Cautious optimism gave way to break, despite common policy
ground
By Vanessa Fuhrmans, Joann S. Lublin and Emily Glazer
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 21, 2017).
Can this relationship be saved?
Few chief executives openly supported candidate Donald Trump in
the 2016 election. Yet by the time of his inauguration, many were
expressing cautious optimism they could work with a president who
presented himself as a leader with business acumen.
Many of Mr. Trump's stated priorities -- lighter regulation and
a tax overhaul -- are supported by corporate leaders. Comforting
some executives, Mr. Trump appointed several CEOs to his cabinet,
such as Exxon Mobil Corp.'s Rex Tillerson and billionaire investor
Wilbur Ross.
"Everyone wanted to support the president in making the country
and its economy better," said Kathryn Wylde, chief executive of the
Partnership for New York City, a group that represents major Wall
Street firms and U.S. companies, and who led a CEO delegation to
the White House earlier this year.
Last week saw a parade of top executives distancing themselves
from the president, in some cases sharply, in response to his
comments about racial violence in Charlottesville, Va. Once
executives started quitting the president's advisory councils, the
groups disbanded, a rare instance of companies putting themselves
squarely, albeit unwillingly, into the political sphere.
"The social issues became too difficult to navigate," said Ms.
Wylde.
Charlottesville was the tipping point, not the cause. Behind the
scenes, some executives say, ties had been growing strained for
months.
Then-Uber Technologies Inc. CEO Travis Kalanick, initially a
supporter of Silicon Valley engaging the president, was the first
to quit a White House council in early February, following employee
pressure and a social-media backlash relating to Uber's response to
the president's proposed travel ban.
David Crane, former CEO of power company NRG Energy Inc., and
now senior operating executive at Pegasus Capital Advisors, said
the president's decision to withdraw from the Paris climate
accords, despite intensive industry lobbying, "was seen as a slap
in the face by many executives."
From the beginning, many were uneasy about Mr. Trump's habit of
calling companies out by name on his Twitter account -- even when
he was praising them.
Apple Inc. executives chose to bite their tongues when in July
the president incorrectly portrayed the company's plans to build
plants in the U.S. Similarly, Merck & Co. chief Kenneth Frazier
and Walt Disney Co. CEO Robert Iger chose to overlook issues where
they and the White House differed so they could have a voice in
deliberations, according to industry executives and Mr. Iger's own
comments.
"We have always believed that dialogue is critical to progress;
that is why I joined the President's Forum," International Business
Machines Corp. CEO Ginni Rometty wrote to employees last week,
noting that IBM had worked with every U.S. president since Woodrow
Wilson. "But this group can no longer serve the purpose for which
it was formed." She added that IBM would continue to work with "all
parts of the government" on policies it supports.
As early as February, the heads of two dozen manufacturers got a
taste of the president's style. At a White House meeting to discuss
job creation, Mr. Trump urged General Electric Co.'s Jeff Immelt to
share how the president hit a hole-in-one during a golf game they
played together. At GE's next board meeting, directors ribbed Mr.
Immelt for telling the story, according to a person familiar with
GE. (Mr. Immelt stepped down as GE's CEO this month but remains
chairman.)
By June, CEOs on the White House councils were already
discussing whether to disband them, because of the time commitment
and the increasing costs of a close association with the White
House.
"It's not in the mandate of a company to enter politics, but
CEOs are politicians, too," said Eric Dezenhall, a Washington-based
crisis consultant who has helped companies respond to the
Charlottesville events. "They have their own bases and
constituencies of employees and consumers and shareholders that
they also have to navigate."
The question now is whether Mr. Trump can win them back. During
President Barack Obama's two terms, CEOs often felt like they were
treated as bystanders, and some still hold out hope for joint
action with the administration.
Kevin Burch, president of Dayton, Ohio, trucking company Jet
Express Inc., said recent events shouldn't overshadow the pursuit
of policy goals. His industry wants a seat at the table for many of
the same reasons that attracted CEOs in the first place.
"The president's a business guy," he said. "We think
infrastructure is something he can really get his arms around and
get some movement."
Larry Kudlow, a commentator and informal economic adviser to Mr.
Trump, who helped draft a campaign tax plan, said while CEOs are
sensitive to social issues, they haven't broken from Trump policies
particularly on deregulation and the tax code.
"This is going to blow over," he said. "I guarantee you that he
will be on the phone with many of them."
The White House said the councils, a standard and often
ineffective device used by administrations of all political
stripes, had outlived their purpose. Trump aides said they retained
open lines to business leaders. "We have an incredible amount of
CEOs that want to give us their advice and guidance," one official
said.
Moreover, given the anti-establishment tide that swept Mr. Trump
into office, he may have received political benefit from taking a
more antagonistic approach to America's large companies.
When Mr. Trump announced his bid for the presidency, few
prominent business figures, apart from venture capitalist Peter
Thiel, threw their support behind him. By the end of August 2016,
not one CEO at the nation's 100 largest companies had donated to
his campaign, according to a Wall Street Journal analysis.
During the transition and the early days of the presidency, many
felt a cautious optimism. Stephen A. Schwarzman, CEO of investment
firm Blackstone Group, declared a new era for economic growth at
January's World Economic Forum gathering in Davos, Switzerland.
At the same event, Boston Consulting Group head Rich Lesser told
the BBC: "I think people see an opportunity with a businessman as
president, who is very committed to business and to growth, and
potentially much less gridlock with the Republicans in control of
Congress."
