The complexity of succession planning

This episode delves into the multifaceted challenges and considerations of succession planning in corporate settings.

1. Succession planning in large corporations can be as dramatic and complex as depicted in popular media.
2. The personality and leadership style of a CEO can become deeply integrated with the company's public image, making succession challenging.
3. Historical and economic contexts, such as inflation and government policies, have significant implications for succession planning.
4. Effective succession involves careful consideration beyond choosing a similar successor; it requires aligning with future strategic needs.
5. The episode illustrates the broader impacts of economic policies and market conditions on corporate governance and planning.

1: Introduction and Background

Kristen Schwab introduces the topic of succession planning, linking it to broader economic issues such as inflation and market dynamics. Kristen Schwab: "We're exploring how economic conditions influence succession planning in today's corporations."

2: Succession Planning at JPMorgan Chase

Discusses Jamie Dimon's potential retirement and the challenges of replacing a long-term CEO. Megan McCarty Corino: "Successions can get messy, much like the fictional scenarios seen in shows like HBO's Succession."

3: Historical Context of Inflation and Economic Policy

Explores how past economic policies impact current corporate strategies. Carola Binder: "Historical inflation and government interventions offer a backdrop for understanding today’s economic and corporate strategies."

1. Understand the Historical Context: Knowing the history of economic policies can provide insights into current market conditions and planning strategies.
2. Evaluate Leadership Styles: Assess whether a successor should mirror the current CEO’s style or bring a new vision, depending on strategic needs.
3. Prepare for Transition: Develop a clear transition plan that includes both internal communication and public relations strategies.
4. Consider External Factors: Always factor in current economic conditions and market trends when planning for succession.
5. Engage Stakeholders: Keep open lines of communication with all stakeholders, including employees, investors, and board members, to ensure a smooth transition.

On Monday, JPMorgan Chase CEO Jamie Dimon hinted at retiring soon after running the banking powerhouse for 18 years. But finding replacements for veteran CEOs can be a tricky business. Also in this episode: New research finds that Native households are more financially stressed. Plus: Lowe’s invests in professional contractors, and Chicago vendors scramble after grocery stores shutter.

People

Jamie Dimon, Carola Binder, Kristen Schwab, Megan McCarty Corino

Companies

JPMorgan Chase, Marketplace

Books

Shock Values, Prices and Inflation in American Democracy

Guest Name(s):

Carola Binder

Content Warnings:

None

Fundraiser
This is it, everybody. Our May fundraiser ends on Friday, and it's your last chance to help us reach our goal this month. Revenue sources for newsrooms like ours are changing, and donations from you, our marketplace community of listeners, are more important than ever. So please help us reach our May goal before Memorial Day weekend and fund public service journalism for all. Give now@marketplace.org.

donate and thanks.

Kristen Schwab
On the show today why inflation and politics are inherently intertwined. Also, home remodeling and succession planning from american public media. This is Marketplace in New York. I'm Kristen Schwab, in for Kyri Rizdahl. It's Tuesday, May 21.

Good to have you with us today. We're going to start with a sort of sideways look at the american consumer and the battle over who sells them the stuff they need to fix up one of their biggest assets, their homes. Lowe's reported first quarter earnings today. The home improvement company says sales were down about 4% from the same period last year. The company attributes that to uncertainty around interest rates and inflation.

One bright spot for the company, though? Spending by professional contractors was up. It's an area Lowe's has been investing in to compete with rivals like Home Depot. Marketplace's Stephanie Hughes has more. Jim Moore has been working as a contractor for about 20 years.

Stephanie Hughes
He buys lumber, tiles, pipe fittings, mostly from one place. It's always been home Depot for us. We just stay with what we know. It's kind of become synonymous with contractor. That's David Muriel Diaz, Moore's colleague.

They're on a smoke break from installing a door in a Baltimore apartment. Jim Moore says his company spends about a million dollars a year just at Home Depot, and the overall professional contractor market in North America is worth about $500 billion, says Drew Redding of Bloomberg Intelligence. Professional contractors tend to be loyal to where they're shopping, so to make inroads to that customer for Lowes is going to continue to take time. Redding says that about 25% to 30% of Lowe's sales are to pro contractors at Home Depot. It's about half.

