1 00:00:02,759 --> 00:00:10,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,640 --> 00:00:14,600 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,640 --> 00:00:17,880 Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg 4 00:00:17,960 --> 00:00:21,080 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,400 --> 00:00:23,120 Speaker 1: or watch us live on YouTube. 6 00:00:24,079 --> 00:00:25,880 Speaker 2: All right, let's talk a little bit more about this. 7 00:00:26,280 --> 00:00:29,840 Speaker 3: Larry Ellison personally backing the paramount bid for Warner Brothers. 8 00:00:29,880 --> 00:00:32,600 Speaker 3: It's something Warner Brothers was looking for and they appear 9 00:00:32,640 --> 00:00:35,680 Speaker 3: to have gotten it now. Stephen Flynn is Bloomberg Intelligence 10 00:00:35,800 --> 00:00:39,000 Speaker 3: Senior credit analyst here and is in studio with us. 11 00:00:39,120 --> 00:00:41,279 Speaker 2: Great to see you, Stephen, Thanks good to be here. 12 00:00:41,880 --> 00:00:42,680 Speaker 2: Break it down for me. 13 00:00:42,760 --> 00:00:47,200 Speaker 3: What does it mean when Paramounts Guidance says that Larry Ellison, 14 00:00:47,200 --> 00:00:50,360 Speaker 3: the chairman of Oracle, is offering a personal financial guarantee 15 00:00:50,600 --> 00:00:53,080 Speaker 3: of forty point four billion dollars in equity financing. 16 00:00:53,080 --> 00:00:54,880 Speaker 2: If something falls apart, what are they going to call 17 00:00:54,960 --> 00:00:56,080 Speaker 2: upon Larry Ellison. 18 00:00:55,800 --> 00:00:56,400 Speaker 4: To do well? 19 00:00:56,440 --> 00:00:59,960 Speaker 5: This is an important step because mid last week, Paramount 20 00:01:00,240 --> 00:01:03,720 Speaker 5: excuse me, the Warner Brothers board recommended shareholders reject the 21 00:01:03,760 --> 00:01:06,120 Speaker 5: tender offer by Paramount for thirty dollars or share. 22 00:01:05,920 --> 00:01:06,480 Speaker 4: And they lift that. 23 00:01:06,560 --> 00:01:09,440 Speaker 5: They listed a list of reasons why, and one of 24 00:01:09,440 --> 00:01:12,520 Speaker 5: them was that there was no personal guarantee from Larry Ellison. 25 00:01:12,600 --> 00:01:16,360 Speaker 5: And now the company Power Amount has addressed that this 26 00:01:16,480 --> 00:01:19,120 Speaker 5: morning with a number of amendments to their tender offer. 27 00:01:19,240 --> 00:01:22,600 Speaker 3: But that means he's putting his equities up up at stake, right. 28 00:01:23,120 --> 00:01:25,160 Speaker 5: And they confirm that they hold one point one six 29 00:01:25,200 --> 00:01:27,080 Speaker 5: billion Oracle shares And if you look at you know, 30 00:01:27,080 --> 00:01:28,840 Speaker 5: an Oracle sharre is about one hundred and ninety four 31 00:01:28,840 --> 00:01:31,120 Speaker 5: dollars or so that's about two hundred and twenty five 32 00:01:31,120 --> 00:01:34,680 Speaker 5: billion dollars. So that is obviously a large amount of 33 00:01:34,760 --> 00:01:37,360 Speaker 5: value there, and the fact that he's personally backing it 34 00:01:37,400 --> 00:01:39,119 Speaker 5: is something that Warner Brothers was looking for. 35 00:01:40,200 --> 00:01:43,160 Speaker 6: Still, a pro form of Paramount Warner Brothers, it's gonna 36 00:01:43,160 --> 00:01:44,160 Speaker 6: be highly levered, isn't it. 37 00:01:44,200 --> 00:01:46,800 Speaker 4: Talk about the debt profile there and how do you 38 00:01:46,920 --> 00:01:49,320 Speaker 4: how do you view it? Yeah, so it gets very complicated. 39 00:01:49,400 --> 00:01:53,240 Speaker 5: So a pro former, you know, Paramount Warner Brothers will 40 00:01:53,280 --> 00:01:56,240 Speaker 5: be highly leverage. You're talking you know, mid four times 41 00:01:56,320 --> 00:02:00,000 Speaker 5: leverage overall, and that's accounting for a significant number of 42 00:02:00,200 --> 00:02:02,120 Speaker 5: synergies that we're giving them credit for. So if you 43 00:02:02,120 --> 00:02:06,200 Speaker 5: look at expected EVATAH or paramount expected EVATAH for Warner Brothers, 44 00:02:06,240 --> 00:02:07,600 Speaker 5: and then you add on top of that, what they're 45 00:02:07,600 --> 00:02:10,520 Speaker 5: targeting is six billion dollars of the annual run rate 46 00:02:10,560 --> 00:02:12,400 Speaker 5: cost savings. It'll take them a few years to get there. 47 00:02:12,440 --> 00:02:14,200 Speaker 5: But if you say pro formal, we'll give them credit. 48 00:02:14,840 --> 00:02:17,239 Speaker 5: The company is still highly leverage at about mid four 49 00:02:17,320 --> 00:02:18,160 Speaker 5: times and x. 50 00:02:18,240 --> 00:02:19,560 Speaker 4: That it's above five times. 51 00:02:19,800 --> 00:02:23,160 Speaker 5: Oh clearly, yes, come on, yeah, And well you're asport 52 00:02:23,200 --> 00:02:23,639 Speaker 5: credit guy. 53 00:02:23,639 --> 00:02:25,639 Speaker 4: You're not giving them credit for the synergies are well, 54 00:02:25,639 --> 00:02:26,000 Speaker 4: you have. 55 00:02:26,000 --> 00:02:28,680 Speaker 5: To give them some credit, but you know, you really 56 00:02:28,720 --> 00:02:29,720 Speaker 5: want to see a dummy and. 57 00:02:30,200 --> 00:02:31,519 Speaker 4: That could a guy. I'm like, I'm all in on this. 58 00:02:31,560 --> 00:02:35,600 Speaker 4: Synergies we usually are less bit more negative. Well, what's 59 00:02:35,600 --> 00:02:37,280 Speaker 4: important too is how they break it up. 60 00:02:37,400 --> 00:02:40,800 Speaker 5: So part of the commitment they have on the credit side, right, 61 00:02:40,800 --> 00:02:43,240 Speaker 5: so you talked about Larry Elison some other equity providers 62 00:02:43,520 --> 00:02:45,520 Speaker 5: providing forty over forty billion dollars. 63 00:02:45,360 --> 00:02:46,200 Speaker 4: Of equity capital. 64 00:02:46,480 --> 00:02:49,760 Speaker 5: They also have a fifty four billion dollars secured bridge commitment. 