Jeff Bezos Takes Over The World

According to this article from the Wall Street Journal, Amazon CEO Jeff Bezos has created a winning business formula which will soon allow him to bypass all his rivals— Amazon, Apple, Facebook and Google—and leave them far behind. What is his strategy? His company does not take profits; it breaks even instead.

The analysis of Amazon’s business tactic of not taking profit, contained in this article, seems to turn all previous conjectures about the evils of “the bottom line” approach in business (“profit above all else”) on their heads. It is precisely because it takes no profit that Amazon is outstripping every other company in America—which  raises its market evaluation, allows it to pay very little in taxes and  to reduce employment through greater work efficiency.  

What would Adam Smith have to say about this?  

By SCOTT GALLOWAY, September 25, 2017 for The Wall Street Journal

 

 

 

 

 

 

 

 

 

Why does Amazon’s ascent matter? Aren’t lower prices and greater efficiencies better for everyone? They are, in all the obvious ways, but that’s not a complete picture. Amazon’s seemingly boundless growth forces us to wrestle with difficult questions about the reasons for its dominance.

For one, Amazon, unlike any other firm its size, has changed the basic compact with financial markets. It has replaced the expectation for profits with a focus on vision and growth, managing its business to break even while investors bid up its stock price.

This radical approach has provided the company with a staggering advantage in free-flowing capital. Google, Facebook, Wal-Mart and most Fortune 500 companies are saddled with expectations of profits. Many firms would be much more innovative if they were given a license to operate without the nuisance of profitability. Amazon has thus had enormous capital on hand to invest in delivery networks, especially the crucial last link for getting goods to the doorsteps of consumers, without having to worry that they don’t yield immediate profits.

Amazon’s strategy of break-even operations also means that it has virtually no profits to tax. Since 2008, Wal-Mart has paid $64 billion in federal income taxes, while Amazon has paid just $1.4 billion. Yet, while paying low taxes, Amazon has added $220 billion in value to the stock held by its shareholders over the past 24 months—equivalent to the entire market capitalization of Wal-Mart.

Something is deeply amiss when a company can ascend to almost a half trillion dollars in market value—becoming the fifth most valuable firm in the world—without paying any meaningful income tax. Does Amazon really owe so little to support public revenue and public needs? If a giant firm pays less than the average 24% in income taxes that the companies of the S&P 500 pay, it logically means that less-successful firms pay more. In this way, Amazon further adds to the winner-take-all tendencies plaguing our economy.

Because Amazon is more efficient than other retailers, it is able to transact the same amount of business with half the employees. If Amazon continues to grow its business by $20 billion a year, the annual toll of lost jobs for merchants, buyers and cashiers will be in the tens of thousands by my calculations. Disruption in the U.S. labor force is nothing new—we have just never dealt with a company that is so ruthless and single-minded about it.

I recently spoke at a conference the day after Jeff Bezos. During his talk, he made the case for a universal guaranteed income for all Americans. It is tempting to admire his progressive values and concern for the public welfare, but there is a dark implication here too. It appears that the most insightful mind in the business world has given up on the notion that our economy, or his firm, can support that pillar of American identity: a well-paying job.

Amazon has brought us many benefits, but we all must recognize that the rise of the One brings with it much more than free two-day delivery. “Alexa, is this a good thing?”

 Scott Galloway is a professor of marketing at the NYU Stern School of Business and the author of “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google,” to be published on Oct. 3 by Portfolio.

 

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“Affluent? Upper Class? No, Not Me.”

A most interesting article from this Sunday’s New York Times gives us a chance to look at the lifestyle of today’s very rich. They differ considerably from those of other periods of extreme wealth  in America such as the Gilded Age, the Roaring Twenties or even the immediate post-war WASP upper class, in that  they prefer to hide their money and pretend to be hard-working middle class people, a “meritocracy” rather than an “aristocracy.” 

By RACHEL SHERMAN, September 10, 2017 forThe New York Times

Nearly all [the interviewed] were in the top 1 or 2 percent.

These people agreed to meet with me as part of research I conducted on affluent and wealthy people’s consumption. I interviewed 50 parents with children at home, including 18 stay-at-home mothers. Highly educated, they worked or had worked in finance and related industries, or had inherited assets in the millions of dollars. Nearly all were in the top 1 percent or 2 percent in terms of income or wealth or both. They came from a variety of economic backgrounds, and about 80 percent were white. . . .

We often imagine that the wealthy are unconflicted about their advantages and in fact eager to display them. Since Thorstein Veblen coined the term “conspicuous consumption” more than a century ago, the rich have typically been represented as competing for status by showing off their wealth. Our current president is the conspicuous consumer in chief, the epitome of the rich person who displays his wealth in the glitziest way possible.

The Gilded Age

Yet we believe that wealthy people seek visibility because those we see are, by definition, visible. In contrast, the people I spoke with expressed a deep ambivalence about identifying as affluent. Rather than brag about their money or show it off, they kept quiet about their advantages. They described themselves as “normal” people who worked hard and spent prudently, distancing themselves from common stereotypes of the wealthy as ostentatious, selfish, snobby and entitled. Ultimately, their accounts illuminate a moral stigma of privilege.

The ways these wealthy New Yorkers identify and avoid stigma matter not because we should feel sorry for uncomfortable rich people, but because they tell us something about how economic inequality is hidden, justified and maintained in American life.

Keeping silent about social class, a norm that goes far beyond the affluent, can make Americans feel that class doesn’t, or shouldn’t, matter. And judging wealthy people on the basis of their individual behaviors — do they work hard enough, do they consume reasonably enough, do they give back enough — distracts us from other kinds of questions about the morality of vastly unequal distributions of wealth. . . .

The stigma of wealth showed up in my interviews first in literal silences about money. When I asked one very wealthy stay-at-home mother what her family’s assets were, she was taken aback. “No one’s ever asked me that, honestly,” she said. “No one asks that question. It’s up there with, like, ‘Do you masturbate?’ ”

“Nobody knows how much we spend.”

Another woman, speaking of her wealth of over $50 million, which she and her husband generated through work in finance, and her home value of over $10 million, told me: “There’s nobody who knows how much we spend. You’re the only person I ever said those numbers to out loud.” She was so uncomfortable with having shared this information that she contacted me later the same day to confirm exactly how I was going to maintain her anonymity. Several women I talked with mentioned that they would not tell their husbands that they had spoken to me at all, saying, “He would kill me,” or “He’s more private.”

