The Wall Street Journal - 07.09.2019 - 08.09.2019

B2| Saturday/Sunday, September 7 - 8, 2019 ** THE WALL STREET JOURNAL.**

THE SCORE

THE BUSINESS WEEK IN 7 STOCKS

NVIDIA CORP.

Chipmakers are holding out hope for a trade deal.

Semiconductor stock Nvidia was among the day’s top

gainers Thursday after the U.S. and China said they

would hold talks in Washington in October. The im-

pending talks have rekindled hopes for progress after the two

countries recently escalated tensions with fresh tariffs. Nvidia

shares gained 6.5% Thursday , while peers Micron Technology

Inc. and Qualcomm Inc. gained 4.7% and 2.5%, respectively.



NVDA

6.5%

PERFORMANCE OFSEMICONDUCTORSTHIS WEEK

Source: FactSet

Nvidia

Micron

Technology

Qualcomm

S&P

12

• 4


• 2

0

2

4

6

8

10

%

Mon. Tues. Weds. Thurs. Fri.

The regulatory disclosures of

most of the companies the Business

Roundtable represents tell me that

senior leaders get paid for perfor-

mance, and by “performance” we

mean stock price. Almost all of their

CEOs issue financial guidance, buy

back sums of stock that dwarf capi-

tal spending, and equate a healthy

share price with a healthy payday.

This won’t change until the com-

pensation model gets turned upside

down. Because there are few con-

crete and generally accepted ways

to judge executive performance be-

yond share price, it’s unclear if the

compensation model will ever actu-

ally get turned upside down.

Ira Kay, a managing partner at

New York compensation consul-

tancy Pay Governance, said boards

have long given managers wide

discretion to improve diversity, ad-

dress climate change or improve

customer satisfaction. And annual

bonuses are often partially tied to

those goals, but that is just a frac-

tion of total compensation. “If you

don’t get your stock price up,

you’re not going to make $25 mil-

lion; you’ll make more like $2 mil-

lion,” Mr. Kay said.

CEOs, like professional athletes,

have a limited time to maximize

earnings. Average tenures are

shortening to about five years, and

many get only one shot in the cap-

tain’s chair. Executives ignoring

the methods by which shareholder

returns are maximized—whether it

be via share buybacks, pay raises,

capital expenditures or layoffs—

are ignoring their self-interest.

Boards readily acknowledge this.

“We design our annual and long-

term incentives to include metrics

that focus on profitability, operat-

ing efficiency and investor returns,”

American Airlines Group, for in-

stance, said in its most-recent

ees and suppliers,” Nell Minow,

vice chair of ValueEdge Advisors,

which consults institutional inves-

tors, told me this week.

J&J’s Mr. Gorsky is learning first

hand that sins of the past will even-

tually bite you in the pocketbook.

One week after the Business

Roundtable letter was published,

the world’s largest health-care

company was hit with a judgment

forcing it to pay $572 million for

Oklahoma’s opioid crisis. The ver-

dict is just the tip of the iceberg

when it comes to potential liabili-

ties that J&J and other pharma-

ceutical companies face.

Ms. Minow said she under-

stands the need for corporations

to tell a better story about sustain-

ability, social responsibility or em-

ployee satisfaction, particularly as

younger buyers, workers and in-

vestors gain influence. There ulti-

mately needs to be a way to uni-

versally measure success.

Of course, what’s good for the

shareholder isn’t always good for

the future of the company. General

Electric spent years touting its fo-

cus on investor returns only to see

its stock price collapse after seri-

ous flaws in business strategy and

other issues emerged. The Securi-

ties and Exchange Commission is

investigating certain accounting

practices, and the company has

lost its blue-chip status.

Mr. Kay said his firm’s research

suggests GE’s saga is the excep-

tion, but its decline is a lesson for

other industries. Executives span-

ning oil companies to traditional

retailers need to shift their think-

ing on several issues or prepare

for a long demise.

Stock prices aren’t perfect. Still,

they offer the most concise mea-

sure of whether a company is on

the fast track or a death march.

Shareholders Are Still King

Despite CEOs’ talk of serving ‘all stakeholders,’ they’re still judged on stock price

ON BUSINESS| JOHN D. STOLL

There are plenty

of disputes that will

be with us for years

to come. Should

global warming be

pinned on humans?

Is health care a uni-

versal right? Are my Detroit Lions

the worst professional sports fran-

chise in history, or would that be

the Cleveland Browns?

