Good morning. David Meyer here in Berlin, filling in for Alan.
As vaccination drives roll out at varying speeds, there’s a big question mark over the issue of what may become—hopefully temporarily—a two-tiered populace.
In Israel, which is running the world’s speediest COVID-19 inoculation campaign (though that hasn’t warded off the need for a tight new lockdown), the health ministry has unveiled a “green passport” that will allow vaccinated people to do things like attend mass gatherings and sporting events. It said the passports will also probably be used by hotels, malls and restaurants.
On the other side of the world, in Los Angeles County, vaccine recipients are getting a digital record, stored on their smartphones, that could end up being used for entrance to concerts or flights.
Some airlines are quite keen on the idea, as a way to return to quasi-normality. Qantas said a month ago that it would require passengers to be vaccinated first if they are to get on-board this year—a step beyond the industry-wide push for a standardized way to show that passengers have at least been tested before departure.
The debate over preferential treatment for vaccinated people is one that’s loaded with many, many factors ranging from the behavioral to the ethical. Would the promise of benefits push skeptics to become vaccinated, or would their withholding be seen as evidence of the vaccination drive being some kind of authoritarian conspiracy? What about people who can’t get vaccinated, for reasons ranging from their personal medical circumstances, to the failure of governments to inoculate people quickly enough?
For officials, these quandaries veer into the territory of human rights—always a balancing act, so they will have to tread carefully due to the constitutional implications.
But what about businesses? Many will undoubtedly have to comb through legal implications too, but, especially in the absence of official rules on the subject, their big issue will be deciding whether or not to continue treating all their customers equally.
For example, once a sizeable proportion of the local populace has been inoculated against COVID-19, will retail chains face pressure to let vaccinated people into their outlets without a mask? Will vaccine resisters then complain that they’re being discriminated against? None of the currently-available vaccines are authorized for use in kids—does that mean cinema operators might have to discriminate against young moviegoers?
In a sense, it’s great to be able to ask these questions—let’s never forget how incredible it is that vaccines are already being rolled out, barely a year into the pandemic. But I certainly don’t know what the answers are, and I’m fascinated to see how they materialize.
More news below.
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In support of political contributions
Most Americans don’t want CEOs involved in politics. A poll conducted last week by Golin and Ipsos found only 41% favored CEOs weighing in on disputed elections, and only 43% wanted them speaking out on impeachment. On the other hand, 74% say CEOs should call for unity and a peaceful transfer of power, and 57% believe it was appropriate for CEOs to speak out after the January 6 insurgency at the Capitol. That pretty well tracks with the way most CEOs and business groups have behaved since election day. They kept their powder dry until all legitimate avenues for disputing the election were exhausted, then came out strongly endorsing the election results and attacking efforts to undermine them. Relatively few have backed impeachment. (You can see the poll results here.)
But how about political contributions? That’s the question raised last week, as a host of companies—Marriott, AT&T, American Express, Best Buy, Cisco, Comcast, Dow and Amazon among them—suspended campaign contributions to members of Congress who challenged the election results. Another large group—Microsoft, Boeing, Blackrock, Coca-Cola, JP Morgan, Ford, GM, UPS, Goldman Sachs and Citigroup—temporarily halted all political contributions to members of both parties. (Quartz has a more comprehensive list of what companies did here.)
Some business leaders are even contemplating permanently shutting their political action committees and exiting the money game altogether. But absent a broader overhaul of campaign finance—which is unlikely anytime soon—I think that’s a mistake. Most big companies remain balanced players in the money game, dividing their dollars roughly equally between members of each party. Walmart, for instance, has kept its contributions at exactly 50-50. Their strategies have less to do with trying to influence outcomes, and more to do with assuring they have access to whoever wins.
The more important question for 2021 is how big business uses that access. There are a host of issues where business has the potential to help broker positive outcomes for the U.S. economy and society: economic stimulus, infrastructure, worker training, climate change. On each of these, business leaders occupy the center, and can help bring the parties together to solve urgent problems.
But on tax and regulatory issues, in particular, corporations will be playing defense. And they’ll be tempted to use what influence they can muster to seek tax breaks and regulatory exemptions that aren’t in the broader public interest. That’s where the commitment to stakeholder capitalism will be tested. The nation desperately needs business involved in government. But business, now more than ever, needs to use its influence to focus on solving long-term challenges.
Why Big Tech regulation is good for private equity, according to one CEO
Increased scrutiny of Big Tech’s power may have some shareholders sweating it. But not so for private investors.
With a new Biden administration and recent threats to crack down on some of the biggest tech behemoths (from Facebook to Amazon), there seems to be support for more regulation. And according to alternative investment manager Hamilton Lane’s CEO, Mario Giannini, that might be good news for the private equity industry.
“Reducing the dominance of large technology companies…is probably not great for some portions of the industry, but good for private equity,” Giannini tells Fortune. In Congress, which now maintains a slim Democratic majority, “I think everyone is interested in saying, ‘Amazon is too powerful, Google [is too powerful],’ pick your name,” he says, arguing there’s bipartisan support for more regulation.
As to what lawmakers do about it, “I’m not sure,” says Giannini, but “to the extent that they do anything to diminish the power of those companies, that’s good for private equity because it creates opportunity for smaller companies.”
To be sure, government scrutiny of large tech companies is a tale as old as time, but lately regulators appear to be turning up the heat on the biggest names: Facebook was recently hit with an antitrust lawsuit alleging it has squashed competition, while players like Amazon and Apple, big winners of the pandemic era, have found themselves the subject of government ire over antitrust concerns. Google, meanwhile, is in hot water once more for its search and search advertising practices. And companies like Facebook and Amazon could be facing their own headwinds in Europe, too.
According to Giannini, whose firm has $73 billion in assets under management and advises on $474 billion in additional assets, the dominance of those FAANG names has been top of mind for private equity firms when scouting for deals.
“Right now, when any private equity [firm] does a deal, …if it’s not their first question, it’s one of their top three questions: ‘Is Amazon going to enter this space, yes or no?’ And that has a huge impact—’Is Google in this space?’” he says.
It isn’t just an issue in tech. Companies like Amazon are moving into health care, for instance, by launching online pharmacies. “If all of the sudden the government [would] say, ‘I’m not going to allow Amazon to encroach in certain areas,’ then I think for private equity, oddly enough, that becomes a net positive because you do then have an opportunity with other companies,” says Giannini.
Though some on the Street argue the threat of sweeping legislative changes to hamper Big Tech’s reach is still minor, the new (albeit slim) Democratic majority in Congress poses “a clear negative for Big Tech as…we would expect much more scrutiny and sharper teeth around FAANG names,” Wedbush analyst Dan Ives wrote in a recent note.
For private investors, says Giannini, that just “creates different opportunity sets.”
More must-read finance coverage from Fortune:
- What job security? Americans are feeling worn down and fearful of layoffs
- Coinbase is pegged for a valuation of up to $75 billion. Is that realistic?
- Still waiting on your $300 unemployment benefit to start? What you need to know
- The U.S. now has a debt level that rivals Italy’s
- In corporate America we trust? Despite perennial crisis, business reputations are rising