Striking Out: Workers Demand More as Economy Booms

Although corporate profits have climbed to their pre-recession peak, thousands of workers across the nation are striking for higher pay and better working conditions. In 2018, nearly 500,000 workers participated in significant strikes – the highest number since the 1980s. The picket lines show no signs of slowing in 2019. Twenty major strikes have already occurred this year, while only seven occurred in 2017. The walkouts have spanned several industries, from teachers, to auto workers, to hotel staff. The disputes largely focus on stagnant wages and meager benefits. However, the new wave of work stoppages may also be fueled by a deeper sense of inequality.

Employers claim that globalization and rapid technological advances have pressured the business to keep wages low. Employees, on the other hand, assert that the companies are hiding behind excuses to hoard profits. Workers who agreed to austerity plans during the economic crisis argue that as the economy rides a 10-year high and corporate profits soar, it is high time to reverse budget cuts. In addition, some are demanding that employers address pressing social issues such as affordable housing, protections for immigrants and refugees, and job security.

In some respects, the strikes are not surprising. Years of strong economic growth and low unemployment have emboldened workers to demand more from their employers. The movement may also be backlash to the Supreme Court’s 2018 ruling in Janus v. Afscme. The Court held that government employees who do not want to join a union cannot be forced to contribute money to the organization. Although many predicted that the decision would be a major blow to unions, labor leaders have responded with more work stoppages and expanded union recruitment efforts.

However, the demands for changes beyond just wages and benefits suggest that striking workers are also motivated by rising inequality and social and economic policies that do not align with their interests. It is possible that the recent spate of high-profile work stoppages will put workers across the country in a better bargaining position to demand more from their employers. At the very least, it is certain that this issue will be at the forefront of the 2020 Presidential election.

Striking Out- Workers Demand More as Economy Booms

Facebook’s Political Ad Policy: Getting Paid for “Free” Speech

Mark Zuckerberg recently gave a speech at Georgetown University defending Facebook’s policy that allows political ads with inaccurate or baseless information to remain on its site. Zuckerberg stated that the policy promotes “free expression” by giving users the “power to express themselves.” In support of this proposition, Zuckerberg referenced the First Amendment, Martin Luther King, Jr., and emphasized the corporation’s commitment to the United States’ long-standing values of free speech.

Facebook’s policy came under scrutiny when the Trump campaign circulated a “30-second video ad that falsely claimed [Joe] Biden committed corrupt acts in Ukraine” – an allegation for which Trump is being investigated. Biden’s campaign requested that Facebook take down the ad, but it refused, citing the same free speech concerns echoed by Zuckerberg.

Since Facebook adopted this policy, several high-profile individuals have stressed the dangers associated with allowing political candidates – mainly the Trump campaign – to pay for the digital dissemination of blatantly false information. For example, Marc Benioff, the CEO of Salesforce, has been vocal in his disapproval of Facebook’s policy, demanding Congress enact legislation barring false advertisements on social media.

Recently, Elizabeth Warren took more drastic measures and purchased a fake ad that claims Mark Zuckerberg endorses Donald Trump for re-election. In response to Facebook’s acceptance of the ad, Warren tweeted that “Facebook [is throwing] its hand up to battling misinformation in the public discourse, because when profit comes up against protecting democracy, Facebook chooses profit.”

Moreover, Bernice King, Martin Luther King, Jr.’s daughter, publicly addressed Zuckerberg’s reference to her father in his recent speech, tweeting that the “disinformation campaigns launched by politicians . . . created an atmosphere for [MLK’s] assassination.” She further stated that “King knew that democracy . . . requires a deep foundation of truth, or it is a house upon sand.”

Facebook has remained steadfast in its position of promoting free expression on its social platform and still refuses to remove any erroneous political ads. With that said, the widespread discontentment with Facebook’s policy may give rise to possible changes in federal legislation. Specifically, 47 U.S.C. § 230 – which limits many social platforms’ liability for unconstitutional speech because these companies are not considered “publishers” of user information – may be called into question. Perhaps Congress will respond to the barrage of false political advertisements by reducing the standard of liability for platforms that have less control over the content generated on their sites.

