By Andrew Ross Sorkin
For years, chief executive officers lived in fear they would become a target of the activist investor Carl Icahn. Now, they live in dread of a different and somewhat more unexpected kind of activist: President Donald Trump.
As corporate executives around the globe try to understand the implications of the Trump administration on their businesses, they seem to be having an almost bipolar reaction: a euphoric sense that regulations and taxes could soon be lowered—which would likely increase their profits and paychecks—yet a simultaneous anxiety that they could become a target of one of the president’s Twitter tirades, which could undo their businesses or possibly their careers.
On Monday Jan 23rd, a bevy of executives—Elon Musk of Tesla, Kevin Plank of Under Armour and Andrew Liveris of Dow Chemical among them—arrived for a 9 a.m. meeting at the White House.
This meeting and similar ones, according to more than a dozen executives who have attended them, are viewed by the executive class not only as an opportunity to help shape policy in their favor, but also, perhaps more important, as a defensive measure aimed at making “friends” with the new president so as to avoid his wrath later.
Make no mistake: Companies are making changes—or, at least, public announcements—aimed (in part or in whole) at appealing to or appeasing Trump. Amazon said it was hiring 100,000 new employees. Ford canceled plans to build a factory in Mexico and said it would create 700 jobs domestically.
Recently, Foxconn, the large Chinese manufacturer behind Apple’s iPhone, said it might spend $7 billion in the United States to build a factory that could employ 50,000 people.
The story, which garnered headlines all over the world, was a clear sop to Trump: In many ways, Foxconn’s statement was seen as a hedge against the possibility that the new president, who has threatened a trade war with China and criticized Apple for manufacturing iPhones abroad, might seek to put further pressure on its business.
Jack Ma, the founder of Alibaba, visited Trump two weeks ago and announced plans to build an online platform that he pledged would create 1 million jobs in the Midwest for farmers and small businesses to export goods to China. The plan had been in the works before Trump was elected, but clearly it helped grease the skids with Trump, who took Ma to pose for pictures in the lobby of Trump Tower.
Masayoshi Son, the leader of SoftBank, was seemingly used as a prop by Trump when he said in December that he planned to invest $50 billion in the United States—even though he had announced plans to start a $100-billion fund more than a month earlier, and much of the money was almost certainly expected to be spent in the United States.
“I have a sneaky feeling that Amazon and many others do not want to rile Trump,” Tim Bajarin president of Creative Strategies Inc., a consulting firm, wrote in an essay on Recode. “What he says and does from his ‘bully pulpit’ could hurt them during his time in office.”
Icahn, a friend and supporter of Trump’s, who was recently named a special adviser on regulation, said in a telephone interview, “You are correct in saying my relationships with companies is somewhat analogous” to Trump’s own relationships with the leaders of them.
“If they are taking advantage of the system, they should be scared,” Icahn said of corporations. “Remember, many of the guys I went after deserved to be scared—but in many cases, I bought stock in companies with managements I liked, and I helped them get things done with recalcitrant boards.”
“It will be a bumpy road,” Icahn said. “But in the long run he will do a great job with the country.”
While some executives may be focused on the optics of their businesses in relation to Trump, Laurence D. Fink, chairman and chief executive of BlackRock, the largest money manager in the world, overseeing over $5 trillion—that’s with a “t”—suggests that each company must rethink its strategy.
“We believe that it is imperative that companies understand these changes and adapt their strategies as necessary,” Fink wrote in a letter to the nation’s top public company executives that he is in the process of sending out. “Not just following a year like 2016, but as part of a constant process of understanding the landscape in which you operate.”
“We will be looking to see how your strategic framework reflects and recognizes the impact of the past year’s changes in the global environment,” Fink added.
One of the big issues companies are likely to confront—and that Trump may confront for them if they aren’t lucky—is how they might use repatriated cash if tax reforms are passed in Washington. (In the 12 months that ended in the third quarter of 2016, BlackRock pointed out that “the value of dividends and buybacks by S&P 500 companies exceeded those companies’ operating profit.”)
Fink warned that he was watching, too. “If tax reform also includes some form of reduced taxation for repatriation of cash trapped overseas, BlackRock will be looking to companies’ strategic frameworks for an explanation of whether they will bring cash back to the US—and if so, how they plan to use it. Will it be used simply for more share buybacks? Or is it a part of a capital plan that appropriately balances returning capital to shareholders with prudently investing for future growth?”
Adam Grant, a professor of management and psychology at the Wharton School of the University of Pennsylvania, said behavioral scientists had a term to describe the way chief executives were thinking about Trump: It is called an “ambivalent relationship.”
That sounds about right.
© 2017 The New York Times
Image credits: Doug Mills/The New York Times