WEBVTT - Need-Based Retail Prevails Over Want-Based: Telsey 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:24.360 at Bloomberg dot com. Earnings very strong numbers coming out 0:00:24.400 --> 0:00:27.080 of Target and Lows today, helping push the market up 0:00:27.120 --> 0:00:30.120 close to one percent. Let's get a breakdown on these 0:00:30.120 --> 0:00:32.960 earnings and all things retail. To do that, nobody better 0:00:33.159 --> 0:00:35.920 to talk to than Dana Telsey. Dana is the CEO 0:00:36.000 --> 0:00:38.960 and founder of Tells, the Advisory Group based in New York. Dana, 0:00:39.000 --> 0:00:41.520 thanks so much for joining us. Let's start with those 0:00:41.680 --> 0:00:45.200 earnings that we've got today, Target and Lows, blockbuster numbers, 0:00:45.200 --> 0:00:48.920 stocks really popping. Gives your takeaways, I think overall, what 0:00:48.960 --> 0:00:51.760 you're seeing is value and convenience is working. When you 0:00:51.840 --> 0:00:55.760 see things in open air centers, they definitely are gaining 0:00:55.760 --> 0:00:58.800 the traffic and gaining share. When you think about both 0:00:58.800 --> 0:01:01.720 Target and Low. Of the numbers certainly came in a 0:01:01.760 --> 0:01:04.720 little bit better than expected. I mean, that's better than 0:01:04.760 --> 0:01:08.720 expected same store sales. That target was very impressive. Keep 0:01:08.720 --> 0:01:11.760 in mind that comp of three point four percent better 0:01:11.800 --> 0:01:15.479 than the the consensus number at just around three percent, 0:01:15.720 --> 0:01:19.039 and it's traffic up two point four percent. That certainly 0:01:19.120 --> 0:01:22.039 is is very super impressive, and it comes from the 0:01:22.120 --> 0:01:25.840 merchandise assortment that they've had, the price investment that they've made, 0:01:26.040 --> 0:01:29.240 the new private brands and remodeling stores. And then you 0:01:29.280 --> 0:01:32.560 see Low's also they maintained their guidance but delivered a 0:01:32.600 --> 0:01:35.399 beat on the second quarter, and their US CAMP of 0:01:35.480 --> 0:01:38.480 three point their US CAMP of three point two percent 0:01:39.040 --> 0:01:42.840 was quite solid. It basically mirrored and came in slightly 0:01:42.920 --> 0:01:46.280 better than home depots US CAMP of three point one percent. 0:01:46.680 --> 0:01:49.480 So I think overall, these big companies have been able 0:01:49.520 --> 0:01:54.480 to integrate, certainly omni channel initiatives they're using buy online, 0:01:54.480 --> 0:01:58.640 pickup in store. The product assortment and price investments are working, 0:01:59.200 --> 0:02:02.720 and there delivering on the gross margin, a big difference 0:02:02.720 --> 0:02:04.840 than what we've seen in some of the apparel companies. 0:02:05.040 --> 0:02:08.640 We've seen gross margin headwinds and apparel companies, we've seen 0:02:08.680 --> 0:02:13.360 gross margin improvement at some of the discounters and home retailers, Dana, 0:02:13.639 --> 0:02:17.040 It's interesting to me to see how people are viewing 0:02:17.120 --> 0:02:20.519 these earnings in light of the US economy. In other words, 0:02:20.720 --> 0:02:24.360 people looking at Target, Walmart and Lows and saying, look, 0:02:24.400 --> 0:02:27.440 they beat. The consumer is strong. And on the flip side, 0:02:27.600 --> 0:02:31.359 these are traditionally discount stores, and Lows not a discount store. 0:02:31.400 --> 0:02:34.000 But people usually renovate rather than move if they don't 0:02:34.000 --> 0:02:36.639 want to make an investment in buying a home. Uh So, 0:02:36.800 --> 0:02:39.440 how are you viewing the beats in terms of that 0:02:39.480 --> 0:02:42.680 broader perspective? I think overall, when I think about the 0:02:42.760 --> 0:02:44.920 US consumer, what it tells me is that the consumer 0:02:45.000 --> 0:02:47.679 is healthy. When I have traffic games like up two 0:02:47.680 --> 0:02:51.360 point four percent in traffic games at Walmart, that's encouraging. 