65 00:02:50,320 --> 00:02:52,760 Speaker 5: And now that's secured. So if we assume that that 66 00:02:52,919 --> 00:02:55,639 Speaker 5: debt is ahead of all the existing debt that's at 67 00:02:55,680 --> 00:02:59,440 Speaker 5: both Warner Brothers and Paramount Skuidance, and again you give 68 00:02:59,480 --> 00:03:02,000 Speaker 5: them credit for sinders. You're talking about pro former leverage 69 00:03:02,000 --> 00:03:04,840 Speaker 5: through the secure debt of about three times. Now, there's 70 00:03:04,880 --> 00:03:07,919 Speaker 5: a possibility that you could get that investment grade rated 71 00:03:08,360 --> 00:03:10,920 Speaker 5: using Charter as an comparable. So if we look at Charter, 72 00:03:11,000 --> 00:03:13,040 Speaker 5: which is one of the biggest cable companies out there, 73 00:03:13,480 --> 00:03:16,400 Speaker 5: they owe almost one hundred billion dollars. Of that, about 74 00:03:16,639 --> 00:03:19,160 Speaker 5: seventy billion dollars or so of it is secured bonds 75 00:03:19,160 --> 00:03:22,119 Speaker 5: and loans that are ig rated, and they're about three 76 00:03:22,160 --> 00:03:24,480 Speaker 5: times levered. So if we use that at a compt 77 00:03:24,800 --> 00:03:27,360 Speaker 5: maybe you could get to investment grade ratings from at 78 00:03:27,400 --> 00:03:29,800 Speaker 5: least two of the three agencies to qualify for investment 79 00:03:29,880 --> 00:03:32,440 Speaker 5: grade for that fifty four billion dollars, which would be 80 00:03:32,600 --> 00:03:33,760 Speaker 5: very key to financing. 81 00:03:33,880 --> 00:03:36,000 Speaker 3: All right, I know we're talking about paramounts Guidance and 82 00:03:36,040 --> 00:03:38,560 Speaker 3: Warner Brothers as the principal players here and Netflix if 83 00:03:38,560 --> 00:03:40,360 Speaker 3: you want to get into that side of the bid too. 84 00:03:40,680 --> 00:03:42,760 Speaker 3: But I'm curious, and this might be a dumb question. 85 00:03:43,760 --> 00:03:48,600 Speaker 3: Larry Ellison, now personally guaranteeing the equity financing, there's a 86 00:03:48,600 --> 00:03:52,400 Speaker 3: lot of questions about Oracle and its debt. Overall, we've 87 00:03:52,400 --> 00:03:55,120 Speaker 3: seen the credit default swaps on its debt rise. That's 88 00:03:55,160 --> 00:03:57,520 Speaker 3: the cost to ensure against a possible default. Does the 89 00:03:57,520 --> 00:04:00,760 Speaker 3: fact that Larry Ellison is committing to backing a large 90 00:04:00,800 --> 00:04:02,640 Speaker 3: portion of the money needed for the deal, does that 91 00:04:02,720 --> 00:04:05,680 Speaker 3: affect Oracle's credit rating at all? Would a credit investor 92 00:04:05,680 --> 00:04:08,880 Speaker 3: and analysts look at that and think, hmm, Now. 93 00:04:08,680 --> 00:04:12,240 Speaker 5: Well, I don't forget Oracle still has a massive equity 94 00:04:12,240 --> 00:04:14,440 Speaker 5: market cap, right, and the stock is traded every day, 95 00:04:14,480 --> 00:04:16,160 Speaker 5: so the market is telling you every day what they 96 00:04:16,160 --> 00:04:18,359 Speaker 5: think the value of Oracle equity is worth. Right, And 97 00:04:18,400 --> 00:04:20,599 Speaker 5: he has again the one point one six billion dollars 98 00:04:20,839 --> 00:04:23,360 Speaker 5: one point one six billion of shares worth about two 99 00:04:23,400 --> 00:04:25,120 Speaker 5: hundred and twenty five billion dollars, and that's what the 100 00:04:25,160 --> 00:04:27,640 Speaker 5: market's saying it's worth. So that's what a credit investor 101 00:04:27,640 --> 00:04:30,920 Speaker 5: would look for that comfort or I'm sorry, an equity 102 00:04:30,960 --> 00:04:33,679 Speaker 5: investor at Warner Brothers Discovery saying that that is backing 103 00:04:33,760 --> 00:04:35,400 Speaker 5: up his forty point four billion dollars. 104 00:04:35,240 --> 00:04:37,160 Speaker 2: And a credit investor wouldn't worry about that part of it. 105 00:04:37,760 --> 00:04:40,480 Speaker 5: I don't think indirectly you could have some concern about it, 106 00:04:40,520 --> 00:04:42,000 Speaker 5: But I don't think directly you would. 107 00:04:42,480 --> 00:04:45,080 Speaker 6: The average credit investors that you talk to about Warner Brothers, 108 00:04:45,120 --> 00:04:45,920 Speaker 6: which daily they. 109 00:04:45,839 --> 00:04:51,000 Speaker 5: Prefer, Well, it's complicated, you would argue that. You know, 110 00:04:51,440 --> 00:04:54,040 Speaker 5: it's interesting is that Warner Brothers bonds or investment grade 111 00:04:54,120 --> 00:04:56,480 Speaker 5: rated right throughout most of the through half of last 112 00:04:56,560 --> 00:04:58,680 Speaker 5: year or half of this year excuse me, twenty twenty five, 113 00:04:59,080 --> 00:05:01,240 Speaker 5: and then they were by far the worst performing, huge 114 00:05:01,240 --> 00:05:04,400 Speaker 5: negative total return. They went into junk, they were fallen 115 00:05:04,480 --> 00:05:07,400 Speaker 5: angel in July, and now they've bounced back and one 116 00:05:07,400 --> 00:05:09,160 Speaker 5: of the better performing high eel names. Was all this 117 00:05:09,279 --> 00:05:12,560 Speaker 5: speculation of some sort of takeout. In either case, the 118 00:05:12,640 --> 00:05:15,359 Speaker 5: bonds are probably better off than they would be without it, 119 00:05:15,400 --> 00:05:17,920 Speaker 5: but there's still some concerns. So if they go with 120 00:05:18,040 --> 00:05:21,039 Speaker 5: the powamount skuiddance deal, there's a chance they could be 121 00:05:21,080 --> 00:05:23,039 Speaker 5: behind all that secure debt that we talked about, that 122 00:05:23,080 --> 00:05:25,599 Speaker 5: fifty four billion dollars of secure debt. But you have 123 00:05:25,640 --> 00:05:29,200 Speaker 5: all that equity capital coming in that's supporting the overall company, 124 00:05:29,320 --> 00:05:32,680 Speaker 5: which would give you support as a bondholder for Warner Brothers. Now, 125 00:05:32,720 --> 00:05:34,480 Speaker 5: the problem with the Netflix deal is that if you're 126 00:05:34,480 --> 00:05:37,320 Speaker 5: a bondholder, you're probably left with the Global networks, which 127 00:05:37,400 --> 00:05:40,479 Speaker 5: is going to be spun out before Netflix comes in 128 00:05:40,520 --> 00:05:43,160 Speaker 5: and buys the studios and streaming operations, and that company 129 00:05:43,160 --> 00:05:46,560 Speaker 5: will be relatively highly levered with a declining business. So 130 00:05:46,600 --> 00:05:48,440 Speaker 5: I'd say it's pretty close, but maybe you lean a 131 00:05:48,480 --> 00:05:50,120 Speaker 5: little bit towards the powamount s guidance. 