A perennial debate in Corporate

America is whether a public com-

pany exists solely to enrich share-

holders or in service of a broader

constituency. The question is re-

emerging as investors like Warren

Buffett and BlackRock Chief Execu-

tive Larry Fink bash short-term

thinking and promote sustainable

business practices.

Last month, 181 CEOs signed a

300-word Business Roundtable let-

ter that said they agree. Johnson

& Johnson CEO Alex Gorsky,

chairing the Roundtable’s gover-

nance committee, said the new

statement “affirms the essential

role corporations can play in im-

proving our society when CEOs are

truly committed to meeting the

needs of all stakeholders.”

Let me unravel Mr. Gorsky’s

quote using clearer terms. In the

pecking order of things executives

should care about, the shareholder

needs to share the ball with em-

ployees, vendors, customers and so-

ciety writ large. This mirrors a

stance the Business Roundtable

took in the 1980s, when corporate

raiders and leveraged buyouts were

reshaping our view of the type of

power investors could wield.

Now, even as investor interests

are increasingly cast as the root of

many social problems, I offer this

word of encouragement to share-

holders: You may be unpopular,

but you are still king.

proxy statement. If you want infor-

mation on broader social goals, the

board encourages readers to pick

up the sustainability report.

Wondering if CEO Doug Parker

understands this? Look no further

than the section of the proxy out-

lining how 100% of his pay comes

in the form of stock. This was

good when American Airlines was

riding high, but it’s been a turbu-

lent summer for the Texas-based

carrier amid labor tensions and

other hiccups. Shareholders have

suffered. No one has more incen-

tive than Mr. Parker to fix that.

In fact, most of the Business

Roundtable signatories are playing

by similar rules.

Best Buy Co., for instance, said

its “philosophy is to align executive

compensation with shareholders’

interests.” The retailer’s proxy out-

lines how to measure that in a slick

chart that highlights investor re-

turns, revenue growth, earnings

performance and cost reduction.

It’s probably safe to bet Best Buy’s

new CEO Corie Barry is as familiar

with that equation as with recy-

cling policies, employee-engage-

ment stats or recycling efforts.

Experts like Mr. Kay say executive

compensation is linked to the stock

price because it is widely believed

that companies that pursue good

practices generally grow in value.

“If you want to be in business

next year, then you’ve got to be

good to your customers, employ-

Unless the CEO

compensation model is

turned upside down,

shareholders will rule.

FROM LEFT TO RIGHT: COOPER NEILL FOR THE WALL STREET JOURNAL; GETTY IMAGES; ASSOCIATED PRESS(2); SARAH STACKE FOR THE WALL STREET JOURNAL

KROGER CO.

The largest U.S. supermarket

chain is jumping on the

meatless train. Kroger shares

gained 0.7% Thursday after

the company said it will roll

out plant-based burger pat-

ties, grinds and other products. The an-

nouncement comes amid rising con-

sumer interest in new meat

replacements. Kroger—which also sells

Beyond Meat Inc.’s meat-replacement

products—will put its own plant-based

deli slices, sausages and other products

on shelves at 1 , 800 of its 2, 800 stores.

The company said those products will be

priced below the offerings from Beyond

Meat but wouldn’t say by how much.



KR

0.7%

ALPHABET INC.

Alphabet-owned YouTube

agreed to pay a $ 170 million

fine to U.S. authorities inves-

tigating alleged abuses of

children’s privacy on the video

platform. The Federal Trade

Commission and the New York state at-

torney general announced the penalty

Wednesday after a yearlong investiga-

tion. The probe was a response to com-

plaints from consumer groups that You-

Tube illegally collected data on children

to sell ads for products such as Barbie

dolls and Play-Doh. The FTC said You-

Tube tracked internet activity for chil-

dren under age 1 3. Alphabet shares

added 1.1% Wednesday.



GOOG

1.1%

TAPESTRY INC.

Tapestry has a new leader.

The handbag company that

combined the Coach and

Kate Spade brands ousted

Victor Luis, who has been

chief executive for five

years, on Wednesday and said he will

be succeeded by board Chairman Jide

Zeitlin. Since Coach acquired Kate

Spade & Co. and changed its name to

Tapestry in 2 01 7, the Kate Spade

brand has struggled. Mr. Zeitlin, who

will remain chairman, said he wasn’t

planning any management changes at

Kate Spade or elsewhere in the

company. Tapestry shares gained 5.1%

Wednesday.



TPR

5.1%

MATCH GROUP INC.

