Content provided by Paul Vaaler of the Carlson School

It’s great to be back in Minnesota after a visit to the UK and Oxford University. It was a great time to visit: sunny days gave the ancient spires of Oxford a special gleam; unexpected political storms gave the Conservative Party a special shock; international currency traders seemed quite a bit more interested in those political storms. Last Thursday, a General Election in the UK saw the Conservatives lose their majority in the House of Commons; they are now trying to conclude an alliance with a small Northern Ireland-based party to get their bare majority back. The UK pound dropped 1.5% against the dollar. Here is where you can get details on that post-election currency gyration: But here’s the interesting thing: The London Stock Exchange FTSE 100 Index (like the New York Stock Exchange’s Dow-Jones Industrial Index) increased by about 1% on the same political news. Here is where you can learn more about the post-election FTSE gyration: The reason: The FTSE 100 is largely comprised of larger multinational firms depending on foreign sales for profitability. A weaker UK pound makes it easier for them to sell. So maybe (larger UK) firms are okay –even perversely happy– with domestic political storms. There’s a lesson here for US companies, particularly many larger multinational US companies based in Minnesota. Recent, sometimes sudden appreciation of the US dollar against major foreign currencies can signify economic strength at home, but also a tougher competitive environment to sell in abroad.

Speaking of economic strength, there are two (and maybe only two) firms in the US that essentially represent the US economy and where it’s going: Maplewood, Minnesota-based 3M and Fairfield, Connecticut’s General Electric Corporation. GE’s CEO of 16 years, Jeff Immelt, announced this week that he is stepping down in favor of another long-time GE veteran, John Flannery. Here is where you can learn more about this transition: . Immelt has been dogged for months by slumping GE stock price, and in the last two years, by an activist investor named Nelson Peltz, whose Trian Capital has nagged Immelt about how to reverse that poor stock performance. Last week saw Immelt throw in the towel after 16 years guiding GE through 9/11, the Great Recession, three presidential administrations, and various international dynamics. Immelt has spent the last few years unwinding its positions at GE Capital, the financial arm of the firm that generated substantial profits in the 1990s and 2000s but then came under burdensome regulations after the Great Recession and the Dodd-Frank reforms that followed. Now the challenge for his successor is to increase growth at GE’s various manufacturing businesses, starting with GE Medical, the business Flannery has led. Flannery will get a short honeymoon from hedgefund managers and others interested in renewed growth in profits. One way Flannery is likely to get that growth quickly would be from layoffs and divestment at marginally-performing businesses. Immelt’s predecessor, Jack Welch, used to have a rule that if a GE business wasn’t #1 or #2 in their industry, that the business would be liable to liquidation and employees laid off. Maybe Flannery will revert back to Welch’s rule to revitalize GE.

CEOs like Immelt are also in the news this week because their pay seems to be excessive, even when leaving their firms. Most recently, outgoing Yahoo CEO Marissa Mayer was reported to have left with more than $260 million in total salary and stock incentive compensation. Here is where you can learn more about that report: Most analysts rate Mayer’s tenure at Yahoo as a failure, so the question is why poor-performing CEOs get such lucrative pay-outs when leaving. The answer seems to be that companies need to offer these lucrative pay-outs to CEOs that fail just to keep themselves attractive for successor candidates who might succeed. That all seems pretty unpersuasive here because Mayer’s exit also coincided with Yahoo’s sale and absorption by AT&T. Think more closely to home of the lucrative $61 million exit package that Target CEO Greg Steinhafel received in May 2014. Think of that payout as a function of Steinhafel’s thoughtful negotiation going into that job in 2008, and Target’s interest in sending a signal that it would be generous to the next CEO, so that it could attract Brian Cornell. Let’s see how that pans out for Target.

This may seem like funny business to you. But if you are looking for real funny business then head to Las Vegas early next month. That’s when you’ll have a chance to see 91-year old funny man Mel Brooks give two shows at the Wynn Las Vegas. Here’s where you can learn more about the shows: In a comedy career that goes back to the mid-1950s as a writer for Sid Ceasar and Your Show of Shows, Brooks somehow never played Vegas. Now he will, but he only has time for a couple of shows in Sin City. That’s because Brooks needs to jet off to London later in July to oversee final rehearsals of a stage version of Young Frankenstein at the West End. Since 2000, the nonagenarian has had multiple musical hits like The Producers and Blazing Saddles, both based on successful movies he co-wrote in the 1960s and 1970s. Funny business is big business for Mel Brooks. His birthday is later in June. Happy birthday, Mel.

In case you missed today’s edition….listen to the podcast below!


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