0:02:51.639 --> 0:02:54.760 It wasn't done just on price the loan. It was 0:02:54.840 --> 0:02:57.880 done on more consumers walking in the door. When I 0:02:57.919 --> 0:03:00.359 think about what I'm seeing in apparel, it's a different 0:03:00.360 --> 0:03:03.920 worlds and apparel. The head winds of tariffs are definitely 0:03:03.919 --> 0:03:06.400 going to be an issue, and you had Macy CEO 0:03:06.600 --> 0:03:09.320 who basically said that trying to pass on some of 0:03:09.360 --> 0:03:12.880 the price increases, the consumer won't accept the price increases. 0:03:13.200 --> 0:03:16.639 There's needs and there's wants. I think both the home 0:03:16.680 --> 0:03:21.160 improvement retailers the discounters are more need based retailers. I 0:03:21.160 --> 0:03:24.639 think apparel retailers are more want based retailers. And certainly 0:03:24.680 --> 0:03:28.000 an apparel given that you've had a consolidation of wearing 0:03:28.040 --> 0:03:32.280 occasions work weekend, Jim and going to a party work 0:03:32.280 --> 0:03:34.960 weekend in gim er all one, you can basically get 0:03:35.080 --> 0:03:38.280 more value for your money in in apparel in different 0:03:38.280 --> 0:03:41.160 places today than what you have in the past because 0:03:41.200 --> 0:03:43.440 you don't need to buy as many different outfits, so 0:03:43.480 --> 0:03:45.880 you better get it right in order to make the difference. 0:03:46.320 --> 0:03:49.040 So Dana, give us a sense. Just you've covered the 0:03:49.080 --> 0:03:51.360 broad retail space for such a long time, you've got 0:03:51.400 --> 0:03:53.320 your finger on the pulse of it. You know. One 0:03:53.320 --> 0:03:55.480 of the concerns out there that I hear from investors 0:03:55.520 --> 0:03:59.000 is that the US, despite all the store closings that 0:03:59.000 --> 0:04:01.160 we've seen, whether it's toys, r ust or whatever, the 0:04:01.280 --> 0:04:04.000 US is still way overstored. Can you give us your 0:04:04.040 --> 0:04:07.200 thoughts on that. I think overall, when you're thinking about 0:04:07.240 --> 0:04:10.040 stores today, I think we do have a smaller store 0:04:10.080 --> 0:04:12.880 base that's required for retailers than you had in the past. 0:04:13.040 --> 0:04:14.960 It's got to be the right stores, and it's got 0:04:14.960 --> 0:04:18.080 to be the right centers, and you're seeing transformations happen. 0:04:18.440 --> 0:04:21.680 I call it reinvention for relevancy, and I think you're 0:04:21.680 --> 0:04:26.159 seeing experiential factors being placed in shopping centers. It's being 0:04:26.200 --> 0:04:29.680 placed in retailers too, in order to create that destination. 0:04:30.160 --> 0:04:33.520 And whether it's food, whether it's events, you're seeing every 0:04:33.560 --> 0:04:36.200 type of retailer in order to connect to their customers. 0:04:36.320 --> 0:04:38.960 You have to innovate, you need to offer speed, and 0:04:39.000 --> 0:04:40.800 you need to learn from the data of what to 0:04:40.880 --> 0:04:43.560 offer them. So when I think about the number of stores, 0:04:43.720 --> 0:04:46.239 you're not seeing as many stores open, you're not seeing 0:04:46.240 --> 0:04:50.200 as many shopping centers open. Reinvesting in both the center 0:04:50.279 --> 0:04:54.080 and the store is required to stay relevant. DNA. It's 0:04:54.120 --> 0:04:57.000 so interesting when you talk about investing. It really highlights 0:04:57.040 --> 0:05:00.480 how companies that have money and have scope have such 0:05:00.480 --> 0:05:03.279 an advantage right now over those that are struggling under 0:05:03.320 --> 0:05:07.599 the load of big debts or just a lack of cash. 0:05:07.760 --> 0:05:09.839 Right and so you're seeing sort of a tale of 0:05:09.880 --> 0:05:12.680 two cities within the retail space. But I have to 0:05:12.720 --> 0:05:16.440 wonder size is it a benefit or a detractor? Because 0:05:16.440 --> 0:05:18.480 people were talking about how department stores are trying to 0:05:18.520 --> 0:05:21.120 be everything to all people, and that became a problem. 