Facebook’s Political Ad Policy- Getting Paid for “Free” Speech

EU Goods Hit Hard by US Tariffs

As of last week, Italian cheese, Spanish olives, Scotch whisky, and French wine, among other EU goods, have just become more expensive to import – thanks to a decision from WTO arbitrators announced earlier this month.

These tariffs are forcing American importers to pay up to 25% more for the targeted items, collectively worth about $7.5 billion. The big hit on imports is expected to severely impact sales, profit margins, and jobs.

The decision to impose these tariffs comes from a 15-year old case that has just recently concluded, where the World Trade Organization ruled that the US could attempt to recover the $7.5 billion lost from ‘unfair state subsidies’ given by the EU to Airbus, an airplane manufacturer.

Spain, the largest producer of olive oil, will be hit hardest by the tariff hike. Over half of the world’s olive oil supply is coming from Spain (2018-2019), and over a tenth of Spanish exports are currently sold into the US.

Scotland is also impacted by the tariffs, as Scotch whisky is integral to the region’s economy; exports to the US were worth nearly $1.5 billion last year. According to the WTO, the tariffs will impact Scotch and Irish whisky produced in the UK, but not whiskey from Ireland.

It signals a troubling future for post-Brexit UK, and the business and union leaders are worried. Scotland’s Secretary of the GMB Union, Gary Smith, was particularly critical of the decision, citing that it represented a “troubling glimpse into the post-Brexit future” for the UK.

That hasn’t stopped the spirits association from fighting back. Over a week ago, a group of fifteen spirits associations from the US and EU called for an end to these tariffs. In their letter to the US administration and EU Commission, they said that their industries had become collateral damage in a bitter, acrimonious trade war.

However, the EU’s chance to retaliate won’t come until next year, when the WTO prepares to rule on what tariffs the EU can impose in retaliation to separate US state aid given to Boeing, Airbus’ competitor.

EU Goods Hit Hard by US Tariffs

 

 

Boeing Removes Chairman Weeks Before Congressional Hearing

After markets closed on Friday October 11th, Boeing announced the removal of Dennis Muilenburg as Chairman. While Muilenburg will retain his titles of CEO, President, and Director, Boeing has designated David L. Calhoun to take over the Elected Non-Executive Chairman role.

This change comes seven months after the Federal Aviation Administration (FAA) grounded the entire 737 Max 8 fleet in response to two deadly crashes that killed 346 passengers. Since then, Boeing has lost an estimated 30 billion dollars in market capital, in addition to the nearly 5 billion dollars it has had to dole out to compensate airlines for lost profits resulting from the grounding. The high capacity, fuel-efficient 737 Max 8 plane was Boeing’s best seller prior to the crashes.

However, Boeing asserts that the separation is not punitive but rather will enable Muilenburg to direct his focus to returning the 737 Max 8 fleet to service. In an official statement released by Boeing, Calhoun reiterated the board’s confidence in Muilenburg’s continued leadership.

While Boeing insists the 737 Max 8 fleet will be ready to return to service by the fourth quarter, many hurdles remain. The company has yet to send the necessary software fixes to the FAA for safety review. Once those fixes are regulator-approved, Boeing will need to ensure pilots are properly trained to handle the updates. Even then, the company must convince elected officials and the general public that these planes are truly safe.

An initial test of public confidence will take place on October 30th when Muilenburg testifies before Congress about the system failures that caused the fatal crashes. There, Boeing will likely face harsh criticism of its governance for failing to provide the oversight necessary to prevent the accidents. As such, the recent shift of leadership may indicate Boeing’s attempt to exhibit responsiveness to these concerns.

Despite the change in official title, Muilenburg remains tasked with the key role of quickly and safely returning the 737 Max 8 fleet to the skies.

Boeing Removes Chairman Weeks Before Congressional Hearing

American Businesses: Patriotism Over Greed?