Declining to work with Mr. Trump also risked incurring his wrath
on Twitter. Drug company executives such as Johnson & Johnson
CEO Alex Gorsky and Merck's Mr. Frazier worried not engaging the
president -- who had criticized drugmakers as "getting away with
murder" -- might make it easier for his administration to give
Medicare the power to negotiate and lower drug prices, according to
industry officials.
Connecticut-based United Technologies Corp. had been targeted by
Mr. Trump on the campaign trail over plans to ship jobs from its
U.S.-based Carrier Corp. subsidiary to Mexico. The company and the
president-elect later struck a deal after the election to keep some
jobs in Indiana.
CEO Gregory Hayes appeared at the White House early on a rainy
January morning for the president's first meeting with corporate
chieftains. It was an inauspicious start. Mr. Hayes was left
waiting outside the gate and eventually left. His name had been
left off the list of invitees, according to people familiar with
the incident.
Mr. Trump's initial immigration ban, imposed days after his
inauguration, posed the first major test. It was an issue some felt
spoke directly to American values and also had a distinct business
impact. Some tech companies had immigrant employees stranded
outside the U.S. Employees at technology firms in particular were
restive.
Microsoft Corp. initially issued a neutral-sounding statement
stressing the importance of immigration. A day later, it sharpened
the tone, calling the policy a "fundamental step backwards." By
early February, more than 130 mostly tech companies had joined
legal action against the ban, which proposed temporarily barring
travel from some Muslim-majority countries. The administration said
the policy, which is now tied up in the courts, was needed to
combat terrorism.
Executives on the president's strategic and policy forum were
unhappy, but disbanding wasn't on the table, people familiar with
the group's discussions said. Instead, members discussed whether to
confront Mr. Trump about the policy during the group's first
meeting in February. There, Tesla Inc.'s Elon Musk kicked off the
criticism, which participants said Mr. Trump acknowledged.
Executives took heart that the president could be persuadable.
At the same meeting, Mr. Trump asked J.P. Morgan Chase & Co.
chief James Dimon to back his argument that China was a currency
manipulator.
Mr. Dimon disagreed, according to people familiar with the
meeting.
"They're not, Mr. President," he said. "They're defending their
currency." Gary Cohn, the White House's economic adviser, and a few
other members expressed similar views. Mr. Trump backed off the
subject, and two months later, his administration chose not to tag
China with the label of currency manipulator.
By late spring, business leaders were growing weary of having to
publicly defend their participation with the White House.
Walt Disney CEO Mr. Iger, the target of online petitions with
hundreds of thousands of signatures calling for him to withdraw
from the business council, responded at a March shareholder meeting
that his participation didn't mean he agreed with all Trump
policies.
Quoting a song from the Broadway hit "Hamilton," he said
remaining on the council gave him a chance to have a voice "in the
room where it happens."
Others bit their tongues. When in a July interview Mr. Trump
told The Wall Street Journal that Apple CEO Tim Cook had promised
to build "three big plants, beautiful plants" in the U.S., Apple
declined to comment publicly.
Though Mr. Trump had incorrectly portrayed Apple's U.S. plans,
Mr. Cook didn't openly challenge the president because "it would
have been a tweet war," according to a person familiar with the
company.
Over the months, leaders brooded to their boards and families
over whether they should take a stand against the president,
according to leaders and corporate advisers.
"Informal conversations among board members often revolved
around 'what do you tell your kids?' " said Leslie A. Brun, Merck's
lead director and CEO of Sarr Group LLC, an investment holding
company.
Some business leaders broke with Mr. Trump after the June
decision to withdraw from the Paris climate accord.
Dozens had publicly urged the president to stick with the
climate deal, and several, including Dow Chemical Co. head Andrew
Liveris and Apple's Mr. Cook made the case directly to the
president that the treaty benefited job growth.
Within hours of Mr. Trump's decision, Mr. Iger and Mr. Musk quit
the presidential council. Mr. Iger told only a few senior
executives at Disney about his decision before announcing it in a
tweet, according to a person close to the CEO.
By then, individual members of both main business advisory
councils had been discussing disbanding them, given they had met
only a few times, according to participants. The discussion picked
up steam in July, when Mr. Trump moved to bar transgender people
from serving in the military, they said.
More executives grew disenchanted after a group of tech-industry
leaders saw few results at a White House meeting in June to
brainstorm ways to modernize the government.
"It was becoming patently clear that these meetings were more of
a time suck than a productive utilization of their time and
resources," said a Washington-based consultant who works with CEOs
involved on the councils.
In recent weeks, IBM's Ms. Rometty and Boston Consulting Group
head Mr. Lesser asked Mr. Schwarzman, the head of the strategy
advisory council, about the future of the group and its
effectiveness, given the pressure they were under from employees
and the public, said people familiar with the group.
The unrest in Charlottesville, and the president's response,
pushed even supporters to make a break.
On Sunday night, Merck's Mr. Frazier called Mr. Brun, the Merck
lead director, to tell him that his conscience wouldn't permit him
to stay on the manufacturing council, Mr. Brun said. Under Armour
Inc.'s CEO Kevin Plank soon followed, along with Intel Corp.'s
Brian Krzanich.
After Mr. Trump's Tuesday news conference, in which he
apportioned blame equally between hate groups and people protesting
them in Charlottesville, other executives said they had no choice
but to go.
--Ted Mann, Jonathan Rockoff, Andrew Tangel and Ben Fritz
contributed to this article.
(END) Dow Jones Newswires
August 21, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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