Economy Updates: Business Groups Push Back on Tax Increase in Biden’s Plan
The chief executive of Delta, Ed Bastian, sent a letter on Wednesday to employees expressing regret for the company’s muted opposition to a restrictive voting law passed last week by the Georgia legislature.
“I need to make it crystal clear that the final bill is unacceptable and does not match Delta’s values,” he wrote in an internal memo that was reviewed by The New York Times.
Mr. Bastian’s position is a stark reversal from last week. As Republican lawmakers in Georgia rushed to pass the new law, Delta, along with other big companies headquartered in Atlanta, came under pressure from activists to publicly and directly oppose the effort. Activists called for boycotts, and protested at the Delta terminal at the Atlanta airport.
Instead, Delta chose to offer general statements in support of voting rights, and work behind the scenes to try and remove some of the most onerous provisions as the new law came together. After the law was passed on Thursday, Mr. Bastian said he believed it had been improved and included several useful changes that make voting more secure.
But on Wednesday, after dozens of prominent Black executives called on corporate America to become more engaged in the issue, Mr. Bastian reversed course.
“After having time to now fully understand all that is in the bill, coupled with discussions with leaders and employees in the Black community, it’s evident that the bill includes provisions that will make it harder for many underrepresented voters, particularly Black voters, to exercise their constitutional right to elect their representatives,” he said. “That is wrong.”
Mr. Bastian went further, saying that the entire premise of the new law — and dozens of similar bills being advanced in other states around the country — was based on false pretenses.
“The entire rationale for this bill was based on a lie: that there was widespread voter fraud in Georgia in the 2020 elections,” Mr. Bastian said. “This is simply not true. Unfortunately, that excuse is being used in states across the nation that are attempting to pass similar legislation to restrict voting rights.”
Also on Wednesday, Larry Fink, the chief executive of BlackRock, issued a statement on LinkedIn saying the company was concerned about the wave of new restrictive voting laws. “BlackRock is concerned about efforts that could limit access to the ballot for anyone,” Mr. Fink said. “Voting should be easy and accessible for ALL eligible voters.”
Seventy-two Black executives signed a letter calling on companies to fight a wave of voting-rights bills similar to the one that was passed in Georgia being advanced by Republicans in at least 43 states.
The effort was led by Kenneth Chenault, a former chief executive of American Express, and Kenneth Frazier, the chief executive of Merck, Andrew Ross Sorkin and David Gelles report for The New York Times.
The signers included Roger Ferguson Jr., the chief executive of TIAA; Mellody Hobson and John Rogers Jr., the co-chief executives of Ariel Investments; Robert F. Smith, the chief executive of Vista Equity Partners; and Raymond McGuire, a former Citigroup executive who is running for mayor of New York. The group of leaders, with support from the Black Economic Alliance, bought a full-page ad in the Wednesday print edition of The New York Times.
“The Georgia legislature was the first one,” Mr. Frazier said. “If corporate America doesn’t stand up, we’ll get these laws passed in many places in this country.”
Last year, the Human Rights Campaign began persuading companies to sign on to a pledge that states their “clear opposition to harmful legislation aimed at restricting the access of L.G.B.T.Q. people in society.” Dozens of major companies, including AT&T, Facebook, Nike and Pfizer, signed on.
To Mr. Chenault, the contrast between the business community’s response to that issue and to voting restrictions that disproportionately harm Black voters was telling.
“You had 60 major companies — Amazon, Google, American Airlines — that signed on to the statement that states a very clear opposition to harmful legislation aimed at restricting the access of L.G.B.T.Q. people in society,” he said. “So, you know, it is bizarre that we don’t have companies standing up to this.”
“This is not new,” Mr. Chenault added. “When it comes to race, there’s differential treatment. That’s the reality.”
Janet L. Yellen, the Treasury secretary, said America’s top financial regulators will re-establish a group to study possible risks and vulnerabilities at hedge funds, renewing an effort that was abandoned by the Trump administration.