Since October 4, 2019, the NBA has unwittingly found itself in the battle ground of a geopolitical conflict after Daryl Morey, the Houston Rockets General Manager, tweeted an image with the words “Fight for freedom – stand with Hong Kong.”  The owner of the Rockets, Tilman Fertitta, engaged in damage control, tweeting that “[Morey] does NOT speak for the [Rockets]” and emphasized that the team is “NOT a political organization.”

Yet, the damage was done.  On October 6, 2019, Chinese sports media outlets retaliated by banning coverage of the Rockets.  Nets Owner, Joe Tsai, the billionaire co-founder of Alibaba, criticized Morey’s tweet for harming the NBA’s relationship with Chinese fans and characterized the Hong Kong pro-democracy protesters as separatists.

The following day, the NBA apologized for Morey’s tweet offending “friends and fans in China” as “regrettable” but claimed it will not censor because the league supports individual expression.  The NBA’s two-faced apology drew the scorn of many Americans including Democrat and Republican politicians.

Nor was China satisfied with the apology.  On October 8, 2019, China’s state television broadcaster’s sports channel banned coverage of the NBA preseason and a Chinese tech company barred two preseason games on its streaming platforms.  By the following day, all elevent Chinese companies that were official partners of the NBA severed ties.  China’s response was a strong message to the NBA that it is not immune from paying homage to the Chinese Communist Party if it desires to do business in China.

The NBA controversy is illustrative of a broader business trend of U.S. companies compromising American values to gain access to China’s market of 1.4 billion people and its growing middle class.  It’s hard to believe the NBA’s apology was not strongly influenced by the fact that an estimated 10% of the NBA’s current revenue comes from China, with that revenue potentially increasing to 20% by 2030.

Other American businesses within the past two years have caved to China’s pressure to conform to its propaganda.  For example, in an Orwellian manner, U.S. airlines, no longer refer to Taiwan by its name, “Taiwan.”  Similarly, fashion companies have not been immune from scrutiny. Luxury fashion company Coach apologized after a backlash from Chinese consumers, for making T-shirts that implied Hong Kong and Taiwan were countries, while Gap said sorry for an allegedly “incorrect map” of China, for omitting Tibet and Taiwan.  Even hotel giant Marriot apologized for disrespecting China through a customer survey listing Tibet and Taiwan as independent countries.

It is clear that China is using American businesses to legitimize its claims over disputed lands.  Unfortunately, American businesses have demonstrated little interest in standing up to China.  Since the NBA incident, tech companies have already yielded to China’s pressure.  Blizzard punished a player for openly supporting Hong Kong protesters, Apple removed the Taiwanese flag emoji in Hong Kong and an app tracking Hong Kong police, and Google removed a pro-Hong Kong game.

Numerous other incidents demonstrate the troubling trend of U.S. businesses abandoning basic values of free speech, democracy, and openness to do business in China.  China’s economic growth has provided it the power to bully foreign businesses to comply with its wishes.  Although American businesses have fortunately become more willing to advocate for social causes, they have overwhelmingly failed to take a principled stand on geopolitical issues involving China.  Despite NBA superstar Lebron James’s claim that “[not] every issue should be everybody’s problem,” injustice abroad does not make it any less of an injustice.

American businesses truly have the power to make a difference in the world.  We should hope they choose to use their power to make the right kind of a difference.  In response to the recent events in the NBA, many Chinese fans “said they would choose patriotism over their love of the game.”  One cannot help but wonder whether American businesses including the NBA may one day likewise summon the courage to unequivocally choose patriotism over their love of money.

 

Facebook may be ordered to remove digital content worldwide, E.U. says

On October 3, 2019, the European Union Court of Justice (the “ECJ”) ordered Facebook to remove illegal content worldwide. Not only does this ruling have global implications for other social media platforms, but it gives rise to freedom of speech issues.

According to the facts of the ECJ case, Ms. Eva Glawischnig-Piesczek – a member of the Nationalrat (National Council of Austria) as well as chair and federal spokesperson of the parliamentary party “die Grünen” (the “Greens”) – sued Facebook Ireland in Austria. Glawischnig-Piesczek sought an injunction to force Facebook Ireland to remove an insulting and defamatory comment published by a Facebook user.