These conflicts often extended to a deep discomfort with displaying wealth. Scott, who had inherited wealth of more than $50 million, told me he and his wife were ambivalent about the Manhattan apartment they had recently bought for over $4 million. Asked why, he responded: “Do we want to live in such a fancy place? Do we want to deal with the person coming in and being like, ‘Wow!’ That wears on you. We’re just not the type of people who wear it on our sleeve. We don’t want that ‘Wow.’ ” His wife, whom I interviewed separately, was so uneasy with the fact that they lived in a penthouse that she had asked the post office to change their mailing address so that it would include the floor number instead of “PH,” a term she found “elite and snobby.”

My interviewees never talked about themselves as “rich” or “upper class,” often preferring terms like “comfortable” or “fortunate.” Some even identified as “middle class” or “in the middle,” typically comparing themselves with the super-wealthy, who are especially prominent in New York City, rather than to those with less.

When I used the word “affluent” in an email to a stay-at-home mom with a $2.5 million household income, a house in the Hamptons and a child in private school, she almost canceled the interview, she told me later. Real affluence, she said, belonged to her friends who traveled on a private plane.

Others said that affluence meant never having to worry about money, which many of them, especially those in single-earner families dependent on work in finance, said they did, because earnings fluctuate and jobs are impermanent.

The Roaring Twenties

American culture has long been marked by questions about the moral caliber of wealthy people. Capitalist entrepreneurs are often celebrated, but they are also represented as greedy and ruthless. Inheritors of fortunes, especially women, are portrayed as glamorous, but also as self-indulgent.

The negative side of this portrayal may be more prominent in times of high inequality (think of the robber barons of the Gilded Age or the Gordon Gekko figures of the 1980s). In recent years, the Great Recession and Occupy Wall Street, which were in the background when I conducted these interviews, brought extreme income inequality onto the national stage again. The top 10 percent of earners now garner over 50 percent of income nationally, and the top 1 percent over 20 percent.

 A decades–long shift in the composition of the wealthy.

It is not surprising, then, that the people I talked with wanted to distance themselves from the increasingly vilified category of the 1 percent. But their unease with acknowledging their privilege also grows out of a decades-long shift in the composition of the wealthy. During most of the 20th century, the upper class was a homogeneous community. Nearly all white and Protestant, the top families belonged to the same exclusive clubs, were listed in the Social Register, educated their children at the same elite institutions.

The post-war WASP upper class

This class has diversified, thanks largely to the opening of elite education to people of different ethnic and religious backgrounds starting after World War II, and to the more recent rise of astronomical compensation in finance. At the same time, the rise of finance and related fields means that many of the wealthiest are the “working rich,” not the “leisure class” Veblen described. The quasi-aristocracy of the WASP upper class has been replaced by a “meritocracy” of a more varied elite. Wealthy people must appear to be worthy of their privilege for that privilege to be seen as legitimate.

Being worthy means working hard, as we might expect. But being worthy also means spending money wisely. In both these ways, my interviewees strove to be “normal.”

Scott and his wife had spent $600,000 in the year before our conversation. “We just can’t understand how we spent that much money,” he told me. “That’s kind of a little spousal joke. You know, like: ‘Hey. Do you feel like this is the $600,000 lifestyle? Whooo!’ ” Rather than living the high life that he imagined would carry such a price tag, he described himself as “frenetic,” asserting, “I’m running around, I’m making peanut butter and jelly sandwiches.” Having money does not mean, in his view, that he is not ordinary.

The people I talked with never bragged about the price of something because it was high; instead, they enthusiastically recounted snagging bargains on baby strollers, buying clothes at Target and driving old cars. They critiqued other wealthy people’s expenditures, especially ostentatious ones such as giant McMansions or pricey resort vacations where workers, in one man’s sarcastic words, “massage your toes.”

They worried about how to raise children who would themselves be “good people” rather than entitled brats. The context of New York City, especially its private schools, heightened their fear that their kids would never encounter the “real world,” or have “fluency outside the bubble,” in the words of one inheritor. Another woman told me about a child she knew of whose father had taken the family on a $10,000 vacation; afterward the child had said, “It was great, but next time we fly private like everyone else.”

To be sure, these are New Yorkers with elite educations, and most are socially liberal. Wealthy people in other places or with other histories may feel more comfortable talking about their money and spending it in more obvious ways. And even the people I spoke with may be less reticent among their wealthy peers than they are in a formal interview.

 A deep tension at the heart of the American dream.

Nonetheless, their ambivalence about recognizing privilege suggests a deep tension at the heart of the idea of American dream. While pursuing wealth is unequivocally desirable, having wealth is not simple and straightforward. Our ideas about egalitarianism make even the beneficiaries of inequality uncomfortable with it. And it is hard to know what they, as individuals, can do to change things.

In response to these tensions, silence allows for a kind of “see no evil, hear no evil” stance. By not mentioning money, my interviewees follow a seemingly neutral social norm that frowns on such talk. But this norm is one of the ways in which privileged people can obscure both their advantages and their conflicts about these advantages.

 

Today’s “meritocracy”

And, as they try to be “normal,” these wealthy and affluent people deflect the stigma of wealth. If they can see themselves as hard workers and reasonable consumers, they can belong symbolically to the broad and legitimate American “middle,” while remaining materially at the top.

These efforts respond to widespread judgments of the individual behaviors of wealthy people as morally meritorious or not. Yet what’s crucial to see is that such judgments distract us from any possibility of thinking about redistribution. When we evaluate people’s moral worth on the basis of where and how they live and work, we reinforce the idea that what matters is what people do, not what they have. With every such judgment, we reproduce a system in which being astronomically wealthy is acceptable as long as wealthy people are morally good.

Calls from liberal and left social critics for advantaged people to recognize their privilege also underscore this emphasis on individual identities. For individual people to admit that they are privileged is not necessarily going to change an unequal system of accumulation and distribution of resources.

Instead, we should talk not about the moral worth of individuals but about the moral worth of particular social arrangements. Is the society we want one in which it is acceptable for some people to have tens of millions or billions of dollars as long as they are hardworking, generous, not materialistic and down to earth? Or should there be some other moral rubric, that would strive for a society in which such high levels of inequality were morally unacceptable, regardless of how nice or moderate its beneficiaries are?

