December 22, 2025 • 25 mins
Watch Scarlet and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu
-Stephen Flynn, Bloomberg Intelligence Senior Credit Analyst, discusses Larry Ellison throwing his personal fortune behind Paramount Skydance Corp.’s bid for Warner Bros. Discovery Inc., raising the stakes in a fiercely contested battle with Netflix Inc.
-Ira Jersey, Bloomberg Intelligence Chief US Interest Rate Strategist, says that heading into the new year, the Federal Reserve may be about to pause interest-rate reductions to give it more time to assess additional data and to determine the next policy path now that rates are "within a range of plausible estimates of neutral" as Chair Jerome Powell said.
-Jody Lurie, Bloomberg Intelligence Credit Analyst, discusses why cruise lines may edge out theme parks on 2026 cash-flow growth
-Brian Campbell, Leader of The Conference Board’s Governance & Sustainability Center discusses on new research on CEO turnover/firings, along with activist campaigns targeting CEOs
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Apple, Cocklay and Android Auto with the Bloomberg
Business App. Listen on demand wherever you get your podcasts,
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Speaker 2 (00:24):
All right, let's talk a little bit more about this.
Speaker 3 (00:26):
Larry Ellison personally backing the paramount bid for Warner Brothers.
It's something Warner Brothers was looking for and they appear
to have gotten it now. Stephen Flynn is Bloomberg Intelligence
Senior credit analyst here and is in studio with us.
Speaker 2 (00:39):
Great to see you, Stephen, Thanks good to be here.
Break it down for me.
Speaker 3 (00:42):
What does it mean when Paramounts Guidance says that Larry Ellison,
the chairman of Oracle, is offering a personal financial guarantee
of forty point four billion dollars in equity financing.
Speaker 2 (00:53):
If something falls apart, what are they going to call
upon Larry Ellison.
Speaker 4 (00:55):
To do well?
Speaker 5 (00:56):
This is an important step because mid last week, Paramount
excuse me, the Warner Brothers board recommended shareholders reject the
tender offer by Paramount for thirty dollars or share.
Speaker 4 (01:05):
And they lift that.
Speaker 5 (01:06):
They listed a list of reasons why, and one of
them was that there was no personal guarantee from Larry Ellison.
And now the company Power Amount has addressed that this
morning with a number of amendments to their tender offer.
Speaker 3 (01:19):
But that means he's putting his equities up up at stake, right.
Speaker 5 (01:23):
And they confirm that they hold one point one six
billion Oracle shares And if you look at you know,
an Oracle sharre is about one hundred and ninety four
dollars or so that's about two hundred and twenty five
billion dollars. So that is obviously a large amount of
value there, and the fact that he's personally backing it
is something that Warner Brothers was looking for.
Speaker 6 (01:40):
Still, a pro form of Paramount Warner Brothers, it's gonna
be highly levered, isn't it.
Speaker 4 (01:44):
Talk about the debt profile there and how do you
how do you view it? Yeah, so it gets very complicated.
Speaker 5 (01:49):
So a pro former, you know, Paramount Warner Brothers will
be highly leverage. You're talking you know, mid four times
leverage overall, and that's accounting for a significant number of
synergies that we're giving them credit for. So if you
look at expected EVATAH or paramount expected EVATAH for Warner Brothers,
and then you add on top of that, what they're
targeting is six billion dollars of the annual run rate
(02:10):
cost savings. It'll take them a few years to get there.
But if you say pro formal, we'll give them credit.
The company is still highly leverage at about mid four
times and x.
Speaker 4 (02:18):
That it's above five times.
Speaker 5 (02:19):
Oh clearly, yes, come on, yeah, And well you're asport
credit guy.
Speaker 4 (02:23):
You're not giving them credit for the synergies are well,
you have.
Speaker 5 (02:26):
To give them some credit, but you know, you really
want to see a dummy and.
Speaker 4 (02:30):
That could a guy. I'm like, I'm all in on this.
Synergies we usually are less bit more negative. Well, what's
important too is how they break it up.
Speaker 5 (02:37):
So part of the commitment they have on the credit side, right,
so you talked about Larry Elison some other equity providers
providing forty over forty billion dollars.
Speaker 4 (02:45):
Of equity capital.
Speaker 5 (02:46):
They also have a fifty four billion dollars secured bridge commitment.
And now that's secured. So if we assume that that
debt is ahead of all the existing debt that's at
both Warner Brothers and Paramount Skuidance, and again you give
them credit for sinders. You're talking about pro former leverage
through the secure debt of about three times. Now, there's
a possibility that you could get that investment grade rated
(03:08):
using Charter as an comparable. So if we look at Charter,
which is one of the biggest cable companies out there,
they owe almost one hundred billion dollars. Of that, about
seventy billion dollars or so of it is secured bonds
and loans that are ig rated, and they're about three
times levered. So if we use that at a compt
maybe you could get to investment grade ratings from at
least two of the three agencies to qualify for investment
(03:29):
grade for that fifty four billion dollars, which would be
very key to financing.
Speaker 3 (03:33):
All right, I know we're talking about paramounts Guidance and
Warner Brothers as the principal players here and Netflix if
you want to get into that side of the bid too.
But I'm curious, and this might be a dumb question.
Larry Ellison, now personally guaranteeing the equity financing, there's a
lot of questions about Oracle and its debt. Overall, we've
seen the credit default swaps on its debt rise. That's
(03:55):
the cost to ensure against a possible default. Does the
fact that Larry Ellison is committing to backing a large
portion of the money needed for the deal, does that
affect Oracle's credit rating at all? Would a credit investor
and analysts look at that and think, hmm, Now.
Speaker 5 (04:08):
Well, I don't forget Oracle still has a massive equity
market cap, right, and the stock is traded every day,
so the market is telling you every day what they
think the value of Oracle equity is worth. Right, And
he has again the one point one six billion dollars
one point one six billion of shares worth about two
hundred and twenty five billion dollars, and that's what the
market's saying it's worth. So that's what a credit investor
would look for that comfort or I'm sorry, an equity
(04:30):
investor at Warner Brothers Discovery saying that that is backing
up his forty point four billion dollars.
Speaker 2 (04:35):
And a credit investor wouldn't worry about that part of it.
Speaker 5 (04:37):
I don't think indirectly you could have some concern about it,
But I don't think directly you would.
Speaker 6 (04:42):
The average credit investors that you talk to about Warner Brothers,
which daily they.