Based on these facts, the Oberster Gerichtshof (“Supreme Court of Austria”) sought a ruling from the ECJ interpreting the EU’s Electronic Commerce Directive (“Directive”). Under the Directive, a host provider (e.g. Facebook) is not liable for digitally stored information if it has no knowledge of its illegal nature. However, this exemption does not prevent courts from ordering host providers to remove and disable access to illegal information.

Ultimately, the ECJ held that the Directive does not preclude a member state court from ordering a host provider to remove information or block access to information worldwide so long as it was “within the framework of the relevant international law.” The ECJ noted that, in this case, it was up to member states to take that law into account.

The decision by the ECJ has been heavily criticized by Facebook, primarily on the grounds that “it undermines the long standing principle that one country does not have the right to impose its laws on speech on another country.” Furthermore, “it also opens the door to obligations being imposed on internet companies to proactively monitor content and then interpret if it is ‘equivalent’ to content that has been found to be illegal.”

In the United States, §230 of the Communications and Decency Act protects internet technology companies from liability arising from content created by its users. As a result, this has allowed social media companies to grow. The protection of the Communications and Decency Act encompasses everything from product reviews to political rants. However, this law has been heavily criticized by both Democrats and Republicans.

In response to this criticism, Facebook unveiled a blueprint for an independent oversight board (“Oversight Board”) last month. The Oversight Board will be responsible for reviewing appeals of the company’s policy decisions regarding posts, photos, and videos it takes down or leaves online. The authority of the prospective Oversight Board is intentionally far reaching. For example, it will have the authority to override decisions regardless of whether or not Mark Zuckerberg agrees.

The aforementioned decision by the ECJ is just one of many recent examples of steps taken by the EU to investigate the technology industry’s data and privacy practices, and ultimately, regulate the technology sector. For example, European regulators fined Google $1.7 billion in March based on allegations that its advertising practices violated antitrust laws.

While Facebook is not allowed to appeal the ECJ ruling, individual European countries have the power to ignore the ruling. Moreover, the United States could use trade agreements to pressure the EU to adopt more expansive internet freedom laws that are similar to the Communications and Decency Act.

Nevertheless, this ECJ decision underscores an important international query: what is the best way to regulate technology giants like Facebook and Google in order to curtail online falsehoods (i.e. fake news) and protect individual users without infringing upon digital free speech? Unfortunately, the answer is far from simple. With that said, it is apparent that the ECJ decision is largely unenforceable around the globe, as international law does not provide any real enforcement mechanisms. Therefore, it is up to individual countries to create meaningful policy to address these countervailing approaches.

Facebook may be ordered to remove digital content worldwide, E.U. says

 

 

 

 

 

 

Oracle’s Secret Weapon: Safra Catz to Potentially Lead as Sole CEO

Oracle’s Safra Catz had been co-Chief Executive Officer (CEO) with Mark Hurd since September 2014. On October 18, 2019, Hurd died at the age of 62. He was known as the leading force behind Oracle’s sales, customer and technical support, business development, and marketing team. Oracle’s co-CEO structure allowed Catz to be the dominant force behind finance, M&A, legal, and human resources – traditionally considered the “back end” of a company. Catz is the financial wizard at Oracle and the mastermind behind Oracle’s economic strategy. She has been rightfully called “The Enforcer.”

This division of executive functions allowed the co-CEOs to specialize in their respective strength areas. Hurd would handle the “front end,” often appearing in the limelight for press interviews, speaking on stage, and socializing with customers. While Catz has intensely maintained a private identity for an executive, she would be subject to more public visibility if she took the helm as sole CEO. Between Catz’s experience as a trained lawyer, former investment banker, and as a 20-year Oracle veteran, she may be the ideal leader for Oracle as it makes a big push to take on Amazon, Microsoft, and Google within the cloud.

