Good morning.
I spent yesterday in a series of fascinating discussions with the roughly 100 CEOs who joined Fortune and TIME at our first ever meeting of The CEO Initiative. It’s difficult to summarize the rich discussions that filled the day, but here are a few key takeaways:
There seemed little disagreement among those attending—committed capitalists, all—that capitalism is in crisis. “The capitalistic model no longer works, “ said Aetna CEO Mark Bertolini, in the starkest formulation. “We are in danger of losing our operating license,” said Allstate’s Tom Wilson, who is now also chairman of the U.S. Chamber of Commerce. Capitalism may the best system for creating prosperity that mankind has yet invented, but there was a clear feeling among the CEOs in attendance that the system has to do a better job of spreading its benefits and proving its social value.
That’s the bad news. But the good news was the commitment all the CEOs felt toward addressing the issue. Pepsi CEO Indra Nooyi said the impetus is coming in part from millennial workers. “They no longer look at it as just a paycheck,” she said. “They look at it as ‘How can I go to work and make a difference in society?’” As a result, companies now feel compelled “to work purpose into the core business model of our company.”
That spirit was evident in a series of off-the-record workshops, where CEOs deliberated on specific actions the private sector could take to address social issues—including how to deploy technology to create jobs rather than destroy them; how to build training and reskilling efforts; how to harness the digital health revolution to help billions; how to invest in women, and more. I left the session convinced that there is an ever-growing group of CEOs who understand the need to rethink how business relates to society, and are determined to do so.
Also at the event, J.P. Morgan CEO Jamie Dimon talked about his bank’s effort to help rebuild Detroit, which earned it a spot on the Fortune Change the World list. And Arianna Huffington talked about the steps taken by Uber—on whose board she sits—to reform its culture. You can read more coverage from the event here.
News below.
| Alan Murray | |
| @alansmurray | |
| alan.murray@fortune.com |
Top News
• Collins Nixes the Senate GOP’s Plan B
Maine Senator Susan Collins delivered the coup de grace to Senate Republicans’ latest efforts to repeal the Affordable Care Act, coming out against what she called the “deeply flawed” Graham-Cassidy proposal. The Senate has a waiver that protects it from Democrat filibustering until the end of the month, but Collins’ opposition, alongside that of Rand Paul and John McCain, deprives the GOP of even a simple majority. Fortune
• Kim, Trump and the Diplomatic Off-Ramp
North Korea said that President Donald Trump’s tweets against it amounted to a declaration of war, eliciting outrage from the White House and wry smiles in Hades from Isoroku Yamamoto and Wilhelm Keitel, who know better what an unofficial declaration of war looks like. In a column for Fortune, Daryl G. Kimball of the Arms Control Association argues that the stand-off with North Korea is now on a par with the Cuban Missile Crisis of 1962, with the worrying difference that Presidents Trump and Kim have shown less ability to be flexible in public disputes than Kennedy and Khrushchev. Fortune
• Crude Prices Hit 5-Month High as Erdogan Channels His Inner Putin
Crude oil prices hit a five-month high of over $52.30 a barrel on increasing signs of global inventories falling as the world economy ticks up. Much of what was in short-term term storage is being bought by China as it bolsters its strategic petroleum reserve. And as with every oil rally, geopolitical supply concerns are also playing a part: Turkey’s President Recep Tayyip Erdogan has threatened to shut Iraqi Kurdistan’s export pipeline to the Mediterranean if it declares independence after yesterday’s referendum. FT, metered access
• Nestlé Moves to Mollify Loeb
Nestle promised a slightly faster pace of share buybacks and raised its targeted margin for operating profits, in a much-awaited response to pressure from activist investor Dan Loeb. The higher margins should be possible due to Nestle “swapping out” up to 10% of its product portfolio, CEO Mark Schneider told investors. The measures are incremental rather than transformational, and they mean that Nestle has now made concessions to Loeb on all but one of his demands. The outstanding one is a demand to sell its 23% stake in L’Oreal, but Lilian Bettencourt’s death last week means that that situation is now a lot more fluid, in that Nestlé now has a clear chance to assume control of the cosmetics group. WSJ, subscription required
Around the Water Cooler
• Macron Reverts to Laisser-Faire on Alstom
Siemens is expected to announce later Tuesday it will merge its rail business with France’s Alstom. According to the FT, the deal will create a ‘European champion’ under majority German control, but based in Paris, and with a French CEO – Henri Poupart-Lafarge. Emmanuel Macron, who nationalized a shipyard to stop it falling into Italian hands earlier this year, appears to be returning to his default setting of less state interference in the economy. The deal will create goodwill in Berlin, which may come in useful when Macron pitches Eurozone reform to the new German government. FT, metered access
• Apple and the Law of Diminishing Returns
Shares in Apple hit an eight-week low after a report suggesting weak initial demand for the iPhone X. Fortune’s Don Reisinger dissected that specific story skeptically, but market sentiment has clearly turned cautious since the launch of the X and iPhone 8, amid fears that they will cannibalize each other’s sales and, more specifically, that the X’s $999 price tag is too ambitious. At a little over 17 times trailing 12-month earnings, the stock has a curiously old-economy feel to it all of a sudden. Fortune
• Khosrowshahi’s ‘Sua Culpa’ Breaks the Ice in London
Uber and Transport for London began a slow and uncertain process of reconciliation, as new CEO Dara Khosrowshahi penned an open letter apologizing for past shortcomings and promising to change for the better. That amounts less to a ‘Mea Culpa’ than to a ‘Sua Culpa’ with a sideways look at his predecessor. It was enough for London Mayor Sadiq Khan, who asked TfL to arrange a meeting with Uber to discuss their differences. Harry Kraemer, a professor at Kellogg School of Management at Northwestern University and former CEO of Baxter, wrote for Fortune Monday that “greater transparency on Uber’s part in working with regulators could be a big part of the cultural turnaround the company needs,” but warned it could have to swallow some “bitter medicine” first. Fortune
• Clayton to Brief Senate on SEC Hack
SEC Chairman Jay Clayton will testify before the Senate Banking Committee later Tuesday about the cyber attack it suffered last year. Details so far are scarce, but Reuters reported Monday that the SEC’s EDGAR system for handling regulatory filings has been repeatedly targeted in recent months. Elsewhere, Deloitte confirmed that its e-mail system had been hacked by attackers who compromised an administrator’s account. Deloitte said only a “very small” number of clients had been affected, without elaborating. Fortune
Summaries by Geoffrey Smith; geoffrey.smith@fortune.com
@geoffreytsmith
