CEO Daily: Monday, 5th December

This weekend’s Coins2Day/TIME Global Forum left me convinced that global business is at a tipping point. The shareholder-first model that guided many companies in the post-World-War II era is dying, and a new model is struggling to emerge. The change has a number of causes, but chief among them:

• The stagnating growth and inequality in developing countries that has left more than two-thirds of those populations with flat or declining incomes for the last decade (see McKinsey Global Institute report Poorer Than Their Parents.)

• The fear of spreading populism that has the potential to tear down the current economic system (with Italian Prime Minister Renzi–arguably–as the latest victim).

• The aspirations of a new generation of leaders and workers who sincerely want to build a better world.

The group that gathered in Rome was a self-selected lot, and might be viewed as preaching among the choir. Even so, it’s a chorus whose members wield considerable influence. It included CEOs from companies employing some 4.7 million people, including McKinsey, Siemens, IBM, Barclays, Shell, Flex, Lenovo, Allstate, Monsanto, United Technologies, Sprint, Telecom Italia, Campbell Soup, Virgin Group, Walgreens Boots, WPP, Novartis, Dow Chemical, Hyatt, Deloitte, Boston Consulting Group, Baxter, Teneo, Insigniam, Mastercard and more. In their deliberations, they agreed to 20 specific actions to address global economic and social problems, ranging from building a corps of community health workers in poor regions of the world, to creating digital identities for the 2 billion people who lack access to financial services, to educating and training displaced, unemployed and underemployed workers.

The actions proposed were not charity, but rather a different way to think about their businesses. Attendees urged their business colleagues to embrace under-served markets, expand basic health services, and improve worker training as part of their core business activities. Their underlying assumption was that such efforts will only be sustained if they are also profitable.

The group’s report was shared Saturday with Pope Francis, who has been an advocate of broader prosperity and a sometime critic of business. In an unexpected move, the Pontiff took time to shake the hands and look into the eyes of each of the CEOs. The Pope is one of the few leaders who has retained an aura of moral authority in this age of outrage. The lesson for CEOs: they need to boost their own moral authority to thrive in the years ahead.

You can read more coverage of the forum here and a full report on the proceedings here. News below.

More news below.

Top News

• Ciao, Matteo

Italy’s Prime Minister Matteo Renzi said he’ll resign after losing a referendum on electoral reform by a crushing 40%-60% margin. Financial markets have weathered an initial setback (helped by the fact that Austria rejected the far right in the re-run of its presidential election Sunday), but Italy’s government bonds and shares in the country’s banks are badly underperforming as political uncertainty sets in. The immediate consequence for the economy is that the planned recapitalization of Monte dei Paschi, Italy’s third-largest bank by assets, is now in trouble, and may require a politically explosive ‘bail-in’ of junior bondholders, many of whom are relatively vulnerable retail investors. Much will depend on how quickly a new government can be formed–and who's in it. Coins2Day

• Dakota Access Pipeline Protesters Rejoice, For Now

The U.S. Army Corps of Engineers rejected an application from the operators of the Dakota Access Pipeline to build the last stage of a link that would carry crude oil from the Bakken shale formation to Illinois. It’s a victory for the Native American and environmental coalition that has campaigned against the $3.8 billion project and a defeat for its backer, Energy Transfer Partners and Sunoco. President-elect Donald Trump has indicated he supports the project, so the campaigners’ victory may prove short-lived. Coins2Day

• Apple Drops More Hints About Car Project

Apple gave another hint about its intentions in the automotive sphere with a letter to the National Highway Traffic Safety Administration offering feedback on its proposed regulations for self-driving cars. The letter doesn’t fully acknowledge the existence of Apple’s autonomous vehicle project, but does say the company is “investing heavily in machine learning and automation.” Its most notable recommendation is that the NHTSA require manufacturers to share data on crashes and near-misses, something that would eliminate Tesla Motors’ substantial lead in that area. Coins2Day

• Trump Turns His Sights on Rexnord

President-elect Donald Trump attacked another U.S. Company for its plans to move jobs to Mexico over the weekend, shaming Milwaukee-based bearings maker Rexnord through his Twitter account. Rexnord plans to move production from a factory in Indianapolis to Monterrey by the middle of next year, The Wall Street Journal cited union sources as saying. Vice President-elect Mike Pence told ABC at the weekend he expected Trump to make such interventions “on a day-by-day basis.”   WSJ, subscription required

Around the Water Cooler

• Exxon CEO Tillerson in Line for State?

ExxonMobil’s long-serving CEO Rex Tillerson is in the frame to be the next Secretary of State, The Wall Street Journal reported transition officials as saying Sunday. President-elect Donald Trump is due to meet with Tillerson and other candidates (including Dana Rohrbacher, a Rebublican congressman from California) later this week. Tillerson has accumulated huge experience of foreign leaders, but how he would recuse himself from dealing with all those countries where ExxonMobil is present is far from clear. To take just one example, Exxon is due to bid later today at the first-ever auctions of drilling rights in Mexican waters of the Gulf of Mexico. By the by, crude oil futures hit their highest level in 17 months overnight on a wave of post-OPEC enthusiasm. WSJ, subscription required

• EU Threatens Social Media Companies

Tech giants including Facebook, Twitter, Google's YouTube and Microsoft will have to act faster to tackle online hate speech or face laws forcing them to do so. EU Justice Commissioner Vera Jourova said social media operators’ attempts at self-regulation were failing–tackling only 40% of recorded incidents within 24 hours, rather than the 100% targeted. Europe has fewer scruples about regulating free speech given the recent spate of terror attacks and the social pressures that have increased in the wake of the refugee crisis. Coins2Day

• Coach Eyes a Burberry Bargain

Upmarket purse-maker Coach has been looking at buying U.K. Luxury group Burberry but has been knocked back more than once by the British group’s management, according to the Financial Times. Burberry had suffered as much as any western luxury group from the Chinese ‘anti-corruption’ clampdown that hit conspicuous consumption. The U.K. Group re-jigged its top management in the summer but is yet to see any meaningful turnaround in its performance or share price, to the frustration of investors.   Coins2Day

• Election Hasn’t Dinted Buffett’s Optimism

Warren Buffett has lost none of his optimism about the American economy despite backing the wrong horse in the presidential election. In an interview with Coins2Day’s Stephen Gandel, Buffett said he isn’t changing his investment strategy, saying they would love to grow in solar energy and repeating his faith in wind power, despite concerns that the new President will cut back federal subsidies for renewables. He also said Berkshire Hathaway’s utility business to be “a whole lot bigger” in 10 or 20 years. Coins2Day

Summaries by Geoffrey Smith [email protected];

@geoffreytsmith