Speaker 5 (04:45):
Prefer, Well, it's complicated, you would argue that. You know,
it's interesting is that Warner Brothers bonds or investment grade
rated right throughout most of the through half of last
year or half of this year excuse me, twenty twenty five,
and then they were by far the worst performing, huge
negative total return. They went into junk, they were fallen
angel in July, and now they've bounced back and one
(05:07):
of the better performing high eel names. Was all this
speculation of some sort of takeout. In either case, the
bonds are probably better off than they would be without it,
but there's still some concerns. So if they go with
the powamount skuiddance deal, there's a chance they could be
behind all that secure debt that we talked about, that
fifty four billion dollars of secure debt. But you have
all that equity capital coming in that's supporting the overall company,
(05:29):
which would give you support as a bondholder for Warner Brothers. Now,
the problem with the Netflix deal is that if you're
a bondholder, you're probably left with the Global networks, which
is going to be spun out before Netflix comes in
and buys the studios and streaming operations, and that company
will be relatively highly levered with a declining business. So
I'd say it's pretty close, but maybe you lean a
little bit towards the powamount s guidance.
Speaker 6 (05:50):
Really, all right, I wouldn't have thought that you guys
are getting soft in early age back in my day.
Speaker 4 (05:54):
All Right, Steven Flinn, thanks so much, appreciate it.
Speaker 6 (05:56):
Steven Flynn, seeing your credit analysts Bloomberg Intelligence with us.
Speaker 2 (06:00):
More from Bloomberg Intelligence coming up after this.
Speaker 1 (06:06):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 6 (06:21):
All right, we got some economic data last week that
the markets were looking for in terms of the labor
market and inflation. We've got some more coming up here.
The question is how how are our good friends down
at the Federal Reserve kind of digesting all this. For that,
we go to mister Ira Jersey and we're going to
get a sense of what his thoughts are there, Ira Jersey,
Chief US Interest.
Speaker 4 (06:39):
Rate Strategies in Bloomberg Intelligence.
Speaker 6 (06:40):
I remember, where do you think the FED is these
days and they're thinking about this economy and where they
need to go.
Speaker 4 (06:45):
Yeah, they were all over the place.
Speaker 7 (06:46):
So what you didn't mention, Paul, was that we had
a ton of FED speak last week too, and we
actually had even more this morning. So you definitely have
two camps that have been built in here, and one
is the more dubsh side of the of the isle
who think that, hey, we should be cutting interest rates
at least a little bit. You even had Williams, the
president of the New York FED, who's the vice chair
(07:07):
of the FOMC so presumably has a little bit more
weight than the rank and file members. So he said
that like, hey, we can go. We don't have to
go quickly, but we're going to ease. So that suggests
to me that maybe January skip is perhaps the base
case for now, but then more easing later, so March April,
you know, once we have a little bit more data
(07:29):
and we can see have the rate cuts that we've
already had actually work to stimulate the economy.
Speaker 4 (07:34):
Or not.
Speaker 3 (07:35):
So the division inside the FOMC is not new. This
is something we've seen over the last couple of rate decisions.
But we do know we're going to get a new
FED chair starting in late May, because that is when
Jerome Powell's term as FED chair ends. Put together the
division within the FED and this timetable for new personnel
(07:55):
at the FOMC, and whether we should be paying attention
to all this FED speak.
Speaker 7 (08:01):
Well, I think you have to listen to all the
FED speak, but you have to take it holistically, right.
You can't just take one member and say, oh, that's
exactly what they're going to do, because it is a
committee and that's what we have to remember. You know.
Then the new chair comes in. President Trump has said
he's going to announce a new chair in January. Presumably
that person is going to take Stephen Myron's seat, and
if that's the case, then the FED Chair elect will
(08:23):
be in it for both the March and the April meetings.
And so therefore we'll have some time around the table,
but we'll make a few speeches as the FED Chair
and we'll be able to see or as a FED governor,
I should say, And so we'll be able to see
is this person really very duvish? Are they not very dubvish?
Presumably they'll be more dubvish than j Powell has been.
But at the same time, you know, again that person
(08:46):
is only one one of the twelve members who actually
votes on the policy decisions.
Speaker 3 (08:51):
Well, if Steven Myron is going to be replaced, we
need to pay attention to what he says. We already
know what side of the dubbish or hawkish campion lands on.
Speaker 7 (08:59):
Well, yeah, I mean he just you know, the most
stubbish person on the committee, and you usually get those extremes, right,
you get one or two really dubbish or relatively hawkish members.
But it's that middle ground that you have to look at.
So that's why someone like a Williams, for example, is
important to listen to because you know he's voted, he
hasn't yet dissented one way or the other. But you know,
(09:20):
if that if he's saying that, hey, we're not going
to necessarily cut in January, you have to take that seriously.
Speaker 6 (09:27):
I do we know what Jerome Palell is going to
do once he steps down from the chairnship.
Speaker 7 (09:31):
As far as I know, he hasn't said what he's
going to do. You know a lot of former FED
chairs either take a role at one of the think
tanks in Washington or go into academia. That those are
two of the typical paths. I wouldn't be surprised if
Jerome Powell maybe even just retired and wound up being
on a lecture circuit or something like that instead of
(09:51):
instead of doing having a day to day type of job.
Speaker 2 (09:55):
Yeah, commanding six figure paying fees for.
Speaker 6 (09:57):
Yeah, exactly, a couple board seats, couple of speaking things.
Speaker 4 (10:00):
That's the way to go. I mean, who needs it?
Speaker 6 (10:02):
Ira, Thanks so much, journeyers appreciate it. Ira Jersey, chief
US interest rate strategist for Bloomberg Intelligence. Joining us there,
stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (10:16):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay, and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 6 (10:30):
I like the analysts who covered like the travel industry,
like cruise ships, theme.
Speaker 2 (10:35):
Parks, and you're going on your first cruise strong.
Speaker 6 (10:37):
On my first cruise next fall in France, so that'll
be interesting. Jody Lourie actually does this, Lori. She actually
does this for a living. She's a credit analyst for
Bloomberg Intelligence. She follows a lot of the leisure sectors
of the economy, think theme parks and cruise lines, that
type of stuff, hotels, casinos, that type of stuff from
the credit perspective, because remember that saw, I mean, equity
(10:59):
of soft debt is hard.
Speaker 4 (11:01):
Right there you go, Jody, let's to spend the cruise
lines here.
Speaker 6 (11:05):
It seems like the cruise people are cruising back in
I mean, Charlie Pellot's any you know, sign of that.
Speaker 4 (11:11):
How are they performing?
Speaker 8 (11:13):
So the cruise lines always have a dedicated base. But
cruising is sort of interesting because it's only two percent
of the travel industry. It really is such a small
portion of it. Where we've been watching is for those
new Dowo cruisers, which I don't know if I'm necessarily
convinced that they're going as often or they're attracting the
new to cruisers, but the cruisers are still very much cruising,
(11:35):
and they're spending more than the average consumer.