Rachel Sherman is an associate professor of sociology at the New School and the author of “Uneasy Street: The Anxieties of Affluence,” from which this essay is adapted.

The Radical Right’s Stealth Plan for America

This book review from The New York Times reveals how the Right has been working successfully undercover for a long time to undermine our democracy and who the people are at its helm.

James McGill Buchanan, shortly after notice of his Nobel Prize in Economics

Book review by HEATHER BOUCHEY for The New York Times

. . . In the United States, promising and then delivering services and protections for the majority of voters provides a path for politicians to be popularly elected. [The economist James McGill] Buchanan was concerned that this would lead to overinvestment in public services, as the majority would be all too willing to tax the wealthy minority to support these programs. So Buchanan came to a radical conclusion: Majority rule was an economic problem. “Despotism,” he declared in his 1975 book “The Limits of Liberty,” “may be the only organizational alternative to the political structure that we observe.”

Buchanan therefore argued for “curbing the appetites of majority coalitions” by establishing ironclad rules that would curb their power. As he was known for saying, “the problems of our times require attention to the rules rather than the rulers.” In 1986, he was awarded the Nobel Memorial Prize in Economic Science for “his development of the contractual and constitutional bases for the theory of economic and political decision making.”

Buchanan, however, also had what MacLean calls a “stealth” agenda. He knew that the majority would never agree to being constrained. He therefore helped lead a push to undermine their trust in public institutions. The idea was to get voters to direct their ire at these institutions and divert their attention away from increasing income and wealth inequality. . . .

Buchanan decided he needed to influence policy at a deeper level. In the ensuing years, he sought to lead an economic and political movement in which he stressed that “conspiratorial secrecy is at all times essential” to mask efforts to protect the wealthy elite from the will of the majority. In September 1973, Buchanan held the inaugural meeting of the International Atlantic Economic Society, arguing for the need to “create, support and activate an effective counterintelligentsia” to reshape the way people thought about government. He believed the center-left controlled academia and “effectively indoctrinated political actors in both parties,” MacLean writes. To fight back, conservatives needed to develop new surrogates who could be “indoctrinated” in turn with right-wing ideas, and then “mobilized, organized and directed” to disseminate them. . . .

Seeing the name of an unfamiliar economist eventually led her to rooms full of documents that made clear how “operatives” had been trained “to staff the far-flung and purportedly separate, yet intricately connected, institutions funded by the Koch brothers and their now large network of fellow wealthy donors.” Buchanan’s papers revealed how, from a series of faculty perches at several universities, he spent his life laying out a game plan for a right-wing social movement.

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David and Charles Koch

One part of his plan involved Social Security. The election of Ronald Reagan as president in 1980 was a watershed for conservatives, yet it quickly became clear that he, too, would succumb to political pressure. By 1982, Reagan’s fight to end Social Security — long a bugbear of Buchanan’s — was faltering. Amid that debate, the libertarian Cato Institute, funded by the brothers Charles and David Koch, made privatization of Social Security its top priority and turned to Buchanan for a master plan. Buchanan told them that “those who seek to undermine the existing structure” must do two things: Make people doubt the viability of Social Security, and divide the public by suggesting high earners be taxed at higher rates — which might sound progressive but would ultimately undo the universal foundation of the program itself. . . .

 American democracy was unprepared to defend itself against the agenda of Buchanan and conservative benefactors. Buchanan may not have been the only actor in this movement, and the role of conservative donors and economists has been documented elsewhere, but we are now living in a world he helped shepherd into reality. Public choice economists argue that those with the most to lose from change will pay the most attention, which has certainly been the case with Charles and David Koch. They and their friends have invested enormous sums in organizations that have changed the national debate about the proper role of government in the economy. Our politically polarized and increasingly paralyzed government institutions are the result . . . .

Power consolidation sometimes seems like a perpetual motion machine, continually widening the gap between those who have power and money and those who don’t. Still, “Democracy in Chains” leaves me with hope: Perhaps as books like MacLean’s continue to shine a light on important truths, Americans will begin to realize they need to pay more attention and not succumb to the cynical view that known liars make the best leaders.

Heads of Leading American Corporations Speak Out Against President: Part Four

Last installment of an article about American big business leaders’ response to a major social issue—White Supremacy. 

By DAVID GELLES, August 20, 2017 for The New York Times

Companies on the conservative end of the ideological spectrum are also increasingly willing to stand up for their principles, and just as likely to face criticism. After it was revealed that the family behind the fast-food chain Chick-fil-A supported groups that opposed same-sex marriage, gay rights protesters targeted the restaurants.

Hobby Lobby, the craft-supply chain run by a conservative Christian family, challenged a provision in the Affordable Care Act that required family-owned corporations to pay for insurance coverage for birth control. Despite drawing the ire of the left, Hobby Lobby took its case to the Supreme Court and won.

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Kevin Plank of Under Armour

Critics of Mr. Plank’s decision cast their net wide, going after all the chief executives who quit the president’s business advisory groups. “This is a remarkable moment in history,” said Lou Dobbs, a Fox Business Network host. “Every one of those C.E.O.s, mark my words, is a coward — and the president is exactly right — a grandstander in the service of the left. And no one should make any mistake: This is a coordinated, orchestrated attack against this president.”

John Carney, a business editor for Breitbart News, the conservative news site, wrote that “corporate America is part of the opposition.”

“The confederacy of the media institutions, the American left, and Corporate America has aligned itself against the populist uprising that brought Trump to the White House,” Mr. Carney wrote. “The battle lines are clear.”

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Howard Schultz of Starbucks

Those executives who go out on a limb know the risks. “We all recognize that with every decision we make, there is a group of people that are not going to agree with us,” Mr. Schultz said. “But you must define your core purpose for being. We stand in the interest of something greater than just making money.”

A Diversity Paradox

Diversity — of opinions, ideologies and religions — is what makes taking a stand on moral issues so treacherous for C.E.O.s. Yet paradoxically, it is also diversity — of races, genders and worldviews, among customers and the work force — that makes many of the executives, when forced to take a stand, come down on the side of inclusion, tolerance and acceptance.