132 00:05:50,200 --> 00:05:52,599 Speaker 6: Really, all right, I wouldn't have thought that you guys 133 00:05:52,600 --> 00:05:54,440 Speaker 6: are getting soft in early age back in my day. 134 00:05:54,680 --> 00:05:56,280 Speaker 4: All Right, Steven Flinn, thanks so much, appreciate it. 135 00:05:56,279 --> 00:06:00,359 Speaker 6: Steven Flynn, seeing your credit analysts Bloomberg Intelligence with us. 136 00:06:00,440 --> 00:06:02,640 Speaker 2: More from Bloomberg Intelligence coming up after this. 137 00:06:06,640 --> 00:06:10,359 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 138 00:06:10,440 --> 00:06:13,480 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 139 00:06:13,520 --> 00:06:16,839 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 140 00:06:16,880 --> 00:06:20,400 Speaker 1: you get your podcasts, or watch us live on YouTube. 141 00:06:21,120 --> 00:06:23,200 Speaker 6: All right, we got some economic data last week that 142 00:06:23,240 --> 00:06:25,000 Speaker 6: the markets were looking for in terms of the labor 143 00:06:25,000 --> 00:06:27,359 Speaker 6: market and inflation. We've got some more coming up here. 144 00:06:27,640 --> 00:06:30,200 Speaker 6: The question is how how are our good friends down 145 00:06:30,240 --> 00:06:32,800 Speaker 6: at the Federal Reserve kind of digesting all this. For that, 146 00:06:32,839 --> 00:06:36,360 Speaker 6: we go to mister Ira Jersey and we're going to 147 00:06:36,400 --> 00:06:38,279 Speaker 6: get a sense of what his thoughts are there, Ira Jersey, 148 00:06:38,360 --> 00:06:39,200 Speaker 6: Chief US Interest. 149 00:06:39,040 --> 00:06:40,599 Speaker 4: Rate Strategies in Bloomberg Intelligence. 150 00:06:40,760 --> 00:06:42,400 Speaker 6: I remember, where do you think the FED is these 151 00:06:42,520 --> 00:06:44,400 Speaker 6: days and they're thinking about this economy and where they 152 00:06:44,440 --> 00:06:44,800 Speaker 6: need to go. 153 00:06:45,480 --> 00:06:46,600 Speaker 4: Yeah, they were all over the place. 154 00:06:46,640 --> 00:06:48,480 Speaker 7: So what you didn't mention, Paul, was that we had 155 00:06:48,480 --> 00:06:50,560 Speaker 7: a ton of FED speak last week too, and we 156 00:06:50,600 --> 00:06:53,640 Speaker 7: actually had even more this morning. So you definitely have 157 00:06:53,680 --> 00:06:55,839 Speaker 7: two camps that have been built in here, and one 158 00:06:55,920 --> 00:06:59,279 Speaker 7: is the more dubsh side of the of the isle 159 00:06:59,320 --> 00:07:01,760 Speaker 7: who think that, hey, we should be cutting interest rates 160 00:07:01,760 --> 00:07:03,880 Speaker 7: at least a little bit. You even had Williams, the 161 00:07:04,640 --> 00:07:07,160 Speaker 7: president of the New York FED, who's the vice chair 162 00:07:07,240 --> 00:07:10,080 Speaker 7: of the FOMC so presumably has a little bit more 163 00:07:10,080 --> 00:07:13,400 Speaker 7: weight than the rank and file members. So he said 164 00:07:13,440 --> 00:07:15,600 Speaker 7: that like, hey, we can go. We don't have to 165 00:07:15,640 --> 00:07:18,480 Speaker 7: go quickly, but we're going to ease. So that suggests 166 00:07:18,480 --> 00:07:22,080 Speaker 7: to me that maybe January skip is perhaps the base 167 00:07:22,120 --> 00:07:26,040 Speaker 7: case for now, but then more easing later, so March April, 168 00:07:27,000 --> 00:07:28,840 Speaker 7: you know, once we have a little bit more data 169 00:07:29,040 --> 00:07:31,520 Speaker 7: and we can see have the rate cuts that we've 170 00:07:31,840 --> 00:07:34,520 Speaker 7: already had actually work to stimulate the economy. 171 00:07:34,600 --> 00:07:34,800 Speaker 4: Or not. 172 00:07:35,360 --> 00:07:37,960 Speaker 3: So the division inside the FOMC is not new. This 173 00:07:38,000 --> 00:07:40,720 Speaker 3: is something we've seen over the last couple of rate decisions. 174 00:07:40,760 --> 00:07:42,320 Speaker 3: But we do know we're going to get a new 175 00:07:42,320 --> 00:07:46,040 Speaker 3: FED chair starting in late May, because that is when 176 00:07:46,680 --> 00:07:51,200 Speaker 3: Jerome Powell's term as FED chair ends. Put together the 177 00:07:51,600 --> 00:07:55,600 Speaker 3: division within the FED and this timetable for new personnel 178 00:07:55,840 --> 00:07:58,920 Speaker 3: at the FOMC, and whether we should be paying attention 179 00:07:59,000 --> 00:08:00,200 Speaker 3: to all this FED speak. 180 00:08:01,120 --> 00:08:02,760 Speaker 7: Well, I think you have to listen to all the 181 00:08:02,800 --> 00:08:04,680 Speaker 7: FED speak, but you have to take it holistically, right. 182 00:08:04,760 --> 00:08:06,680 Speaker 7: You can't just take one member and say, oh, that's 183 00:08:06,680 --> 00:08:08,760 Speaker 7: exactly what they're going to do, because it is a 184 00:08:08,800 --> 00:08:11,920 Speaker 7: committee and that's what we have to remember. You know. 185 00:08:12,000 --> 00:08:14,080 Speaker 7: Then the new chair comes in. President Trump has said 186 00:08:14,080 --> 00:08:17,160 Speaker 7: he's going to announce a new chair in January. Presumably 187 00:08:17,200 --> 00:08:20,000 Speaker 7: that person is going to take Stephen Myron's seat, and 188 00:08:20,040 --> 00:08:23,800 Speaker 7: if that's the case, then the FED Chair elect will 189 00:08:23,800 --> 00:08:26,840 Speaker 7: be in it for both the March and the April meetings. 190 00:08:27,520 --> 00:08:30,040 Speaker 7: And so therefore we'll have some time around the table, 191 00:08:30,120 --> 00:08:32,320 Speaker 7: but we'll make a few speeches as the FED Chair 192 00:08:32,720 --> 00:08:35,280 Speaker 7: and we'll be able to see or as a FED governor, 193 00:08:35,280 --> 00:08:37,120 Speaker 7: I should say, And so we'll be able to see 194 00:08:37,240 --> 00:08:40,480 Speaker 7: is this person really very duvish? Are they not very dubvish? 195 00:08:40,640 --> 00:08:43,320 Speaker 7: Presumably they'll be more dubvish than j Powell has been. 196 00:08:43,400 --> 00:08:46,280 Speaker 7: But at the same time, you know, again that person 197 00:08:46,400 --> 00:08:49,600 Speaker 7: is only one one of the twelve members who actually 198 00:08:49,720 --> 00:08:51,439 Speaker 7: votes on the policy decisions. 199 00:08:51,600 --> 00:08:53,280 Speaker 3: Well, if Steven Myron is going to be replaced, we 200 00:08:53,280 --> 00:08:55,080 Speaker 3: need to pay attention to what he says. We already 201 00:08:55,160 --> 00:08:58,600 Speaker 3: know what side of the dubbish or hawkish campion lands on. 202 00:08:59,760 --> 00:09:02,000 Speaker 7: Well, yeah, I mean he just you know, the most 203 00:09:02,040 --> 00:09:05,080 Speaker 7: stubbish person on the committee, and you usually get those extremes, right, 204 00:09:05,080 --> 00:09:08,680 Speaker 7: you get one or two really dubbish or relatively hawkish members. 