Speaker 3 (11:37):
They're also spending more than the people who go to
theme parks, according to your research, And partly that might
be because the cruise line industry attracts a different kind
of customer than the theme park industry. Theme park skews younger,
cruises skew older easy, Which would you prefer if you
are an operator? Which would you prefer if you're an investor.
Speaker 8 (12:00):
So we don't make full recommendations, but I will tell
you a couple of things based on our research findings.
So first of all, you have to think about how
people book cruising versus how they book theme parks. So
when you're talking about cruises, they book far in advance,
they book a year or two well in advance. And
what the cruise lines have been doing, particularly post pandemic,
is they've been locking people in on the drink packages,
(12:22):
on the experiences. They've been giving these steal of deals
excursion ideas, and when you get on the boat, it's
more expensive. So people say, Okay, I'm going to book
my cruise, but I'm also going to book the snorkeling,
and I'm going to book this. I'm going to book
that the ones that I definitely want to do, they
also book the drink packages which you know, I think
you can go either way on that personally, because I
don't think I drink enough, but maybe other people do,
(12:45):
and and it really sort of just helps their cash flows. Now,
theme parks people book much later, they are younger, they
are lower income than the US median household. And the
key for them is they.
Speaker 2 (12:59):
Can get people in the door.
Speaker 8 (13:01):
They can get them with season passes, or they can
just get them for the one day pass, but they're
not necessarily convincing them to spend in park the same way.
Speaker 2 (13:07):
But there's higher volume in theme park.
Speaker 8 (13:09):
Right, there's pretty highvlume in theme parks, but if they're
just paying for the admission, it might not necessarily cover
the costs per se. Right, they'll get in the door,
but they have high capex, they have high just high
costs in general, and they have all the employees that
they're paying for.
Speaker 6 (13:24):
Six Flags, that's a theme park that got some local
Jersey flavor here, six Flags Great Adventure.
Speaker 4 (13:31):
How's the capital structure for these theme parks?
Speaker 8 (13:33):
They are high capex, so high capital intensive companies.
Speaker 4 (13:37):
They have high level rides.
Speaker 8 (13:39):
Right exactly, and similar to cruise lines. So where we
sort of see it interesting is theme parks and cruise
lines are constantly they have to get the new experience in, right,
So they have to spend not just on maintaining their products,
so not just maintaining the ship or maintaining the ride,
they also have to get new ones in. So people say,
I want to go to a Great Adventure because I
want to ride Superman, right, So they do this to
(14:02):
get people excited, draw them in so that they're going.
I mean, you know, the biggest example that we don't cover.
I don't cover Universal or Comcast, but you know, Universal's
new theme park this year was a big driver to Florida.
It wasn't as big as expected necessarily, but it's still
pretty big. Now, if you're talking about the regional theme
parks is a little bit more difficult because people aren't
(14:23):
necessarily planning these long term vacations around Great Adventure.
Speaker 3 (14:27):
Do the theme parks attract more domestic consumers than the cruises?
I mean, I'm just curious in terms of the sustainability
and the stability of your customer base.
Speaker 2 (14:38):
So it depends on the brand.
Speaker 8 (14:40):
Because if you look pre pandemic and now going into
a few years post pandemic, the cruise lines they segment,
So Norwegian most of their customer bases US their US customers.
When you get to Royal Caribbean, it's a little bit less.
It's about so I think it's about eighty percent for Norwegian.
I'm doing this off the top of my head memory,
but eighty percent Norwegian. You get to back, it's like
(15:00):
seventy or sixty five for Royal, And then you get
to Carnival and it's even less than that. It's closer
to half, it's not quite half that are US versus international,
they have a much larger international presence. Brian Egger and I,
my equity counterpart, we were on the Aida, which is
one of the one of their brands that they market
to international customers, specifically in Germany, and it was a
(15:23):
one hundred and thirty three round.
Speaker 2 (15:26):
The world cruise.
Speaker 8 (15:28):
Nice They were stopping in New York for the day,
and they brought a bunch of us on, a bunch
of US equity and credit nerds, and took us around
the ship and everything was in German, as expected because
most of their customers were German. So that's Carnival has
a much more diversified customer base. If you talk about
theme parks, SeaWorld or United Parks as they go. Right now,
(15:49):
their Florida parks, which make up about half their revenue,
is international about ten twenty percent, But when you get
to six flags, it's much more domestic.
Speaker 6 (15:58):
We were off the a Mafia Coast last fall, oh fancy,
and I saw this big yacht thats like either navy
blue or black, And I said, what who owns that?
Speaker 2 (16:08):
It's the rich Carlton Ritz Carlton. Yes, I actually have
the run on it, just parked in. Those are small, though,
I mean in terms of the relative five hundred people.
Speaker 4 (16:16):
Yeah, I mean that looked pretty cool.
Speaker 8 (16:18):
Yeah, that's for the people who want to be on
a luxury yacht but don't want to actually own a
luxury yacht.
Speaker 6 (16:26):
Right.
Speaker 2 (16:26):
The joke about boats is.
Speaker 8 (16:28):
Bring on another thousand, right, My mother in law likes
st always say that, and that's why it's called boat.
So but the uh, you know, the thing about cruising
is that there's a perception about who the typical cruiser is. Right,
it's the you know, older people who are retired who
likes who like to bring basically the catskills on the water.
(16:49):
But really, I mean it's changed over time. And what's
interesting about our credit research and our travel survey that
we do every half a year is we're seeing that
it's actually really really spread out. If you look into
the buckets that we've segmented, it's really you know, it's
one third of each, so it's one third, eighteen to
thirty four year old one third that like middle age group,
and fifty five and older one third, so it's really
(17:11):
not specifically the older.
Speaker 4 (17:13):
All right, Very good, Jodi, thank you so much. We
appreciate that. Jodi Lourie.
Speaker 6 (17:17):
She is senior credit analyst for Bloomberg Intelligence. Following the
leisure part of the economy, stay with us.
Speaker 4 (17:24):
More from Bloomberg Intelligence coming up after this.
Speaker 1 (17:30):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am. He's done on Apple, Cocklay and
Android Auto with the Bloomberg Business App. Listen on demand
wherever you get your podcasts, or watch us live on YouTube.
Speaker 6 (17:44):
Well, it is a crazy time to be a CEO.
New research from the Conference Board provides insights onto two
big trends. Number one CEO turnover I think it's going
up CEO and number two CEO.
Speaker 4 (17:55):
Targeted shareholder activism and again.
Speaker 6 (17:57):
We just had that try and acquisition of Janis Henderson
and they were shareholders.
Speaker 4 (18:02):
So they said, we're going to buy this whole thing
out right, So it's happening out there.
Speaker 6 (18:05):
Brian Campbell joins US US Center Leader for Governance and
Sustainability at the Commerce Board. Brian talked to us about
CEO turnover, Is it rising and soy sure?
