Author Anand Giridharadas was on vacation in August when an email from JPMorgan Chase CEO Jamie Dimon landed in his inbox. “I’d love to talk to you when you have a minute,” the chief executive of the largest American bank wrote.
- Giridharadas tells me he considered putting off responding but decided the message was too interesting to ignore. The two are on opposite sides of a roiling debate over the future of capitalism playing out from corporate C-suites to the Democratic presidential race.
Dimon, chairman of the Business Roundtable, led that group, which lobbies on behalf of top CEOs, to recast its mission statement for the first time in 22 years. The new version plays down the importance of maximizing shareholder value. It commits the group instead to promoting a wider good by focusing among others things on employee well-being, supporting local communities and treating suppliers more fairly.
Critics of concentrated corporate power and soaring inequality, including Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), dismissed the move as an empty rhetorical shift. It’s a view Giridharadas gave voice to in his book, “Winners Take All: The Elite Charade of Changing the World,” which argues plutocrats have preserved their power by gesturing toward good works while ensuring the underlying rules delivering them the spoils never change. And he offered skeptical quotes to the coverage of the Roundtable’s move, including in the Fortune piece that broke the news. (Full disclosure: Giridharadas and I co-edited our high school newspaper and remain friends.)
The phone call between Dimon and Giridharadas wasn’t productive, Giridharadas says. The bank chief wanted to know what more the writer would ask CEOs to do. Giridharadas says he offered some suggestions, including that Roundtable companies align their lobbying with the new mission statement and make compliance with that standard a condition of membership in the group.
Dimon, he says, replied the organization is not “a police force” and can’t regulate how individual companies advocate. He objected to Giridharadas’s contention that some Roundtable members exploit their workers as part of their business model; Dimon said he knows the chief executives to be good people, and besides, “a lot of people just don’t like to work,” he said, according to Giridharadas.
“BRT executives, including our CEO, have engaged with a lot of people around the new Statement of Corporate Purpose,” JPMorgan spokesman Andrew Gray said. “These quotes don’t reflect the conversation.”
But the face-off between corporate heads and advocates of systemic change continues — and promises to be a defining fight in the 2020 presidential contest and beyond. The Roundtable launched the latest salvo, responding to a letter from Warren with one of their own. Warren had asked ten CEOs who signed the Roundtable’s new mission statement what steps they were taking to implement it. And she asked whether they would adopt prescriptions laid out in the Accountable Capitalism Act, her bill to force big companies to secure a federal charter that would legally enshrine their broader responsibilities to stakeholders.
Roundtable president and CEO Josh Bolten made clear the group won't support the legislation. “While we share the goal of increasing economic opportunity for all Americans, we believe the Accountable Capitalism Act would not advance that goal and, in many respects, would be counterproductive, hurting the very people we want to help,” Bolten writes, according to a copy of the letter the Roundtable gave me. “Given our diverse economy, business decisions about how best to serve employees and deliver high-quality goods and services to customers require flexibility within the private sector. Creating a new government entity to oversee those decisions would undermine U.S. competitiveness and result in less innovation.”
Instead, Bolten pointed to actions its members are taking on their own that he framed as making good on their support for the revamped mission statement. Those include raising the minimum pay for their workers and voicing support for a higher federal minimum wage; backing increased infrastructure investment; calling on Congress to overhaul higher-education funding; and endorsing new data privacy standards for consumers.
JPMorgan has taken its own steps. It just announced that 2,100 of its hires last year — 10 percent of those the bank brought aboard — have criminal records, the product of the firm's “second chance” hiring push. Talking up those results this week: Heather Higginbottom, who served in the Obama administration as a deputy budget director and a deputy secretary of state. Now she's running the JPMorgan PolicyCenter, which the bank just launched to push for regulatory changes addressing racial iniquities and other ills.
Meanwhile, the U.S. Chamber of Commerce announced its own bid to make the case businesses can tackle socioeconomic challenges without new government rules, unveiling an initiative called Project GO. “The fundamental challenge we face today is to preserve the ability of our nation’s companies, to grow, innovate, and drive prosperity under a system of free and fair capitalism, while also acknowledging and addressing the shortcomings in the system,” Chamber president Suzanne Clark said in a speech. “There are better answers than sweeping government mandates.”