205 00:09:08,880 --> 00:09:11,199 Speaker 7: But it's that middle ground that you have to look at. 206 00:09:11,240 --> 00:09:13,959 Speaker 7: So that's why someone like a Williams, for example, is 207 00:09:14,280 --> 00:09:16,880 Speaker 7: important to listen to because you know he's voted, he 208 00:09:16,960 --> 00:09:20,160 Speaker 7: hasn't yet dissented one way or the other. But you know, 209 00:09:20,480 --> 00:09:23,200 Speaker 7: if that if he's saying that, hey, we're not going 210 00:09:23,200 --> 00:09:26,160 Speaker 7: to necessarily cut in January, you have to take that seriously. 211 00:09:27,080 --> 00:09:28,880 Speaker 6: I do we know what Jerome Palell is going to 212 00:09:28,920 --> 00:09:30,800 Speaker 6: do once he steps down from the chairnship. 213 00:09:31,840 --> 00:09:33,920 Speaker 7: As far as I know, he hasn't said what he's 214 00:09:33,960 --> 00:09:35,680 Speaker 7: going to do. You know a lot of former FED 215 00:09:35,800 --> 00:09:38,840 Speaker 7: chairs either take a role at one of the think 216 00:09:38,840 --> 00:09:41,880 Speaker 7: tanks in Washington or go into academia. That those are 217 00:09:42,160 --> 00:09:45,840 Speaker 7: two of the typical paths. I wouldn't be surprised if 218 00:09:45,920 --> 00:09:48,640 Speaker 7: Jerome Powell maybe even just retired and wound up being 219 00:09:48,679 --> 00:09:51,320 Speaker 7: on a lecture circuit or something like that instead of 220 00:09:51,880 --> 00:09:54,080 Speaker 7: instead of doing having a day to day type of job. 221 00:09:55,280 --> 00:09:57,480 Speaker 2: Yeah, commanding six figure paying fees for. 222 00:09:57,600 --> 00:10:00,000 Speaker 6: Yeah, exactly, a couple board seats, couple of speaking things. 223 00:10:00,120 --> 00:10:01,880 Speaker 4: That's the way to go. I mean, who needs it? 224 00:10:02,320 --> 00:10:05,199 Speaker 6: Ira, Thanks so much, journeyers appreciate it. Ira Jersey, chief 225 00:10:05,280 --> 00:10:08,320 Speaker 6: US interest rate strategist for Bloomberg Intelligence. Joining us there, 226 00:10:08,960 --> 00:10:12,120 Speaker 6: stay with us. More from Bloomberg Intelligence coming up after this. 227 00:10:16,040 --> 00:10:19,720 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 228 00:10:19,800 --> 00:10:22,880 Speaker 1: weekdays at ten am Eastern on Apple Coarclay, and Android 229 00:10:22,920 --> 00:10:26,200 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 230 00:10:26,280 --> 00:10:29,760 Speaker 1: you get your podcasts, or watch us live on YouTube. 231 00:10:30,080 --> 00:10:32,800 Speaker 6: I like the analysts who covered like the travel industry, 232 00:10:32,880 --> 00:10:35,320 Speaker 6: like cruise ships, theme. 233 00:10:35,120 --> 00:10:37,479 Speaker 2: Parks, and you're going on your first cruise strong. 234 00:10:37,240 --> 00:10:40,520 Speaker 6: On my first cruise next fall in France, so that'll 235 00:10:40,559 --> 00:10:44,280 Speaker 6: be interesting. Jody Lourie actually does this, Lori. She actually 236 00:10:44,320 --> 00:10:46,520 Speaker 6: does this for a living. She's a credit analyst for 237 00:10:46,600 --> 00:10:50,000 Speaker 6: Bloomberg Intelligence. She follows a lot of the leisure sectors 238 00:10:50,040 --> 00:10:52,760 Speaker 6: of the economy, think theme parks and cruise lines, that 239 00:10:52,760 --> 00:10:55,960 Speaker 6: type of stuff, hotels, casinos, that type of stuff from 240 00:10:55,960 --> 00:10:59,840 Speaker 6: the credit perspective, because remember that saw, I mean, equity 241 00:10:59,880 --> 00:11:01,280 Speaker 6: of soft debt is hard. 242 00:11:01,360 --> 00:11:04,040 Speaker 4: Right there you go, Jody, let's to spend the cruise 243 00:11:04,080 --> 00:11:04,640 Speaker 4: lines here. 244 00:11:05,440 --> 00:11:08,320 Speaker 6: It seems like the cruise people are cruising back in 245 00:11:08,400 --> 00:11:11,400 Speaker 6: I mean, Charlie Pellot's any you know, sign of that. 246 00:11:11,800 --> 00:11:12,720 Speaker 4: How are they performing? 247 00:11:13,280 --> 00:11:16,080 Speaker 8: So the cruise lines always have a dedicated base. But 248 00:11:16,320 --> 00:11:18,520 Speaker 8: cruising is sort of interesting because it's only two percent 249 00:11:19,040 --> 00:11:21,679 Speaker 8: of the travel industry. It really is such a small 250 00:11:21,760 --> 00:11:25,120 Speaker 8: portion of it. Where we've been watching is for those 251 00:11:25,160 --> 00:11:27,520 Speaker 8: new Dowo cruisers, which I don't know if I'm necessarily 252 00:11:27,520 --> 00:11:31,800 Speaker 8: convinced that they're going as often or they're attracting the 253 00:11:31,840 --> 00:11:34,959 Speaker 8: new to cruisers, but the cruisers are still very much cruising, 254 00:11:35,160 --> 00:11:37,079 Speaker 8: and they're spending more than the average consumer. 255 00:11:37,960 --> 00:11:40,840 Speaker 3: They're also spending more than the people who go to 256 00:11:40,960 --> 00:11:44,839 Speaker 3: theme parks, according to your research, And partly that might 257 00:11:44,880 --> 00:11:47,719 Speaker 3: be because the cruise line industry attracts a different kind 258 00:11:47,720 --> 00:11:52,000 Speaker 3: of customer than the theme park industry. Theme park skews younger, 259 00:11:52,160 --> 00:11:56,120 Speaker 3: cruises skew older easy, Which would you prefer if you 260 00:11:56,160 --> 00:11:58,320 Speaker 3: are an operator? Which would you prefer if you're an investor. 261 00:12:00,200 --> 00:12:03,000 Speaker 8: So we don't make full recommendations, but I will tell 262 00:12:03,040 --> 00:12:05,320 Speaker 8: you a couple of things based on our research findings. 