Speaker 9 (18:16):
I think, Paul, thank you for having me. I think
the trend is that it is up and we are
seeing definitely more CEO transition, partially driven by what may
have been longer delayed CEO transitions when you think back
to the pandemic and the volatility since then, companies kept
people in positions for longer, and I think that coupled
(18:38):
with regular transition, is showing a spike.
Speaker 3 (18:42):
So making up for some lost time, which makes sense.
Where do we see this happening the most? Are they
big companies, smaller companies, companies that are lagging behind in
terms of performance?
Speaker 2 (18:52):
And if so, by what metrics are we looking at performance?
Speaker 5 (18:55):
Sure?
Speaker 9 (18:55):
Thank you, Squally. I think what we're noticing is a
trend that's across the board. Fact hire, a spike in
well performing companies as opposed to just poor performing companies.
So I think that's the news part of this, the takeaway.
And then I think what you're also seeing is we
would view this as a shift in corporate governance more
of a proactive approach at the board level.
Speaker 6 (19:17):
Female CEOs are twice more likely to be targeted by activists.
Speaker 4 (19:22):
Wow, what's the data show there?
Speaker 9 (19:24):
Well, I think what we're seeing is that twice as
likely to be targeted would be reflective of what the
data shows. And then from the market's perspective, it's possible
that activists are targeting women's CEOs because they're more likely
to cooperate, may play into other stereotypes, but definitely, the
trend so high that it is notable.
Speaker 3 (19:47):
I guess one exception to that is what's happening over
at Lululemon, right because Elliott has a stake in Lululemon
and it has now become the biggest shareholder in that company.
Calvin McDonald, the male CEOs on his way out at
the end of January, and there are eyeing the former CFO,
Ralph Lauren, who is a woman.
Speaker 6 (20:02):
Yeah, all right, we'll see so CEOs when I look
for CEO if I'm the board, Do I prefer an
internal candidate or an external candidate?
Speaker 4 (20:13):
And is that changing?
Speaker 9 (20:15):
Historically it was an internal focus. We are seeing a
shift toward external and I think that just layers into
where we are from a volatility standpoint in the markets generally,
and what companies are facing between the economy, inflation and
activist activity.
Speaker 2 (20:32):
Brian, what skill.
Speaker 3 (20:33):
Set is most valuable for a board right now when
they're looking at a new CEO? I would imagine that
during the pandemic you wanted someone who is very familiar
with supply chain logistics, and even so in the era
of tariffs under Trump two point zero, that would be
something that's really really important. But have we seen certain
skill sets become kind of paramount and then others become
(20:53):
less important?
Speaker 9 (20:54):
Sure, I think the skills matrix that a board focuses
on when looking at potential candidates has certainly shifted. Crisis
management is a key skill set that has to be
present in the current environment, the ability to adapt and
be flexible in spite of moving targets, and that was
not necessarily the case a decade or so.
Speaker 3 (21:14):
Ago, and DEI that no longer matters or is it
still there? In the background.
Speaker 9 (21:18):
We would say it's definitely relevant, but not as prominent
as it was, and companies are not speaking about it
quite as affirmatively as they were in the last few years.
Speaker 4 (21:28):
That didn't last very long.
Speaker 2 (21:29):
How long did it last for? Like a year or two?
Speaker 4 (21:31):
I do know it didn't seem like a flash. There
you go, touch that compensation.
Speaker 6 (21:35):
What's the latest on CEO compensation because a lot of
folks feel like the stock based compensation. While of the
lines the CEO with the longer term growth, they tend
to set targets that are kind of short term. If
you meet this earnings or this cashlow of this revenue boom,
you get this monster stock award. But that's always been
the case.
Speaker 4 (21:52):
I guess sure.
Speaker 9 (21:52):
I think what you're seeing there boards focused on their
own accountability. They're under pressure to drive performance and they
need the CEO tied into that. So certainly, when you
talk about the activist side of it, you've got the
Lulu Lemon piece.
Speaker 4 (22:06):
But then when you.
Speaker 9 (22:07):
Think about traditional board orchestrations of CEO roles. Recently, Coca
Cola announced that in March they're going to have a
new CEO, Henry Braun, who's coming in with thirty years
of experience. This is part of an orchestrated change, so
definitely new new opportunities within structuring and governance. And then
I think the compensation package there is more tuned into
(22:29):
the longer term performance at the company versus maybe an
external candidate where there's a compackage that lures them to
the company.
Speaker 3 (22:36):
Brian, I'm sure you guys have done this CEO's Report,
this research report a couple of times. Now what surprises
you the most in this latest edition did you not anticipate?
Speaker 9 (22:48):
I think what we're seeing in the background, and we're
certainly hearing it from the members of the conference board anecdotally,
is the shift in corporate governance to a strategic orchestrated
CEO succession plan.
Speaker 4 (22:59):
So that's new. I think the CEO seat has.
Speaker 9 (23:02):
Always been a quote unquote, you know, potential hot seat,
but definitely more so orchestrated planning boards being accountable and
trying to plan that succession and then also including CEOs
on the exit, keeping them on the board to continue
continue that institutional knowledge, so opportunity there as well.
Speaker 6 (23:20):
Well.
Speaker 3 (23:20):
So it used to be they would when they were
out of CEO they were just gone from the board
completely and persona non grata.
Speaker 9 (23:26):
Right, And I think it's part of that strategic building
of a continuity plan that will continue to perpetuate the
institutional knowledge and keep some help for the new CEO
transitioning into the role.
Speaker 6 (23:39):
How about succession planning for CEO these days, because you know,
I followed for a long time the Walt Disney Company
and they had a great succession plan in place until
the CEO blew it up at the last moment. And
now it's been ten years and kind of screwing around
with mister Iger. How important is succession planning?
Speaker 4 (23:55):
It's critical these days.
Speaker 9 (23:57):
And I think what happens now is you've got pipelines
of potential candidates internal and external, which is new, and
then also being able to transition in case somebody who
is in the wings waiting for an opportunity decides that
they're going to leave and take an opportunity elsewhere. Companies
need to be flexible, boards need to be adaptable.
Speaker 2 (24:17):
Well, Paul, to your point.
Speaker 3 (24:19):
Now they have James Gorman, the former CEO and chairman
of Morgan Stanley, leading the succession planning over at Disney,
because he himself had done such a good job planning
for his succession at Morgan Stanley.
Speaker 6 (24:29):
Yeah, unfortunately they lost two at least two, maybe a
three serious outstanding executives and some time a lot of times. Yeah,
but I guess if you hold Disney shareholders, they'll be like, hey,
bopken Stain is off as long as he wants. That's
how good he is, how good we believe him to be.
Speaker 4 (24:45):
What's the big thing that.