Lowe's has stated it's going after small and medium sized contractors who might remodel a kitchen or a bathroom. Home Depot has been positioning itself to become a one stop shop for really big jobs. Somebody doing, say, like a full house renovation or an addition. Right now, high interest rates are keeping a lot of homeowners from taking out loans to remodel. But if rates go down later this year, professional contractors should see more big ticket projects.

Jim Moore
They're not being canceled. They're simply being deferred until the timing gets a little bit better for consumers. Also, Redding says much of the housing stock in the US is older, and those homes are going to need TLC beyond what a regular diyer can do. He also points out that while Home Depot and Lowe's compete with each other for these professionals, they're also up against specialty stores for flooring, lumber, electrical equipment. Baltimore contractor Jim Moore says it is helpful if the help knows what they're talking about.

If you had a trained guy in the plumbing aisle that could say, oh, no, you can't use that for gas lines. You have to use this, this, or this. Morris says one thing he likes is being in and out of stores as fast as possible. Time spent shopping is time not spent building or earning money. In Baltimore, I'm Stephanie Hughes for Marketplace Wall street.

Kristen Schwab
Today in a slightly better mood than yesterday. Just slightly. We'll have the details when we do the numbers.

Inflation, inflation, inflation. Are you sick of it yet? Because the word is everywhere these days. Rising prices are a regular topic during a trip to the grocery store. Also on this program.

And as we get closer to the election in politics, it turns out that connection, prices and politics, is a deeply embedded one, partly because the way the government deals with rising prices has changed a lot over the decades. Which leads me to Carola Binder, an economist at Haverford College. In her new book, Shock Values, Prices and Inflation in American Democracy, she looks back at the history of how the government, through the Fed and policy, has tried to stabilize prices. Professor Binder, it's good to talk with you again. You too.

So one of the light bulb moments for me when I was looking at your book is when you talk about how periods of war often come with periods of inflation, and you make the connection that the pandemic has actually been described as a global. Can you tell me about those parallels and why they matter? Sure. So almost all of the major wars that we've had in us history have involved the need for a lot more government spending, because, of course, the government has to finance the military, and that government spending and the need to finance it has tended to be inflationary. You also get it in other emergencies.

Carola Binder
If the government is, for example, addressing the COVID pandemic by sending out stimulus checks and by having the Fed loosening monetary policy. Yeah. And you say these emergencies inherently politicize monetary policy. What's the connection there? Why is that?

Right. Because inflation, for one, just affects different groups of people in different ways. It can be more helpful to you if you're a debtor, and so the real value of your debt declines. But it can hurt you if you're a creditor, and also because there's disagreement about how the government ought to address it, whether there should be price controls, whether there should be monetary tightening, whether taxes should increase. All of those things lead to a lot of disagreement and a lot of tension and sometimes social turmoil.

Kristen Schwab
One key policy you dig into from the world War two era is price controls. Can you talk about what that is and why they're a central part of your book today? Right. So the book really looks at the different ways that the government has tried to either stabilize or manage prices, and monetary policy is only one part of that. The government has also tried using regulatory policy like price controls.

Carola Binder
So in World War two, there was enough public agreement that it was really a time of emergency and that keeping prices down and really mobilizing the war effort was important enough that at least for a time, there was able to be popular support for price controls. The price controls really involved a massive state effort. Right. Because you had to have surveillance to make sure that they were being complied with. Shop owners would have incentive to try to sell things at market rate rather than at the controlled rate.

So you had basically housewives who were volunteering to go around and make sure that everyone was complying. Is that not such a popular tactic today or viewed as one? Well, when inflation was really rising in 2021, there were some op eds and things arguing for price controls and drawing some parallels between the pandemic in world War two. But I don't think that there was anywhere near the popular support that would have been needed for a really broad based system of price controls like that. There are still, and there is often support for controls on particular things, like sometimes in the medical field.

But the idea that the government is going to set the price for all of the different groceries and things that we buy is pretty hard to imagine today. Going back to sort of the top of our conversation, do you see a future where economic policy and politics are seen as separate? I don't think you can ever really separate economic policy from politics, and I don't think you really should. We try to keep monetary policy separate from fiscal policy, because fiscal policy is rightly in the domain of politics. Right.