Ms. Yellen on Wednesday presided over the first meeting since President Biden took office of the Financial Stability Oversight Council — a group led by the Treasury secretary. In a session that was closed to the public, officials discussed financial weaknesses that had been exposed during the March 2020 market meltdown, including those at mutual funds and hedge funds.
“This council used to have a hedge fund working group, and as of today, we have one again,” Ms. Yellen said while summarizing those discussions later on Wednesday. “We’re re-establishing the working group so that we can better share data, identify risks and work to strengthen our financial system.”
The council’s hedge fund discussion was inspired by a highly leveraged trade that went awry in March 2020, causing hedge funds to dump Treasury bonds and exacerbating ruptures in the government bond market.
The increased oversight of hedge funds — which cater to big-money investors and often use risky strategies — is especially notable in the days after a meltdown at Archegos Capital Management caused big losses for banks. The drama has highlighted interconnections that wind through the financial system, potentially leaving it more fragile.
During a webcast portion of the meeting, the council — which also counts officials including the Federal Reserve chair and the head of the Securities and Exchange Commission among its members — discussed how regulators are thinking about climate-related financial risks.
Ms. Yellen said officials must think about climate change as a practical risk as disasters become more frequent and intense, inflicting financial losses. She said institutions will also need to think about how the shift to a less carbon-heavy world could impact banking and markets.
“On all of these fronts, the council has an important role to play, helping to coordinate regulators’ collective efforts to improve the measurement and management of climate-related risk in the financial system,” she said.
Google employees in the United States will likely be allowed to return to the office next month, the company said on Wednesday.
Google and other tech companies that shuttered their offices at the start of the pandemic are gradually reopening work spaces as vaccines become widely available. Facebook told employees that its Menlo Park headquarters would open in May, and Uber has allowed a limited number of employees to return to its San Francisco offices. Other tech companies, like Twitter, have allowed employees to work from home indefinitely.
Workers at Google will have the option to return in April, Fiona Cicconi, Google’s chief people officer, told employees in an email seen by The New York Times. Offices will operate at a limited capacity, and reopenings will vary state by state, based on the number of coronavirus cases in the area, Ms. Cicconi said.
“Offices will begin to open in a limited capacity based on specific criteria that include increases in vaccine availability and downward trends in Covid-19 cases,” Ms. Cicconi wrote. “We advise you to get a vaccine, though it will not be mandatory to have one in order for Googlers to return to the office.”
Workers who do opt to return will be required to wear masks, practice social distancing and pass a health survey, Google said.
Google said that it would not change the September date, when it plans to require employees in the United States to return to the office, and that employees could continue to work remotely until then. Some of Google’s offices in Asia and the Middle East have already reopened.
Business groups and large corporations reacted negatively on Wednesday to President Biden’s expected proposal to fund his $2 trillion package of infrastructure spending with a substantial increase in corporate taxes.
The scale of the infrastructure program — the details of which Mr. Biden is expected to unveil later on Wednesday — is so big that is that it would require 15 years of higher taxes on corporations to pay for eight years of spending. The plans include raising the corporate tax rate to 28 percent from 21 percent. The corporate tax rate had been cut from 35 percent under former President Donald J. Trump.
The Business Roundtable said it supported infrastructure investment, calling it “essential to economic growth” and important “to ensure a rapid economic recovery” — but rejected corporate tax increases as a way to pay for it.
“Policymakers should avoid creating new barriers to job creation and economic growth, particularly during the recovery,” the group’s chief executive, Joshua Bolten, said in a statement.
The U.S. Chamber of Commerce echoed that view. “We strongly oppose the general tax increases proposed by the administration, which will slow the economic recovery and make the U.S. less competitive globally — the exact opposite of the goals of the infrastructure plan,” the chamber’s chief policy officer, Neil Bradley, said in a statement.
