Corporate America’s Not-So-New Allies

https://www.nytimes.com/2021/04/06/business/dealbook/democrats-republicans-business.html

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For decades, corporate America was seen as a natural ally of the Republican Party. But as companies increasingly use their clout to speak out on social issues, a rift has emerged. “Parts of the private sector keep dabbling in behaving like a woke parallel government,” Senator Mitch McConnell said yesterday after a series of statements from big businesses about restrictions to voting rights in Georgia and elsewhere. At the same time, liberal Democrats who made their careers bashing big business may have reason to rethink who their friends are, Andrew writes in his latest column.

The fight over voting rights breaks traditional alignments. While corporate money has increasingly flowed to Democrats in recent years, business still tends to lean Republican. (“My heart is Democratic but my brain is kind of Republican,” Jamie Dimon of JPMorgan Chase has said.) But Republicans are now making threats to the bottom lines of companies criticizing their policies, from encouraging boycotts to weaponizing state tax codes. Democrats, meanwhile, are encouraging companies to use their money and influence to steer policy in their preferred direction.

There’s reason to be wary of corporate America’s new activism. Talk is cheap, as some Republicans have noted. Senator Marco Rubio of Florida, for instance, called Major League Baseball’s decision to move its All-Star Game out of Atlanta “an easy way to signal virtues without significant financial fallout.” On the other side of the political aisle, the Georgia Democratic leader Stacey Abrams said she was “disappointed” about the economic hit that would result from the move, even as she respected M.L.B.’s stance.

Businesses support one party, and it isn’t the Republicans or Democrats. Businesses like Republican policies on tax and regulation because they bolster profits. For the same reason, they’re now aligning with Democrats on social issues that customers and employees are vocal about. “Business doesn’t have a political party,” Andrew writes. “Its party is profit.”

Credit Suisse reveals a huge hit from the Archegos meltdown. The bank will record a write-down of 4.4 billion Swiss francs ($4.7 billion) tied to the implosion of Archegos Capital Management, which will lead to a 900 million franc loss in its first quarter. The firm will also replace a half-dozen executives, including its chief risk officer and its head of investment banking.

Democrats can fast-track President Biden’s infrastructure plans. The Senate’s parliamentarian ruled that Democrats could reopen the budget plan they passed in February to add directives, potentially allowing them to sidestep Republican opposition.

Air France gets another bailout. The embattled airline will receive up to 4 billion euros ($4.7 billion) in aid from the French government, as it struggles with a wave of infections in Europe that has dampened demand for travel. In return, the government could double its stake in the carrier, to 30 percent.

Google prevails over Oracle at the Supreme Court. Justices ruled that Google did not infringe copyright when it used aspects of the Java programming language in its Android operating system. Software developers praised the decision as preserving their ability to innovate using existing technology.

BlackRock will conduct a racial equity audit. The money-management giant agreed to examine how its policies and practices contribute to racial injustices, Bloomberg reports. Other Wall Street firms, including Bank of America, Citigroup and JPMorgan Chase, have asked shareholders to reject investor proposals for similar audits.

Topps, known for its trading cards and Bazooka gum, is going public by merging with a SPAC in a deal that values the company at $1.3 billion. The transaction includes an investment of $250 million led by the SPAC sponsor Mudrick Capital, along with investors including GAMCO and Wells Capital. Michael Eisner, the former Disney C.E.O. who is Topps’s chairman, will roll his entire stake into the new company, and stay on.

“Everybody has a story about Topps,” Mr. Eisner said. That’s what initially attracted him to the trading card company, which he acquired in 2007 via his investment firm, Tornante, and Madison Dearborn for $385 million. Buying Topps was a bet on a brand that elicits an “emotional connection” as strong as Disney, the company Mr. Eisner ran for 21 years. (And he knows the value of sports: At Disney, he helped acquire ESPN via ABC.)

Topps has focused on a shift to digital, launching online apps for users to trade collectibles and play games. It also created “Topps Now,” which makes of-the-moment cards to capture a defining play or a pop culture meme. (It sold nearly 100,000 cards featuring Bernie Sanders at the presidential inauguration in his mittens.) And, yes, it has gotten into blockchain, too, via the craze for nonfungible tokens, or NFTs.

The pandemic has increased interest in memorabilia, with a Mickey Mantle card recently selling for $5.2 million. “Topps probably made something like a nickel on it, 70 years ago,” said Jason Mudrick, the founder of Mudrick Capital. NFT mania will allow Topps to take advantage of the secondhand market by linking collectibles to digital tokens. The executives involved in the merger stressed that an NFT boost was not part of their projections, nor a driver of the deal. Topps is focused on digital investments and growth beyond sports, like its partnerships with Marvel and “Star Wars.” The company generated record sales of $567 million in 2020, a 23 percent jump over the previous year.