Speaker 6 (24:46):
CEOs need to be focusing on these days? It doesn't
is it simply shareholder MAXI mentioning shareholder value or stakeholder value.
Speaker 9 (24:53):
I think that's a critical aspect of it that will
always be there at the end of the day, though,
I think it is building out that more robust skill
set toward FLEs, flexibility, adaptability, crisis management. The current volatility
that we're seeing out there, I think is the new normal.
So CEOs need to adapt.
Speaker 6 (25:08):
All right, Very good, Brian Campbell, us Center Leader for
Governors and Sustainability at the conference aboard here.
Speaker 1 (25:15):
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Speaker 2 (00:24):
All right, let's talk a little bit more about this.
Speaker 3 (00:26):
Larry Ellison personally backing the paramount bid for Warner Brothers.
It's something Warner Brothers was looking for and they appear
to have gotten it now. Stephen Flynn is Bloomberg Intelligence
Senior credit analyst here and is in studio with us.
Speaker 2 (00:39):
Great to see you, Stephen, Thanks good to be here.
Break it down for me.
Speaker 3 (00:42):
What does it mean when Paramounts Guidance says that Larry Ellison,
the chairman of Oracle, is offering a personal financial guarantee
of forty point four billion dollars in equity financing.
Speaker 2 (00:53):
If something falls apart, what are they going to call
upon Larry Ellison.
Speaker 4 (00:55):
To do well?
Speaker 5 (00:56):
This is an important step because mid last week, Paramount
excuse me, the Warner Brothers board recommended shareholders reject the
tender offer by Paramount for thirty dollars or share.
Speaker 4 (01:05):
And they lift that.
Speaker 5 (01:06):
They listed a list of reasons why, and one of
them was that there was no personal guarantee from Larry Ellison.
And now the company Power Amount has addressed that this
morning with a number of amendments to their tender offer.
Speaker 3 (01:19):
But that means he's putting his equities up up at stake, right.
Speaker 5 (01:23):
And they confirm that they hold one point one six
billion Oracle shares And if you look at you know,
an Oracle sharre is about one hundred and ninety four
dollars or so that's about two hundred and twenty five
billion dollars. So that is obviously a large amount of
value there, and the fact that he's personally backing it
is something that Warner Brothers was looking for.
Speaker 6 (01:40):
Still, a pro form of Paramount Warner Brothers, it's gonna
be highly levered, isn't it.
Speaker 4 (01:44):
Talk about the debt profile there and how do you
how do you view it? Yeah, so it gets very complicated.
Speaker 5 (01:49):
So a pro former, you know, Paramount Warner Brothers will
be highly leverage. You're talking you know, mid four times
leverage overall, and that's accounting for a significant number of
synergies that we're giving them credit for. So if you
look at expected EVATAH or paramount expected EVATAH for Warner Brothers,
and then you add on top of that, what they're
targeting is six billion dollars of the annual run rate
(02:10):
cost savings. It'll take them a few years to get there.
But if you say pro formal, we'll give them credit.
The company is still highly leverage at about mid four
times and x.
Speaker 4 (02:18):
That it's above five times.
Speaker 5 (02:19):
Oh clearly, yes, come on, yeah, And well you're asport
credit guy.
Speaker 4 (02:23):
You're not giving them credit for the synergies are well,
you have.
Speaker 5 (02:26):
To give them some credit, but you know, you really
want to see a dummy and.
Speaker 4 (02:30):
That could a guy. I'm like, I'm all in on this.
Synergies we usually are less bit more negative. Well, what's
important too is how they break it up.
Speaker 5 (02:37):
So part of the commitment they have on the credit side, right,
so you talked about Larry Elison some other equity providers
providing forty over forty billion dollars.
Speaker 4 (02:45):
Of equity capital.
Speaker 5 (02:46):
They also have a fifty four billion dollars secured bridge commitment.
And now that's secured. So if we assume that that
debt is ahead of all the existing debt that's at
both Warner Brothers and Paramount Skuidance, and again you give
them credit for sinders. You're talking about pro former leverage
through the secure debt of about three times. Now, there's
a possibility that you could get that investment grade rated
(03:08):
using Charter as an comparable. So if we look at Charter,
which is one of the biggest cable companies out there,
they owe almost one hundred billion dollars. Of that, about
seventy billion dollars or so of it is secured bonds
and loans that are ig rated, and they're about three
times levered. So if we use that at a compt
maybe you could get to investment grade ratings from at
least two of the three agencies to qualify for investment
(03:29):
grade for that fifty four billion dollars, which would be
very key to financing.
Speaker 3 (03:33):
All right, I know we're talking about paramounts Guidance and
Warner Brothers as the principal players here and Netflix if
you want to get into that side of the bid too.
But I'm curious, and this might be a dumb question.
Larry Ellison, now personally guaranteeing the equity financing, there's a
lot of questions about Oracle and its debt. Overall, we've
seen the credit default swaps on its debt rise. That's
(03:55):
the cost to ensure against a possible default. Does the
fact that Larry Ellison is committing to backing a large
portion of the money needed for the deal, does that
affect Oracle's credit rating at all? Would a credit investor
and analysts look at that and think, hmm, Now.
Speaker 5 (04:08):
Well, I don't forget Oracle still has a massive equity
market cap, right, and the stock is traded every day,
so the market is telling you every day what they
think the value of Oracle equity is worth. Right, And
he has again the one point one six billion dollars
one point one six billion of shares worth about two
hundred and twenty five billion dollars, and that's what the
market's saying it's worth. So that's what a credit investor
would look for that comfort or I'm sorry, an equity
(04:30):
investor at Warner Brothers Discovery saying that that is backing
up his forty point four billion dollars.
Speaker 2 (04:35):
And a credit investor wouldn't worry about that part of it.
Speaker 5 (04:37):
I don't think indirectly you could have some concern about it,
But I don't think directly you would.
Speaker 6 (04:42):
The average credit investors that you talk to about Warner Brothers,
which daily they.
Speaker 5 (04:45):
Prefer, Well, it's complicated, you would argue that. You know,
it's interesting is that Warner Brothers bonds or investment grade
rated right throughout most of the through half of last
year or half of this year excuse me, twenty twenty five,
and then they were by far the worst performing, huge
negative total return. They went into junk, they were fallen
angel in July, and now they've bounced back and one
(05:07):
of the better performing high eel names. Was all this
speculation of some sort of takeout. In either case, the
bonds are probably better off than they would be without it,
but there's still some concerns. So if they go with
the powamount skuiddance deal, there's a chance they could be
behind all that secure debt that we talked about, that
fifty four billion dollars of secure debt. But you have
all that equity capital coming in that's supporting the overall company,
(05:29):
which would give you support as a bondholder for Warner Brothers. Now,
the problem with the Netflix deal is that if you're
a bondholder, you're probably left with the Global networks, which
is going to be spun out before Netflix comes in
and buys the studios and streaming operations, and that company
will be relatively highly levered with a declining business. So
I'd say it's pretty close, but maybe you lean a
little bit towards the powamount s guidance.