The president’s focus on the work force will help the economy as it recovers from the pandemic-induced slowdown, the National Association of Manufacturers, a trade group, said in a statement. But, it added, the proposed tax increase would hurt the country’s competitive advantage.
“Raising taxes on manufacturers would fundamentally undermine our ability to lead this recovery,” the trade group said.
Wall Street has been wary of possible tax increases since the presidential election and has hoped that gridlock in Washington would moderate Mr. Biden’s agenda. On Wednesday, a spokesman for JPMorgan Chase said the bank’s chief executive, Jamie Dimon, believed “that the corporate tax rate for companies in the U.S. has to be competitive globally, which it is now.”
But “he has no problem with high-income people like himself paying a higher tax rate,” said the spokesman, Joseph Evangelisti.
The Biden administration has indicated that tax increases for wealthy Americans will help fund the second phase of the infrastructure plan, which is expected to be announced next month and will focus on priorities like education, health care and paid leave. The increase in corporate taxes is an effort to “ensure that corporations pay their fair share,” White House officials said in a news release.
Delta Air Lines said Wednesday that it would sell middle seats on flights starting May 1, more than a year after it decided to leave them empty to promote distancing. Other airlines had blocked middle seats early in the pandemic, but Delta held out the longest by several months and is the last of the four big U.S. airlines to get rid of the policy.
The company’s chief executive, Ed Bastian, said that a survey of those who flew Delta in 2019 found that nearly 65 percent expected to have received at least one dose of a coronavirus vaccine by May 1, which gave the airline “the assurance to offer customers the ability to choose any seat on our aircraft.”
Delta started blocking middle seat bookings in April 2020 and said that it continued the policy to give passengers peace of mind.
“During the past year, we transformed our service to ensure their health, safety, convenience and comfort during their travels,” Mr. Bastian said in a statement. “Now, with vaccinations becoming more widespread and confidence in travel rising, we’re ready to help customers reclaim their lives.”
Air travel has started to recover meaningfully in recent weeks, with ticket sales rising and as well over one million people per day have been screened at airport checkpoints since mid-March, according to the Transportation Security Administration. More than 1.5 million people were screened on Sunday, the busiest day at airports since the pandemic began. Air travel is still down about 40 percent from 2019.
The Centers for Disease Control and Prevention continues to recommend against travel, even for those who have been vaccinated. This week, its director, Dr. Rochelle Walensky, warned of “impending doom” from a potential fourth wave of the pandemic if Americans move too quickly to disregard the advice of public health officials.
Delta also said on Wednesday that it would give customers more time to use expiring travel credits. All new tickets purchased in 2021 and credits set to expire this year will now expire at the end of 2022.
Starting April 14, the airline plans to bring back soft drinks, cocktails and snacks on flights within the United States and to nearby international destinations. In June, it plans to start offering hot food in premium classes on some coast-to-coast flights. Delta also announced changes that will make it easier for members of its loyalty program to earn points this year.
Deliveroo, the British food delivery service, dropped as much as 30 percent in its first minutes of trading on Wednesday, a gloomy public debut for the company that was promoted as a post-Brexit win for London’s financial markets.
The company had set its initial public offering price at 3.90 pounds a share, valuing Deliveroo at GBP7.6 billion or $10.4 billion. But it opened at GBP3.31, 15 percent lower, and kept falling. By the end of the day, shares had recovered only slightly, closing at about GBP2.87, 26 percent lower.
The offering has been troubled by major investors planning to sit out the I.P.O. amid concerns about shareholder voting rights and Deliveroo rider pay. Deliveroo, trading under the ticker “ROO,” sold just under 385 million shares, raising GBP1.5 billion.
The business model of Deliveroo and other gig economy companies is increasingly under threat in Europe as legal challenges mount. Two weeks ago, Uber reclassified more than 70,000 drivers in Britain as workers who will receive a minimum wage, vacation pay and access to a pension plan, after a Supreme Court ruling. Analysts said the move could set a precedent for other companies and increase costs.