Taxes and government spending do really have big distributional consequences, and that means that there's something that I think we should be voting on. But they're really fundamentally inseparable because they affect society so much, and they're something that people have to understand and come to some agreement on as someone who. Studies the economy but also lives in it as a regular person, tell me, why'd you write this book? I wrote this book because I felt like there was something missing in what I knew about inflation, and I wanted to learn it. In grad school.

If you do an economics PhD, you learn models of the macroeconomy, and they may have predictions for inflation and for how central banks behave. But I really wanted to know more of the context. Why is it that we delegated monetary policy to the Fed rather than choose some other kind of institutional arrangements? I wanted to understand what the Constitution says and what our laws say about what is even legitimate for the government to do when it comes to trying to intervene in prices in some way or another. What has it been like to have your book come out at a time when maybe we thought inflation would be less in the news, but still very much is, and watch all of it continue to move on?

Well, I was writing the book when inflation was even higher than it is now. Of course, I was hoping that inflation would come down, even if it meant my book became less newsworthy or less timely. But I think that inflation really is a perpetual topic. Anytime there's an election, there's always questions about if inflation has been low, can the president take any credit for that? If inflation has been high, should the president take any blame for that?

And it's a time when inflation is very much in the news every day and something that all households are thinking about and feeling the effects of. Carola Binder is an associate professor of economics at Haverford College. Her new book is shock prices and inflation in american democracy, Kerala. Thanks so much for chatting. Thanks so much for having me.

Kristen Schwab
We start this story with a name that has held weight in the finance world for decades, Jamie Dimon. It appears the weight that he holds, though at least at JPMorgan Chase, may lessen soon. Yesterday at the bank's investor day, the CEO hinted that his tenure would be something less than five more years. Thats a pretty murky timeline, possibly because filling diamond shoes wont be easy. Hes led the company for 18 years, longer than any of his peers, and under his guidance, JPMorgan Chase has become the biggest bank in the country.

So we had marketplaces. Megan McCarty Corino look at the complicated process of succession planning. Successions of longtime CEO's can get messy. Thats why the topic made for four seasons of delightfully dramatic prestige tv.

Jim Moore
I have you beat, you morons like. HBO's Logan Roy, long running CEO's often become larger than life, says business professor Yojud Chang at the University of Virginia. The personality of the CEO becomes so deeply intertwined with the external image of a company, they're not only financially invested, but also likely very much emotionally invested. Which can make it hard for a company to move on. Charles Elson, the founding director of the Weinberg center for Corporate Governance at the University of Delaware, says keeping an outgoing CEO too close can lead to a Disney type scenario.

Megan McCarty Corino
Hello, goodbye, hello, goodbye. In late 2021, CEO Bob Iger handed the reins to his chosen successor, Bob Chapek, only to take them back less than a year later. That process seems to have been much more CEO driven than board driven, and I think that that's the fatal mistake, because what a CEO looks for in a trusted lieutenant and what the company needs to carry it into the future might be very different, says David Larker, an emeritus professor at Stanford. You have to ask the question, do you want somebody just like that, only younger, or do you want somebody quite different? Plus, long running CEO's will often stay on as an executive director or member of the board, as three times Starbucks CEO Howard Schultz has done.

That can inhibit a new CEO, says Jeffrey Sonnenfeld, a professor of management at Yale. Sometimes a new person learning to walk. They wobble a little bit. And he says boards of directors have to give their new choice the space to find their own path. I'm Megan McCarty, Corino for marketplace.

Justin Doggett
Coming up, that's my core business anyway. I originally started as an online first brand, direct to consumer. Sometimes it's best to go back to where you began. But first, let's do the numbers. The Dow Jones industrial average gained 66 points, two tenths percent to finish at 39,872.

Kristen Schwab
The Nasdaq lifted 37 points, two tenths to close at 16,832. And the S and P 500 added 13 points, one 4%, to end at 53.21. We heard earlier from Stephanie Hughes about home improvement stores battle for contractors business. Let's check in on some of those stores. Lowes sank one and nine tenths percent.

Home Depot lost half a percent. Floor and decor declined eight tenths percent. Speaking of home improvement, did you know that Americans spent $158 billion in 2021 replacing systems and fixtures in and around their homes? That's according to Harvard's Joint center for Housing. They spent another $72 billion on disaster related repairs or improvements to their lot or yards, and $101 billion on discretionary work like room additions or bath and kitchen remodeling.

