China Talks, AT&T Plans, CEO Turnover: CEO Daily for September 13, 2018

September 13, 2018, 10:38 AM UTC

Good morning.

Members of Fortune’s CEO Initiative had a conference call yesterday with Katherine Gehl and Michael Porter, who you may remember teamed up in Fortune last year to write “Why Politics Is Failing America.” It was an innovative analysis that applied the competitive strategy tools Porter developed for business to U.S. politics, concluding it had all the dysfunctional characteristics of a duopoly. The system works well for the participants—party enthusiasts who can raise lots of money and motivate their core supporters—but fails to serve the interests of the ultimate consumers: U.S. citizens.

In yesterday’s call, Gehl and Porter talked about the research they have been doing since then on political reform. “Washington is working exactly how it is designed to work, and delivering what it is designed to deliver. But it is not designed for us,” Gehl said, noting that some 43% of Americans now identify as independents. “In any other industry this large with this much dissatisfaction, you would see new entrants,” Porter said. But the party duopoly has made that all but impossible.

What’s the solution? The one they emphasized on yesterday’s call was this: Hold open primaries that choose the top four candidates, regardless of party affiliation, followed by rank-choice general elections with “instant run-offs.” That would ensure the candidate with the most support would win the race, regardless of party affiliation.

The two are focusing their efforts on congressional elections, whose rules are set in many cases by state legislators. They called on the CEOs to join their effort to push those legislators for reform. “We in business have been drawn into the partisan dysfunction,” Porter said, making campaign donations to ensure access for business lobbyists. “We need to look at ourselves,” and recognize that the political-industrial complex has “lost the trust of a lot of Americans.”

Amen to that. More news below.

Top News

China Talks

The U.S. has asked China for another round of trade talks, a development which has boosted U.S. equities—maybe that mega-tranche of new tariffs won't be coming after all. The negotiations would most likely take place in Washington. Chinese Foreign Ministry spokesman Geng Shuang said China welcomed the invitation, adding: "China has always held that an escalation of the trade conflict is not in anyone’s interests. In fact, from last month’s preliminary talks in Washington, the two sides’ trade talk teams have maintained various forms of contact, and held discussions on the concerns of each side." Reuters

AT&T Plans

AT&T CEO Randall Stephenson told The Wall Street Journal that the firm wants to step up its investments in HBO in order to better compete with Netflix. He said AT&T will use data on its customers' habits to "inform its content bets"—while also boosting its advertising analytics business to give media companies more of an alternative to Facebook and Google. WSJ

CEO Turnover

A new report shows unprecedented turnover in the ranks of U.S. CEOs. The study, from the consultancy Challenger, Gray and Christmas, also shows that women are increasingly taking over newly vacated CEO positions. Apparently, 154 CEOs left their roles in August, the highest number since September 2006 when there were 152 departures. Fortune

Apple Prices

Apple's newest iPhones are, again, its priciest ever. The cheapest model is the iPhone XR, which at $749 is $50 more expensive than last year's iPhone 8. The most expensive, the $1,099 iPhone XS Max, is $100 more expensive than last year's iPhone X. The strategy didn't help Apple sell more phones in the last year, but it did lead to a 14% jump in revenue. Apple must be hoping it works again. Fortune

Around the Water Cooler

Code Brown

Former British Prime Minister Gordon Brown has a dire warning about the next financial crisis: the problem, he says, is that this time round countries won't be able to sufficiently coordinate their response, due to a breakdown in international cooperation. "This is a leaderless world and I think when the next crisis comes, and there will be a future crisis, we'll find that we neither have the fiscal or monetary room for manoeuvre or the willingness to take that action," he said. BBC

NAFTA Leverage

Who has the leverage in the NAFTA talks? There are three ways of looking at it, according to this Bloomberg piece: President Trump does, due to his initiation of the process and divide-and-conquer strategy; or Canada does, due to the math on new car rules; or Congress does—and Congress may look very different by the time it gets round to voting on the new deal, after the midterms. Bloomberg

Snowden Aftermath

In a case inspired by the revelations of NSA whistleblower Edward Snowden, the European Court of Human Rights has ruled that British spies broke European rules on privacy and free expression with the way they ran their mass surveillance regime. However, the court said that the GCHQ intelligence agency's use of information collected by the NSA was legal. Fortune

Just Undo It

The mayor of Kenner, a suburb of New Orleans, banned the recreation department from buying Nike products, after the company ran advertising featuring the knee-taking NFL star Colin Kaepernick. But then Ben Zahn had to do a u-turn, rescinding the order on the advice of the city attorney. Zahn: "My patriotism will not waiver, but my focus needs to be on the city of Kenner and the many great projects we have in store for our city." NBC

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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