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Eli Kantor is a labor, employment and immigration law attorney. He has been practicing labor, employment and immigration law for more than 36 years. He has been featured in articles about labor, employment and immigration law in the L.A. Times, Business Week.com and Daily Variety. He is a regular columnist for the Daily Journal. Telephone (310)274-8216; eli@elikantorlaw.com. For more information, visit beverlyhillsimmigrationlaw.com and and beverlyhillsemploymentlaw.com

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Monday, August 21, 2017

Trump and the CEOs: Behind the Collapse of an Uneasy Alliance

Wall Street Journal 
By Vanessa Fuhrmans, Joann S. Lublin and Emily Glazer
Biography Vanessa.Fuhrmans@wsj.com 
August 20, 2017

Can this relationship be saved?

Few chief executives openly supported candidate Donald Trump in the 2016 election. Yet by the time of his inauguration, many were expressing cautious optimism they could work with a president who presented himself as a leader with business acumen.

Many of Mr. Trump’s stated priorities—lighter regulation and a tax overhaul —are supported by corporate leaders. Comforting some executives, Mr. Trump appointed several CEOs to his cabinet, such as Exxon Mobil Corp.’s Rex Tillerson and billionaire investor Wilbur Ross.

“Everyone wanted to support the president in making the country and its economy better,” said Kathryn Wylde, chief executive of the Partnership for New York City, a group that represents major Wall Street firms and U.S. companies, and who led a CEO delegation to the White House earlier this year.

Demonstrators at the White House protested the decision to withdraw from the Paris climate change agreement in June.

Last week saw a parade of top executives distancing themselves from the president, in some cases sharply, in response to his comments about racial violence in Charlottesville, Va. Once executives started quitting the president’s advisory councils, the groups disbanded, a rare instance of companies putting themselves squarely, albeit unwillingly, into the political sphere.

“The social issues became too difficult to navigate,” said Ms. Wylde.

Charlottesville was the tipping point, not the cause. Behind the scenes, some executives say, ties had been growing strained for months.

Then-Uber Technologies Inc. CEO Travis Kalanick, initially a supporter of Silicon Valley engaging the president, was the first to quit a White House council in early February, following employee pressure and a social-media backlash relating to Uber’s response to the president’s proposed travel ban.

David Crane, former CEO of power company NRG Energy Inc., and now senior operating executive at Pegasus Capital Advisors, said the president’s decision to withdraw from the Paris climate accords, despite intensive industry lobbying, “was seen as a slap in the face by many executives.”

From the beginning, many were uneasy about Mr. Trump’s habit of calling companies out by name on his Twitter account—even when he was praising them.

Apple Inc. executives chose to bite their tongues when in July the president incorrectly portrayed the company’s plans to build plants in the U.S. Similarly, Merck & Co. chief Kenneth Frazier and Walt Disney Co. CEO Robert Iger chose to overlook issues where they and the White House differed so they could have a voice in deliberations, according to industry executives and Mr. Iger’s own comments.

“We have always believed that dialogue is critical to progress; that is why I joined the President’s Forum,” International Business Machines Corp. CEO Ginni Rometty wrote to employees last week, noting that IBM had worked with every U.S. president since Woodrow Wilson. “But this group can no longer serve the purpose for which it was formed.” She added that IBM would continue to work with “all parts of the government” on policies it supports.

As early as February, the heads of two dozen manufacturers got a taste of the president’s style. At a White House meeting to discuss job creation, Mr. Trump urged General Electric Co.’s Jeff Immelt to share how the president hit a hole-in-one during a golf game they played together. At GE’s next board meeting, directors ribbed Mr. Immelt for telling the story, according to a person present at that meeting. (Mr. Immelt stepped down as GE’s CEO this month but remains chairman.)

By June, CEOs on the White House councils were already discussing whether to disband them, because of the time commitment and the increasing costs of a close association with the White House.

“It’s not in the mandate of a company to enter politics, but CEOs are politicians, too,” said Eric Dezenhall, a Washington-based crisis consultant who has helped companies respond to the Charlottesville events. “They have their own bases and constituencies of employees and consumers and shareholders that they also have to navigate.”

The question now is whether Mr. Trump can win them back. During President Barack Obama’s two terms, CEOs often felt like they were treated as bystanders, and some still hold out hope for joint action with the administration.

Kevin Burch, president of Dayton, Ohio, trucking company Jet Express Inc., said recent events shouldn’t overshadow the pursuit of policy goals. His industry wants a seat at the table for many of the same reasons that attracted CEOs in the first place.

“The president’s a business guy,” he said. “We think infrastructure is something he can really get his arms around and get some movement.”

Larry Kudlow, a commentator and informal economic adviser to Mr. Trump, who helped draft a campaign tax plan, said while CEOs are sensitive to social issues, they haven’t broken from Trump policies particularly on deregulation and the tax code.

“This is going to blow over,” he said. “I guarantee you that he will be on the phone with many of them.”

The White House said the councils, a standard and often ineffective device used by administrations of all political stripes, had outlived their purpose. Trump aides said they retained open lines to business leaders. “We have an incredible amount of CEOs that want to give us their advice and guidance,” one official said.

Moreover, given the anti-establishment tide that swept Mr. Trump into office, he may have received political benefit from taking a more antagonistic approach to America’s large companies.

When Mr. Trump announced his bid for the presidency, few prominent business figures, apart from venture capitalist Peter Thiel, threw their support behind him. By the end of August 2016, not one CEO at the nation’s 100 largest companies had donated to his campaign, according to a Wall Street Journal analysis.