Larry Ellison, the Chief Technology Officer (CTO), former CEO, and founder of Oracle, oversees engineering and product development, but still maintains a final say with respect to executive decisions. He has noted that he is not interested in being CEO again. Ellison gave Oracle’s board five internal candidates to be considered for the next CEO.

One of the named candidates is Steve Miranda, Executive Vice President of Oracle Applications Product Development at Oracle. Additionally, Don Johnson, Vice President of Oracle Cloud Infrastructure, and Thomas Kurian, Oracle’s former President of Product Development, now CEO of Google Cloud, are being considered. Two other contenders, Dave Donatelli, Executive Vice President for Worldwide Sales and Marketing Strategy, and Edward Screven, Chief Corporate Architect at Oracle, are also in the mix.

Although one of Ellison’s five named candidates could potentially rise to co-CEO with Catz, it stands to reason that Catz has more experience as a leader. She has been in the CEO role since 2014 and has the business acumen, legal knowledge, and leadership skills to shine as sole CEO. Some even describe her as “brilliant, [and] tough as nails.” Oracle will need to adapt quickly during this critical stage – with the loss of Hurd – and appoint a leader that will keep the company relevant in a fiercely competitive technology landscape.

Oracle’s Secret Weapon: Safra Catz to Potentially Lead as Sole CEO

Group Nine Media Acquires PopSugar to Access Market of Millennial Women

New York-based digital media company Group Nine Media announced its decision to acquire women’s lifestyle publisher PopSugar earlier this month. The deal is an all-stock transaction and follows Group Nine’s successful round of funding, a $50 million financing led by Discovery Inc. While details of the deal are yet to be disclosed, reports have valued PopSugar at $300 million and Group Nine at $600 million.

PopSugar is now part of the larger portfolio of brands owned by Group Nine, which includes mobile news brand NowThis, animal-story focused The Dodo, tech content publisher Seeker, and digital brand Thrillist, which focuses on travel and entertainment. The women’s lifestyle publisher previously raised $41 million from Sequoia Capital and Institutional Venture Partners (IVP) and claims that it reaches “one in two millennial women in the United States” through its brands.

According to Group Nine CEO Benjamin Lerer, the decision to acquire PopSugar is a strategic decision to expand Group Nine’s outreach to a community that loves the PopSugar brand and will generate an additional 200 million social media followers for the company.  PopSugar’s founder, Brian and Lisa Sugar have said that the transaction will allow PopSugar to create a scalable business model that sets the standard for the next-generation media company. Bringing the entities together is largely aimed at combining the ambition, momentum and leadership of Group Nine with PopSugar’s vast innovative experience in commerce.

According to its spokesperson, a large group of PopSugar’s 500 employees are to be integrated into Group Nine. Additionally, Lisa and Brian Sugar will be taking on executive roles in Group Nine. They will be joined by Sequoia’s Michael Mortiz on Group Nine’s board of directors. Overall, PopSugar’s shareholders look to own a stake of more than 30% in in the surviving entity, which will continue to be called Group Nine Media.

This is yet another transaction in digital publishing sector, which recently saw the high-profile acquisition of New York Media by Vox Media. The deal follows Vice Media’s $400 million acquisition of women’s lifestyle publisher Refinery 29, which was also in talks to be acquired by Group Nine, as a way to enhance its advertising business. The growth of tech behemoths like Google and Facebook has made it difficult for digital media businesses dependent on advertising revenue. This acquisition looks to find a solution to the problem. It falls in line with Lerer’s statement last November where he said that the consolidation of the digital media industry is inevitable as it can diversify revenue generation and can largely benefit advertisers, who will gain exposure to larger audiences. Further, the lack of overlap in the entities’ core businesses adds value to the surviving entity, which is a product of a strategic alliance and could undoubtedly prove to be successful in the long run.

Group Nine Media Acquires PopSugar To Access Market Of Millennial Women

Tesla’s New Software Update Allows Cars to Park Themselves

With its latest round of software updates, Tesla has even more to offer to its customers.

Tesla vehicles are already considered a breakthrough. But they don’t cease to amaze, nor innovate. The pioneer of driverless car technology recently unleashed its latest update “software version 10.0.” Equipped with multiple features, this software is being hailed by the industry for its innovative inclusion called “smart summon.” This feature can command a Tesla in and out of the parking lot without a driver. The owner simply self-directs his or her car’s Autopilot driver assistance system through the Tesla smartphone’s app to the location of choice. Additionally, the inbuilt car’s sensor helps Tesla to accelerate in a direction and move back and forth. As for safety concerns, the software halts the car if it detects any mobile or immobile object in the vicinity.

To achieve its optimum function while complying with California’s Department of Motor Vehicle safety regulations, Tesla recommends its customers use this technology within a 200 feet range. However, as evidenced by demonstration videos surfaced by owners, the car can technically self-drive down the public street.

To continue meeting its customer’s luxury expectations Tesla has created easy ways to watch Netflix, Hulu, and YouTube in its Model S, Model X, or Model 3. And in upcoming days, the company plans to add more streaming and entertainment services to refine its customer’s experience.

Additionally, new features such as “I’m Feeling Lucky” and “I’m Feeling Hungry” in the car’s navigation system can route Tesla owners to their nearest eateries or point of interest. Plus, the new mobile Tesla app equips its controller to remotely access its car windows, defrost the vehicle’s cabin, and provides options to open and close the garage door.

In expected fashion, Telsa has once again surpassed any features unveiled by other automobile makers.

Tesla’s New Software Update Allows Cars to Park Themselves

Uber Goes Shopping: Cornershop Acquisition

Uber recently announced its plan to acquire a majority stake in Cornershop, an on-demand grocery delivery company with a presence in Chile, Mexico, Peru, and Canada. Cornershop plans to continue operations under its current management but will report to a board where Uber has majority control. Absent any delays in regulatory approval, the parties expect to complete the transaction in early 2020.

The Cornershop acquisition reflects Uber’s ongoing strategy to expand beyond its core ride service business. Uber CEO Dara Khosrowshahi highlighted that this transaction helps Uber achieve its goal of being “the operating system for your everyday life.” Uber’s focus on diversifying its business comes after a turbulent ride since its IPO in May 2019. Uber believes that building ancillary services, such as grocery delivery, for its already captive audience of 100 million users will allow it to further monetize those users and make progress towards its goal of becoming profitable.

Cornershop is not Uber’s first venture within food logistics. The company originally tested a variety of delivery services for goods and other items through its Uber Everything initiative, which launched in 2016. Though Uber’s ambitions were large, the company quickly realized that Uber Eats was the most promising line of business, and it is where the company has invested significant capital to date. Partnering with Cornershop will enable Uber to expand upon the logistics already in place from both companies and make quick headway into the grocery delivery space.

Though the food and grocery delivery markets present significant opportunities for growth, they are also highly competitive. Uber Eats already faces strong competition from vendors like GrubHub in the U.S. and Just Eat internationally. Uber can expect similarly formidable competition within the grocery delivery space from U.S. heavy hitters such as Instacart and AmazonFresh. Instacart alone has raised over $1.9 billion and, unlike Uber, is dedicated solely to servicing this market. To what extent Uber will be able to replicate Cornershop’s international success in the U.S. remains to be proven.

Uber has already begun celebrating the potential Cornershop can bring to the Uber platform. However, there are several regulatory approvals still pending – primarily since Cornershop operates in several international markets. In September 2018, Walmart announced it would purchase Cornershop for $225 million, but the transaction was rejected just four months ago by Mexico’s Federal Economic Competition Commission due to antitrust concerns. That said, Uber will likely not face the same level of regulatory scrutiny the Walmart-Cornershop partnership received since Uber is not a retailer and cannot similarly corner the market.

Competition and regulatory hurdles aside, the heightened pressure of being a publicly-traded company will likely force investors to pay close attention to Uber’s strategy and narrative around the acquisition. Uber will need to continue educating its shareholders on the value Cornershop can bring to its platform and the potential it could mean for future growth and profitability.

Uber Goes Shopping – Cornershop Acquisition