Speaker 6 (05:50):
Really, all right, I wouldn't have thought that you guys
are getting soft in early age back in my day.
Speaker 4 (05:54):
All Right, Steven Flinn, thanks so much, appreciate it.
Speaker 6 (05:56):
Steven Flynn, seeing your credit analysts Bloomberg Intelligence with us.
Speaker 2 (06:00):
More from Bloomberg Intelligence coming up after this.
Speaker 1 (06:06):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 6 (06:21):
All right, we got some economic data last week that
the markets were looking for in terms of the labor
market and inflation. We've got some more coming up here.
The question is how how are our good friends down
at the Federal Reserve kind of digesting all this. For that,
we go to mister Ira Jersey and we're going to
get a sense of what his thoughts are there, Ira Jersey,
Chief US Interest.
Speaker 4 (06:39):
Rate Strategies in Bloomberg Intelligence.
Speaker 6 (06:40):
I remember, where do you think the FED is these
days and they're thinking about this economy and where they
need to go.
Speaker 4 (06:45):
Yeah, they were all over the place.
Speaker 7 (06:46):
So what you didn't mention, Paul, was that we had
a ton of FED speak last week too, and we
actually had even more this morning. So you definitely have
two camps that have been built in here, and one
is the more dubsh side of the of the isle
who think that, hey, we should be cutting interest rates
at least a little bit. You even had Williams, the
president of the New York FED, who's the vice chair
(07:07):
of the FOMC so presumably has a little bit more
weight than the rank and file members. So he said
that like, hey, we can go. We don't have to
go quickly, but we're going to ease. So that suggests
to me that maybe January skip is perhaps the base
case for now, but then more easing later, so March April,
you know, once we have a little bit more data
(07:29):
and we can see have the rate cuts that we've
already had actually work to stimulate the economy.
Speaker 4 (07:34):
Or not.
Speaker 3 (07:35):
So the division inside the FOMC is not new. This
is something we've seen over the last couple of rate decisions.
But we do know we're going to get a new
FED chair starting in late May, because that is when
Jerome Powell's term as FED chair ends. Put together the
division within the FED and this timetable for new personnel
(07:55):
at the FOMC, and whether we should be paying attention
to all this FED speak.
Speaker 7 (08:01):
Well, I think you have to listen to all the
FED speak, but you have to take it holistically, right.
You can't just take one member and say, oh, that's
exactly what they're going to do, because it is a
committee and that's what we have to remember. You know.
Then the new chair comes in. President Trump has said
he's going to announce a new chair in January. Presumably
that person is going to take Stephen Myron's seat, and
if that's the case, then the FED Chair elect will
(08:23):
be in it for both the March and the April meetings.
And so therefore we'll have some time around the table,
but we'll make a few speeches as the FED Chair
and we'll be able to see or as a FED governor,
I should say, And so we'll be able to see
is this person really very duvish? Are they not very dubvish?
Presumably they'll be more dubvish than j Powell has been.
But at the same time, you know, again that person
(08:46):
is only one one of the twelve members who actually
votes on the policy decisions.
Speaker 3 (08:51):
Well, if Steven Myron is going to be replaced, we
need to pay attention to what he says. We already
know what side of the dubbish or hawkish campion lands on.
Speaker 7 (08:59):
Well, yeah, I mean he just you know, the most
stubbish person on the committee, and you usually get those extremes, right,
you get one or two really dubbish or relatively hawkish members.
But it's that middle ground that you have to look at.
So that's why someone like a Williams, for example, is
important to listen to because you know he's voted, he
hasn't yet dissented one way or the other. But you know,
(09:20):
if that if he's saying that, hey, we're not going
to necessarily cut in January, you have to take that seriously.
Speaker 6 (09:27):
I do we know what Jerome Palell is going to
do once he steps down from the chairnship.
Speaker 7 (09:31):
As far as I know, he hasn't said what he's
going to do. You know a lot of former FED
chairs either take a role at one of the think
tanks in Washington or go into academia. That those are
two of the typical paths. I wouldn't be surprised if
Jerome Powell maybe even just retired and wound up being
on a lecture circuit or something like that instead of
(09:51):
instead of doing having a day to day type of job.
Speaker 2 (09:55):
Yeah, commanding six figure paying fees for.
Speaker 6 (09:57):
Yeah, exactly, a couple board seats, couple of speaking things.
Speaker 4 (10:00):
That's the way to go. I mean, who needs it?
Speaker 6 (10:02):
Ira, Thanks so much, journeyers appreciate it. Ira Jersey, chief
US interest rate strategist for Bloomberg Intelligence. Joining us there,
stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (10:16):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay, and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 6 (10:30):
I like the analysts who covered like the travel industry,
like cruise ships, theme.
Speaker 2 (10:35):
Parks, and you're going on your first cruise strong.
Speaker 6 (10:37):
On my first cruise next fall in France, so that'll
be interesting. Jody Lourie actually does this, Lori. She actually
does this for a living. She's a credit analyst for
Bloomberg Intelligence. She follows a lot of the leisure sectors
of the economy, think theme parks and cruise lines, that
type of stuff, hotels, casinos, that type of stuff from
the credit perspective, because remember that saw, I mean, equity
(10:59):
of soft debt is hard.
Speaker 4 (11:01):
Right there you go, Jody, let's to spend the cruise
lines here.
Speaker 6 (11:05):
It seems like the cruise people are cruising back in
I mean, Charlie Pellot's any you know, sign of that.
Speaker 4 (11:11):
How are they performing?
Speaker 8 (11:13):
So the cruise lines always have a dedicated base. But
cruising is sort of interesting because it's only two percent
of the travel industry. It really is such a small
portion of it. Where we've been watching is for those
new Dowo cruisers, which I don't know if I'm necessarily
convinced that they're going as often or they're attracting the
new to cruisers, but the cruisers are still very much cruising,
(11:35):
and they're spending more than the average consumer.
Speaker 3 (11:37):
They're also spending more than the people who go to
theme parks, according to your research, And partly that might
be because the cruise line industry attracts a different kind
of customer than the theme park industry. Theme park skews younger,
cruises skew older easy, Which would you prefer if you
are an operator? Which would you prefer if you're an investor.
Speaker 8 (12:00):
So we don't make full recommendations, but I will tell
you a couple of things based on our research findings.