Deliveroo, which is based in London and was founded in 2013, is now in 12 countries and has more than 100,000 riders, recognizable on the streets by their teal jackets and food bags. Last year, Amazon became its biggest shareholder.
Demand for Deliveroo’s services could soon diminish, as pandemic restrictions in its largest market, Britain, begin to ease. In a few weeks, restaurants will reopen for outdoor dining. Last year, Deliveroo said, it lost GBP226.4 million even as its revenue jumped more than 50 percent to nearly GBP1.2 billion.
Last week, a joint investigation by the Independent Workers’ Union of Great Britain and the Bureau of Investigative Journalism was published based on invoices of hundreds of Deliveroo riders. It found that a third of the riders made less than GBP8.72 an hour, the national minimum wage for people over 25.
Deliveroo dismissed the report, calling the union a “fringe organization” that didn’t represent a significant number of Deliveroo riders. The company said that riders were paid for each delivery and earn “GBP13 per hour on average at our busiest times.”
On Monday, shares traded hands in a period called conditional dealing open to investors allocated shares in the initial offering. The stock is expected to be fully listed on the London Stock Exchange next Wednesday and can be traded without restrictions from then.
The Chinese tech behemoth Huawei reported sharply slower growth in sales last year, which the company blamed on American sanctions that have both hobbled its ability to produce smartphones and left those handsets unable to run popular Google apps and services, limiting their appeal to many buyers.
Huawei said on Wednesday that global revenue was around $137 billion in 2020, 3.8 percent higher than the year before. The company’s sales growth in 2019 was 19.1 percent.
Over the past two years, Washington has placed strict controls on Huawei’s ability to buy and make computer chips and other essential components. United States officials have expressed concern that the Chinese government could use Huawei or its products for espionage and sabotage. The company has denied that it is a security threat.
In recent months, Huawei has continued to release new handset models. But sales have suffered, including in its home market. Worldwide, shipments of Huawei phones fell by 22 percent between 2019 and 2020, according to the research firm Canalys, making the company the world’s third largest smartphone vendor last year. In 2019, it was No. 2, behind Samsung.
Huawei remained top dog last year in telecom network equipment, according to the consultancy Dell’Oro Group, even as Britain and other governments blocked Huawei from building their nations’ 5G infrastructure.
Announcing the company’s financial results on Wednesday, Ken Hu, one of its deputy chairmen, said that despite the challenges, Huawei was not changing the broad direction of its business. Another Huawei executive recently revealed on social media that the company was offering an artificial intelligence product for pig farms, which some people took as a sign that Huawei was diversifying to survive.
Mr. Hu took note of the news reports about Huawei’s pig-farming product but said it was “not true” that the company was making any major shifts. “Huawei’s business direction is still focused on technology infrastructure,” he said.
Apple is investing in UnitedMasters, a music distribution company that lets musicians bypass traditional record labels.
Artists who distribute through UnitedMasters keep ownership of their master recordings and pay either a yearly fee or 10 percent of their royalties.
Apple led the $50 million funding round, announced on Wednesday, which values UnitedMasters at $350 million, the DealBook newsletter reports. Existing investors, including Alphabet and Andreessen Horowitz, also participated in the funding.
Musicians are increasingly taking ownership of their work. Taylor Swift, most famously, and Anita Baker, most recently, have publicized their fights with labels over their master recordings. Artists once needed the heft of major publishing labels — which typically demand ownership of master recordings — to build a fan base. But with social media, labels no longer play as significant a gatekeeping role. UnitedMasters has partnerships with the N.B.A., ESPN, TikTok and Twitch, deals that reflect the new ways that people discover music.
“Technology, no doubt, has transformed music for consumers,” said Steve Stoute, the former major label executive who founded UnitedMasters. “Now it’s time for technology to change the economics for the artists.” The deal with UnitedMasters is about “empowering creators,” Eddy Cue, Apple’s head of internet software and services, said.