Business leaders looking to the future are accepting that it is unwise to isolate swaths of the population by coming off as racist, sexist or intolerant. Instead, for the sake of the bottom line, it is imperative that they appeal to the widest possible audience. “Business leaders aren’t threatened by an America that is browner, an America that is more diverse; they welcome that,” Mr. Walker said. “Business leaders are bullish on diversity.”

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Darren Walker of Ford Foundation and Marc Benioff of Salesforce 

What’s more, some executives have concluded that speaking out on issues of morality can improve more than their reputations — it can benefit recruitment, morale and even sales. “Our employees come here knowing that this is something that is extremely important to us,” said Mr. Benioff of Salesforce. “Business is the greatest platform for affecting change.”

If the voices of business leaders seem amplified, that is perhaps because in such partisan times, few politicians can speak to both sides of the aisle, leaving a vacuum for business leaders to fill. This last week, the executives on Mr. Trump’s business advisory councils piped up, led by Mr. Frazier of Merck.

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Kenneth C. Frazier of Merck

The black chief executive of a $172 billion company — a multimillionaire who was born in a poor neighborhood, a former lawyer who fought for civil rights and had agreed to advise the president — Mr. Frazier offered remarks that set the tone for the business world at large.

“Our country’s strength stems from its diversity,” he wrote, adding, “America’s leaders must honor our fundamental values by clearly rejecting expressions of hatred, bigotry and group supremacy, which run counter to the American ideal that all people are created equal.”

The C.E.O.s had found their voice.

This concludes this four-part article

Heads of Leading American Corporations Speak Out Against President: Part Three

Part three of a four-part article on the response of top American business leaders to the president’s support of white supremacists.

By DAVID GELLES, August 20, 2017 for The New York Times

‘Many Sides,’ One Voice

Last weekend, as white nationalists protested the removal of a statue of the Confederate general Robert E. Lee in Charlottesville, chief executives were paying close attention to the president’s response. Among those watching was Kenneth C. Frazier, the chief executive of the drugmaker Merck and one of dozens of executives who had agreed to advise Mr. Trump on economic issues.

Kenneth C. Frazier of Merck

Mr. Frazier disagreed with the president’s stances on immigration and climate change, but he believed it was important to have a seat at the table. Yet for Mr. Frazier, the son of a janitor and the grandson of a man born into slavery, the president’s remarks — in which he blamed the violence on “many sides” — were too much to bear.

On Monday morning, Mr. Frazier said he would step down from Mr. Trump’s manufacturing council. “As C.E.O. of Merck and as a matter of personal conscience, I feel a responsibility to take a stand against intolerance and extremism,” he wrote.

The president took to Twitter, lacerating Mr. Frazier and attacking Merck, bluster that alienated more chief executives. By the end of the day, the chiefs of Under Armour and Intel had dropped off the same advisory group. The following morning, three nonprofit business leaders also quit.

As the manufacturing council fell apart, another presidential advisory group was also tottering. The Strategic and Policy Forum, a group with chief executives of some of the country’s biggest companies, held a conference call and agreed to disband.

The reaction from business leaders extended well beyond the confines of the presidential advisory councils.

James Murdoch of 21st Century Fox

James Murdoch, the chief executive of 21st Century Fox, pledged to donate $1 million to the Anti-Defamation League. The gesture was all the more remarkable because Mr. Murdoch is the son of Rupert Murdoch, a staunch supporter of Mr. Trump, and because his company operates Fox News, known for its favorable coverage of the president.

“What we watched this last week in Charlottesville and the reaction to it by the President of the United States concern all of us as Americans and free people,” the younger Mr. Murdoch wrote in an email to associates. “I can’t even believe I have to write this: standing up to Nazis is essential; there are no good Nazis. Or Klansmen, or terrorists.”

Technology companies severed ties with white supremacist groups. Google and GoDaddy dropped domain registrations for far right publications. Facebook deleted articles that celebrated hate crimes. Spotify took down music by white power rock bands.

Howard Schultz of Starbucks

And in Seattle, Mr. Schultz held a town-hall meeting for more than 1,000 employees where he condemned bigotry and called for unity. “I could sense the anxiety,” he said. “I felt a need to create a safe and loving environment.”

All week, the business world’s actions went beyond the donations to charity and pledges to plant trees that once defined corporate social responsibility.

“For a long time, corporate social responsibility was a buzzword marketing tool, walled off within an organization,” said Alan Fleischmann, president of Laurel Strategies, an executive advisory firm. “Now it has to be central for the C.E.O., part of their everyday responsibility and leadership.”

The Cost of Speaking Out

Kevin Plank of Under Armour

Kevin Plank, the founder and chief executive of Under Armour, the athletic apparel maker, built a brand that celebrates diversity, sponsoring athletes like the basketball player Stephen Curry and artists like the ballerina Misty Copeland. Yet when asked to serve on the president’s manufacturing council early this year, Mr. Plank agreed, voicing his optimism about Mr. Trump.

His star sponsors made their displeasure known. “I strongly disagree with Kevin Plank’s recent comments in support of Trump,” Ms. Copeland said. Mr. Curry also expressed his distaste for the president.

So on Monday night, when Mr. Plank stepped down from his advisory role, he might have thought his troubles were over. Instead, Mr. Trump’s supporters have risen up, calling for a boycott of Under Armour.

“The leaders of corporate America have demonstrated the courage to call out something that is unacceptable,” said Mr. Walker of the Ford Foundation. “But speaking truth to power can come with huge costs.”

Because companies have inherently diverse customers and employees, taking a stand can be a no-win situation for chief executives. For every employee, investor and customer they make happy, they may well make someone else unhappy.

When Pepsi this year released an ad featuring Kendall Jenner offering a police officer a soda in the midst of an apparent Black Lives Matter protest, the condemnation was swift. Two years earlier, Starbucks drew wide ridicule when, as part of an effort by Mr. Schultz to start a national conversation on race relations, baristas were encouraged to write “race together” on coffee cups.

This article will be concluded in one more installment.

Heads of Leading American Corporations Speak Out Against President: Part Two

We continue this list of American business leaders who recently defied the President on the White Supremacy issue.

By DAVID GELLES, August 20, 2017 for The New York Times

Looking for Controversy

Companies have reckoned with issues of race, class and gender for generations now.

On Feb. 1, 1960, four black college students sat down at the segregated lunch counter at a Woolworth’s store in Greensboro, N.C. The civil rights sit-in movement was born, and five months later, Woolworth’s desegregated.

