“More than at any time in recent history, governments, businesses and individuals are examining how companies operate.” Those aren’t my words—they come from IBM CEO Ginni Rometty, in her annual Corporate Responsibility Report, which is out this morning. She’s right: the bar is being raised, by government, by the public, and most of all, by employees. And that’s a good thing.

Rometty cites three principles, in particular, that she says are guiding IBM’s work:

• The purpose of AI is to augment human intelligence, not replace it – and the company must help train workers to make the most of new technologies.
• Data and insights belong to their creator, and “IBM is dedicated to the protection of our clients’ data and to harnessing its power to expand prosperity and opportunity.” (Take that, Facebook and Google.)
• And new technology, including AI, must be transparent and explainable, in order to earn society’s trust.

Those seem like a good place to start.

Meanwhile, since it’s Friday, some feedback: One CEO Daily reader, perhaps tiring of our coverage of the CEO Initiative, pointed me to James Mackintosh’s column in yesterday’s Wall Street Journal, which warns that investors who put their money in companies that seek to do good should expect to do badly.

Mackintosh’s argument, in a nutshell, is that even companies that do bad things—pollute, abuse employees, etc.—will be profitable investments at some price. “Coal miners have returned almost 20% in the past 12 months in dollar terms,” he says.

That may be true in the short term (although a number of studies, by Just Capital and others, suggest socially responsible companies outperform even in the short run). In the long, term, however, any conflicts between profit and purpose tend to disappear. If you want to invest in a company that is going to be alive and thriving 100 years from now, you’d better avoid those pursuing policies that risk environmental or social breakdown.

Mackintosh ends his column by quoting the man who runs the world’s largest pension fund—Hiro Mizuno, of Japan’s $1.5 trillion Government Pension Investment Fund, which takes a decidedly long-term view. Some people invest in socially responsible companies as a way of avoiding risk, Mizuno says. Others think it’s a means of outperforming the market. And others do it for policy reasons. “I really don’t care—we just need to avoid systemic failure of the capital markets.”

Amen to that. News below.

Top News

The Amazon Effect

Amazon's extraordinary power is reflected in how its moves can instantly tank other companies' stock—and yesterday showed that effect in action. When Amazon unveiled its delivery network plans, based on encouraging entrepreneurs to set up small businesses to deliver Amazon packages, it knocked Fedex and UPS's stock by 1.3% and 2.3% respectively. But the real demonstration came from its purchase of online pharmacy PillPack. CVS's shares dropped 5.8%, Walgreens' 9.9% and Rite Aid's 10.9%. Fortune

Novartis Spin-Off

Novartis is going to spin out its eyecare business, Alcon. The Swiss pharmaceuticals giant is trying to focus more on its core medicines business under new CEO Vas Narasimhan, and it reckons the spinoff could net it at least $25 billion. The move is set to take place in the first half of 2019, with Alcon listing in Switzerland. Novartis has also announced a $5 billion share buyback. Financial Times

California's GDPR-Lite

California is going to get a sweeping privacy law that's analogous to—if not quite as stringent as—Europe's General Data Protection Regulation. From the start of 2020, consumers will be able to block companies from selling their data and demand that their data is deleted. Companies serving Californians to any meaningful degree will also have to be transparent about the data they hold, why they're storing it, and who gets their hands on it. Seismic stuff, particularly in Silicon Valley's home state. Fortune

Xiaomi Re-evaluation

Chinese phone-maker Xiaomi has reportedly cut its IPO size, pricing its stock the lower end of its range for a company valuation of $54 billion, rather than the $100 billion that was hoped for. The stock will start trading in Hong Kong on July 9. Xiaomi is backed by three of China's biggest tech tycoons, Li Ka-shing, Jack Ma and Pony Ma. South China Morning Post

Around the Water Cooler

Car Tariffs

If President Donald Trump goes ahead with his threat to impose heavy tariffs in imported European automobiles, EU leaders say they are ready to retaliate. The leaders of the 28 EU countries said this morning that Trump's steel and aluminum tariffs "cannot be justified on the grounds of national security"—the same justification Trump apparently wants to use for his tariffs on European cars—and that "the EU must respond to all actions of a clear protectionist nature." The EU has already responded to the metals tariffs by imposing levies on Harley-Davidson bike imports, leading the company to offshore more of its manufacturing. Bloomberg

Unintended Consequences

President Trump's burgeoning trade war with China could actually end up benefiting the country, according to some experts. Here's the logic: the trade war would end up disrupting supply chains with the U.S., thereby boosting the fortunes of China's Belt and Road initiative, which is all about investing in trade routes in and out of China. And China could get more export markets as a result of Trump's actions, too. CNBC

Cigarette Ruling

The World Trade Organization has rejected complaints from Cuba, Honduras, Dominican Republic and Indonesia that Australia's law mandating plain packaging for cigarettes violates international trade rules. It's a landmark decision that backs up regulations removing tobacco companies' branding from packaging, and makes it more likely that such rules will spread. Similar rules have already been introduced in the U.K., Ireland, Hungary, Norway, France and New Zealand, and more are set to follow. BBC

Google Speaker Dumping

A Morgan Stanley analyst has recommended an interesting strategy for Alphabet to win dominance in the smart home speaker market: dumping, basically. Brian Nowak said Thursday that a $3.3 billion investment in giving a Google Home Mini to every home in the U.S. would pay off five times over in profits from retail searches conducted through the devices, and help Alphabet fend off the Amazon threat. Marketwatch

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