0:05:21.400 --> 0:05:23.960 On the other hand, Walmart and Target are doing well 0:05:24.000 --> 0:05:26.840 because they are able to sort of leverage all these 0:05:26.880 --> 0:05:31.240 different aspects of their businesses and provide a holistic kind 0:05:31.279 --> 0:05:34.600 of you know, role for for the consumer. I'm just 0:05:34.640 --> 0:05:37.359 wondering where when a size good and when is it not. 0:05:38.440 --> 0:05:41.760 I think, whether you're big or whether you're small, if 0:05:41.760 --> 0:05:44.880 you don't have an innovative products, it won't drive demand. 0:05:45.279 --> 0:05:47.640 When you think of what's happening with the apparel companies, 0:05:47.920 --> 0:05:52.560 the apparel companies, brands, whether it's Levi's reinvented themselves. We 0:05:52.600 --> 0:05:55.320 can look at companies like what BF is doing with 0:05:55.480 --> 0:05:58.960 north Face, with Vans, which has been the collaborations they've had, 0:05:59.000 --> 0:06:01.360 which has been so compelled selling. You're taking a look 0:06:01.360 --> 0:06:05.040 at companies that are in the midst of transformation like Tiffany's, 0:06:05.040 --> 0:06:08.840 who is upgrading their business while you're having Target and Walmart. 0:06:09.360 --> 0:06:12.400 Look at big bought small Target. I mean Walmart has 0:06:12.440 --> 0:06:15.760 bought many smaller companies in order to be able to 0:06:15.920 --> 0:06:20.000 enhance their speed, to identify omni channel and integrate omni 0:06:20.120 --> 0:06:23.080 channel into their business. Look what Greg Bran at Walmart. 0:06:23.120 --> 0:06:25.760 At Walmart did with their U S stores. I think 0:06:25.800 --> 0:06:30.120 investing isn't isn't a just nice to do, It's a 0:06:30.240 --> 0:06:33.000 must do. And I'd rather be small and more profitable 0:06:33.240 --> 0:06:36.520 if you're investing and you're making yourself essential to the consumer, 0:06:36.960 --> 0:06:40.159 rather than just have size for size six steake. Scale 0:06:40.240 --> 0:06:42.479 matters as long as you can drop profits to the 0:06:42.480 --> 0:06:47.520 bottom line. So Dana has Retail America have they weathered 0:06:47.720 --> 0:06:50.960 the Amazon storm? I look at the Target did their 0:06:50.960 --> 0:06:55.440 Their digital sales are kind of really strong. Digital sales 0:06:55.520 --> 0:06:58.120 at Walmart as well as as retail America kind of 0:06:58.440 --> 0:07:00.920 weather that initial on a lot by Amazon over the 0:07:01.000 --> 0:07:03.400 last a dozen years or so. I think they have. 0:07:03.640 --> 0:07:06.800 I think if anything, we've seen every company turned themselves 0:07:06.880 --> 0:07:10.880 inside out and basically having Amazon taught them that we 0:07:10.920 --> 0:07:13.760 need to make the best better and make the best better, 0:07:13.800 --> 0:07:18.240 whether it's data, whether it's logistics, whether it's supply chain. 0:07:18.560 --> 0:07:22.040 There's speed to markets getting faster, and looked at today, 0:07:22.280 --> 0:07:24.760 whatever goes down the runway today should be able to 0:07:24.800 --> 0:07:27.200 be bought in the same time. So I think that 0:07:27.320 --> 0:07:30.520 the paste of newness is faster than it's ever been before. 0:07:31.120 --> 0:07:33.080 Danta Telsey, thank you so much for spending time with 0:07:33.160 --> 0:07:36.560 us today. Dana Telsey, chief executive officer in chief research 0:07:36.680 --> 0:07:54.640 officer at Telsey Advisory Group, who owns Greenland? Who should 0:07:54.720 --> 0:07:57.200 own Greenland? President Trump says that he would like to 0:07:57.520 --> 0:08:02.560 buy Greenland. Dana's primate chain is Minister Meta Frederickson. Spoke 0:08:02.680 --> 0:08:06.120 on this issue at a press conference at nine Eastern 0:08:06.880 --> 0:08:10.200 talking about Trump and Greenland. She was speaking in Copenhagen. 