Fortune President and CEO Alan Murray, who wrote the original story on the Roundtable’s new mission statement and had the exclusive on the group's response to Warren, argues more government regulation won’t deliver better outcomes. “I see more and more companies backing up their purpose and values statements with real action these days,” he wrote in his CEO Daily newsletter. “And I see little reason in history to believe that Warren’s legislation regulating corporate governance would be an effective alternative. But the battle lines are drawn.”
Giridharadas counters that regardless of CEOs’ intentions, expecting them to bring needed foundational changes to an order that’s kinged them is folly.
From his half-hour conversation with Dimon, for example, he concluded the Wall Streeter is “very proud of this BRT initiative. I think he really thinks he's changed capitalism... It was beyond his understanding that voluntary virtue does nothing on its own.”
— Housing market slides. WSJ's Laura Kusisto and Harriet Torry: "The housing market sputtered in September as a lack of homes for sale and high prices disrupted what was shaping up as a rebound in the second half of the year. Sales of previously owned U.S. homes fell 2.2% in September from the previous month to a seasonally adjusted annual rate of 5.38 million, the National Association of Realtors said Tuesday...
"Buying conditions had turned more hospitable in recent months, thanks to falling mortgage rates, a growing selection of homes for sale and slowing home-price growth. But the latter two factors have quickly reversed course and dampened home buyer enthusiasm."
— New Brexit chaos. The Post's William Booth and Karla Adam: "Brexit was once again thrown into chaos Tuesday, after Parliament first voted to support Boris Johnson’s withdrawal deal in principle but then, minutes later, rejected his fast-track timetable for passing the necessary legislation. The yes-no result means that Johnson probably won’t be able to deliver on his “do or die” promise to get Britain out of the European Union by Oct. 31.
"Whether Brexit will be postponed by days, weeks or months remained unclear... Ominously, as a clear threat, the prime minister warned that his government would immediately step up preparations to leave the European Union without a deal at the end of October. But that could be a bluff."
- Stocks fell on the news. Reuters's April Joyner: "U.S. stocks ended lower on Tuesday, giving up early gains after British lawmakers rejected the government’s proposed timetable for passing legislation to ratify its deal to exit the European Union... With Tuesday’s losses the S&P 500 fell below 3000, but remained within 1% of its record closing high in July. The Dow Jones Industrial Average fell 39.54 points, or 0.15%, to 26,788.1, the S&P 500 lost 10.73 points, or 0.36%, to 2,995.99 and the Nasdaq Composite dropped 58.69 points, or 0.72%, to 8,104.30."
— Fed pumps more money into repo market. WSJ's Michael Derby: "The Federal Reserve Bank of New York injected $99.9 billion in temporary liquidity and $7.5 billion in permanent reserves into financial markets Tuesday. The short-term intervention came via $64.90 billion in overnight repurchase agreements with eligible banks, and with a $35 billion repo operation that will run through Nov. 5... Tuesday’s intervention is part of an effort to help tame volatility in short-term rate markets with temporary and permanent injections of liquidity."
- Warren wants answers. CNBC's Jeff Cox: "Sen. Elizabeth Warren said she is worried that banks may try to use the recent tumult in short-term lending markets as an excuse to get regulations eased on the industry... [She] said she is 'concerned' about that issue and whether Wall Street institutions will try to assert that liquidity regulations imposed after the financial crisis are too strict and interfering with lending market functions."
— China resumes U.S. soybean purchases: “Chinese buyers are back in the market for American soybeans after crushers in the Asian nation were granted a new round of tariff waivers, according to people familiar with the matter,” Bloomberg News reports.
“Soybean processors in China were granted permission to buy another 10 million metric tons of U.S. supplies without retaliatory duties, said the people, who asked not to be identified because the information is private. This would be a third round of waivers, with about 5 million tons granted previously.”