263 00:12:05,559 --> 00:12:08,360 Speaker 8: So first of all, you have to think about how 264 00:12:08,559 --> 00:12:11,960 Speaker 8: people book cruising versus how they book theme parks. So 265 00:12:12,000 --> 00:12:14,560 Speaker 8: when you're talking about cruises, they book far in advance, 266 00:12:14,600 --> 00:12:16,760 Speaker 8: they book a year or two well in advance. And 267 00:12:16,800 --> 00:12:19,200 Speaker 8: what the cruise lines have been doing, particularly post pandemic, 268 00:12:19,440 --> 00:12:22,520 Speaker 8: is they've been locking people in on the drink packages, 269 00:12:22,640 --> 00:12:25,600 Speaker 8: on the experiences. They've been giving these steal of deals 270 00:12:25,679 --> 00:12:28,960 Speaker 8: excursion ideas, and when you get on the boat, it's 271 00:12:29,000 --> 00:12:31,840 Speaker 8: more expensive. So people say, Okay, I'm going to book 272 00:12:31,840 --> 00:12:34,640 Speaker 8: my cruise, but I'm also going to book the snorkeling, 273 00:12:34,640 --> 00:12:35,960 Speaker 8: and I'm going to book this. I'm going to book 274 00:12:36,000 --> 00:12:37,800 Speaker 8: that the ones that I definitely want to do, they 275 00:12:37,880 --> 00:12:40,160 Speaker 8: also book the drink packages which you know, I think 276 00:12:40,160 --> 00:12:42,559 Speaker 8: you can go either way on that personally, because I 277 00:12:42,600 --> 00:12:45,040 Speaker 8: don't think I drink enough, but maybe other people do, 278 00:12:45,559 --> 00:12:49,559 Speaker 8: and and it really sort of just helps their cash flows. Now, 279 00:12:49,679 --> 00:12:54,160 Speaker 8: theme parks people book much later, they are younger, they 280 00:12:54,200 --> 00:12:58,680 Speaker 8: are lower income than the US median household. And the 281 00:12:58,800 --> 00:12:59,920 Speaker 8: key for them is they. 282 00:12:59,800 --> 00:13:01,080 Speaker 2: Can get people in the door. 283 00:13:01,120 --> 00:13:03,240 Speaker 8: They can get them with season passes, or they can 284 00:13:03,320 --> 00:13:05,080 Speaker 8: just get them for the one day pass, but they're 285 00:13:05,080 --> 00:13:07,880 Speaker 8: not necessarily convincing them to spend in park the same way. 286 00:13:07,880 --> 00:13:09,520 Speaker 2: But there's higher volume in theme park. 287 00:13:09,640 --> 00:13:12,480 Speaker 8: Right, there's pretty highvlume in theme parks, but if they're 288 00:13:12,520 --> 00:13:15,200 Speaker 8: just paying for the admission, it might not necessarily cover 289 00:13:15,240 --> 00:13:18,080 Speaker 8: the costs per se. Right, they'll get in the door, 290 00:13:18,440 --> 00:13:21,240 Speaker 8: but they have high capex, they have high just high 291 00:13:21,240 --> 00:13:23,199 Speaker 8: costs in general, and they have all the employees that 292 00:13:23,200 --> 00:13:23,920 Speaker 8: they're paying for. 293 00:13:24,400 --> 00:13:27,120 Speaker 6: Six Flags, that's a theme park that got some local 294 00:13:27,240 --> 00:13:30,560 Speaker 6: Jersey flavor here, six Flags Great Adventure. 295 00:13:31,200 --> 00:13:33,559 Speaker 4: How's the capital structure for these theme parks? 296 00:13:33,920 --> 00:13:36,920 Speaker 8: They are high capex, so high capital intensive companies. 297 00:13:37,280 --> 00:13:39,319 Speaker 4: They have high level rides. 298 00:13:39,559 --> 00:13:42,720 Speaker 8: Right exactly, and similar to cruise lines. So where we 299 00:13:42,800 --> 00:13:45,079 Speaker 8: sort of see it interesting is theme parks and cruise 300 00:13:45,080 --> 00:13:49,199 Speaker 8: lines are constantly they have to get the new experience in, right, 301 00:13:49,240 --> 00:13:52,360 Speaker 8: So they have to spend not just on maintaining their products, 302 00:13:52,400 --> 00:13:55,240 Speaker 8: so not just maintaining the ship or maintaining the ride, 303 00:13:55,480 --> 00:13:58,080 Speaker 8: they also have to get new ones in. So people say, 304 00:13:58,120 --> 00:13:59,280 Speaker 8: I want to go to a Great Adventure because I 305 00:13:59,280 --> 00:14:02,280 Speaker 8: want to ride Superman, right, So they do this to 306 00:14:02,320 --> 00:14:05,480 Speaker 8: get people excited, draw them in so that they're going. 307 00:14:05,520 --> 00:14:07,880 Speaker 8: I mean, you know, the biggest example that we don't cover. 308 00:14:07,960 --> 00:14:11,360 Speaker 8: I don't cover Universal or Comcast, but you know, Universal's 309 00:14:11,400 --> 00:14:14,160 Speaker 8: new theme park this year was a big driver to Florida. 310 00:14:14,200 --> 00:14:16,959 Speaker 8: It wasn't as big as expected necessarily, but it's still 311 00:14:16,960 --> 00:14:19,000 Speaker 8: pretty big. Now, if you're talking about the regional theme 312 00:14:19,040 --> 00:14:23,000 Speaker 8: parks is a little bit more difficult because people aren't 313 00:14:23,000 --> 00:14:26,720 Speaker 8: necessarily planning these long term vacations around Great Adventure. 314 00:14:27,920 --> 00:14:32,800 Speaker 3: Do the theme parks attract more domestic consumers than the cruises? 315 00:14:32,800 --> 00:14:36,160 Speaker 3: I mean, I'm just curious in terms of the sustainability 316 00:14:36,160 --> 00:14:37,920 Speaker 3: and the stability of your customer base. 317 00:14:38,360 --> 00:14:40,040 Speaker 2: So it depends on the brand. 318 00:14:40,200 --> 00:14:43,840 Speaker 8: Because if you look pre pandemic and now going into 319 00:14:43,840 --> 00:14:46,960 Speaker 8: a few years post pandemic, the cruise lines they segment, 320 00:14:47,120 --> 00:14:50,880 Speaker 8: So Norwegian most of their customer bases US their US customers. 321 00:14:51,400 --> 00:14:53,720 Speaker 8: When you get to Royal Caribbean, it's a little bit less. 322 00:14:53,720 --> 00:14:55,880 Speaker 8: It's about so I think it's about eighty percent for Norwegian. 323 00:14:55,920 --> 00:14:57,680 Speaker 8: I'm doing this off the top of my head memory, 324 00:14:57,960 --> 00:15:00,520 Speaker 8: but eighty percent Norwegian. You get to back, it's like 325 00:15:00,640 --> 00:15:03,080 Speaker 8: seventy or sixty five for Royal, And then you get 326 00:15:03,120 --> 00:15:05,360 Speaker 8: to Carnival and it's even less than that. It's closer 327 00:15:05,360 --> 00:15:09,680 Speaker 8: to half, it's not quite half that are US versus international, 328 00:15:09,840 --> 00:15:12,800 Speaker 8: they have a much larger international presence. Brian Egger and I, 329 00:15:12,880 --> 00:15:16,160 Speaker 8: my equity counterpart, we were on the Aida, which is 330 00:15:16,280 --> 00:15:19,040 Speaker 8: one of the one of their brands that they market 331 00:15:19,280 --> 00:15:23,360 Speaker 8: to international customers, specifically in Germany, and it was a 332 00:15:23,560 --> 00:15:26,280 Speaker 8: one hundred and thirty three round. 333 00:15:26,040 --> 00:15:27,840 Speaker 2: The world cruise. 