0:08:10.400 --> 0:08:14.440 Listen to what she had to say. A discussion has, however, 0:08:14.520 --> 0:08:20.040 been very raised about a potential sale of Greenland. Um. 0:08:20.040 --> 0:08:25.120 This has clearly been rejected by Kim Kitchen, a position 0:08:25.320 --> 0:08:31.480 that I share. Of course, this does not change the 0:08:31.560 --> 0:08:35.760 character of our good relations. Well, perhaps it doesn't change 0:08:35.760 --> 0:08:40.040 the character of the good relations between what's going on 0:08:40.600 --> 0:08:43.880 there and the u AS. But President Trump decided to 0:08:43.920 --> 0:08:47.520 cancel our reschedule a meeting with the Prime Minister due 0:08:47.559 --> 0:08:49.920 to the issue over Greenland. Here to give us a 0:08:49.960 --> 0:08:52.680 sense of what this hall is about, Morton Butler, political 0:08:52.720 --> 0:08:57.440 reporter for Bloomberg News, coming to us from Copenhagen in Denmark. Martin, 0:08:57.960 --> 0:09:00.320 why is this even a debate right now? Why are 0:09:00.320 --> 0:09:05.080 we talking about Greenland? Well, Greenland. Um, it's got a 0:09:05.120 --> 0:09:10.480 prominent role in international politics right now. Arctics. The Arctics 0:09:10.920 --> 0:09:16.880 are really dominant in both Russian politics, Chinese politics, US politics, 0:09:16.920 --> 0:09:19.520 and of course in the Nordic region as well because 0:09:19.600 --> 0:09:25.040 their massive resources up their natural gas and oil and sorts, 0:09:25.120 --> 0:09:29.480 and a very important trade route UM by Sea is 0:09:29.840 --> 0:09:34.680 opening up up there. So so this area really compiles 0:09:34.760 --> 0:09:38.000 a lot of attention right now all over the globe. Basically, Yeah, 0:09:38.040 --> 0:09:41.480 but what what gave President Trump the idea that this 0:09:41.559 --> 0:09:45.360 was actually for sale? Well, I mean, he's not the 0:09:45.400 --> 0:09:49.319 first American president to try to purchase this particular island. 0:09:50.120 --> 0:09:55.240 Truman made similar efforts in forty six. I believe it 0:09:55.360 --> 0:09:59.240 was UM. I suppose UM. With the upcoming trip to 0:09:59.720 --> 0:10:03.560 tow to Denmark and with Greenland in the center of 0:10:03.559 --> 0:10:07.199 attention for that trip, perhaps this seems to be um 0:10:07.240 --> 0:10:12.840 an idea that has has emerged somehow in the White House. Okay, 0:10:12.960 --> 0:10:15.559 so Morton, I guess that then there's a question of 0:10:15.800 --> 0:10:18.680 let's put aside the idea that Denmark is going to 0:10:18.720 --> 0:10:21.720 sell at stake in Greenland and just talk about the 0:10:21.760 --> 0:10:26.040 strategic role of Greenland. Is there a sense that Denmark 0:10:26.160 --> 0:10:30.560 is establishing closer ties with say, rivals of the United 0:10:30.640 --> 0:10:35.160 States over America in terms of giving sort of a 0:10:35.160 --> 0:10:39.600 strategic upper hand with the resources you were talking about. No, 0:10:39.800 --> 0:10:43.480 on the contrary, actually, China a few years back made 0:10:43.520 --> 0:10:47.000 efforts I think actually last year made efforts to invest 0:10:47.200 --> 0:10:55.400 in infrastructure, critical airport infrastructure in Greenland that Denmark. I 0:10:55.440 --> 0:10:57.560 don't know if it's a courtesy to the US, because 0:10:57.600 --> 0:11:00.480 Denmark also had interest in this particul going to move, 0:11:00.520 --> 0:11:04.560 but decided to co fund airports in Greenland instead of 0:11:05.240 --> 0:11:07.839 letting China pitch in on this. So so this is 0:11:07.920 --> 0:11:12.440 just one of many examples of Denmark trying to sort 0:11:12.440 --> 0:11:15.679 of allow us to play a role in in Greenland 0:11:15.920 --> 0:11:19.280 domestic and international politics up there. But also there are 0:11:19.360 --> 0:11:23.040 trying to keep other players out of Greenland, of which 0:11:23.160 --> 0:11:26.240 I mean Greenland has an extensive home rule, but Denmark 0:11:26.280 --> 0:11:30.480 has the final say in security, defense and international affairs. 0:11:31.200 --> 0:11:33.880 So more than you're in Copenhagen right now. What's the 0:11:33.960 --> 0:11:37.520 sense on the street in Copenhagen, the folks in Denmark, 0:11:37.559 --> 0:11:41.880 what do they think about this issue? Well, um, I 0:11:41.920 --> 0:11:44.320 think most people and you could tell by the trader 0:11:44.440 --> 0:11:49.040 reaction this morning, because obviously, Trump tweeted last night and 0:11:49.760 --> 0:11:51.959 a local US time, which was in the middle of 0:11:52.000 --> 0:11:55.040 a night here in Denmark. So most people woke up 0:11:55.200 --> 0:11:59.200 to sort of a big surprise that this visit who 0:11:59.320 --> 