Hasbro blames tariffs for canceled orders: “Hasbro shares plunged nearly 17 percent after the toy giant said retailers had canceled or changed orders in response to new and looming tariffs tied to the Trump administration’s trade war with China,” my colleague Abha Bhattarai reports.
“The disclosure comes during a crucial period for the maker of Nerf and My Little Pony, which last year made one-third of its sales between October and December. It also comes after [Trump] delayed tariffs on $156 billion worth of Chinese imports, including toys — originally scheduled for September — to Dec. 15, saying he didn’t want to affect consumers during the holiday shopping season. But executives at Hasbro say the uncertainty of new import duties — and changes in when they will be implemented — has already had an impact.”
— Ross: Talks with E.U. could head off auto tariffs. Reuters: "New negotiations with the European Union could be an alternative to imposing tariffs on automotive imports next month, U.S. Commerce Secretary Wilbur Ross has suggested in an interview with the Financial Times published on Wednesday...
"Trump declared this year that some imported vehicles and parts posed a national security threat, but delayed a decision until November on whether to impose tariffs, so as to allow for more time for trade talks with the European Union. 'One (option) would be to say, "I’m just not going to do anything", the second would be to impose tariffs on some or all (countries) . . . the third might be some other form of negotiation,' Ross said, describing options being considered by Trump."
— Top Trump officials return to Davos in the Desert. NYT's Alan Rappeport, Kate Kelly and Maggie Haberman: "The top echelon of Washington and Wall Street will return to an opulent investment conference in Saudi Arabia next week, a year after American officials and prominent business leaders shunned the gathering amid backlash surrounding the killing of Jamal Khashoggi, a dissident Saudi journalist.
"The Treasury Department confirmed on Tuesday that Treasury Secretary Steven Mnuchin would participate in the Future Investment Initiative gathering in Riyadh. Jared Kushner, President Trump’s son-in-law and senior adviser, will also attend the conference, alongside Brian H. Hook, the State Department’s special envoy overseeing Iran policy, and Avi Berkowitz, an aide to Mr. Kushner, according to people familiar with the matter."
- Wall Street execs, too. "Among those planning to participate are Stephen A. Schwarzman, the chief executive of the Blackstone Group; Dina Powell McCormick, a member of the management committee of Goldman Sachs; and Larry Fink, chief executive of BlackRock. John Waldron, who was named Goldman’s president and chief operating officer in 2018, will attend the conference as well."
— SoftBank takes over WeWork: “SoftBank Group Corp. is set to take control of WeWork after securing a deal that could hand co-founder Adam Neumann a nearly $1.7 billion windfall and sever most of his ties with the troubled office-space start-up,” my colleagues Maureen Farrell and Eliot Brown report.
“WeWork, in danger of running out of cash in the coming weeks, chose a rescue offer from SoftBank over a competing proposal from JPMorgan Chase & Co., according to people familiar with the matter. It had asked both parties to submit proposals by a deadline yesterday. The deal is expected to value the company at about $8 billion, a far cry from what it was aiming for in an initial public offering earlier this year and even less than the $47 billion at which a January investment from SoftBank pegged its worth.”
- What this means for WeWork's employees: “While he will walk away a billionaire, most We employees are left holding stock options that are under water at the roughly $20-a-share valuation implied by the SoftBank deal, according to former executives familiar with the compensation packages. That leaves them with little beyond their salaries and — for thousands set to be laid off — any severance.”
— First high level departure at Boeing amid 737 Max struggles: “Boeing Co. BA 1.79% shuffled the ranks of top management on Tuesday, replacing the head of its jetliner business as it struggles to shore up confidence among customers, investors and lawmakers in the company’s handling of the 737 MAX crisis,” the WSJ's Andrew Tangel and Doug Cameron report.
“The removal of Kevin McAllister is the first high-level departure from Boeing since the second crash of a MAX, in March, triggered a global grounding of its best-selling jet and billions of dollars in losses at the nation’s largest exporter. The executive reshuffle comes on the eve of Boeing’s quarterly earnings.”