As streaming services, including Apple’s, compete for subscribers, they are cutting more favorable deals with the artists who attract users to platforms. Spotify announced an initiative called “Loud and Clear” this week to detail how it pays musicians following public pressure.
More than a week after the Swedish retailer H&M came under fire in China for a months-old statement expressing concern over reports of Uyghur forced labor in the region of Xinjiang, a major source of cotton, the company published a statement saying it hoped to regain the trust of customers in China.
In recent days, H&M and other Western clothing brands including Nike and Burberry that expressed concerns over reports coming out of Xinjiang have faced an outcry on Chinese social media, including calls for a boycott endorsed by President Xi Jinping’s government. The brands’ local celebrity partners have terminated their contracts, Chinese landlords have shuttered stores and their products have been removed from major e-commerce platforms.
Caught between calls for patriotism among Chinese consumers and campaigns for conscientious sourcing of cotton in the West, some other companies, including Inditex, the owner of the fast-fashion giant Zara, quietly removed statements on forced labor from their websites.
On Wednesday, H&M, the world’s second-largest fashion retailer by sales after Inditex, published a response to the controversy as part of its first quarter 2021 earnings report.
Not that it said much. There were no explicit references to cotton, Xinjiang or forced labor. However, the statement said that H&M wanted to be “a responsible buyer, in China and elsewhere” and was “actively working on next steps with regards to material sourcing.”
“We are dedicated to regaining the trust and confidence of our customers, colleagues, and business partners in China,” it said.
During the earnings conference call, the chief executive, Helena Helmersson, noted the company’s “long-term commitment to the country” and how Chinese suppliers, which were “at the forefront of innovation and technology,” would continue to “play an important role in further developing the entire industry.”
“We are working together with our colleagues in China to do everything we can to manage the current challenges and find a way forward,” she said.
Executives on the call did not comment on the impact of the controversy on sales, except to state that around 20 stores in China were currently closed.
H&M’s earnings report, which covered a period before the recent outcry in China, reflected diminished profit for a retailer still dealing with pandemic lockdowns. Net sales in the three months through February fell 21 percent compared with the same quarter a year ago, with more than 1,800 stores temporarily closed.
By: Ella Koeze.Data delayed at least 15 minutes.Source: FactSet
Stocks on Wall Street rose on Wednesday but fell short of a record, as investors waited for President Biden to lay out plans for a $2 trillion package of infrastructure spending.
The S&P 500 rose about 0.4 percent, while the Nasdaq composite climbed by 1.5 percent. Shares of big technology companies including Apple, Amazon, Alphabet and Microsoft were all higher.
The yield on 10-year Treasury notes was 1.73 percent, a day after having jumped as high as 1.77 percent.
Prospects of a strong economic recovery in the United States, supported by large amounts of fiscal spending and the vaccine rollout, have pushed bond yields higher. Economic growth and higher inflation have made bonds less appealing as investors adjust their expectations for how much longer the Federal Reserve will need to keep its easy-money policies.
Elsewhere in markets
European stock indexes were mostly lower. The Stoxx Europe 600 index fell 0.2 percent, while the FTSE 100 index in Britain dropped 0.9 percent.
H&M shares fell 3.3 percent in Stockholm after the clothing retailer reported a drop in sales in its quarterly earnings and said it was “dedicated to regaining the trust and confidence” of its Chinese customers and partners. Recently, H&M and other brands have been caught up in calls for a boycott in China after they expressed concerns about forced labor in the region of Xinjiang, a major source of cotton. H&M’s shares have dropped 10 percent in the past two weeks.
Deliveroo shares dropped 26 percent below their I.P.O. price on their first day of trading in London. The food delivery company’s public debut has been marred by concerns about low pay for its riders and lack of profits, and major investors sat out the offering.
In today’s On Tech newsletter, Shira Ovide talks to New York Times reporter Karen Weise about the vote on whether to form a union at an Amazon warehouse in Bessemer, Ala., and how the outcome may reverberate beyond this one workplace.