Decades later, activists called on American companies to divest from apartheid South Africa. Under pressure, many big companies, including General Motors and Pepsi, pulled out of the country.

But for the most part, companies got political only under duress. Rarely have chief executives gone looking for a controversy. Instead, the prevailing view was one articulated by the economist Milton Friedman in The New York Times in 1970: “the social responsibility of business is to increase its profits.”

 Milton Friedman, the economist who rated the bottom line paramount over every other socio-political issue.

By the 1990s, some corporate actors began taking the initiative. Apple, Disney and Xerox extended health care benefits to partners of gay and lesbian employees, helping to pave the way for broader acceptance of gay rights. Still, promoting inclusion and advancing diversity were hardly part of the curriculum for emerging titans of industry.

“When I went to business school, you didn’t see anything like this,” said Marc Benioff, the founder and chief executive of Salesforce. “Nobody talked about taking a stand or adopting a cause.”

 

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Marc Benioff of Salesforce

Now, Mr. Benioff is at the vanguard of a group of executives who are more connected — to customers, employees, investors and other business leaders — than ever before, and who are unafraid to use their influence.

In 2015, after Indiana passed a law that would have made it easier for religious conservatives to refuse service to gay people, Mr. Benioff canceled all Salesforce events in the state and threatened to relocate employees away from Indianapolis.

The outcry from Mr. Benioff and other business leaders helped force politicians, including Vice President Mike Pence, then the governor of Indiana, to reverse course. Ultimately, lawmakers passed a watered-down version of the law.

“C.E.O.s wield economic influence,” Mr. Benioff said. “Nobody wanted to lose those jobs in Indiana. But we had to make a statement that we were going to withdraw if they were going to create laws that were going to discriminate against our employees.”

The business community’s triumph in Indiana emboldened progressive executives, and many have become more willing to confront controversial topics unprompted.

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Randall Stephenson of AT&T

Randall Stephenson, the chief executive of AT&T, recently reflected on racial tensions in America at a meeting of 2,000 employees. “Black lives matter,” Mr. Stephenson said, “we should not say, ‘All lives matter,’ to justify ignoring the real need for change.”

   

Hamdi Ulukaya of Chobani Yogurt and Timothy A. Cook of Apple

Hamdi Ulukaya, the founder and chief executive of the yogurt maker Chobani, has hired hundreds of refugees — drawing the ire of the far right, but making him a cause célèbre for progressives.

And even before the showdown in Indiana, Timothy D. Cook, the chief executive of the world’s largest company, Apple, came out as gay — the most prominent executive to make such an announcement. “I’m proud to be gay, and I consider being gay among the greatest gifts God has given me,” he wrote.

                

     Elon Musk of Tesla and Robert A. Iger of Disney

But faced with circumstances they cannot in good conscience accept, more and more chieftains appear unafraid to act. In June, after the president withdrew the United States from the Paris climate accord, Elon Musk, the chief executive of Tesla, and Robert A. Iger, the chief of Disney, resigned from presidential advisory councils, setting the stage for this past week’s revolt.

“The C.E.O.s of big public companies don’t walk out onto the plank of social and political leadership by default,” said Nancy Koehn, a historian at Harvard Business School. “But today, to keep silent is to jeopardize the reputation of the company.”

To be continued

 

Heads of Major American Corporations Speak Out Against President: Part One

We are reprinting this article from The New York Times in its entirety because of its importance. Because of its length it will appear in four parts. This is Part One.

The article seems significant to us because it allows our readers to see the heads of America’s major corporations as fallible human beings whose ethical choices we may sometimes support. The article is a veritable Who’s Who of today’s leading CEOs.

By DAVID GELLES, August 20, 2017 for The New York Times

The nation has split into political tribes. The culture wars are back, waged over transgender rights and immigration. White nationalists are on the march.

Amid this turbulence, a surprising group of Americans is testing its moral voice more forcefully than ever: C.E.O.s.

After Nazi-saluting white supremacists rioted in Charlottesville, Va., and President Trump dithered in his response, a chorus of business leaders rose up this past week to condemn hate groups and espouse tolerance and inclusion. And as lawmakers in Texas tried to restrict the rights of transgender people to use public bathrooms, corporate executives joined activists to kill the bill.

These and other actions are part of a broad recasting of the voice of business in the nation’s political and social dialogue, a transformation that has gained momentum in recent years as the country has engaged in fraught debates over everything from climate change to health care.

Mary T. Barra of General Motors

In recent days, after the Charlottesville bloodshed, the chief executive of General Motors, Mary T. Barra, called on people to “come together as a country and reinforce values and ideals that unite us — tolerance, inclusion and diversity.”

Jamie Dimon of JPMorgan 

Jamie Dimon of JPMorgan said, “The equal treatment of all people is one of our nation’s bedrock principles.”

 Doug McMillon of Walmart

Walmart’s chief executive, Doug McMillon, criticized Mr. Trump by name for his handling of the violence in Charlottesville, and called for healing.

And in a rebuke to the president, who suggested that both the racist groups and the counterprotesters marching in Charlottesville were to blame for the violence there, a wave of chief executives who had agreed to advise Mr. Trump quit his business advisory councils, leading to the dissolution of two groups.

The forthright engagement of these and other executives with one of the most charged political issues in years — the swelling confidence of a torch-bearing, swastika-saluting, whites-first movement — is “a seminal moment in the history of business in America,” said Darren Walker, the president of the Ford Foundation and a board member at PepsiCo.

Darren Walker of the Ford Foundation

“In this maelstrom, the most clarifying voice has been the voice of business,” he said. “These C.E.O.s have taken the risk to speak truth to power.”

This transformation didn’t happen overnight. Chief executives face a constellation of pressures, and speaking up can create considerable uncertainty. Customers can be offended, colleagues can feel isolated and relations with lawmakers can suffer. Words and actions can backfire, resulting in public relations disasters. All this as a chief executive is expected to constantly grow sales.

Even this past week, it was easy to discern careful calculations made by executives who chose to speak out against Mr. Trump. Many faced calls to resign from the presidential advisory councils, and the prospect of boycotts if they did not.

But they also faced notable and new kinds of pressure from within — from employees who expect or encourage their company to stake out positions on numerous controversial social or economic causes, and from board members concerned with reputational issues. In the past week, business leaders have responded with all-staff memos and town-hall meetings.