334 00:15:28,200 --> 00:15:30,800 Speaker 8: Nice They were stopping in New York for the day, 335 00:15:31,080 --> 00:15:33,040 Speaker 8: and they brought a bunch of us on, a bunch 336 00:15:33,080 --> 00:15:36,040 Speaker 8: of US equity and credit nerds, and took us around 337 00:15:36,080 --> 00:15:39,360 Speaker 8: the ship and everything was in German, as expected because 338 00:15:39,360 --> 00:15:42,240 Speaker 8: most of their customers were German. So that's Carnival has 339 00:15:42,280 --> 00:15:45,000 Speaker 8: a much more diversified customer base. If you talk about 340 00:15:45,040 --> 00:15:48,800 Speaker 8: theme parks, SeaWorld or United Parks as they go. Right now, 341 00:15:49,160 --> 00:15:52,080 Speaker 8: their Florida parks, which make up about half their revenue, 342 00:15:52,560 --> 00:15:56,880 Speaker 8: is international about ten twenty percent, But when you get 343 00:15:56,880 --> 00:15:58,520 Speaker 8: to six flags, it's much more domestic. 344 00:15:58,960 --> 00:16:02,560 Speaker 6: We were off the a Mafia Coast last fall, oh fancy, 345 00:16:03,040 --> 00:16:05,880 Speaker 6: and I saw this big yacht thats like either navy 346 00:16:05,920 --> 00:16:08,160 Speaker 6: blue or black, And I said, what who owns that? 347 00:16:08,280 --> 00:16:10,880 Speaker 2: It's the rich Carlton Ritz Carlton. Yes, I actually have 348 00:16:10,960 --> 00:16:13,880 Speaker 2: the run on it, just parked in. Those are small, though, 349 00:16:13,920 --> 00:16:16,720 Speaker 2: I mean in terms of the relative five hundred people. 350 00:16:16,880 --> 00:16:18,880 Speaker 4: Yeah, I mean that looked pretty cool. 351 00:16:18,920 --> 00:16:22,440 Speaker 8: Yeah, that's for the people who want to be on 352 00:16:22,480 --> 00:16:25,600 Speaker 8: a luxury yacht but don't want to actually own a 353 00:16:25,680 --> 00:16:26,280 Speaker 8: luxury yacht. 354 00:16:26,320 --> 00:16:26,480 Speaker 6: Right. 355 00:16:26,720 --> 00:16:28,320 Speaker 2: The joke about boats is. 356 00:16:28,240 --> 00:16:30,560 Speaker 8: Bring on another thousand, right, My mother in law likes 357 00:16:30,600 --> 00:16:33,520 Speaker 8: st always say that, and that's why it's called boat. 358 00:16:33,720 --> 00:16:38,200 Speaker 8: So but the uh, you know, the thing about cruising 359 00:16:38,400 --> 00:16:42,000 Speaker 8: is that there's a perception about who the typical cruiser is. Right, 360 00:16:42,320 --> 00:16:46,160 Speaker 8: it's the you know, older people who are retired who 361 00:16:46,200 --> 00:16:49,400 Speaker 8: likes who like to bring basically the catskills on the water. 362 00:16:49,880 --> 00:16:52,880 Speaker 8: But really, I mean it's changed over time. And what's 363 00:16:52,920 --> 00:16:55,880 Speaker 8: interesting about our credit research and our travel survey that 364 00:16:55,920 --> 00:16:58,760 Speaker 8: we do every half a year is we're seeing that 365 00:16:58,800 --> 00:17:01,000 Speaker 8: it's actually really really spread out. If you look into 366 00:17:01,040 --> 00:17:04,360 Speaker 8: the buckets that we've segmented, it's really you know, it's 367 00:17:04,400 --> 00:17:06,240 Speaker 8: one third of each, so it's one third, eighteen to 368 00:17:06,280 --> 00:17:09,400 Speaker 8: thirty four year old one third that like middle age group, 369 00:17:09,440 --> 00:17:11,760 Speaker 8: and fifty five and older one third, so it's really 370 00:17:11,880 --> 00:17:13,720 Speaker 8: not specifically the older. 371 00:17:13,920 --> 00:17:15,680 Speaker 4: All right, Very good, Jodi, thank you so much. We 372 00:17:15,720 --> 00:17:17,520 Speaker 4: appreciate that. Jodi Lourie. 373 00:17:17,840 --> 00:17:21,199 Speaker 6: She is senior credit analyst for Bloomberg Intelligence. Following the 374 00:17:21,840 --> 00:17:24,280 Speaker 6: leisure part of the economy, stay with us. 375 00:17:24,440 --> 00:17:26,760 Speaker 4: More from Bloomberg Intelligence coming up after this. 376 00:17:30,680 --> 00:17:34,399 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 377 00:17:34,480 --> 00:17:37,159 Speaker 1: weekdays at ten am. He's done on Apple, Cocklay and 378 00:17:37,160 --> 00:17:40,439 Speaker 1: Android Auto with the Bloomberg Business App. Listen on demand 379 00:17:40,480 --> 00:17:44,040 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 380 00:17:44,560 --> 00:17:47,520 Speaker 6: Well, it is a crazy time to be a CEO. 381 00:17:48,119 --> 00:17:50,919 Speaker 6: New research from the Conference Board provides insights onto two 382 00:17:50,960 --> 00:17:53,920 Speaker 6: big trends. Number one CEO turnover I think it's going 383 00:17:54,000 --> 00:17:55,879 Speaker 6: up CEO and number two CEO. 384 00:17:55,680 --> 00:17:57,840 Speaker 4: Targeted shareholder activism and again. 385 00:17:57,840 --> 00:18:01,440 Speaker 6: We just had that try and acquisition of Janis Henderson 386 00:18:01,440 --> 00:18:03,360 Speaker 6: and they were shareholders. 387 00:18:02,920 --> 00:18:04,119 Speaker 4: So they said, we're going to buy this whole thing 388 00:18:04,160 --> 00:18:05,399 Speaker 4: out right, So it's happening out there. 389 00:18:05,440 --> 00:18:08,639 Speaker 6: Brian Campbell joins US US Center Leader for Governance and 390 00:18:08,680 --> 00:18:11,560 Speaker 6: Sustainability at the Commerce Board. Brian talked to us about 391 00:18:11,800 --> 00:18:16,720 Speaker 6: CEO turnover, Is it rising and soy sure? 392 00:18:16,760 --> 00:18:19,560 Speaker 9: I think, Paul, thank you for having me. I think 393 00:18:19,600 --> 00:18:22,239 Speaker 9: the trend is that it is up and we are 394 00:18:22,280 --> 00:18:26,760 Speaker 9: seeing definitely more CEO transition, partially driven by what may 395 00:18:26,760 --> 00:18:31,080 Speaker 9: have been longer delayed CEO transitions when you think back 396 00:18:31,119 --> 00:18:35,280 Speaker 9: to the pandemic and the volatility since then, companies kept 397 00:18:35,320 --> 00:18:38,600 Speaker 9: people in positions for longer, and I think that coupled 398 00:18:38,600 --> 00:18:41,520 Speaker 9: with regular transition, is showing a spike. 399 00:18:42,480 --> 00:18:44,879 Speaker 3: So making up for some lost time, which makes sense. 400 00:18:45,119 --> 00:18:47,520 Speaker 3: Where do we see this happening the most? Are they 401 00:18:47,600 --> 00:18:51,280 Speaker 3: big companies, smaller companies, companies that are lagging behind in 402 00:18:51,359 --> 00:18:52,200 Speaker 3: terms of performance? 403 00:18:52,240 --> 00:18:54,760 Speaker 2: And if so, by what metrics are we looking at performance? 