Bonds rose the yield on the ten year t note fell to 4.41%. You're listening to marketplace.

I
My name is Lee Hawkins. I've been a journalist for over 25 years. On my new podcast, what happened in Alabama? I get answers to some of the hardest questions about how things came to be for many black Americans and the truth that must come before any reconciliation can happen. I investigate my family history, my upbringing in Minnesota, and my father's painful nightmares about growing up in Alabama.

What happened in Alabama is a new series, confronting the cycles of trauma for myself, my family, and for many black Americans. Listen now.

Fundraiser
This is it, everybody. Our may fundraiser ends on Friday, and it's your last chance to help us reach our goal this month. Revenue sources for newsrooms like ours are changing, and donations from you, our marketplace community of listeners, are more important than ever. So please help us reach our may goal before Memorial Day weekend and fund public service journalism for all. Give now@marketplace.org.

donate and thanks.

Kristen Schwab
This is Marketplace. I'm Kristin Schwab. We got a window into the health of Americans financial security this morning from the Federal Reserve's annual survey of household economics and decision making, or shed for short. It says that in 2023, 72% of respondents said they were doing at least okay financially. 63% said they could cover an unexpected $400 bill.

Those numbers are basically the same from the year before. What also persists is the presence of racial gaps. Black and hispanic respondents once again reported lower levels of security than asian and white Americans. But there's one group the survey doesn't tell us american Indians and Alaska natives. Data on those households exists, but doesn't make it into the published report.

Why, you ask marketplaces Savannah Marr explains. The sheds famous $400 question asks respondents how they'd cover a surprise bill of that size. For 25 year old Malia knorr, that's not a hypothetical. You know what? My car's a piece of crap and it breaks down like three or four times a year.

Jim Moore
Nor is tlingit from southeast Alaska, but lives in Portland, Oregon. She quit her job last fall. Now shes putting herself through grad school with a couple of side hustles, like leading public health trainings for tribal governments. Im also a dog walker and I sell jewelry. If the Fed called her up to ask about her finances, Knorr would say something like, its kind of a precarious situation.

Her income isnt super predictable, but shes making ends meet. Shed tell the Fed that shes doing okay, just worse off than last year. And shed answer yes to whether she could afford a $400 bill without taking on credit card debt. In fact, shed be relieved if her next mechanic bill was dollar 400 or less. I wish emergencies cost dollar 400 these days.

Honestly, the shed survey does capture responses from native people like nor, but they make up just 1% of the total sample. The Federal Reserve says thats not enough to rigorously compare to other groups in its published report, and thats why most research you hear about on this show tells us nothing about native consumers or tribal economies. The small sample sizes means that its trickier but still possible to get useful information about them. Ava Laplant is a research assistant with the Minneapolis Fed center for Indian Country Development. She and her colleagues pooled nine years of publicly available but previously unpublished shed data.

She says that allowed them to draw some meaningful conclusions about how native households are faring generally, we find that american indian and Alaska native households experience consistently lower financial security, lower financial security than everyone else taking the survey. No matter how you slice it, over those nine years, native households were 20% less likely than average to say they're doing at least okay financially, and around 30% less likely to say they had the savings to pay for that surprise $400 bill. Even controlling for factors like age and education level, I dont think its that surprising. Randall Akee is an economist in UCLAs american indian studies department. He says these findings track with what researchers know about lower average incomes, limited employment opportunities, and poor credit access in many native communities.

Still, they can help bolster the case for funding and policy changes that might help. You know, I think tribal leaders, government officials that are interested in increasing access to capital, access to banking, this is the kind of evidence you want. Akee says the federal government could invest in reaching more native households with surveys like the shed and the monthly jobs report. Over sampling could help fill data gaps. But for now, I think you have to be creative.

You have to be creative in thinking about, okay, the perfect data doesn't exist. However, how can I get close to that? Akee says. That's the kind of effort it takes to get a glimpse of what's going on with native consumers and tribal economies. I'm Savannah Mar for marketplace.

