For C.E.O.s, a New Concern: The Activist in Chief


For years, chief executive officers lived in fear they would become a target of the activist investor Carl Icahn.

Now, they live in dread of a different and somewhat more unexpected kind of activist: President Donald J. Trump.

As corporate executives around the globe try to understand the implications of the Trump administration on their businesses, they seem to be having an almost bipolar reaction: a euphoric sense that regulations and taxes could soon be lowered — which would likely increase their profits and paychecks — yet a simultaneous anxiety that they could become a target of one of the president's Twitter tirades, which could undo their businesses or possibly their careers.

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Over the last two months, dozens of chief executives have made pilgrimages to Trump Tower on Fifth Avenue in New York City. The ritual involves being photographed in the lobby in front of the gold elevators and having your name hastily tweeted by the throngs (journalistic and otherwise) involved in the spectator sport.

U.S. President Donald Trump speaks as he poses with labor leaders on January 23, 2017 in the Oval Office at the White House in Washington, DC.
Nicholas Kamm | AFP | Getty Images

For the moment, the action seems to have shifted to Washington. On Monday, a bevy of executives — Elon Musk of Tesla, Kevin Plank of Under Armour and Andrew Liveris of Dow Chemical among them — arrived for a 9 a.m. meeting at the White House.

This meeting and similar ones, according to more than a dozen executives who have attended them, are viewed by the executive class not only as an opportunity to help shape policy in their favor, but also, perhaps more important, as a defensive measure aimed at making "friends" with the new president so as to avoid his wrath later.

Make no mistake: Companies are making changes — or, at least, public announcements — aimed (in part or in whole) at appealing to or appeasing Mr. Trump. Amazon said it was hiring 100,000 new employees. Ford canceled plans to build a factory in Mexico and said it would create 700 jobs domestically.

On Monday, Foxconn, the large Chinese manufacturer behind Apple's iPhone, said it might spend $7 billion in the United States to build a factory that could employ 50,000 people.

The story, which garnered headlines all over the world, was a clear sop to Mr. Trump: In many ways, Foxconn's statement was seen as a hedge against the possibility that the new president, who has threatened a trade war with China and criticized Apple for manufacturing iPhones abroad, might seek to put further pressure on its business.

Jack Ma, the founder of Alibaba, visited Mr. Trump two weeks ago and announced plans to build an online platform that he pledged would create a million jobs in the Midwest for farmers and small businesses to export goods to China. The plan had been in the works before Mr. Trump was elected, but clearly it helped grease the skids with Mr. Trump, who took Mr. Ma to pose for pictures in the lobby of Trump Tower.

Masayoshi Son, the leader of SoftBank, was seemingly used as a prop by Mr. Trump when he said in December that he planned to invest $50 billion in the United States — even though he had announced plans to start a $100 billion fund more than a month earlier, and much of the money was almost certainly expected to be spent in the United States.

"I have a sneaky feeling that Amazon and many others do not want to rile Trump," Tim Bajarin the president of Creative Strategies Inc., a consulting firm, wrote in an essay on Recode. "What he says and does from his 'bully pulpit' could hurt them during his time in office."

Mr. Icahn, a friend and supporter of Mr. Trump's, who was recently named a special adviser on regulation, said in a telephone interview, "You are correct in saying my relationships with companies is somewhat analogous" to Mr. Trump's own relationships with the leaders of them.

"If they are taking advantage of the system, they should be scared," Mr. Icahn said of corporations. "Remember, many of the guys I went after deserved to be scared — but in many cases, I bought stock in companies with managements I liked, and I helped them get things done with recalcitrant boards."

"It will be a bumpy road," Mr. Icahn said. "But in the long run he will do a great job with the country."

While some executives may be focused on the optics of their businesses in relation to Mr. Trump, Laurence D. Fink, the chairman and chief executive of BlackRock, the largest money manager in the world overseeing over $5 trillion — that's with a "t" — suggests that each company must rethink its strategy.

"We believe that it is imperative that companies understand these changes and adapt their strategies as necessary," Mr. Fink wrote in a letter to the nation's top public company executives that he is in the process of sending out. "Not just following a year like 2016, but as part of a constant process of understanding the landscape in which you operate."

"We will be looking to see how your strategic framework reflects and recognizes the impact of the past year's changes in the global environment," Mr. Fink added. "How have these changes impacted your strategy and how do you plan to pivot, if necessary, in light of the new world in which you are operating?"

One of the big issues that companies are likely to confront — and that Mr. Trump may confront for them if they aren't lucky — is how they might use repatriated cash if tax reforms are passed in Washington. Mr. Trump has made his presidency about creating jobs. Yet many chief executives have already said that if they are able to repatriate cash at a low tax rate, they will engage in stock buybacks and mergers and acquisitions. (In the 12 months ending in the third quarter of 2016, BlackRock pointed out that "the value of dividends and buybacks by S&P 500 companies exceeded those companies' operating profit.")

Mr. Fink warned that he was watching, too. "If tax reform also includes some form of reduced taxation for repatriation of cash trapped overseas, BlackRock will be looking to companies' strategic frameworks for an explanation of whether they will bring cash back to the U.S. — and if so, how they plan to use it. Will it be used simply for more share buybacks? Or is it a part of a capital plan that appropriately balances returning capital to shareholders with prudently investing for future growth?"

Between Mr. Trump and the investor class, chief executives may be cornered in their offices more than ever as they try to adjust to the new reality.

Adam Grant, a professor of management and psychology at the Wharton School of the University of Pennsylvania, said behavioral scientists had a term to describe the way chief executives were thinking about Mr. Trump: It is called an "ambivalent relationship."

That sounds about right.