Respond, Reopen, Reset

By DealBook | The New York Times

DealBook is the first to report on a new poll of Americans’ economic priorities after the pandemic. The survey by Just Capital, a nonprofit research group that tracks companies’ social impact, and The Harris Poll found that few people are looking forward to a return to business as usual.

Just 25 percent of those surveyed think capitalism as it stands is good for society. By contrast, a large majority thinks that the pandemic has exposed underlying structural problems and that big companies should “reset” their priorities.

• In short, the pandemic is an opportunity to “build a better form of capitalism,” said Martin Whittaker, Just Capital’s C.E.O.

Customers won’t forget how companies reacted to the crisis, the survey found. More than 80 percent of respondents said they would remember which companies “did the right thing by their workers,” whether that’s extra safety measures or efforts to avoid layoffs. Three-quarters of those polled said they would remember the businesses that took missteps during the pandemic “long after it is over.”

• Majorities of respondents supported health and safety measures, flexible working practices, hazard pay, and protecting jobs at the expense of profits, instead of reopening as quickly as possible.

Who’s doing what? Just Capital has tracked corporations’ responses to the pandemic since March. It has expanded its tool to include the 301 largest publicly traded employers in the U.S. The group has added more details about director and executive pay cuts, worker bonuses and voluntary leave policies.

• About 30 percent of these companies have announced pay cuts for executives or the board, while just over 10 percent have increased pay for front-line workers. In some cases, these actions have already expired.

It’s official: The U.S. economy is in recession, according to the committee that judges such things. But investors shrugged, and stock markets continued to climb.

The longest economic expansion in history is over. The National Bureau of Economic Research’s Business Cycle Dating Committee marks economic peaks and troughs by trends in G.D.P., employment and other indicators. The most recent expansion, which began in June 2009 and ended in February, ran for 128 months, the longest stretch of growth since records started in 1854.

The recession may already be over. The common rule is that a recession is two consecutive quarters of contraction, and the U.S. will certainly experience that: The 5 percent fall in G.D.P. in the first quarter is expected to be followed by a drop of more than 30 percent. But the downturn that began in March might have subsided by May, judging by last week’s employment report.

• The shortest recession on record is a six-month period in 1980. This downturn may be shorter, but could be the most severe since World War II. Most economists don’t expect the economy to recover output levels before late 2021.

Stock markets erased pandemic losses. On the same day that the recession was officially announced, the S&P 500 turned positive for the year, and the Nasdaq hit a record high. “Investors seem to have decided that the past three months were just a bad dream,” Scott Clemons of Brown Brothers Harriman told The Times’s Matt Phillips.

• Over the past 10 weeks, every S&P 500 stock has generated a positive return, according to Bloomberg.

• Even companies in bankruptcy protection, like Hertz and J.C. Penney, have seen their shares more than double recently (from very low levels), fueled by speculative retail traders. (The chart for Hertz’s stock on the Robinhood app is something to behold.)

As more of the U.S. reopens, the finance industry is preparing to return to the office. But the landscape will be very different from pre-pandemic times.

Wall Streeters will encounter plexiglass dividers, temperature checks and moreThe Times’s Kate Kelly reports. Workers will have to socially distance while waiting for touch-free elevators, and cafeterias will be replaced by meal boxes. Some real estate companies are providing apps that show which restrooms are the least crowded at any given time.

Many workers won’t have to return to the office yet if they feel uncomfortable. And many companies, including the private equity firms TPG and Carlyle, aren’t planning on reopening their offices until after Labor Day.

Social distancing measures could transform Wall Street, potentially dampening a traditionally boisterous in-person culture. Recruitment could become more difficult, and newer employees may not absorb company culture if they can’t mingle with seasoned colleagues.

More reopening news:

• Americans are traveling again. The T.S.A. screened 440,000 travelers at airports on Sunday, compared with fewer than 90,000 on April 14. (NYT)
• When 511 epidemiologists expect to return to shared offices, board planes and attend sporting events or concerts. (NYT)
• The coronavirus transmission rate is climbing in Los Angeles County. Experts attribute the increase to reopening measures. (L.A. Times)

Steven Davidoff Solomon, a.k.a. the Deal Professor, is a professor at the U.C. Berkeley School of Law and the faculty co-director at the Berkeley Center for Law, Business and the Economy. Here, he considers the prospects for health care M.&A. during a pandemic.