0:12:02.000 remember another only to visit the prime minister, but also 0:12:02.080 --> 0:12:06.160 to visit the Queen of Denmark. Um was like a 0:12:06.200 --> 0:12:08.920 big surprise to a lot of people. Remarks on Twitter 0:12:09.160 --> 0:12:14.800 thing like sort of dismay thing that it's incomprehensible, that 0:12:14.880 --> 0:12:19.600 it's um disrespectful. Some are even talking about the potential 0:12:19.640 --> 0:12:23.240 diplomatic crisis between Denmark and the US. I remember, Denmark 0:12:23.360 --> 0:12:27.000 is not just any Scandinavian or European country here. Denmark 0:12:27.080 --> 0:12:30.880 is a founding member of NATO, is a US ally 0:12:31.000 --> 0:12:37.440 in the Iraq War, um longstanding trading partner, as the 0:12:37.520 --> 0:12:41.200 US is Denmark's second biggest export nation, so there are 0:12:41.240 --> 0:12:44.480 strong ties between the two countries historically. So so this 0:12:44.600 --> 0:12:47.280 of course took a lot of Dames by surprise, Martin, 0:12:47.360 --> 0:12:49.520 It took a lot of people by surprise. I mean, 0:12:49.840 --> 0:12:52.240 let's just be completely honest, a cost space spade. I mean, 0:12:52.280 --> 0:12:54.680 when this happened, I think a lot of people destruct 0:12:54.760 --> 0:12:57.240 and said Greenland like, I mean, why why are why 0:12:57.240 --> 0:13:00.199 are we talking about this now and when we with 0:13:00.240 --> 0:13:02.559 the sale etcetera. It just seems a little bit out 0:13:02.559 --> 0:13:06.480 of left field. Are there any ways to explain this, uh, 0:13:06.520 --> 0:13:09.200 you know, perhaps under the cover or just something some 0:13:09.320 --> 0:13:12.600 other motivation that could be behind this that we're not 0:13:12.720 --> 0:13:18.680 really understanding. From a Danish perspective, I haven't heard any 0:13:18.880 --> 0:13:22.200 other speculation than the fact that this, of course would 0:13:22.240 --> 0:13:25.599 be a central part of the meeting between p M 0:13:25.679 --> 0:13:32.920 Frederickson and Greenland PM King Keelson and of course Donald Trump. Um. Obviously, 0:13:33.080 --> 0:13:36.120 when this is supposed to be on the table at 0:13:36.160 --> 0:13:39.560 a meeting, the President gets some sort of of of 0:13:39.679 --> 0:13:43.000 intel and Evans get some meeting preparations, and I mean 0:13:43.559 --> 0:13:47.800 this seems to be the situation where the President then 0:13:48.679 --> 0:13:53.320 decided to to to to talk about potentially purchasing Greenland. 0:13:53.320 --> 0:13:56.080 This is not something that has been mentioned in Danish 0:13:56.120 --> 0:13:59.840 media or in the local media and Greenland recently recently. 0:14:00.080 --> 0:14:01.760 This took a lot of people by surprise when it 0:14:01.840 --> 0:14:05.640 was initially reported last week. UM, and it was also 0:14:05.679 --> 0:14:08.840 debated when the Danish Prime Minister Frederickson actually went to 0:14:08.880 --> 0:14:14.720 Greenland an other assignment on Sunday. So this was clearly 0:14:14.800 --> 0:14:17.160 coming as a surprise as well for the for the 0:14:17.240 --> 0:14:20.320 Danish PM interesting a lot of as elately so mentioned, 0:14:20.320 --> 0:14:22.560 a surprise to a lot of people uh in around 0:14:22.560 --> 0:14:25.360 the world. I think that Morton Butler, political reporter for 0:14:25.360 --> 0:14:27.400 Bloomberg News, thank you so much for joining us and 0:14:27.400 --> 0:14:30.920 giving us some local color. Morgan's based in Copenhagen, Denmark, 0:14:31.040 --> 0:14:33.760 so giving a sense that it was certainly this discussion 0:14:33.840 --> 0:14:37.720 about the US possibly purchasing Greenland came certainly as a 0:14:37.760 --> 0:14:41.120 surprise to the Danes who woke up to the tweets 0:14:41.120 --> 0:15:00.600 this morning from President Trump about Greenland. A hundred and 0:15:00.600 --> 0:15:05.120 eighty one chief executive officers gathered together and discussed their 0:15:05.280 --> 0:15:08.440 role in this world. Their result was that we have 0:15:08.640 --> 0:15:12.160 a purpose beyond just that of shareholders shorting us down 0:15:12.200 --> 0:15:15.960 to discuss Brian Stafford's