404 00:18:55,119 --> 00:18:55,359 Speaker 5: Sure? 405 00:18:55,400 --> 00:18:57,720 Speaker 9: Thank you, Squally. I think what we're noticing is a 406 00:18:57,760 --> 00:19:02,040 Speaker 9: trend that's across the board. Fact hire, a spike in 407 00:19:02,400 --> 00:19:05,760 Speaker 9: well performing companies as opposed to just poor performing companies. 408 00:19:06,240 --> 00:19:08,600 Speaker 9: So I think that's the news part of this, the takeaway. 409 00:19:09,080 --> 00:19:11,200 Speaker 9: And then I think what you're also seeing is we 410 00:19:11,240 --> 00:19:14,040 Speaker 9: would view this as a shift in corporate governance more 411 00:19:14,080 --> 00:19:16,440 Speaker 9: of a proactive approach at the board level. 412 00:19:17,400 --> 00:19:21,520 Speaker 6: Female CEOs are twice more likely to be targeted by activists. 413 00:19:22,200 --> 00:19:23,680 Speaker 4: Wow, what's the data show there? 414 00:19:24,240 --> 00:19:27,360 Speaker 9: Well, I think what we're seeing is that twice as 415 00:19:27,720 --> 00:19:30,240 Speaker 9: likely to be targeted would be reflective of what the 416 00:19:30,320 --> 00:19:34,640 Speaker 9: data shows. And then from the market's perspective, it's possible 417 00:19:34,680 --> 00:19:39,200 Speaker 9: that activists are targeting women's CEOs because they're more likely 418 00:19:39,240 --> 00:19:43,240 Speaker 9: to cooperate, may play into other stereotypes, but definitely, the 419 00:19:44,080 --> 00:19:46,480 Speaker 9: trend so high that it is notable. 420 00:19:47,080 --> 00:19:49,399 Speaker 3: I guess one exception to that is what's happening over 421 00:19:49,400 --> 00:19:52,760 Speaker 3: at Lululemon, right because Elliott has a stake in Lululemon 422 00:19:52,880 --> 00:19:55,200 Speaker 3: and it has now become the biggest shareholder in that company. 423 00:19:55,400 --> 00:19:58,119 Speaker 3: Calvin McDonald, the male CEOs on his way out at 424 00:19:58,160 --> 00:20:01,399 Speaker 3: the end of January, and there are eyeing the former CFO, 425 00:20:01,520 --> 00:20:02,600 Speaker 3: Ralph Lauren, who is a woman. 426 00:20:02,920 --> 00:20:08,360 Speaker 6: Yeah, all right, we'll see so CEOs when I look 427 00:20:08,400 --> 00:20:11,200 Speaker 6: for CEO if I'm the board, Do I prefer an 428 00:20:11,240 --> 00:20:13,360 Speaker 6: internal candidate or an external candidate? 429 00:20:13,480 --> 00:20:14,320 Speaker 4: And is that changing? 430 00:20:15,000 --> 00:20:18,119 Speaker 9: Historically it was an internal focus. We are seeing a 431 00:20:18,160 --> 00:20:22,120 Speaker 9: shift toward external and I think that just layers into 432 00:20:22,160 --> 00:20:25,119 Speaker 9: where we are from a volatility standpoint in the markets generally, 433 00:20:25,160 --> 00:20:29,879 Speaker 9: and what companies are facing between the economy, inflation and 434 00:20:30,080 --> 00:20:31,480 Speaker 9: activist activity. 435 00:20:32,240 --> 00:20:33,399 Speaker 2: Brian, what skill. 436 00:20:33,160 --> 00:20:35,479 Speaker 3: Set is most valuable for a board right now when 437 00:20:35,480 --> 00:20:37,439 Speaker 3: they're looking at a new CEO? I would imagine that 438 00:20:37,520 --> 00:20:40,399 Speaker 3: during the pandemic you wanted someone who is very familiar 439 00:20:40,440 --> 00:20:43,360 Speaker 3: with supply chain logistics, and even so in the era 440 00:20:43,400 --> 00:20:45,800 Speaker 3: of tariffs under Trump two point zero, that would be 441 00:20:46,119 --> 00:20:50,080 Speaker 3: something that's really really important. But have we seen certain 442 00:20:50,119 --> 00:20:53,120 Speaker 3: skill sets become kind of paramount and then others become 443 00:20:53,200 --> 00:20:53,920 Speaker 3: less important? 444 00:20:54,280 --> 00:20:57,000 Speaker 9: Sure, I think the skills matrix that a board focuses 445 00:20:57,040 --> 00:21:00,760 Speaker 9: on when looking at potential candidates has certainly shifted. Crisis 446 00:21:00,760 --> 00:21:03,760 Speaker 9: management is a key skill set that has to be 447 00:21:03,800 --> 00:21:07,320 Speaker 9: present in the current environment, the ability to adapt and 448 00:21:07,359 --> 00:21:11,399 Speaker 9: be flexible in spite of moving targets, and that was 449 00:21:11,440 --> 00:21:14,160 Speaker 9: not necessarily the case a decade or so. 450 00:21:14,080 --> 00:21:17,199 Speaker 3: Ago, and DEI that no longer matters or is it 451 00:21:17,240 --> 00:21:18,440 Speaker 3: still there? In the background. 452 00:21:18,800 --> 00:21:21,800 Speaker 9: We would say it's definitely relevant, but not as prominent 453 00:21:21,840 --> 00:21:24,639 Speaker 9: as it was, and companies are not speaking about it 454 00:21:24,720 --> 00:21:28,080 Speaker 9: quite as affirmatively as they were in the last few years. 455 00:21:28,320 --> 00:21:29,320 Speaker 4: That didn't last very long. 456 00:21:29,920 --> 00:21:31,440 Speaker 2: How long did it last for? Like a year or two? 457 00:21:31,560 --> 00:21:33,639 Speaker 4: I do know it didn't seem like a flash. There 458 00:21:33,720 --> 00:21:35,720 Speaker 4: you go, touch that compensation. 459 00:21:35,760 --> 00:21:38,320 Speaker 6: What's the latest on CEO compensation because a lot of 460 00:21:38,359 --> 00:21:40,840 Speaker 6: folks feel like the stock based compensation. While of the 461 00:21:40,840 --> 00:21:44,720 Speaker 6: lines the CEO with the longer term growth, they tend 462 00:21:44,760 --> 00:21:46,920 Speaker 6: to set targets that are kind of short term. If 463 00:21:46,920 --> 00:21:49,200 Speaker 6: you meet this earnings or this cashlow of this revenue boom, 464 00:21:49,240 --> 00:21:51,800 Speaker 6: you get this monster stock award. But that's always been 465 00:21:51,840 --> 00:21:52,120 Speaker 6: the case. 466 00:21:52,160 --> 00:21:52,879 Speaker 4: I guess sure. 467 00:21:52,920 --> 00:21:55,680 Speaker 9: I think what you're seeing there boards focused on their 468 00:21:55,720 --> 00:22:00,199 Speaker 9: own accountability. They're under pressure to drive performance and they 469 00:22:00,200 --> 00:22:03,159 Speaker 9: need the CEO tied into that. So certainly, when you 470 00:22:03,200 --> 00:22:05,440 Speaker 9: talk about the activist side of it, you've got the 471 00:22:05,520 --> 00:22:06,440 Speaker 9: Lulu Lemon piece. 