Investors are swiping left on

Match Group. The stock fell

4.6% Thursday after Face-

book Inc. announced it is

launching a dating feature in

the U.S., a competitor to

Match’s dating websites and apps.

Facebook users over the age of 18 can

opt in to Facebook Dating and create

dating profiles that help them find

people with common interests, events

and groups. The dating profiles will be

separate from the users’ main profiles.

The Facebook feature is already avail-

able in 1 9 other countries, including Ar-

gentina, Brazil, Canada, Mexico, Singa-

pore and Thailand.



MTCH

4.6%

CVS HEALTH CORP.

Almost a year after the deal

closed, the CVS-Aetna

merger is finally official. A

federal judge approved a Jus-

tice Department settlement

late Wednesday that allowed

CVS to acquire Aetna for nearly $7 0

billion. While the deal closed in Novem-

ber, U.S. District Judge Richard Leon

has spent months questioning whether

the settlement did enough to protect

competition and consumers. On

Wednesday, he said the health-care

markets at issue in the case “are not

only very competitive today, but are

likely to remain so post-merger.” CVS

Health shares gained 1.8% Thursday.



CVS

1.8%

FANNIE MAE

The Trump administration

said late Thursday it would

support privatizing mortgage-

finance giants Fannie Mae

and Freddie Mac, and said it

wanted to curtail the firms’

roles in housing finance. Left unresolved

were several key questions, such as

what to do with the government’s large

stakes in the firms, how to build up

their capital so they can operate as pri-

vate companies again, and how to

shrink Fannie and Freddie’s footprint in

housing. The lack of specifics and the

murky timeline sent shares of Fannie

Mae down 8.8% Friday , while Freddie

Mac fell 8 .2%. —Francesca Fontana



FNMA

8.8%

From left, American Airlines CEO Doug Parker, Johnson & Johnson’s Alex Gorsky, BlackRock’s Larry Fink, Warren Buffett and Best Buy’s Corie Barry.

National Public Radio’s news

chief is facing an internal back-

lash over public remarks she

made criticizing the network’s

coverage of race relations.

Nancy Barnes, NPR’s senior

vice president for news, said last

week at an industry conference

that the network’s coverage of

race is “more lacking than we re-

alized,” according to a report in

the nonprofit news service Cur-

rent. She also lamented a lack of

“disciplined, direct coverage of

race relations and the culture

wars.” Ms. Barnes said the net-

work was looking into establish-

ing a beat for that topic.

In response, about 85 of NPR’s

569 newsroom and programming

staffers cosigned an email sent

Thursday to Ms. Barnes, who was

named NPR’s top news executive

last year, saying she failed to rec-

ognize the strides they have made

in covering racism, anti-Semitism

and hate-driven violence.

“These words travel and not

only are they hurtful, they fur-

ther marginalize people of color

in an organization with historic

problems of under-representing

and/or dismissing the voices, cre-

ativity and work of non-white

journalists,” they wrote in the

email, according to a copy re-

viewed by The Wall Street Jour-

nal. “Robust coverage of the is-

sues you want to expand has

been alive and well.”

NPR covers race from a variety

of angles on multiple shows and

platforms. The network’s Code

Switch team focuses on race and

identity, and race relations are

frequently discussed on shows

such as “It’s Been a Minute” and

“Alt.Latino.”

In a statement, Ms. Barnes

apologized for her remarks, say-

ing she regrets that she “didn’t

speak to what we’re already do-

ing and have done in the past.”

“I shared some thoughts on

how we will tackle critical issues,

including race and racism,” wrote

Ms. Barnes. “What I intended to

convey was that I was looking for

more resources to augment this

important work on a daily basis.”

The NPR employees asked Ms.

Barnes, who is white, to address

their concerns in an all-staff town

hall meeting. They also called for

more diversity in NPR’s leader-

ship ranks. In a reply, Ms. Barnes

said she was out of the office but

would set up a meeting upon her

return.

“Thank you for sharing your

concerns with me; I want you to

know that I take them seriously,”

Ms. Barnes said.

Some NPR programming dedi-

cated to diversity-related themes

has been curtailed in recent

years. “Tell Me More,” which was

hosted by “All Things Consid-

ered” host Michel Martin, was

shut down in 2014. NPR’s former

ombudsman, Edward Schu-

macher-Matos, wrote in an article

at the time that the decision

drew backlash from many of the

network’s listeners.

BYBENJAMINMULLIN

NPR News

Chief Faces

Backlash

From Staff