In short, while companies are naturally designed to be moneymaking enterprises, they are adapting to meet new social and political expectations in sometimes startling ways.

Howard Schultz of Starbucks

“Not every business decision is an economic one,” said Howard Schultz, the chairman of Starbucks, who was one of the country’s first company leaders to proactively address social issues. “The reason people are speaking up is that we are fighting for what we love and believe in, and that is the idealism and the aspiration of America, the promise of America, the America that we all know and hold so true.”

To be continued

The Wells Fargo Story

Wells Fargo said that it discontinued the insurance practices last September after it had found “inadequacies in vendor processes and internal controls that negatively impacted some customers.” [“Inadequacies,” indeed—pure gobbledygook for underhanded double-dealing . . . “some customers”—274,000, to be exact.] The bank has contended that 570,000 people may be owed refunds.

[Allan] Dunlap, 55, is one of those affected by the bank’s insurance activities. His experience with Wells Fargo highlights the harm done to actual people and points to the challenges Wells faces in remedying it. More than a year after he started battling with Wells Fargo, Mr. Dunlap said, he is still awaiting confirmation that his credit report has been corrected.

“I never missed a payment and I always had insurance,” Mr. Dunlap said in a phone interview. “But they forced additional coverage on my vehicle and it showed up on my credit report that I was 60 to 90 days late on my payments.” Repeated calls to Wells Fargo to get them to fix the error were unsuccessful, he said. [Not answering the phone or misdirecting the call are favorite techniques of bureaucracies when they would rather ignore the injured party.]

Jennifer A. Temple, a Wells Fargo spokeswoman, acknowledged in a statement “that our customer service and our processes did not measure up and we are working with Mr. Dunlap to make things right.”[Translation: “We robbed him but got caught. Perhaps we’ll return the money.” 

Mr. Dunlap’s story began in March 2016 in Jamestown, N.D., where he worked transporting recreational vehicles.

20gret-master768

He found his dream car at a local dealership — a low-mileage, mint-condition Chrysler 300, vintage 2008, selling for around $25,000. Together with a friend who co-signed for the loan, Mr. Dunlap financed the purchase through Wells Fargo Dealer Services. The amount of the loan was almost $21,000.

Before he could take possession of the car, he was asked to provide the dealership with proof of existing car insurance. Wells Fargo loan documents prepared by the dealership show that his coverage was with State Farm.

For three months, he made his $410 loan payments without a hitch. But in early May, Wells Fargo sent both borrowers a letter saying it had not received the necessary documentation showing that the car was insured. A second notice saying the same thing followed a month later.

When the first notice came in, Mr. Dunlap was recovering from a stroke, he said. Still, he began calling Wells Fargo to tell them he already had insurance. He was unsuccessful, he said, because he’d be kept on hold for long periods and often got disconnected. [See what we mean about those phone calls.]

Ms. Temple of Wells Fargo said: “We recognize there were a number of customers who experienced difficulty verifying with Wells Fargo and our vendor if they had insurance and we are sorry that Mr. Dunlap experienced this challenge.”

On July 1, Mr. Dunlap’s loan statement showed, Wells Fargo charged $1,079 for insurance on the car — the first time such a charge had appeared. The insurance, a year’s premium, took effect in March when he bought the car.

Mr. Dunlap said he didn’t know about the charge and records show he made his regular loan payment in July. But because he owed the additional $1,079 for insurance, he fell behind. Late fees began accruing, and his problems on the loan were reported to credit bureaus.

He made more calls to Wells Fargo. “I’d talk to one person in one state, another person in another state; I’d send them papers,” he said. “There were so many different people involved, the information doesn’t get to the right sources.”

Some Wells Fargo letters came from Phoenix, Ariz., while others were postmarked Irvine, Calif., and Irving, Tex.

Sometimes Mr. Dunlap’s calls reached the office of the president at Wells Fargo Dealer Services. “Those people would say, ‘We’ll get back to you,’” Mr. Dunlap said, “but nothing would happen.”

He even tried reaching the bank’s board, Mr. Dunlap said.

In the old days it was the stagecoach that got robbed by the bad guys. But today it’s reversed: the stagecoach robs its passengers with impunity—the law is on their side.

Finally in mid-September, Wells Fargo canceled the insurance it had placed on Mr. Dunlap’s car. But the bank credited his loan account with only $846. That meant he was still behind on the loan.

Trying to get another loan to pay off the existing one was impossible, he said. “They would say, ‘No, you’re late with Wells Fargo,’” Mr. Dunlap said.

Exasperated, Mr. Dunlap decided to sell the Chrysler last November so he could close out the Wells Fargo loan. He sold it for around $19,000, he said, $6,000 less than he had paid eight months earlier. The amount he needed to pay off the loan was $20,250, Wells Fargo records show.

But Mr. Dunlap’s battle wasn’t over. Now he had to correct his credit report, an effort that he said was still going on.

Earlier this year, he asked the bank for $1,000 in compensation for its mistakes. In a letter dated June 1, the bank declined to provide it. [They make their own rules, whatever suits them best.] 

“At this time we are unable to comply with your request for compensation,” the letter said. Wells also said it was submitting requests to credit bureaus to remove the late payments recorded on Mr. Dunlap’s history. “We sincerely apologize for any inconvenience this matter may have caused,” the letter added.

Late last month, Mr. Dunlap said he was amazed when he saw an article in The New York Times disclosing Wells Fargo’s dubious insurance practices. “I thought I was the only one going through this,” he said.

Trying to get assurances that his credit report had been corrected, Mr. Dunlap called Wells Fargo again. He said he told the bank that he planned to contact the Times reporter about his experience. “They said, ‘Don’t talk to the reporter, we’ll try to fix this,’” he said. [Finally the bank begins to see that someone may be catching on to their skullduggery.]

The promise from Wells Fargo came more than a year after his problems with the bank began. It was too little, too late, he said.

The Wells Fargo Story

Some 800,000 people were affected by the Wells Fargo auto insurance dealings, according to an in-depth analysis commissioned by the bank. The expense of the unneeded insurance, which covered collision damage, propelled 274,000 bank customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions.

Wells Fargo said that it discontinued the insurance practices last September after it had found “inadequacies in vendor processes and internal controls that negatively impacted some customers.” [“Inadequacies,” indeed—pure gobbledygook for underhanded double-dealing . . . “some customers”—274,000, to be exact.] The bank has contended that 570,000 people may be owed refunds.

