Thursday, 26 Nov 2020

Should C.E.O.s Keep Speaking Out?

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Whither the activist C.E.O.?

As President-elect Joe Biden prepares to assume office in January, Andrew has a big question: Will corporate America’s increasingly outspoken leaders change course for a new political era?

Over the past four years, the role of C.E.O. seemed to change fundamentally. As I’ve written before, many corporate chiefs became public statesmen and stateswomen, weighing in on social and political issues they wouldn’t have dreamed of touching in years past.

Some may see that as a permanent shift. But what if it was a historical outlier?

C.E.O.s like Doug McMillon of Walmart, Ken Frazier of Merck and Ed Stack of Dick’s Sporting Goods may have been forced to take stands because of unease with President Trump’s divisive positions on immigration, racial injustice, the pandemic and more.

It’s unclear whether that calculus changes now. Mr. Biden may pursue policies less friendly to business — namely, on taxes — but he seems likely to run a more predictable administration.

Corporate America may still be more focused on social and political issues than in the past. But its leaders may not feel the need to speak out about them as much anymore. Is that a good or bad thing?

HERE’S WHAT’S HAPPENING

Pfizer unveils encouraging Covid-19 vaccine data, and the market soars. The drugmaker said this morning that early results from its coronavirus treatment trials suggest its vaccine was more than 90 percent effective in preventing infections among volunteers. In response, S&P 500 futures are up nearly 4 percent in premarket trading; Zoom’s shares are down more than 15 percent.

Warren Buffett reopens his checkbook. As part of its earnings report on Saturday, the billionaire’s company Berkshire Hathaway said that it spent a record $9 billion buying back its own stock in the third quarter. But Berkshire’s operating profit dropped 32 percent in the quarter because of the pandemic.

SoftBank is back in the black. The Japanese investment giant reported a $6 billion profit for its most recent quarter, much of that driven by a recovery — on paper at least — of investments by its Vision Funds. Its shares jumped 5 percent on the news.

A small step for hyperfast travel. Virgin Hyperloop, one of several companies working on sci-fi-ish transportation tech, completed its first test involving human subjects: Two volunteers rode in a pod that hit 107 m.p.h.

Turkey’s finance minister quits a day after the country’s central bank chief is ousted. Berat Albayrak, who is also the son-in-law of President Recep Tayyip Erdogan, announced his resignation as finance minister last night, not long after Mr. Erdogan dismissed Murat Uysal at the central bank. It adds to the Turkish economy’s turmoil, with the lira losing 30 percent of its value against the dollar this year.

Biden’s Day 1 agenda

Although the current resident is not going quietly, Joe Biden is preparing for his move to the White House. His transition team has announced four priorities for his first days in office: Covid-19, economic recovery, racial equity and climate change. But his room to maneuver on these and other issues will be limited by a (potentially) Republican-controlled Senate, divisions within the Democratic Party and a fragile economy.

Here are some of the biggest challenges President-elect Biden faces:

Divisions among Democrats. Immediately after the race was called, the progressive and moderate wings of the party blamed each other for Democrats ceding ground in the House and failing to win clear control of the Senate. The progressive standard-bearer Representative Alexandria Ocasio-Cortez said policies like Medicare for All and the Green New Deal were popular, and that moderate candidates simply ran weak campaigns. Moderates like Representative Conor Lamb said messages like “defund the police” hurt them on the trail, and warned against shifting the party to the left.

Gridlock with Republicans. Whether Republicans keep hold of the Senate won’t be decided until two Georgia runoff elections in January. If they do, as prediction markets imply, Mr. Biden has a solid working history with the majority leader, Mitch McConnell. That makes some bipartisan action on matters like infrastructure and economic stimulus possible, though after such a bitter election neither side may be in a mood to compromise.

There is plenty that Mr. Biden could do with executive orders, especially on issues like the environment, but changes enacted via legislation would be more enduring.

Balance the cabinet. Mr. Biden’s first major appointments will come today: a coronavirus task force. Future appointments will reveal how he plans to balance the concerns of the left, right and center. (Progressives reportedly have a wish list and a blacklist.) Some names to watch at two key agencies, from a variety of ideological schools:

Treasury Department: Federal Reserve Bank of Atlanta chief Raphael Bostic, Fed governor Lael Brainard, TIAA C.E.O. Roger Ferguson, former Fed governor and deputy Treasury secretary Sarah Bloom Raskin, and Senator Elizabeth Warren.

Commerce Department: C.E.O. of Ariel Investments Mellody Hobson, former Virginia governor Terry McAuliffe, and former eBay C.E.O. (and Republican) Meg Whitman, according to Politico.

Raise taxes. Without Senate control, overhauling Mr. Trump’s 2017 tax cut would be tough, making Mr. Biden’s proposals to raise rates on corporations and the wealthy, remove the carried interest loophole, and alter the step-up basis on inherited assets look unlikely. But tweaking how regulations are applied on companies’ foreign income could be possible through executive action.