CEO of Diligent. He also is 0:15:16.000 --> 0:15:19.400 the co author of Corporate Governance in the Digital Age. 0:15:19.960 --> 0:15:22.880 So Brian, let's just start there. What did you make 0:15:23.080 --> 0:15:26.680 of this sort of I guess resolution coming out of 0:15:26.720 --> 0:15:30.680 the business round table that had signatories such as Black Rocks, 0:15:30.760 --> 0:15:35.560 Larry Fink as well as JP Morgan's Jamie Diamond. Yeah, 0:15:35.560 --> 0:15:39.400 it's super interesting. Um, conclusion coming out of the Business Roundtable, 0:15:39.680 --> 0:15:42.360 I guess not unexpected in the grand scheme of things. 0:15:42.440 --> 0:15:44.760 Larry Think has been writing about this for a while 0:15:45.200 --> 0:15:49.160 State Street as well, that the expectation should be for 0:15:49.240 --> 0:15:52.080 business leaders to actually serve a broader purpose rather than 0:15:52.120 --> 0:15:55.600 just profits and only profits. And it is a realization 0:15:55.680 --> 0:15:58.600 that other stakeholders matter. And then if you really take 0:15:59.120 --> 0:16:02.400 a long term interest in um in the role that 0:16:02.880 --> 0:16:06.120 your business plays, and in communities, in the um UH 0:16:06.160 --> 0:16:09.440 and with your employees, it's actually it's actually good for business. 0:16:09.480 --> 0:16:11.600 So one of the issues some of the pushback that 0:16:11.640 --> 0:16:14.560 I've read is that if some of these CEOs were 0:16:14.560 --> 0:16:19.560 so concerned about the inequality UM in income, wouldn't it 0:16:19.600 --> 0:16:21.880 be better for them to raise wages for their employees 0:16:21.880 --> 0:16:25.560 and maybe lower executive pay. Well, I mean you do 0:16:25.640 --> 0:16:27.960 see this in many places, with some companies actually raising 0:16:28.080 --> 0:16:31.440 kind of um the average um UH income level or 0:16:31.480 --> 0:16:33.960 the average wage of entry level employees. So I think 0:16:34.000 --> 0:16:36.680 you will see more of that um. Of course, Walmart 0:16:36.680 --> 0:16:39.160 did that a few years ago, and you saw actually 0:16:39.160 --> 0:16:41.960 an increase in UH in the net promoter scores of 0:16:41.960 --> 0:16:44.640 of Walmart stores because actually people who are happier treated 0:16:44.640 --> 0:16:46.880 customers in a better way, and that should translate into 0:16:46.920 --> 0:16:50.360 ideally customers buying more. So you will see that I 0:16:50.560 --> 0:16:53.200 be interesting challenges them to being that actually hasn't really 0:16:53.240 --> 0:16:56.680 been reported in this is you know, the average tenure 0:16:56.720 --> 0:16:58.760 for a board director is close to eight years of 0:16:58.760 --> 0:17:01.680 a public company. The average tenure for CEO is only 0:17:01.760 --> 0:17:04.120 five years, and so I think the reason why that's 0:17:04.160 --> 0:17:07.280 important is the board can take a longer term view 0:17:07.320 --> 0:17:10.359 of governance and the corporation existing over longer period of time. 0:17:10.760 --> 0:17:13.840 I think it can be challenging for the individual CEO, 0:17:13.920 --> 0:17:16.879 who typically has a shorter time horizon or window, to 0:17:17.440 --> 0:17:20.800 not focus more on profit and and change the focus 0:17:20.800 --> 0:17:23.080 more on broader stakeholders. And I think that's a little 0:17:23.080 --> 0:17:25.520 bit of the shift that you've seen the business roundtable, 0:17:25.560 --> 0:17:29.960 which end up being unbelievably tenured CEOs kind of steering organizations. 