So first of all, you have to think about how
people book cruising versus how they book theme parks. So
when you're talking about cruises, they book far in advance,
they book a year or two well in advance. And
what the cruise lines have been doing, particularly post pandemic,
is they've been locking people in on the drink packages,
(12:22):
on the experiences. They've been giving these steal of deals
excursion ideas, and when you get on the boat, it's
more expensive. So people say, Okay, I'm going to book
my cruise, but I'm also going to book the snorkeling,
and I'm going to book this. I'm going to book
that the ones that I definitely want to do, they
also book the drink packages which you know, I think
you can go either way on that personally, because I
don't think I drink enough, but maybe other people do,
(12:45):
and and it really sort of just helps their cash flows. Now,
theme parks people book much later, they are younger, they
are lower income than the US median household. And the
key for them is they.
Speaker 2 (12:59):
Can get people in the door.
Speaker 8 (13:01):
They can get them with season passes, or they can
just get them for the one day pass, but they're
not necessarily convincing them to spend in park the same way.
Speaker 2 (13:07):
But there's higher volume in theme park.
Speaker 8 (13:09):
Right, there's pretty highvlume in theme parks, but if they're
just paying for the admission, it might not necessarily cover
the costs per se. Right, they'll get in the door,
but they have high capex, they have high just high
costs in general, and they have all the employees that
they're paying for.
Speaker 6 (13:24):
Six Flags, that's a theme park that got some local
Jersey flavor here, six Flags Great Adventure.
Speaker 4 (13:31):
How's the capital structure for these theme parks?
Speaker 8 (13:33):
They are high capex, so high capital intensive companies.
Speaker 4 (13:37):
They have high level rides.
Speaker 8 (13:39):
Right exactly, and similar to cruise lines. So where we
sort of see it interesting is theme parks and cruise
lines are constantly they have to get the new experience in, right,
So they have to spend not just on maintaining their products,
so not just maintaining the ship or maintaining the ride,
they also have to get new ones in. So people say,
I want to go to a Great Adventure because I
want to ride Superman, right, So they do this to
(14:02):
get people excited, draw them in so that they're going.
I mean, you know, the biggest example that we don't cover.
I don't cover Universal or Comcast, but you know, Universal's
new theme park this year was a big driver to Florida.
It wasn't as big as expected necessarily, but it's still
pretty big. Now, if you're talking about the regional theme
parks is a little bit more difficult because people aren't
(14:23):
necessarily planning these long term vacations around Great Adventure.
Speaker 3 (14:27):
Do the theme parks attract more domestic consumers than the cruises?
I mean, I'm just curious in terms of the sustainability
and the stability of your customer base.
Speaker 2 (14:38):
So it depends on the brand.
Speaker 8 (14:40):
Because if you look pre pandemic and now going into
a few years post pandemic, the cruise lines they segment,
So Norwegian most of their customer bases US their US customers.
When you get to Royal Caribbean, it's a little bit less.
It's about so I think it's about eighty percent for Norwegian.
I'm doing this off the top of my head memory,
but eighty percent Norwegian. You get to back, it's like
(15:00):
seventy or sixty five for Royal, And then you get
to Carnival and it's even less than that. It's closer
to half, it's not quite half that are US versus international,
they have a much larger international presence. Brian Egger and I,
my equity counterpart, we were on the Aida, which is
one of the one of their brands that they market
to international customers, specifically in Germany, and it was a
(15:23):
one hundred and thirty three round.
Speaker 2 (15:26):
The world cruise.
Speaker 8 (15:28):
Nice They were stopping in New York for the day,
and they brought a bunch of us on, a bunch
of US equity and credit nerds, and took us around
the ship and everything was in German, as expected because
most of their customers were German. So that's Carnival has
a much more diversified customer base. If you talk about
theme parks, SeaWorld or United Parks as they go. Right now,
(15:49):
their Florida parks, which make up about half their revenue,
is international about ten twenty percent, But when you get
to six flags, it's much more domestic.
Speaker 6 (15:58):
We were off the a Mafia Coast last fall, oh fancy,
and I saw this big yacht thats like either navy
blue or black, And I said, what who owns that?
Speaker 2 (16:08):
It's the rich Carlton Ritz Carlton. Yes, I actually have
the run on it, just parked in. Those are small, though,
I mean in terms of the relative five hundred people.
Speaker 4 (16:16):
Yeah, I mean that looked pretty cool.
Speaker 8 (16:18):
Yeah, that's for the people who want to be on
a luxury yacht but don't want to actually own a
luxury yacht.
Speaker 6 (16:26):
Right.
Speaker 2 (16:26):
The joke about boats is.
Speaker 8 (16:28):
Bring on another thousand, right, My mother in law likes
st always say that, and that's why it's called boat.
So but the uh, you know, the thing about cruising
is that there's a perception about who the typical cruiser is. Right,
it's the you know, older people who are retired who
likes who like to bring basically the catskills on the water.
(16:49):
But really, I mean it's changed over time. And what's
interesting about our credit research and our travel survey that
we do every half a year is we're seeing that
it's actually really really spread out. If you look into
the buckets that we've segmented, it's really you know, it's
one third of each, so it's one third, eighteen to
thirty four year old one third that like middle age group,
and fifty five and older one third, so it's really
(17:11):
not specifically the older.
Speaker 4 (17:13):
All right, Very good, Jodi, thank you so much. We
appreciate that. Jodi Lourie.
Speaker 6 (17:17):
She is senior credit analyst for Bloomberg Intelligence. Following the
leisure part of the economy, stay with us.
Speaker 4 (17:24):
More from Bloomberg Intelligence coming up after this.
Speaker 1 (17:30):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am. He's done on Apple, Cocklay and
Android Auto with the Bloomberg Business App. Listen on demand
wherever you get your podcasts, or watch us live on YouTube.
Speaker 6 (17:44):
Well, it is a crazy time to be a CEO.
New research from the Conference Board provides insights onto two
big trends. Number one CEO turnover I think it's going
up CEO and number two CEO.
Speaker 4 (17:55):
Targeted shareholder activism and again.
Speaker 6 (17:57):
We just had that try and acquisition of Janis Henderson
and they were shareholders.
Speaker 4 (18:02):
So they said, we're going to buy this whole thing
out right, So it's happening out there.
Speaker 6 (18:05):
Brian Campbell joins US US Center Leader for Governance and
Sustainability at the Commerce Board. Brian talked to us about
CEO turnover, Is it rising and soy sure?
Speaker 9 (18:16):
I think, Paul, thank you for having me. I think
the trend is that it is up and we are
seeing definitely more CEO transition, partially driven by what may
have been longer delayed CEO transitions when you think back
to the pandemic and the volatility since then, companies kept
people in positions for longer, and I think that coupled
(18:38):
with regular transition, is showing a spike.
Speaker 3 (18:42):
So making up for some lost time, which makes sense.
Where do we see this happening the most? Are they
big companies, smaller companies, companies that are lagging behind in
terms of performance?
Speaker 2 (18:52):
And if so, by what metrics are we looking at performance?