Stimulate the economy. With Mr. Trump focused on vote-counting lawsuits and the parties turning their attention to the Georgia Senate runoffs, the prospects for a new stimulus package in the lame-duck period is anyone’s guess. The Biden administration can use executive orders to shore up relief for student loan borrowers and try to repurpose funds from previous stimulus efforts, but a new package could be up in the air for a while.

Cool down trade tensions. The days of presidential tweets threatening trade wars may be over, but few foresee a wholesale change. Mr. Biden’s focus is at home, so pandemic relief is the priority even if allies press him to act on tariffs. Longer term, the Biden economic plan is focused on “bringing home critical supply chains so that we aren’t dependent on other countries in future crises.”

Reimpose financial regulations. Mr. Biden is expected to unwind Mr. Trump’s deregulatory push on payday lenders, banking discrimination, the Dodd-Frank law and other issues. To help with the reversal, Mr. Biden is expected to tap Gary Gensler, a former regulator in the Obama administration, as an adviser, according to The Wall Street Journal.

Take on Big Tech. Justice Department appointments will signal the new administration’s priorities in antitrust investigations; Mr. Biden has already called out Amazon as not paying enough taxes and said that a legal shield for social networks known as Section 230 should be revoked. Telecoms will be on the watch for major infrastructure spending, which could include investment in broadband across the country, a plan both parties support.

Make energy cleaner. Mr. Biden is seeking a carbon pollution-free power sector by 2035, and plans to invest in clean-energy technologies. Oil and gas suppliers foresee regulatory difficulties, including trouble striking new Bureau of Land Management pipeline deals and gaining access to federal property for fracking.

Defend Obamacare. After the country gets “past the pandemic,” the Biden team said it will aim to keep health insurance protections for pre-existing conditions and to advance “a Medicare-like public option.” Centrist Democrats oppose the latter, as do health insurers and conservatives, some of whom are still battling Obamacare. As it happens, the Supreme Court will hear arguments about the Affordable Care Act tax mandate tomorrow (the law is expected to survive even if that clause may not).

Boost jobs. Elements of the Biden plan may be fine with Republicans, like bolstering domestic manufacturing. But the emphasis on unions and “an updated social contract” may not survive a divided Congress. The message from voters on ballot initiatives related to labor markets was mixed: Florida’s minimum wage increase passed, but so did a California effort to classify app-based drivers as contractors instead of employees, undermining a state law Democrats cite as a model for 21st-century gig work.

“Think about your legacy and what’s best for the country. Concede graciously and call for unity from all who have supported you.”

— The hedge fund manager Bill Ackman, in a tweet directed at President Trump.

The week ahead

Investors anticipate the release of Airbnb’s I.P.O. prospectus, potentially on Thursday, ahead of a blockbuster listing that is expected to raise around $3 billion at a $30 billion valuation (and that’s after a pandemic hit the travel industry).

In earnings highlights: the mall owner Simon Property Group, which acquired Brooks Brothers, Forever 21 and J.C. Penney during the downturn, reports today; Adidas and Lyft on Tuesday; Cisco, Disney, Palantir (its first earnings as a public company) and Tencent on Thursday; and DraftKings on Friday.

Trade talks between Britain and the E.U. enter a critical phase, with both sides saying that Nov. 15 is the deadline for a deal to be struck before the Brexit transition period ends. If there is no agreement, tariffs and other barriers will be imposed on Jan. 1.

In time for the holiday shopping season, Apple is expected to unveil its first Macs without Intel chips at an event on Tuesday. In the gaming world, Microsoft launches new XBox consoles on Tuesday and Sony unveils the PlayStation 5 on Thursday.

THE SPEED READ

Deals

The activist hedge fund Elliott Management has taken a stake in F5 Networks, a maker of support software, with an aim of increasing the company’s stock price. (WSJ)

The Japanese data company Uzabase agreed to sell Quartz, the news site, to its top managers, two years after buying it for $86 million. (WSJ)

Evergrande, the embattled Chinese real estate developer, abandoned efforts to list in China and refocused on raising money from private investors. (Bloomberg)

Politics and policy

Government watchdogs have been flooded with reports of fraud involving the Paycheck Protection Program. (WSJ)

Tech

How Chinese regulators are rewriting fintech rules to clamp down on companies like Ant Group. (FT)

Apple halted new business with Pegatron, one of its iPhone suppliers, after discovering what it said were labor violations. (Bloomberg)

Best of the rest

“The Battle to Keep America’s Black Banks Alive” (WSJ)

“Digital nomads” hoping to ride out the pandemic abroad are getting tripped up by visas, taxes and more. (NYT)

R.I.P. Alex Trebek, the quick-witted host of “Jeopardy!” for a record-setting 37 years, who died on Sunday at age 80. (NYT)

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