0:17:29.960 --> 0:17:33.920 And you know, brand a cynic might say CEOs are 0:17:33.960 --> 0:17:37.720 doing this as the cycle turns and want to make 0:17:37.760 --> 0:17:41.520 an excuse for why they may underperform because they're catering 0:17:41.560 --> 0:17:43.840 to the greater good and not their shareholders. What would 0:17:43.880 --> 0:17:47.639 you say to that, I think it's a fair comment 0:17:47.680 --> 0:17:50.719 to actually say, you know, how how is the climate 0:17:50.760 --> 0:17:53.560 evolving and how it is the climate changing? And is 0:17:53.600 --> 0:17:56.840 this in in um? Uh? Is this in response to 0:17:56.840 --> 0:17:59.719 the changing climate? Um? We do have a rise of populism, 0:18:00.119 --> 0:18:02.199 it's in every story that we hear kind of on 0:18:02.240 --> 0:18:05.200 a day to day basis on on your program. Uh. 0:18:05.200 --> 0:18:08.040 And we do have a rise in next generation buyers 0:18:08.600 --> 0:18:13.080 UM in gen Z buyers who actually care more about 0:18:13.080 --> 0:18:16.639 an organization. And it's it's culturalate sense of good in 0:18:16.680 --> 0:18:18.560 the world. So I think it is it is in 0:18:18.720 --> 0:18:21.200 partial response to the environment that we're in today, which 0:18:21.240 --> 0:18:23.240 is less of an end of the cycle comment, but 0:18:23.359 --> 0:18:26.320 more of the different environment that we operate and live in. 0:18:26.880 --> 0:18:30.400 So the CEO stated that the rising cost of healthcare 0:18:30.520 --> 0:18:33.760 and and and all the student debt associated with higher 0:18:33.840 --> 0:18:37.560 education is certainly a motivation for some of their plans. 0:18:37.560 --> 0:18:41.960 Do you anticipate Corporate America ever trying to tackle meaningfully 0:18:42.359 --> 0:18:45.840 either of these two issues? Are both? Uh? You know 0:18:46.160 --> 0:18:47.840 what I see and what I thought was an interest 0:18:47.880 --> 0:18:49.840 in going to come out of the business round table? 0:18:49.960 --> 0:18:52.600 Was um actually a slightly different angle on that? And 0:18:52.600 --> 0:18:56.000 and diligent. We recently published the Place on on the 0:18:56.119 --> 0:18:59.840 increasing tone and conversation around political uncertainty and boards that 0:19:00.000 --> 0:19:03.199 at organizations and corporations are having to deal with in 0:19:03.280 --> 0:19:07.639 many cases, which is a lack of leadership coming from 0:19:07.840 --> 0:19:11.880 UM countries and CEOs and boards actually having to take 0:19:11.920 --> 0:19:14.520 more of a leadership role. And to what I expect 0:19:14.760 --> 0:19:18.320 leading organizations to take more of a role around societal issues. 0:19:18.359 --> 0:19:21.399 You brought up student debt, healthcare, etcetera. Um, yes, I 0:19:21.400 --> 0:19:25.760 think you will see UM CEOs taking incorporations taking increasing 0:19:25.840 --> 0:19:29.160 role in that because maybe that leadership doesn't exist within 0:19:29.200 --> 0:19:31.479 the public sector. You know, Brian, it's an interesting, uh, 0:19:32.160 --> 0:19:35.080 it's an interesting sort of conflict here. How do you lead? 0:19:35.200 --> 0:19:38.280 How do you sort of have a role in these debates? 0:19:38.400 --> 0:19:41.600 Is it sort of a verbal political injection into the 0:19:41.640 --> 0:19:45.760 conversation or is it something just leading by example? Right? 0:19:45.800 --> 0:19:48.439 I mean, so, how do you expect these executives to 0:19:48.520 --> 0:19:54.520 engage beyond just their obligations to their shareholders. It's a 0:19:54.560 --> 0:19:57.000 great question, and I think you've seen that evolve in 0:19:57.040 --> 0:20:00.320 the last few years where I think see those and 0:20:00.520 --> 0:20:03.560 organizations used to fall into more of a lead by 0:20:03.640 --> 0:20:07.840 example kind of silent approach and what you've seen more 0:20:07.960 --> 0:20:11.520 now and Jamie Diamond is increasingly vocal about it UM, 0:20:11.560 --> 0:20:14.119 but actually CEO as having a perspective and a point 0:20:14.119 --> 0:20:18.359 of view around UM different issues. And you know, ultimately 0:20:19.040 --> 0:20:25.560 UM organizations, consumers, employees actually follow authentic leaders and also 0:20:25.600 --> 0:20:29.120 authentic organizations. So an organization taking a stand for something 0:20:29.160 --> 0:20:32.159 they believe in. You've seen this on issues of immigration, 0:20:32.480 --> 0:20:35.000 You've seen this on increasingly number of issues. So I 0:20:35.240 --> 0:20:38.000 don't think that's going going away. What we hear often 0:20:38.080 --> 0:20:40.159 from boards is how does the CEO do it in 0:20:40.200 --> 0:20:43.639 the right way? Maybe maybe not going off on social media, 0:20:43.680 --> 0:20:46.199 but how do people use the right forum and use 0:20:46.240 --> 0:20:48.720 their standing to actually have a point of view, to 0:20:48.760 --> 0:20:51.760 be an authentic leader and do it in the right way. So, Brian, 0:20:51.800 --> 0:20:54.960 do you expect to see changes in any executive compensation? 