage.

Moreover, does anyone doubt that rival governments—think China—don’t have full access to their country’s best and brightest AI engineers to enhance their weapons programs? Worth remembering the Internet began with technology transfer from the Pentagon. Is there any good reason, now that the balance of skills has shifted, that it shouldn’t go the other way? Empowered employees have generally pushed their employers in good directions in recent years. But in this case, they got it wrong.

Separately, I was at the American Museum of Natural History last evening, where hedge fund billionaire Ray Dalio was announcing the launch of OceanX (not to be confused with Oceans 8, also out this week.) It’s an ambitious new program to explore the oceans and expose them to some of Dalio’s radical transparency, creating compelling media with the likes of James Cameron and the BBC. Dalio is the anti-Musk; he thinks exploring the oceans is far more fruitful than exploring space. And the ambitious 3-D film he premiered last night backed his point.

News below.

Top News

Schultz for President?

We seem to be deep into will-they-won't-they territory on the presidential ambitions front. A day or two ago it was Joe Biden; now it's Starbucks executive chairman Howard Schultz, who has announced that he's stepped down from the company. "For some time now, I have been deeply concerned about our country—the growing division at home and our standing in the world," he said. "One of the things I want to do in my next chapter is to figure out if there is a role I can play in giving back. I'm not exactly sure what that means yet." Fortune

Twitter Pop

Twitter's share price jumped as much as 5% in after-hours trading after S&P Dow Jones announced that the social media company is replacing Monsanto (now taken over by Bayer and killed off as a brand) on the S&P 500. The change will go into effect on Thursday, before the market opens. Meanwhile, Monsanto's spot in the S&P 100 will now be taken by Netflix. Fortune

Manafort Accusation

Special Counsel Robert Mueller's office has accused former Trump campaign chairman Robert Manafort of breaking his bail conditions by trying to tamper with witnesses in his criminal lobbying case. The special counsel says Manafort tried to reach witnesses using an encrypted messaging app, and one witness "understood Manafort's outreach to be an effort to 'suborn perjury.'" CNBC

RBS Stake

The British government has been the majority shareholder in Royal Bank of Scotland since it bailed the bank out in the financial crisis. Now it's reduced its holding by selling a £2.5 billion ($3.3 billion) stake, sending RBS's shares falling by over 3%. "This is an important moment for RBS and an important step in returning the bank to private ownership," said CEO Ross McEwan. However, the government made a £2.1 billion loss on the stake, due to the disparity between RBS's current share price and the price it paid a decade ago. BBC

Around the Water Cooler

Cakes and Flowers

Yesterday's Supreme Court ruling on a baker's refusal to make a cake for a gay wedding (he was within his rights) did not set a clear precedent for other cases, so another case may head up to the top court regarding a similar issue. This time it's about a Washington state florist who refused to provide flowers for a gay wedding—Arlene's Flowers was found in violation of state law and, backed by the same Christian non-profit that defended Masterpiece Cakeshop, the proprietor has appealed to the Supreme Court. NBC

European Relations

Retired four-star general Barry McCaffrey wrote a piece for Fortune warning of a "significant and growing chasm" opening up between the U.S. and Europe, with President Trump's tariffs only being the final straw—other points of disagreement include NATO, climate change and Iran. "I can confidently say that U.S.-Europe relations are at their lowest point in modern history. The situation is dire and worsening," he writes. Fortune

Qatar Airways

Qatar Airways CEO Akbar Al Baker has said the carrier cannot be led by a woman. "Of course it has to be led by a man, because it is a very challenging position," he said. Rivals such as Qantas have been making efforts to increase diversity in management. Here's Qantas CEO Alan Joyce, regarding the fact that the Australian carrier's management is now 40% female: "It's the right business thing to do and it's the right moral thing to do." Bloomberg

Trump Jr.

At least two major publishing houses have reportedly turned down a book proposal from Donald Trump Jr. He wants to write an apologia for his father's record, but according to one Fox Business source: "There was basically no interest in a book that's basically a defense of daddy book when you're under federal investigation yourself." Fox Business

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.

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