Trump’s White House tweets force CEOs to fight or flee
President Donald Trump is injecting himself into the daily business of US companies to an unprecedented extent, spurring investors and executives to weigh their exposure to his wrath when making decisions.
The latest was Nordstrom, which drew Trump’s public anger on Twitter Wednesday for discontinuing his daughter Ivanka’s line, saying sales had slumped.
Trump shot back, first from his personal account, then retweeted from his official @POTUS account:
My daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person -- always pushing me to do the right thing! Terrible!
— Donald J. Trump (@realDonaldTrump) February 8, 2017
The tweet initially sent Nordstrom’s shares down slightly before they rebounded and ended the day up 4 per cent, the biggest daily gain in two months.
Two hours after attacking the department store, Trump hosted Intel Corp.’s Chief Executive Officer Brian Krzanich in the Oval Office to announce that the semiconductor-maker would spend US$7 billion on a factory in Chandler, Arizona, creating 3,000 jobs — a move that was already widely expected by investors and did little to boost shares. Once again, Trump took to Twitter.
— Donald J. Trump (@realDonaldTrump) February 8, 2017
Not even three weeks into Trump’s presidency, the moves fit a familiar pattern in his dealings with companies: Do what Trump wants, or face a presidential rebuke.
This direct, company-by-company intervention is forcing CEOs and corporate boards into a choice they’ve never before faced with a sitting president — are we with him, or against him? — in a way that distorts normal decision-making and conflicts with shareholder interests.
“There are some firms that are invariably going to hold back their punches; they are holding back certain announcements or decisions because this is a time of uncertainty,” said Mohan Tatikonda, a professor at Indiana University’s Kelley School of Business. “On the other hand, there are firms that are taking advantage of the climate.”
“Damned if you do, damned if you don’t,” he said.
Some choose to fight.
Technology companies Apple, Alphabet, Amazon.com, Microsoft and others have emerged as vocal critics of Trump’s immigration executive order. Starbucks Chief Executive Officer Howard Schultz, on the weekend that Trump’s immigration order was enacted, wrote that he had a “heavy heart” and that the coffee chain plans to hire 10,000 refugees over five years around the world.
For companies with younger, urban and likely more liberal customers, standing up to Trump can be an effective strategy, and any critical response from the president can be emblematic of the values they want to convey.
“It really depends on who your customers are, what demographic they fit into and whether you want to play towards that or play statesman-like corporate CEO,” said Davia Temin, CEO of Temin and Co., a communications consulting firm.
Others cave. United Technologies cancelled plans to shutter an Indianapolis factory in its Carrier unit and agreed to trim the number of jobs it would send to Mexico after Trump’s complaints. Even so, the company will still move hundreds of jobs, while receiving a US$7 million incentive package from Indiana in exchange for the operations that will remain.
On Thursday, Trump was meeting at the White House with the CEOs of US. airlines to discuss regulatory issues, taxes and infrastructure improvements at airports. He met last week with pharmaceutical companies, and in the first week of his presidency with automakers.
— President Trump (@POTUS) January 31, 2017
Lockheed Martin and Boeing, both targets of Trump over the costs of military aircraft, have pledged to work with the new administration to keep spending in check, without divulging specific details. The moves have given Trump public victories even as it is unclear whether any aspect of the companies’ government contracts has changed.
Ford Motor took heat from Trump during the presidential campaign over plans to build a plant in Mexico, a move the automaker initially defended. Then last month, CEO Mark Fields announced the company would cancel a US$1.6 billion small-car factory in Mexico and add 700 US jobs instead. The CEO has also praised Trump’s plans for a tax overhaul and said he expects a more favourable business environment under the new president.
Even Ford’s support hasn’t been universal, though. The automaker came out against Trump’s travel ban against seven predominantly Muslim nations, saying in a statement attributed to Fields and Executive Chairman Bill Ford that “we do not support this policy or any other that goes against our values as a company.”
The Nordstrom tweet crossed a new line in the eyes of critics, suggesting that Trump — now sitting in the White House — wanted to influence corporate policy in a way that would directly affect the finances of a family member. The retailer had come under fire from the Grab Your Wallet campaign, a critic of the administration that is asking shoppers to boycott retailers that carry Ivanka Trump or Donald Trump goods.
Nordstrom said on Wednesday that sales of Ivanka Trump’s brand have “steadily declined,” especially in the second half of last year, and that continuing to offer the line no longer made sense.
“This latest Trump tweet amounts to an undisguised attack on Nordstrom for not helping to enrich his daughter Ivanka and thus, indirectly, helping to enhance his own wealth inasmuch as the Trump Empire is a family enterprise if ever there was one,” Laurence Tribe, a professor of constitutional law at Harvard, said in an e-mail. “The message that sends to the world at large is that everybody had better make financial tribute to the Trump family enterprises —or else.”