0:20:55.040 --> 0:20:57.320 I know, you know the biggest a lot of executive 0:20:57.320 --> 0:20:59.919 conversation is tied to stock frice performance with through option 0:21:00.080 --> 0:21:03.000 and stock grants, and uh is that now going and 0:21:03.040 --> 0:21:05.840 that's tied to shareholder you know, stock price performance? Is 0:21:05.840 --> 0:21:07.960 that going to be now include maybe E s G 0:21:08.200 --> 0:21:11.720 scores or employee morale or any other kind of metrics 0:21:11.720 --> 0:21:15.200 to kind of measure some of these stakeholder issues. Yeah, 0:21:15.200 --> 0:21:17.199 I think you saw a proposal for that even with UM, 0:21:17.280 --> 0:21:20.080 with Uber and their board and Dara's compensation being tied 0:21:20.119 --> 0:21:23.520 to diversity metrics. So I think you're seeing elements of 0:21:23.560 --> 0:21:27.639 this rollout into CEO compensation and I would expect that 0:21:27.720 --> 0:21:30.600 to continue. How much of that is driven by specific 0:21:30.680 --> 0:21:33.720 CEO targets and how much it is driven by UM 0:21:34.240 --> 0:21:37.720 the board behind closed doors, and maybe with the CEO 0:21:37.840 --> 0:21:41.560 vocally saying we care about our environment, we care about 0:21:41.760 --> 0:21:46.160 the quality of of living of our employees, and so 0:21:46.400 --> 0:21:49.760 how much is specifically tied to compensation versus just comes 0:21:49.760 --> 0:21:52.040 down the tone and tenor UM. We'll have to see, 0:21:52.080 --> 0:21:55.560 but you do see it creeping its way into executive compensation. Brian, 0:21:55.600 --> 0:21:57.639 just real quick here, I'm wondering, do you think that 0:21:57.760 --> 0:22:00.520 this meeting is sort of the outcome from the business roundtable, 0:22:00.520 --> 0:22:04.840 will actually affect change in anyway. I think you've been 0:22:04.880 --> 0:22:08.679 seeing organizations in the tone of organizations begin to change 0:22:09.000 --> 0:22:13.120 and focus not just on UH each individual dollar of profit, 0:22:13.240 --> 0:22:16.640 but more on the broader set of stakeholders being customers, 0:22:16.720 --> 0:22:20.040 being UM, the environments we live in, being employees. So 0:22:20.240 --> 0:22:22.600 I think this was a more formal announcement of it, 0:22:22.640 --> 0:22:25.000 But like you mentioned. You know, Larry Fink and Black 0:22:25.119 --> 0:22:26.800 Rock have been talking about this for a while, and 0:22:26.840 --> 0:22:29.520 you're also as you see a trend in ownership moving 0:22:29.560 --> 0:22:33.560 away from kind of active managed funds to more index 0:22:33.600 --> 0:22:35.879 fund in the state streets the world, and the Black 0:22:36.000 --> 0:22:40.280 Rocks owning more and more of the stock of these organizations, 0:22:40.320 --> 0:22:42.760 that ends up having a broader role. So I think 0:22:42.800 --> 0:22:45.639 we're still in the early innings of that evolution. How 0:22:45.720 --> 0:22:49.520 much of it is hard targets versus um changing in tone, 0:22:49.560 --> 0:22:51.919 we'll have to see. Bryan Stafford, thanks so much for 0:22:52.040 --> 0:22:55.000 joining us. Brian as the CEO of Diligent UH is 0:22:55.040 --> 0:22:58.120 also the co author of the book of Corporate Governance 0:22:58.119 --> 0:23:01.720 in the Digital Age of very interesting discussion on the 0:23:01.800 --> 0:23:05.720 changing role of CEOs, branching a little bit more from 0:23:05.760 --> 0:23:25.160 just returns to shareholders to maybe more for stakeholders. It 0:23:25.280 --> 0:23:29.560 was the auction heard around the world. Germany sold thirty 0:23:29.640 --> 0:23:34.040 year bonds with a coupon of zero, an effective yield 0:23:34.119 --> 0:23:39.520 of negative eleven basis points, mind boggling data reaching records. 0:23:39.680 --> 0:23:42.760 The question is who wanted to buy it, and it 0:23:42.800 --> 0:23:44.960