Kristen Schwab
Whenever a large retailer goes out of business, there are real effects, not just for the company and its employees, but for the brands sitting on the stores shelves. Last month, all 33 locations of Foxtrot and Dom's Kitchen and market closed. Both were upscale grocers in Illinois, Texas and the Washington, DC area. Owned by parent company Outfox Hospitality, the store shut down with virtually no notice and now its vendors, especially the small businesses that make things like hot sauces and dips, theyre scrambling to find new ways to stay in business. Esther Yoonji Kang of WBEZ in Chicago has the story.

Get my gloves on. Justin Doggett is the owner and one man operation at Kyoto Black, a subscription and retail based cold brew coffee company on Chicago's north side. So, yeah, just hold this until it fills up. On this afternoon, he's filling pouches of cold brew, snapping on a dispenser spout and packing boxes to ship to customers. Doggett also delivers the cold brew in bottles and kegs to local cafes and grocers, which used to include Foxtrot's 15 locations in Chicago.

David Larker
The stores were kind of like whole foods, but smaller and chic er with lots of local brands. Daggett found out over Instagram that Foxtrot was closing just after he delivered dozens of bottles to one location. Did you get any emails from Foxtrot? I haven't heard anything from Foxtrot. The last thing that I heard from Foxtrot was the order of placement.

Justin Doggett
That was it. After the shock wore off, Doggett sprang to action. He asked friends on Facebook to subscribe to his monthly cold brew. He needs more than 800 new subscribers to replace the lost revenue from Foxtrot. That's my core business anyway.

I originally started as an online first brand, direct to consumer, so I've been pushing that mostly to plug the gap. Shipping directly to the consumer is not an option for Simone Freeman. Her company, Freeman house Chai, makes fresh drinks that are not shelf stable. She says about half of her revenue last year was from selling to Foxtrot and doms. For her, the grocers were that sweet spot.

David Larker
It was a chain, but stocked local goods, and it was a great place to get the word out about her brand. We had tons of different people reach out to us via email or Instagram and say, oh, I saw you at Foxtrot. I love your product so much. Where else can I find you? Freeman says she never expected the fast expanding chain to shut down overnight.

I was absolutely shocked. I mean, they had a location that they were building in DC. They had another doms that they were building. They just had this merger. Parent company Outfox Hospitality did not respond to an interview request.

Freeman does not expect to get back the couple thousand dollars the grocer owes her. And Yuta Katsuyama, owner of Onigiri Kororin, isn't holding his breath either. He says he invoiced the stores for about $13,000 before they shut down. That's about a week's worth of revenue. I don't think we gotta get that payment.

Katsuyama sells fresh onigiri, japanese rice balls filled with salmon or tuna wrapped in seaweed. He had sold them at Dom's first and had just started selling at Foxtrot last month. We were about to expand our team and equipment for meet their demand, he says. Foxtrot was once his dream retail store, but now he's looking for somewhere else to sell. Back at Kyoto, black, Justin Doggett is pouring some cold brew from the tap.

He says as tough as it is to lose the Fox chart account, he's felt really supported these past few weeks. I get messages saying like so and so said, hey, if you want to sell here, you can and spread this to vendors, you know. So that has been a great support network. There have been people taking initiatives on Instagram to just get a list of affected companies together, he says. The food and beverage industry is volatile, but when shakeups happen, the community shows up for one another.

In Chicago, I'm Esther Yoonji Kang for marketplace.

Kristen Schwab
This final note on the way out today, filed this under whenever there's a new market for something, there's also a lot of new investment. And eventually, somewhere down the line, a market correction. This time it's streaming. I read this in the New York Times. Pixar will stop making original shows for Disney, which means Pixar is reducing its workforce by 14%.

The idea here is that the company has lost its focus and employees were spread too thin when the brand started making content for the streaming platform. Another lesson in quality over quantity. Our digital and on demand team includes Carrie Barber, Jordan Mangi, Dylan Miettinen, Janet Nguyen, Olga Oxman, Ellen Rolfuss, Virginia K. Smith, and Tony Wagner. Francesca Levy is the executive director of digital and on demand.

And I'm Kristen Schwab. We'll be back tomorrow.

This is 08:00 p.m. hey, everyone. It's Rima Grace, host of this is uncomfortable. If you're looking for some good recommendations on books to read, well, you should join. This is uncomfortable's summer book club every other week in our newsletter, well share a new book thatll make you rethink your relationship to money, class, and work, while also featuring an interview with the author or an expert on the topic.

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