— Esper recuses himself from massive Pentagon contract: “Defense Secretary Mark T. Esper has recused himself from a high-profile review of the Pentagon’s controversial JEDI cloud computing contract because his son is employed with one of the initial bidders, a Defense Department spokesman said,” my colleagues Aaron Gregg and Jay Greene report.
“Moving forward, the review is to be handled by Deputy Defense Secretary David Norquist 'out of an abundance of caution,' Pentagon spokesman Jonathan Hoffman said in statement emailed to reporters. Amazon and Microsoft are the only two companies eligible to win the massive award, after Oracle and IBM were eliminated from the competition. Amazon is widely seen as a front-runner because of its experience handling classified data for the CIA.” (Amazon Chief Executive Jeff Bezos owns The Washington Post.)
— Big changes at apparel giants: Nike and Under Armour will both have new CEOs in the new year.
Nike's future: The company said “its longtime CEO Mark Parker is stepping down, effective January of next year,” CNBC's Lauren Thomas and Marc Gilbert report. Park took over from founder Phil Knight in 2006. “Under Parker’s leadership, Nike has seen its stock surge and sales climb. But the company has also faced its share of corporate culture scandals and backlash over controversial marketing campaigns.”
- Who's next: “In a sign of the company’s focus on digital, he will be replaced by John Donahoe, a Nike board member and the CEO of ServiceNow. Donahoe was formerly the CEO of eBay and is chairman of the board at PayPal.
Under Armour's future: “Under Armour, one of the biggest names in sportswear, announced that founder Kevin Plank will step down as chief executive and turn the reins over to his chief operating officer,” my colleague Rachel Siegel reports. Plank as been the Baltimore-based company's only CEO and face since its founding in 1996. “Some had been calling for new leadership at Under Armour, in part, because of troubling reports about its work culture. In 2018, the Wall Street Journal reported that visits to strip clubs were allowable work-related expenses. Other reports highlighted some female and minority employees who said they were disregarded for promotions.”
- Who's next: “Patrik Frisk, who has focused on boosting the lagging North America business since he joined the company in 2017, will assume his new duties on Jan. 1.”
— Investment bankers charged in global insider trading case: “Federal prosecutors in Manhattan have charged six bankers from Goldman Sachs Group Inc., Moelis & Co., Centerview Partners LLC and others with a wide-ranging insider-trading scheme spanning Europe and in the U.S. that yielded tens of millions of dollars in allegedly illegal profits,” the WSJ's Rebecca Davis O’Brien report.
“Four separate indictments unsealed in recent days laid out several interconnected alleged conspiracies that the Manhattan U.S. attorney’s office said represented a 'global insider trading ring.' Insiders at multiple banks obtained nonpublic information about publicly traded companies and provided that information to securities traders, who profited from the illicit scheme, according to indictments in Manhattan federal court.”
- Prosecutors allege that the traders tried to get journalists involved: “One of the traders, in turn, leaked that information to journalists, with the aim of having them publish news articles that could influence stock prices, the indictment alleges. The trader reaped more than $1.2 million through trades pegged to articles based on information he leaked, the indictment alleges.”
- Facebook CEO Mark Zuckerberg is scheduled to testify at a Financial Services Committee hearing about his company.
- Boeing, Anthem, Caterpillar, Ford, Hilton, General Dynamics, Microsoft, Tesla, Spirit Airlines, PayPal, O’Reilly Auto, eBay Inc. and Eli Lilly are among the notable companies reporting their earnings today, per Kiplinger.
- The Urban Institute holds an event on reimagining housing policy.
- Two House Education and Labor Committee subcommittees hold a hearing on preserving worker protections in the modern economy.
- Amazon, American Airlines, 3M, Intel, Comcast, Visa, Southwest Air, Dow, Capital One, Hershey Foods, GMC Holdings, Valero Energy, First Solar and Twitter are among the notable companies reporting their earnings today, per Kiplinger.
- Verizon, Phillips 66 Partners, Goodyear Tire and Anheuser-Busch InBev are among the notable companies reporting their earnings today, per Kiplinger.
From The Post's Tom Toles: