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The Morning Risk Report: Scandals Highlight Peril of Having CEO Out Front |
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A sign featuring Papa John's founder John Schnatter is displayed at a Papa John's pizza store in Quincy, Mass., in December. PHOTO: AP Photo/Charles Krupa
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Good morning. Facebook's Mark Zuckerberg, Tesla's Elon Musk and Papa John's John Schnatter all are the face of their respective companies--and all recently made comments that garnered criticism and thrust their companies into the spotlight, drawing attention to the risks an organization faces when the person running a company is its chief spokesman, Risk & Compliance Journal’s Ben DiPietro reports.
Problems prompted by a brand spokesman’s comments are harder to deal with when that person also is the controlling shareholder or a person of power such as a chief executive or board chairman, said Tadd Schwartz, president of the crisis-communications firm Schwartz Media Strategies.
“You’re putting all of your eggs in one basket when you do that,” he said.
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Social media has changed the nature of the risks as well, said Vincent Schiavone, head of Prioratus Consulting and Crisis Simulation and chief executive of data-analytics firm AKUDA Labs.
No corporation should issue a press release with a quote from the CEO without it being properly vetted through its communications, legal and investor relations departments because any comment a CEO makes that is picked up by the press can have impact on the company's stock, said Mr. Schiavone.
“If a CEO tweets because he wants to and his executive team can’t talk him out of it…the CEO has a boss and it’s the board,” said Mr. Schiavone. "They have to act on behalf of the shareholders, tamp him down or insist on a mechanism for things like that."
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| From Risk & Compliance Journal |
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U.S. officials released guidance this week that highlights the ways North Korea evades sanctions, saying it could make companies aware of tactics that expose them to compliance risks. The advisory document addresses two primary sanctions risk areas: inadvertent sourcing of goods, services or technology from North Korea, or the presence of North Korean citizens in supply chains, the U.S. State Department said.
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President Trump said it was “disgraceful" that federal regulators have blocked Sinclair Broadcast Group Inc.’s $3.9 billion acquisition of Tribune Media Co., taking sides against the Federal Communications Commission in the politically charged deal, WSJ reports. “So sad and unfair that the FCC wouldn’t approve the Sinclair Broadcast merger with Tribune,” tweeted Mr. Trump. He said the acquisition would have created a “much needed conservative voice by and for the people.”
The Trump administration said it would extend $12 billion in emergency aid to farmers, WSJ reports, amid signs the U.S. agricultural sector is beginning to feel the impact of President Donald Trump’s escalating trade disputes with major U.S. trading partners. Agriculture Secretary Sonny Perdue said the U.S. government would provide incremental payments to support prices of some of the hardest-hit commodities, including soybeans, sorghum, cotton, corn, wheat and pork.
American Airlines Group Inc. changed the way it describes Taiwan on Wednesday, WSJ reports, bowing to Chinese pressure to start using language approved by Beijing when referring to the self-governing island. The U.S. carrier previously referred to the Taiwan capital, Taipei, as “TPE, Taiwan” in its list of destinations, but now offers “TPE – Taoyuan International,” a reference to Taipei’s main airport, skirting the fraught issue of Taiwan’s political status. The other top U.S. airlines are also bowing to Beijing’s pressure, Reuters reports.
The U.S. Education Department is investigating whether Temple University administrators used deceptive marketing practices to recruit students to its online M.B.A. program, according to a government letter obtained by The Wall Street Journal. Temple’s Fox School of Business was rated the nation’s best online master’s in business administration program by U.S. News and World Report for four years running, including 2018, until employees disclosed to the magazine in January that inflated student test data was used to rank the school, triggering the dean’s resignation and a probe by the state attorney general this month.
The Internal Revenue Service won a court case closely watched by technology companies, WSJ reports, as an appeals court upheld a regulation governing how corporations divide expenses between their domestic and foreign operations. Tech companies had billions of dollars at stake in the case because the rules at issue determine where they report some deductions.
The Trump administration said it would resume billions of dollars in payments expected by insurers under an Affordable Care Act program, WSJ reports, ending a brief suspension that it had said was necessary because of a judge’s ruling.
An heiress to the Seagram Co. fortune was released on a $100 million bond following her arrest in a widening probe of a self-help organization that prosecutors say was a secretive cult that branded its victims and forced them to participate in sexual acts, Bloomberg reports. The new charges add a bizarre twist to a sensational case that generated headlines with the April arrest of Allison Mack, 35, an actress who allegedly recruited sex slaves. The heiress, who was not charged with sex crimes, pleaded not guilty. Ms. Mack denies wrongdoing.
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Goldman Sachs Group Inc. fired a salesman last month after he was arrested twice in just over a year and charged both times with attacking a woman, Bloomberg reports. "We deny all the allegations," said Lance Fletcher, his lawyer.
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Sergio Marchionne, who engineered a merger of the auto industry’s weakest companies—Fiat and Chrysler—and turned the combination into a cash-generating machine, died at the age of 66. Exor SpA, the company that controls Fiat Chrysler, on Wednesday announced Mr. Marchionne’s death, WSJ reports. His death thrusts the heir to the family that controls Fiat Chrysler into the spotlight.
John Schnatter’s relations with Papa John’s International Inc., the pizza giant he founded, appeared to crumble abruptly and irreparably after reports this month that he had used a racial slur. In fact, WSJ reports, long before Papa John’s board moved to sever formal ties with Mr. Schnatter in the past week, his relationship had been deteriorating with the company and the man he had chosen to succeed him as chief executive, over issues including marketing, sales and who exactly was running the show.
Facebook Inc.’s top lawyer, who led the company’s investigation into Russian election interference, is leaving the company at the end of the year, WSJ reports. Colin Stretch, who has worked at the company since 2010, announced his departure in a Facebook post Tuesday afternoon. He leaves while Facebook is the subject of multiple probes by federal agencies regarding the company’s mishandling of private user data. The company also set
up an “innovation hub” in China in a bid to boost its presence in the country and pledged tough U.S. election security.
Cable tycoon John Malone has retired from the board of Charter Communications Inc., the company said Tuesday. Mr. Malone, who owns a significant stake in Charter, said he is reducing his travel and wants to focus on fewer board positions. He will become Charter’s director emeritus and won’t be able to vote on board matters, WSJ reports.
Lululemon Athletica Inc. has appointed Calvin McDonald to serve as its next chief executive officer, WSJ reports, tapping a top executive of beauty company Sephora to lead the athletic-wear maker. Lululemon said Tuesday that Mr. McDonald’s appointment is effective Aug. 20. He will have a $1.25 million base salary and serve as a board director, according to a Securities and Exchange Commission filing.
Godiva Chocolatier has hired Virginie Costa as chief financial officer at the Brussels-based maker of chocolates and other confectioneries, CFO Journal reports. Ms. Costa will join Godiva on Aug. 6 from U.K. fashion house Burberry Group PLC, where she served as finance chief for the company’s Americas business.
In an age when leaders can be out quickly, often in a day, boards need to be active in preparing and planning for change, WSJ reports.
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Sergio Marchionne, who engineered a turnaround for Fiat and Chrysler by combining the companies, has died at the age of 66. PHOTO: BILL PUGLIANO/GETTY IMAGES
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Many U.S. manufacturers are shrugging off concerns over tariffs and trade tensions so far, as strong demand at home and abroad is yielding stronger-than-expected profits, WSJ reports. Manufacturers are booking more orders and delivering higher profits in a strong U.S. economy, many buoyed by a rebound in oil prices that has spurred demand from domestic drillers.
Ivanka Trump, Mr. Trump's daughter, is closing her namesake fashion brand and planning a longer-term focus on policy in Washington. Ms. Trump said to WSJ that she had contemplated the move in recent months as she grew frustrated by the restrictions she placed on the company, IT Collection LLC, to avoid possible conflicts of interest while serving in the White House.
The Canadian Securities Exchange is quickly becoming the go-to place for U.S. cannabis companies orphaned by their own stock exchanges because the U.S. government still considers marijuana an illegal drug, AP reports.
Vodafone Group PLC Chief Executive Officer Vittorio Colao staked the British company’s future on Europe’s maturing telecommunications market, where business is now shrinking in a challenge for his successor Nick Read, Bloomberg reports.
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| Corrections & Clarifications |
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Former U.S. Treasury official John E. Smith will be co-head of the national security practice at law firm Morrison & Foerster LLP. Tuesday's Morning Risk Report incorrectly said he'd be co-chair of the Washington D.C. office, where he'll be based.
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Follow the WSJ Risk & Compliance Team on Twitter: @WSJRisk, @srubenfeld, @BenDiPietro1 and @LikelyMara.
Send complaints, comments and kudos to Ben DiPietro at ben.dipietro@wsj.com.
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