Michael Brandstaedter, the C.E.O. of Topps, said he expected baseball memorabilia to continue to be lifted by trends like players coming up from the minor leagues more quickly even after the pandemic bump fades.

Can it keep up the momentum? Among the industries attracting SPAC investors, Mr. Mudrick said that collectibles — both digital and physical — were the surest bet. “Our core business is value investing,” he said, and “we just couldn’t wrap our heads around” electric vehicles, drones and the other sectors that are hot for SPACs.

September is the new July — at least in the target dates some companies are giving their employees for a return to the office (if they’re setting a date at all). “Flexible” and “hybrid” working will be common, judging by what some big companies have said recently:

Wells Fargo told its staff in a memo last month that it had set a Sept. 6 return-to-office target and was “optimistic” that vaccinations and case levels would let that stand. It’s had about 60,000 people working at bank branches and other facilities during the pandemic, but 200,000 more remotely.

PwC, the consulting firm that employs 284,000 people, is set to open one office in each of its major cities in May and the rest in September, assuming conditions allow. It expects at least some to work in a hybrid format.

IBM, which employs about 346,000, hasn’t set a strict timeline for its U.S. workers’ return to the office — but expects 80 percent will eventually work in a combination of remote and in-person schedules.

Ford Motor, which has more than 30,000 employees, will begin to transition to a “flexible hybrid work model” in July.

Walmart told employees in March it would start bringing workers back at its Bentonville, Ark., office campus no earlier than July, while its global technology employees will continue to work virtually. (Most of its 1.5 million employees work at its stores, and a vast number have continued to do so.)

Treasury Secretary Janet Yellen called for a global minimum tax rate on multinational corporations in a speech yesterday. International coordination, she said, would stop a “race to the bottom” between countries offering ever-lower tax rates to attract businesses. For the U.S., it could also raise revenue by keeping companies from shifting profits overseas when the Biden administration has expansive spending plans to fund.

Ms. Yellen’s remarks kicked off a wider campaign to find ways to pay for the president’s $2 trillion infrastructure package that would mean “all citizens fairly share the burden of financing government,” she said. Some Senate Democrats were on the same page, releasing a similar proposal meant to discourage companies from moving operations and jobs abroad and to incentivize investment in domestic research and manufacturing. Their “framework to invest in the American people” tweaks President Trump’s 2017 tax law, which reduced the headline corporate tax rate to 21 percent from 35 percent.

There is resistance outside and inside the party. Republicans claim that a corporate tax increase — Mr. Biden proposes a headline rate of 28 percent — would drive investment abroad. Joe Manchin, the Democratic senator from West Virginia, is also wary of the proposals. He said he would only go for a 25 percent rate, and that a half-dozen Democratic allies supported him, more than enough to thwart Mr. Biden’s plan in the Senate.

International agreement might be impossible, if the domestic resistance is any indication. Even if countries could agree on a global minimum tax rate for companies, the implementation and durability of any deal could be shaky, given changes in leadership and the temptation to undercut one another in the name of competitiveness. The O.E.C.D. has been trying to sell its members, including the U.S., on common corporate tax practices for years: Here’s the announcement of an action plan in 2013, which has since been more about plans than actions.

Deals

SoftBank agreed to buy 40 percent of AutoStore, a warehouse automation company, at an $8 billion valuation. (WSJ)

Apollo Global Management is reportedly leading a group to buy a $10 billion stake in Saudi Aramco’s oil pipelines. (Bloomberg)

The short seller Carson Block is planning to bet against more SPACs, calling the market for blank-check firms a “scam.” (Bloomberg)

Politics and policy

London-based bankers still fear their industry is being left behind in Britain’s negotiations with the E.U. over relations after Brexit. (CNBC)

What is infrastructure, really? (NYT)

Tech

Why China is racing to create the first digital currency to be backed by a major central bank. (WSJ)

Uber let its drivers in California see passenger destinations and name prices as it fought moves to categorize them as employees. Having won, it may now revoke that. (S.F. Chronicle)

“What’s Good About Tech Bubbles” (NYT)

Best of the rest

The C.E.O. of Norwegian Cruise Line argues that pandemic restrictions on his industry should be loosened: “I’d like to hear an argument why we couldn’t sail.” (WaPo)

The Winklevoss twins may have lost their fight for Facebook, but they have since become billionaire crypto kingpins. (Forbes)

China’s latest effort to blunt criticism of its treatment of Muslims in the Xinjiang region is … a musical. (NYT)

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