AstraZeneca probably won’t acquire Gilead. If it tried, there is a high probability that the rumored deal would run into significant national security issues.

Gilead’s market cap is nearly $100 billion, so any acquisition by an overseas company — AstraZeneca is based in Britain — would be scrutinized by the Committee on Foreign Investment in the United States, or Cfius. The committee can block any transaction that impairs national security. Even before the pandemic, it had focused on biotechnology and health care, but new attention on Covid-19 vaccines and treatments could make otherwise bullish health care companies think twice about potential deals. Gilead is best known right now for remdesivir, the only drug that has been shown to work in Covid-19 patients.

Cfius has already moved to review all foreign investments in domestic biotechnology businesses. The national security process is going to be a key tool for the government to maintain and reorder health care supply chains. Congress is likely to offer tax incentives to bring production back from abroad, impose supply requirements for goods related to health and safety, and strengthen Cifus’s powers to block transfers of health technology.

A potential AstraZeneca acquisition of Gilead would be an early test. To clear Cfius review, AstraZeneca would have to make significant assurances about the development and supply of health products.

Even then, whether the authorities would allow such an acquisition is about as certain as everything else in these times — that is, not very.

The tech giant said it would no longer sell facial recognition technology because of its potential use in racial profiling and surveillance — and called on Congress to combat systemic racism.

From a letter that IBM’s chief, Arvind Krishna, sent to Congress:

• “IBM firmly opposes and will not condone uses of any technology, including facial recognition technology offered by other vendors, for mass surveillance, racial profiling, violations of basic human rights and freedoms, or any purpose which is not consistent with our values and Principles of Trust and Transparency.”

• Mr. Krishna added that while A.I. can be a useful policing tool, sellers and users alike “have a shared responsibility to ensure that A.I. is tested for bias, particularly when used in law enforcement, and that such bias testing is audited and reported.”

The decision was spurred by the racial justice protests following George Floyd’s killing, CNBC reports. Studies have shown that many commercial facial recognition systems suffer from bias on the basis of age, race and ethnicity, and its role in invasive law enforcement practices.

• That said, facial recognition wasn’t a big source of revenue for the company, CNBC adds.

More on corporate responses to racial injustice:

• The editor of Bon Appétit, Adam Rapoport, resigned yesterday over criticism of a photograph of him in a racially insensitive costume and uproar at racial pay disparities at the magazine. Worth watching: whether turmoil will also hit Condé Nast’s other titles. (NYT)

• The Carlyle co-founder David Rubenstein urged Congress to change the designation of Arlington House, a memorial to the Confederate general Robert E. Lee, whose rehabilitation he helped finance. (WaPo)

• Tempests over teapots: Two popular British tea brands rebuked a right-wing social media personality and said they supported the Black Lives Matter movement. (Guardian)


• Dan Loeb’s Third Point and David Tepper’s Appaloosa are among the investors taking a $3.25 billion stake in PG&E. The bankrupt California utility also hopes to borrow $11 billion. (TheStreet, WSJ)
• Lemonade, an online insurance seller backed by SoftBank, has filed for an I.P.O. It was last valued at $2 billion. (Business Insider)

Politics and policy

• Several hedge funds are reportedly considering leaving Hong Kong after Beijing’s moves to tighten control of the territory. (FT)
• Democrats in Congress unveiled an expansive bill that would overhaul law enforcement. (NYT)


• Many Twitter accounts amplifying China’s messages on the coronavirus appear to be part of a coordinated campaign. (NYT)

Best of the rest

• Several hospital chains that received taxpayer funds are laying off workers or cutting wages. (NYT)
• 3M sued an Amazon third-party merchant for selling protective face masks for as much as 18 times list price. (WSJ)

Read the full story at The New York Times.