472 00:22:06,680 --> 00:22:07,320 Speaker 4: But then when you. 473 00:22:07,240 --> 00:22:12,159 Speaker 9: Think about traditional board orchestrations of CEO roles. Recently, Coca 474 00:22:12,200 --> 00:22:14,600 Speaker 9: Cola announced that in March they're going to have a 475 00:22:14,640 --> 00:22:17,760 Speaker 9: new CEO, Henry Braun, who's coming in with thirty years 476 00:22:17,760 --> 00:22:20,280 Speaker 9: of experience. This is part of an orchestrated change, so 477 00:22:20,400 --> 00:22:25,479 Speaker 9: definitely new new opportunities within structuring and governance. And then 478 00:22:25,520 --> 00:22:29,480 Speaker 9: I think the compensation package there is more tuned into 479 00:22:29,520 --> 00:22:32,359 Speaker 9: the longer term performance at the company versus maybe an 480 00:22:32,359 --> 00:22:35,639 Speaker 9: external candidate where there's a compackage that lures them to 481 00:22:35,680 --> 00:22:36,200 Speaker 9: the company. 482 00:22:36,560 --> 00:22:39,440 Speaker 3: Brian, I'm sure you guys have done this CEO's Report, 483 00:22:39,600 --> 00:22:43,359 Speaker 3: this research report a couple of times. Now what surprises 484 00:22:43,400 --> 00:22:47,760 Speaker 3: you the most in this latest edition did you not anticipate? 485 00:22:48,119 --> 00:22:49,800 Speaker 9: I think what we're seeing in the background, and we're 486 00:22:49,800 --> 00:22:52,680 Speaker 9: certainly hearing it from the members of the conference board anecdotally, 487 00:22:53,640 --> 00:22:57,240 Speaker 9: is the shift in corporate governance to a strategic orchestrated 488 00:22:57,359 --> 00:22:58,720 Speaker 9: CEO succession plan. 489 00:22:59,320 --> 00:23:02,919 Speaker 4: So that's new. I think the CEO seat has. 490 00:23:02,800 --> 00:23:05,440 Speaker 9: Always been a quote unquote, you know, potential hot seat, 491 00:23:05,680 --> 00:23:09,960 Speaker 9: but definitely more so orchestrated planning boards being accountable and 492 00:23:10,000 --> 00:23:14,840 Speaker 9: trying to plan that succession and then also including CEOs 493 00:23:14,880 --> 00:23:17,440 Speaker 9: on the exit, keeping them on the board to continue 494 00:23:17,520 --> 00:23:20,560 Speaker 9: continue that institutional knowledge, so opportunity there as well. 495 00:23:20,640 --> 00:23:20,800 Speaker 6: Well. 496 00:23:20,800 --> 00:23:22,520 Speaker 3: So it used to be they would when they were 497 00:23:22,560 --> 00:23:24,160 Speaker 3: out of CEO they were just gone from the board 498 00:23:24,240 --> 00:23:26,480 Speaker 3: completely and persona non grata. 499 00:23:26,440 --> 00:23:29,280 Speaker 9: Right, And I think it's part of that strategic building 500 00:23:29,640 --> 00:23:33,199 Speaker 9: of a continuity plan that will continue to perpetuate the 501 00:23:33,240 --> 00:23:37,200 Speaker 9: institutional knowledge and keep some help for the new CEO 502 00:23:37,680 --> 00:23:38,800 Speaker 9: transitioning into the role. 503 00:23:39,520 --> 00:23:42,439 Speaker 6: How about succession planning for CEO these days, because you know, 504 00:23:42,480 --> 00:23:44,840 Speaker 6: I followed for a long time the Walt Disney Company 505 00:23:44,840 --> 00:23:47,560 Speaker 6: and they had a great succession plan in place until 506 00:23:47,600 --> 00:23:49,320 Speaker 6: the CEO blew it up at the last moment. And 507 00:23:49,359 --> 00:23:52,000 Speaker 6: now it's been ten years and kind of screwing around 508 00:23:52,400 --> 00:23:55,159 Speaker 6: with mister Iger. How important is succession planning? 509 00:23:55,880 --> 00:23:57,119 Speaker 4: It's critical these days. 510 00:23:57,200 --> 00:24:00,760 Speaker 9: And I think what happens now is you've got pipelines 511 00:24:00,800 --> 00:24:05,040 Speaker 9: of potential candidates internal and external, which is new, and 512 00:24:05,080 --> 00:24:08,400 Speaker 9: then also being able to transition in case somebody who 513 00:24:08,480 --> 00:24:11,760 Speaker 9: is in the wings waiting for an opportunity decides that 514 00:24:11,800 --> 00:24:14,800 Speaker 9: they're going to leave and take an opportunity elsewhere. Companies 515 00:24:14,800 --> 00:24:17,199 Speaker 9: need to be flexible, boards need to be adaptable. 516 00:24:17,600 --> 00:24:18,760 Speaker 2: Well, Paul, to your point. 517 00:24:19,000 --> 00:24:21,560 Speaker 3: Now they have James Gorman, the former CEO and chairman 518 00:24:21,560 --> 00:24:25,200 Speaker 3: of Morgan Stanley, leading the succession planning over at Disney, 519 00:24:25,240 --> 00:24:28,080 Speaker 3: because he himself had done such a good job planning 520 00:24:28,080 --> 00:24:29,639 Speaker 3: for his succession at Morgan Stanley. 521 00:24:29,760 --> 00:24:32,680 Speaker 6: Yeah, unfortunately they lost two at least two, maybe a 522 00:24:32,880 --> 00:24:37,000 Speaker 6: three serious outstanding executives and some time a lot of times. Yeah, 523 00:24:37,000 --> 00:24:39,960 Speaker 6: but I guess if you hold Disney shareholders, they'll be like, hey, 524 00:24:40,000 --> 00:24:42,160 Speaker 6: bopken Stain is off as long as he wants. That's 525 00:24:42,200 --> 00:24:44,800 Speaker 6: how good he is, how good we believe him to be. 526 00:24:45,400 --> 00:24:46,600 Speaker 4: What's the big thing that. 527 00:24:46,520 --> 00:24:49,119 Speaker 6: CEOs need to be focusing on these days? It doesn't 528 00:24:49,200 --> 00:24:52,880 Speaker 6: is it simply shareholder MAXI mentioning shareholder value or stakeholder value. 529 00:24:53,200 --> 00:24:55,120 Speaker 9: I think that's a critical aspect of it that will 530 00:24:55,119 --> 00:24:57,200 Speaker 9: always be there at the end of the day, though, 531 00:24:57,200 --> 00:24:59,280 Speaker 9: I think it is building out that more robust skill 532 00:24:59,320 --> 00:25:04,640 Speaker 9: set toward FLEs, flexibility, adaptability, crisis management. The current volatility 533 00:25:04,640 --> 00:25:06,560 Speaker 9: that we're seeing out there, I think is the new normal. 534 00:25:06,640 --> 00:25:08,040 Speaker 9: So CEOs need to adapt. 535 00:25:08,320 --> 00:25:11,119 Speaker 6: All right, Very good, Brian Campbell, us Center Leader for 536 00:25:11,280 --> 00:25:14,359 Speaker 6: Governors and Sustainability at the conference aboard here. 537 00:25:15,320 --> 00:25:20,000 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify 538 00:25:20,200 --> 00:25:23,680 Speaker 1: and anywhere else you get your podcasts. 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