Speaker 5 (18:55):
Sure?
Speaker 9 (18:55):
Thank you, Squally. I think what we're noticing is a
trend that's across the board. Fact hire, a spike in
well performing companies as opposed to just poor performing companies.
So I think that's the news part of this, the takeaway.
And then I think what you're also seeing is we
would view this as a shift in corporate governance more
of a proactive approach at the board level.
Speaker 6 (19:17):
Female CEOs are twice more likely to be targeted by activists.
Speaker 4 (19:22):
Wow, what's the data show there?
Speaker 9 (19:24):
Well, I think what we're seeing is that twice as
likely to be targeted would be reflective of what the
data shows. And then from the market's perspective, it's possible
that activists are targeting women's CEOs because they're more likely
to cooperate, may play into other stereotypes, but definitely, the
trend so high that it is notable.
Speaker 3 (19:47):
I guess one exception to that is what's happening over
at Lululemon, right because Elliott has a stake in Lululemon
and it has now become the biggest shareholder in that company.
Calvin McDonald, the male CEOs on his way out at
the end of January, and there are eyeing the former CFO,
Ralph Lauren, who is a woman.
Speaker 6 (20:02):
Yeah, all right, we'll see so CEOs when I look
for CEO if I'm the board, Do I prefer an
internal candidate or an external candidate?
Speaker 4 (20:13):
And is that changing?
Speaker 9 (20:15):
Historically it was an internal focus. We are seeing a
shift toward external and I think that just layers into
where we are from a volatility standpoint in the markets generally,
and what companies are facing between the economy, inflation and
activist activity.
Speaker 2 (20:32):
Brian, what skill.
Speaker 3 (20:33):
Set is most valuable for a board right now when
they're looking at a new CEO? I would imagine that
during the pandemic you wanted someone who is very familiar
with supply chain logistics, and even so in the era
of tariffs under Trump two point zero, that would be
something that's really really important. But have we seen certain
skill sets become kind of paramount and then others become
(20:53):
less important?
Speaker 9 (20:54):
Sure, I think the skills matrix that a board focuses
on when looking at potential candidates has certainly shifted. Crisis
management is a key skill set that has to be
present in the current environment, the ability to adapt and
be flexible in spite of moving targets, and that was
not necessarily the case a decade or so.
Speaker 3 (21:14):
Ago, and DEI that no longer matters or is it
still there? In the background.
Speaker 9 (21:18):
We would say it's definitely relevant, but not as prominent
as it was, and companies are not speaking about it
quite as affirmatively as they were in the last few years.
Speaker 4 (21:28):
That didn't last very long.
Speaker 2 (21:29):
How long did it last for? Like a year or two?
Speaker 4 (21:31):
I do know it didn't seem like a flash. There
you go, touch that compensation.
Speaker 6 (21:35):
What's the latest on CEO compensation because a lot of
folks feel like the stock based compensation. While of the
lines the CEO with the longer term growth, they tend
to set targets that are kind of short term. If
you meet this earnings or this cashlow of this revenue boom,
you get this monster stock award. But that's always been
the case.
Speaker 4 (21:52):
I guess sure.
Speaker 9 (21:52):
I think what you're seeing there boards focused on their
own accountability. They're under pressure to drive performance and they
need the CEO tied into that. So certainly, when you
talk about the activist side of it, you've got the
Lulu Lemon piece.
Speaker 4 (22:06):
But then when you.
Speaker 9 (22:07):
Think about traditional board orchestrations of CEO roles. Recently, Coca
Cola announced that in March they're going to have a
new CEO, Henry Braun, who's coming in with thirty years
of experience. This is part of an orchestrated change, so
definitely new new opportunities within structuring and governance. And then
I think the compensation package there is more tuned into
(22:29):
the longer term performance at the company versus maybe an
external candidate where there's a compackage that lures them to
the company.
Speaker 3 (22:36):
Brian, I'm sure you guys have done this CEO's Report,
this research report a couple of times. Now what surprises
you the most in this latest edition did you not anticipate?
Speaker 9 (22:48):
I think what we're seeing in the background, and we're
certainly hearing it from the members of the conference board anecdotally,
is the shift in corporate governance to a strategic orchestrated
CEO succession plan.
Speaker 4 (22:59):
So that's new. I think the CEO seat has.
Speaker 9 (23:02):
Always been a quote unquote, you know, potential hot seat,
but definitely more so orchestrated planning boards being accountable and
trying to plan that succession and then also including CEOs
on the exit, keeping them on the board to continue
continue that institutional knowledge, so opportunity there as well.
Speaker 6 (23:20):
Well.
Speaker 3 (23:20):
So it used to be they would when they were
out of CEO they were just gone from the board
completely and persona non grata.
Speaker 9 (23:26):
Right, And I think it's part of that strategic building
of a continuity plan that will continue to perpetuate the
institutional knowledge and keep some help for the new CEO
transitioning into the role.
Speaker 6 (23:39):
How about succession planning for CEO these days, because you know,
I followed for a long time the Walt Disney Company
and they had a great succession plan in place until
the CEO blew it up at the last moment. And
now it's been ten years and kind of screwing around
with mister Iger. How important is succession planning?
Speaker 4 (23:55):
It's critical these days.
Speaker 9 (23:57):
And I think what happens now is you've got pipelines
of potential candidates internal and external, which is new, and
then also being able to transition in case somebody who
is in the wings waiting for an opportunity decides that
they're going to leave and take an opportunity elsewhere. Companies
need to be flexible, boards need to be adaptable.
Speaker 2 (24:17):
Well, Paul, to your point.
Speaker 3 (24:19):
Now they have James Gorman, the former CEO and chairman
of Morgan Stanley, leading the succession planning over at Disney,
because he himself had done such a good job planning
for his succession at Morgan Stanley.
Speaker 6 (24:29):
Yeah, unfortunately they lost two at least two, maybe a
three serious outstanding executives and some time a lot of times. Yeah,
but I guess if you hold Disney shareholders, they'll be like, hey,
bopken Stain is off as long as he wants. That's
how good he is, how good we believe him to be.
Speaker 4 (24:45):
What's the big thing that.
Speaker 6 (24:46):
CEOs need to be focusing on these days? It doesn't
is it simply shareholder MAXI mentioning shareholder value or stakeholder value.
Speaker 9 (24:53):
I think that's a critical aspect of it that will
always be there at the end of the day, though,
I think it is building out that more robust skill
set toward FLEs, flexibility, adaptability, crisis management. The current volatility
that we're seeing out there, I think is the new normal.
So CEOs need to adapt.
Speaker 6 (25:08):
All right, Very good, Brian Campbell, us Center Leader for
Governors and Sustainability at the conference aboard here.
Speaker 1 (25:15):
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