[Allan] Dunlap, 55, is one of those affected by the bank’s insurance activities. His experience with Wells Fargo highlights the harm done to actual people and points to the challenges Wells faces in remedying it. More than a year after he started battling with Wells Fargo, Mr. Dunlap said, he is still awaiting confirmation that his credit report has been corrected.

“I never missed a payment and I always had insurance,” Mr. Dunlap said in a phone interview. “But they forced additional coverage on my vehicle and it showed up on my credit report that I was 60 to 90 days late on my payments.” Repeated calls to Wells Fargo to get them to fix the error were unsuccessful, he said. [Not answering the phone or misdirecting the call are favorite techniques of bureaucracies when they would rather ignore the injured customer.]

Jennifer A. Temple, a Wells Fargo spokeswoman, acknowledged in a statement “that our customer service and our processes did not measure up and we are working with Mr. Dunlap to make things right.”[Translation: “We robbed him but got caught. Perhaps we’ll return the money.” 

Mr. Dunlap’s story began in March 2016 in Jamestown, N.D., where he worked transporting recreational vehicles.

He found his dream car at a local dealership — a low-mileage, mint-condition Chrysler 300, vintage 2008, selling for around $25,000. Together with a friend who co-signed for the loan, Mr. Dunlap financed the purchase through Wells Fargo Dealer Services. The amount of the loan was almost $21,000.

Before he could take possession of the car, he was asked to provide the dealership with proof of existing car insurance. Wells Fargo loan documents prepared by the dealership show that his coverage was with State Farm.

For three months, he made his $410 loan payments without a hitch. But in early May, Wells Fargo sent both borrowers a letter saying it had not received the necessary documentation showing that the car was insured. A second notice saying the same thing followed a month later.

When the first notice came in, Mr. Dunlap was recovering from a stroke, he said. Still, he began calling Wells Fargo to tell them he already had insurance. He was unsuccessful, he said, because he’d be kept on hold for long periods and often got disconnected.

Ms. Temple of Wells Fargo said: “We recognize there were a number of customers who experienced difficulty verifying with Wells Fargo and our vendor if they had insurance and we are sorry that Mr. Dunlap experienced this challenge.”

On July 1, Mr. Dunlap’s loan statement showed, Wells Fargo charged $1,079 for insurance on the car — the first time such a charge had appeared. The insurance, a year’s premium, took effect in March when he bought the car.

Mr. Dunlap said he didn’t know about the charge and records show he made his regular loan payment in July. But because he owed the additional $1,079 for insurance, he fell behind. Late fees began accruing, and his problems on the loan were reported to credit bureaus.

He made more calls to Wells Fargo. “I’d talk to one person in one state, another person in another state; I’d send them papers,” he said. “There were so many different people involved, the information doesn’t get to the right sources.”

Some Wells Fargo letters came from Phoenix, Ariz., while others were postmarked Irvine, Calif., and Irving, Tex.

Sometimes Mr. Dunlap’s calls reached the office of the president at Wells Fargo Dealer Services. “Those people would say, ‘We’ll get back to you,’” Mr. Dunlap said, “but nothing would happen.”

He even tried reaching the bank’s board, Mr. Dunlap said.

Bailed_UpIn the old days it was the stagecoach that got robbed by the bad guys. But today it’s reversed: the stagecoach robs its passengers with impunity—the law is on their side.

Finally in mid-September, Wells Fargo canceled the insurance it had placed on Mr. Dunlap’s car. But the bank credited his loan account with only $846. That meant he was still behind on the loan.

Trying to get another loan to pay off the existing one was impossible, he said. “They would say, ‘No, you’re late with Wells Fargo,’” Mr. Dunlap said.

Exasperated, Mr. Dunlap decided to sell the Chrysler last November so he could close out the Wells Fargo loan. He sold it for around $19,000, he said, $6,000 less than he had paid eight months earlier. The amount he needed to pay off the loan was $20,250, Wells Fargo records show.

But Mr. Dunlap’s battle wasn’t over. Now he had to correct his credit report, an effort that he said was still going on.

Earlier this year, he asked the bank for $1,000 in compensation for its mistakes. In a letter dated June 1, the bank declined to provide it. [They make their own rules, whatever suits them best.] 

“At this time we are unable to comply with your request for compensation,” the letter said. Wells also said it was submitting requests to credit bureaus to remove the late payments recorded on Mr. Dunlap’s history. “We sincerely apologize for any inconvenience this matter may have caused,” the letter added.

Late last month, Mr. Dunlap said he was amazed when he saw an article in The New York Times disclosing Wells Fargo’s dubious insurance practices. “I thought I was the only one going through this,” he said.

Trying to get assurances that his credit report had been corrected, Mr. Dunlap called Wells Fargo again. He said he told the bank that he planned to contact the Times reporter about his experience. “They said, ‘Don’t talk to the reporter, we’ll try to fix this,’” he said. [Finally the bank begins to see that someone may be catching on to their skullduggery.]

The promise from Wells Fargo came more than a year after his problems with the bank began. It was too little, too late, he said.

 

 

C.E.O.s Traditionally Avoid Politics, But No Longer Can

There are times when politics cannot be avoided. Our blog much prefers to remain neutral with regard to Republican/Democrat, Rich/Poor, Upper Class/Working Class, Elitist/Populist, Conservative/Progressive, feeling that the solution to Inequality lies somewhere in between and will require concessions and understanding from both sides to achieve. The issue is one of economics and should be understood that way.  It is not ideological.

What occurred in Charlotteville, Virginia earlier this week has made it impossible for those heads of major companies who advise the President to remain neutral.  Their break with the President  will have consequences with the economy and therefore we must take note of it.                                                               

By JAMES B. STEWART, August 6, 2017 for The New York Times

The bar for a chief executive of a public corporation to repudiate a United States president is extraordinarily high. Corporate leaders aren’t given their power, prestige, responsibility and nine-figure pay packages to use the corner office as their personal soapbox.

With President Trump’s comments on white supremacists and other right-wing extremists ringing in the ears of America’s chief executives, that high bar appears to have been passed.

This week, what had been a trickle of defections from the White House business advisory councils over issues like immigration and climate change turned into a torrent. By Wednesday, both of the councils had collapsed; Mr. Trump insisted that he had decided to disband them.