During the transition and the early days of the presidency, many felt a cautious optimism. Stephen A. Schwarzman, CEO of investment firm Blackstone Group, declared a new era for economic growth at January’s World Economic Forum gathering in Davos, Switzerland.

At the same event, Boston Consulting Group head Rich Lesser told the BBC: “I think people see an opportunity with a businessman as president, who is very committed to business and to growth, and potentially much less gridlock with the Republicans in control of Congress.”

Declining to work with Mr. Trump also risked incurring his wrath on Twitter. Drug company executives such as Johnson & Johnson CEO Alex Gorsky and Merck’s Mr. Frazier worried not engaging the president—who had criticized drugmakers as “getting away with murder”—might make it easier for his administration to give Medicare the power to negotiate and lower drug prices, according to industry officials.

Connecticut-based United Technologies Corp. had been targeted by Mr. Trump on the campaign trail over plans to ship jobs from its U.S.-based Carrier Corp. subsidiary to Mexico. The company and the president-elect later struck a deal after the election to keep some jobs in Indiana.

CEO Gregory Hayes appeared at the White House early on a rainy January morning for the president’s first meeting with corporate chieftains. It was an inauspicious start. Mr. Hayes was left waiting outside the gate and eventually left. His name had been left off the list of invitees, according to people familiar with the incident.

Mr. Trump’s initial immigration ban, imposed days after his inauguration, posed the first major test. It was an issue some felt spoke directly to American values and also had a distinct business impact. Some tech companies had immigrant employees stranded outside the U.S. Employees at technology firms in particular were restive.

Microsoft Corp. initially issued a neutral-sounding statement stressing the importance of immigration. A day later, it sharpened the tone, calling the policy a “fundamental step backwards.” By early February, more than 130 mostly tech companies had joined legal action against the ban, which proposed temporarily barring travel from some Muslim-majority countries. The administration said the policy, which is now tied up in the courts, was needed to combat terrorism.

Executives on the president’s strategic and policy forum were unhappy, but disbanding wasn’t on the table, people familiar with the group’s discussions said. Instead, members discussed whether to confront Mr. Trump about the policy during the group’s first meeting in February. There, Tesla Inc.’s Elon Musk kicked off the criticism, which participants said Mr. Trump acknowledged.

Executives took heart that the president could be persuadable. At the same meeting, Mr. Trump asked J.P. Morgan Chase & Co. chief James Dimon to back his argument that China was a currency manipulator.

Mr. Dimon disagreed, according to people familiar with the meeting.

“They’re not, Mr. President,” he said. “They’re defending their currency.” Gary Cohn, the White House’s economic adviser, and a few other members expressed similar views. Mr. Trump backed off the subject, and two months later, his administration chose not to tag China with the label of currency manipulator.

By late spring, business leaders were growing weary of having to publicly defend their participation with the White House.

Walt Disney CEO Mr. Iger, the target of online petitions with hundreds of thousands of signatures calling for him to withdraw from the business council, responded at a March shareholder meeting that his participation didn’t mean he agreed with all Trump policies.

Quoting a song from the Broadway hit “Hamilton,” he said remaining on the council gave him a chance to have a voice “in the room where it happens.”

Others bit their tongues. When in a July interview Mr. Trump told The Wall Street Journal that Apple CEO Tim Cook had promised to build “three big plants, beautiful plants” in the U.S., Apple declined to comment publicly.

Though Mr. Trump had incorrectly portrayed Apple’s U.S. plans, Mr. Cook didn’t openly challenge the president because “it would have been a tweet war,” according to a person familiar with the company.

Over the months, leaders brooded to their boards and families over whether they should take a stand against the president, according to leaders and corporate advisers.

“Informal conversations among board members often revolved around ‘what do you tell your kids?’ ” said Leslie A. Brun, Merck’s lead director and CEO of Sarr Group LLC, an investment holding company.

Some business leaders broke with Mr. Trump after the June decision to withdraw from the Paris climate accord.

Dozens had publicly urged the president to stick with the climate deal, and several, including Dow Chemical Co. head Andrew Liveris and Apple’s Mr. Cook made the case directly to the president that the treaty benefited job growth.

Within hours of Mr. Trump’s decision, Mr. Iger and Mr. Musk quit the presidential council. Mr. Iger told only a few senior executives at Disney about his decision before announcing it in a tweet, according to a person close to the CEO.

By then, individual members of both main business advisory councils had been discussing disbanding them, given they had met only a few times, according to participants. The discussion picked up steam in July, when Mr. Trump moved to bar transgender people from serving in the military, they said.

More executives grew disenchanted after a group of tech-industry leaders saw few results at a White House meeting in June to brainstorm ways to modernize the government.

“It was becoming patently clear that these meetings were more of a time suck than a productive utilization of their time and resources,” said a Washington-based consultant who works with CEOs involved on the councils.

In recent weeks, IBM’s Ms. Rometty and Boston Consulting Group head Mr. Lesser asked Mr. Schwarzman, the head of the strategy advisory council, about the future of the group and its effectiveness, given the pressure they were under from employees and the public, said people familiar with the group.

The unrest in Charlottesville, and the president’s response, pushed even supporters to make a break.

On Sunday night, Merck’s Mr. Frazier called Mr. Brun, the Merck lead director, to tell him that his conscience wouldn’t permit him to stay on the manufacturing council, Mr. Brun said. Under Armour Inc.’s CEO Kevin Plank soon followed, along with Intel Corp.’s Brian Krzanich.

After Mr. Trump’s Tuesday news conference, in which he apportioned blame equally between hate groups and people protesting them in Charlottesville, other executives said they had no choice but to go.

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