The End of Shareholder Primacy, Again: CEO Daily
Okay, one more time, before week’s end. Yesterday, it was the editors of The Economist who took aim at the Business Roundtable’s new statement of corporate purpose. They had two main arguments:
1. Corporations have a lack of accountability for their social goals; better for governments to do the job.
2. Stakeholder capitalism will lead to a decline in business dynamism.
I am sympathetic to point one. But I spent most of my career covering economic policy out of Washington, and watched the ability of government to take on the most obvious problems steadily decline. Look, for instance, at the need for a complete revamp of worker training programs to deal with the onslaught of technological change. Washington has done close to nothing. Shouldn’t we be glad that business is taking constructive steps to address the problem?
I also understand the historic argument around dynamism. Managerial capitalism in the 1950s and ’60s did indeed lead to sleepy and poorly performing corporations in the 1970s and 80s, as I chronicled in Revolt in the Boardroom.
But forgive me for saying it: this time is different. For one thing, the rapid pace of technological change and the onslaught of disruptive innovation have left most big companies anything but complacent. Yesterday, I wrote that UPS CEO David Abney is more concerned about start-ups then legacy competitors. That’s a common refrain in today’s business world, and is just one of many indications we are in a period of Schumpeterian creative destruction that is driving the best big companies to transform themselves faster than ever before in their histories. I’ve been doing this for four decades, and have never seen CEOs less complacent. The elephants feel like they have to dance, or else.
Second, the desire to solve social problems is itself driving dynamism. If you have any doubt about that, take a look at Fortune’s Change the World list, published earlier this week. By applying their profit-making superpowers to some of the world’s most stubborn problems, companies are driving real social change. It’s been said that companies today are taking on unsolvable problems and solving them, while government is staring at solvable problems, and doing nothing. I’m surprised my friends at The Economist don’t see that.
I’m in Portland this morning, where I’m participating with my daughter in the Hood to Coast 199 mile relay run. If all goes well, I’ll be sore and tired, but back Monday morning.
The massive fires that are taking place in the Amazon have caused spikes in carbon emissions and will increase global warming, scientists have warned. Brazil's far-right president, Jair Bolsonaro, claimed without evidence that NGOs started the fires to discredit him, but it’s likely that the devastation is down to illegal land-clearing by those emboldened by his anti-environmentalist policies. French President Emmanuel Macron is calling the fires a global crisis. Washington Post
HP CEO Dion Weisler is quitting for family health reasons, the PC manufacturer said yesterday. His successor will be HP imaging and printing chief Enrique Lores, who's been with the company for three decades. Wall Street didn't like the news—HP's shares fell 6% in after-hours trading. Fortune
Carriers such as AT&T and Verizon are finally going to seriously crack down on robocalls, in a deal struck with 51 state attorneys general. The robocalls will be blocked before reaching customers—without said customers having to pay for the privilege—and the networks will help law enforcement investigate and prosecute miscreants. Fortune
Toymaker Hasbro is shelling out around $4 billion for Entertainment One, the British owner of preschool brands such as Peppa Pig and PJ Masks. The firms said in a statement: "Hasbro will leverage Entertainment One immersive entertainment capabilities to bring our portfolio of brands that have appeal to gamers, fans and families to all screens globally." Entertainment One investors may want to see a counter-offer, though, as the news prompted the share price to sail past the agreed price. Reuters
AROUND THE WATER COOLER
Overstock CEO Patrick Byrne made the company's shares jump by as much as 15%, by resigning. Byrne had made some seemingly eccentric statements about the "deep state" and his "involvement in certain government matters." He said in a statement: "Though patriotic Americans are writing me in support, my presence may affect and complicate all manner of business relationships, from insurability to strategic discussions regarding our retail business." Board member Jonathan Johnson is now interim CEO. NBC News
Bad news for Facebook's Libra cryptocurrency project: some founding backers (who remain as yet unidentified) told the Financial Times that they're already considering pulling out, thanks to regulatory scrutiny that has somehow come as a surprise to them. Meanwhile, Facebook is apparently annoyed that other members of the nascent consortium aren’t backing the plan more vocally. FT
Tax Cut Hint
White House economic advisor Larry Kudlow claims President Trump will propose another tax cut before the next presidential election. Kudlow: "You very may well see a new rollout of additional middle-class tax relief and small-business tax relief." Not imminently, though, as "we believe the economy is quite healthy." CNBC
Tesla is tapping LG Chem for the batteries in its China-made, China-destined cars. The South Korean firm's batteries will be used first in the Model 3, then the compact crossover Model Y. LG Chem's shares jumped on the news, though this is reportedly not an exclusive arrangement. Bloomberg