Such a public schism between a president and a business leadership long considered the backbone of the Republican establishment left corporate historians at a loss for precedent. “There’s never been anything to compare to this,” said Jeffrey A. Sonnenfeld, a dean of leadership studies at the Yale School of Management and the author of “Firing Back: How Great Leaders Rebound From Career Disasters.”

0416_merck-kenneth-frazier-ceo_900

Kenneth Frazier

Referring to a tweet by Mr. Trump criticizing Kenneth Frazier, the Merck executive who led this week’s corporate retreat from the White House councils, Mr.Sonnenfeld,  said, “Never in history has a president attacked and threatened the chief executive of a major U.S. corporation like that.”

After provoking a furor with his initial failure to condemn the white supremacists behind last weekend’s violence in Charlottesville, Va., Mr. Trump might have staved off a full-scale exodus with his somewhat stilted but conciliatory comments on Monday. But then he reignited the flames at a news conference on Tuesday at which he said there was “blame on both sides,” including club-wielding members of what he called the “alt-left,” for the Charlottesville violence.

Jamie Dimon

Stephen Schwartzman

Ginni Rometti

As pressure mounted on prominent council members like Jamie Dimon of JPMorgan Chase, Stephen A. Schwarzman of the Blackstone Group, Ginni Rometti of IBM and Indra Nooyi of PepsiCo, as well as other chief executives who remained silent or issued platitudes, corporate boards were hastily meeting to map strategy. “I’ve heard from 24 chief executives in the past two days,” Mr. Sonnenfeld said on Wednesday. “Boards are having ad hoc conference calls. People are very worried and concerned.”

Those conversations have been far more complicated than one might expect. It’s safe to say that no chief executive wants to be identified with white supremacy, racism or domestic terrorism. At the same time the president wields enormous influence over their shareholders, employees and customers.

“Chief executives don’t have the luxury of ventilating their personal political opinions, whatever they might be,” Mr. Elson said. “They shouldn’t let their personal views influence their business decisions. If they really feel strongly about something, they can always resign and then say whatever they want.”

As he told me shortly after Mr. Trump took office, “When the president calls, you should go to see him, regardless of your political persuasion, out of respect for the office.”

Back then, Mr. Sonnenfeld, too, praised Mr. Trump’s openness to business views . . .

This week was a different story. After the Charlottesville events and Mr. Trump’s comments, “chief executives have a moral duty to use their position as a bully pulpit and to speak out,” Mr. Sonnenfeld said, adding that George Weyerhaeuser, a former chairman of the giant timber and wood products company bearing his name, had once told him, “We have a license to operate from society, and if we violate that license it can be revoked.”

Or as Mr. Elson told me, “At some point, if identification with the administration becomes so polarizing that it impairs your ability to run the company, then you may have to do something.”

Weighing the benefits of advising a president steeped in controversy versus the risks to shareholders and other constituents from potential consumer boycotts is a calculus that varies widely from company to company.

Unlike some companies with a large consumer base to appease, Boeing has thrived by burnishing its ties to Mr. Trump.

At one extreme is a company like Boeing, which, as I noted last week, has thrived by burnishing its ties to Mr. Trump, who posed for photos in front of a 787 Dreamliner at a nonunion Boeing plant in South Carolina. Boeing is one of the federal government’s largest contractors ($1.1 billion was allotted recently for 14 Boeing fighter jets); the Export-Import Bank once threatened by Mr. Trump finances many of Boeing’s buyers; a host of other executive-branch decisions affect its profits; and it has no direct exposure to consumers.

At the opposite end of the spectrum is Under Armour, the maker of athletic wear, whose chief executive, Kevin Plank, left the president’s council earlier this week. Under Armour’s success depends in part on endorsements from celebrity athletes, many of whom — like Stephen Curry, the basketball star — are African-American. Under Armour customers had already organized a consumer boycott on social media earlier this year, prompting Mr. Plank to issue an open letter pledging to be “a force of unity, growth and optimism for our city and our country” and to oppose “any new actions that negatively impact our team, our neighbors or their families.”

Stephen Curry is among a number of African-American players who endorse products by Under Armour, an athletic wear company that has pledged to be “a force of unity, growth and optimism for our city and our country.”

That new action appears to have arrived.

“The risk of consumer blowback is especially acute for companies like Under Armour, and you’ve seen this elsewhere in the retail space,” Mr. Sonnenfeld said. But he noted that speaking out against a social scourge like racism can also enhance a brand. “Taking a public stand doesn’t mean there’s a misalignment with shareholder interests,” he said. “It can be the right thing to do. Howard Schultz has done this very effectively at Starbucks.”

On Monday, Mr. Schultz publicly criticized the president’s response to the Charlottesville events, and on Wednesday he spoke at an emotional companywide meeting. “I come to you as an American, as a Jew, as a parent, as a grandparent, as an almost 40-year partner of a company I love so dearly,” he said. “I come to you with profound, profound concern about the lack of character, morality, humanity and what this might mean for young children and young generations.”

Howard Schultz, the chief executive of Starbucks, told employees on Wednesday that he had “profound, profound concern about the lack of character, morality, humanity” that he said was exhibited in Mr. Trump’s remarks.

Historically, corporate aversion to politics has at times held firm even under national leadership that threatens the health of the economy, and with it the well-being of every company. The most notorious example was the support of German industry for Hitler and the Nazi regime, which ended up destroying the nation’s economy. American companies also worked with the Nazis before the United States entered the war, including — as the current Amazon production of F. Scott Fitzgerald’s “The Last Tycoon” reminds us — Hollywood studios.

Comparing the Trump administration to the Nazis may be a stretch, but many business leaders are concerned that stirring up deep-seated racial and nationalist animosities could be destabilizing, leading to riots, property damage and widespread civil unrest reminiscent of the late 1960s. . . .

In such circumstances, collective action by business leaders is often the most effective course, as members of the president’s advisory councils appear to have decided this week. That way no one company bears the brunt of the president’s wrath.

After Mr. Trump’s comments about Charlottesville, Mr. Sonnenfeld has been among those calling for collective opposition. “Fomenting racial unrest is not in the nation’s interest and it’s not in businesses’ interest,” he said. “Divide and conquer has always been Trump’s strategy, and somehow it has worked until now. The way to take a bully down is through collective action.”