But at another level, the story illustrates classically inept leadership at the top, and I don’t mean just by Ailes, but also by 21^st Century Fox CEO James Murdoch and his father, controlling shareholder Rupert Murdoch. We can blame them confidently because the extraordinary nature of the Carlson case leaves no possibility that the Murdochs were ignorant of Ailes’s behavior. In most cases that are settled, the allegations remain only that. But this one included an extremely rare feature, an unhedged, fulsome apology by 21^st Century Fox: “We sincerely regret and apologize for the fact that Gretchen was not treated with the respect and dignity that she and all of our colleagues deserve.” Why the apology? And how was Carlson able to extract $20 million from Fox in mere weeks? Well, it seems she had recordings. She had reportedly been secretly recording her meetings with Ailes for a year and a half. Allegations in her lawsuit, for example that Ailes said, “I think you and I should have had a sexual relationship a long time ago and then you’d be good and better and I’d be good and better,” were apparently transcribed from the recordings.

So while Ailes maintains he has behaved within the law, and no court has made a finding, I think we can give Carlson’s allegations more than average weight in depicting an atmosphere at Fox. It also becomes harder to dismiss the many allegations by other female former Fox anchors who spoke up after Carlson sued. It thus seems impossible that the Murdochs were clueless about how Ailes ran his ship. They must have chosen not to see what was there.

Such behavior is classically inept leadership because it fits an ancient pattern. How does a leader deal with a manager who’s producing knockout results but behaving repugnantly? The right answer is obviously to discipline or fire the manager. Results may suffer for a time, but the culture grows stronger. The far more common response is to look the other way. Great results continue for a time, but the culture is poisoned.

To switch metaphors, 21^st Century Fox skillfully extinguished the fire that Carlson lit, but far greater damage to Fox News had already been done and will take much longer to repair.

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What We're Reading Today

Ackman takes large Chipotle stake 
Bill Ackman's Pershing Square hedge fund disclosed it owns 9.9% of Steve Ells's Chipotle. The stock has been beaten down by the E. Coli scare last year. Ackman will likely question the makeup of Chipotle's board, whose members have a lengthy median tenure of 17 years. CNNMoney

Roger Ailes didn't pay in Carlson settlement 
21st Century Fox publicly apologized to Gretchen Carlson for not allowing her to work with the dignity she deserved and reportedly paid her $20 million to settle her harassment claim against Ailes. But Ailes's lawyer says he will pay none of that sum and did nothing wrong. The Wrap

Cable companies continue to fight the FCC...
...over the commission's plan to open the set-top box market to competition. Representatives for Randall Stephenson's AT&T and the industry organization representing Brian Roberts's Comcast and other cable companies said they would let subscribers watch shows on third-party devices through apps developed under industry standards, circumventing the set-top box. The FCC has proposed a licensing body that would oversee the effort, which cable companies say will freeze innovation. Bloomberg

Palantir sues early investor
Alex Karp's company has sued Marc Abramowitz, claiming the early investor requested confidential information about Palantir projects and used it to file patents of his own. The company has asked the court to forbid Abramowitz from using Palantir's confidential information. Abramowitz hasn't yet responded. Fortune

Building a Better Leader

When it's time for founders to demote themselves
The two founders of travel insurance company Seven Corners realized they could no longer run the business because they weren't great at expanding to large scale, which the company needed to survive. Inc.

Some tactics women use to move up the ladder…
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Companies with profit-sharing...
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Trump Troubles

Questions surround a Trump contribution
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Goldman Sachs bans partners from donating to Trump
Rules that took effect Sept. 1 ban partners from giving to campaigns of any state official running for federal office. Since Trump's VP candidate, Mike Pence, is governor of Indiana, partners can't donate to Trump's campaign. Trump supporters will question the timing of the rule, which allows donations to Hillary Clinton. CEO Lloyd Blankfein hasn't yet disclosed who he will support in the election. Fortune

Koch brothers set up academy
The Grassroots Leadership Academy wants to help the next group of conservative activists shape future policy. Activists will learn how to court moderate voters and champion the free-market principles supported by Charles and David Koch. It's part of a plan to shape the Republican party after the 2016 election, no matter who wins. NYT

Up or Out

Syngenta CFO John Ramsay will retire at the end of the month, to be succeeded by Mark Patrick.  MarketWatch

Morningstar founder Joe Mansueto will step down as CEO at year-end, remaining  chairman and adding the title of executive chairman. Kunal Kapoor will succeed Mansueto as CEO.  Investment News

Fortune Reads and Videos

The U.S. sent $1.3 billion more...
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Allergan lays out a "social contract with patients"
In a blog post, CEO Brent Saunders promised not to raise prices of life-saving drugs dramatically and condemned the practice. Fortune

Starbucks strikes deal with bagel shop
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Qualcomm and AT&T team up...
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