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It’s a big week for financial policy. The Federal Open Market Committee begins its two-day meeting today, and the Bureau of Economic Research releases the consumer price index on Wednesday. All eyes will be on inflation: The CPI report will quantify just how much we’ve seen over the last month, and the Fed will decide if it’s gone down enough to cut interest rates.
It’s highly unlikely that the Fed will choose to cut rates this month, writes Forbes senior contributor Simon Moore. Regardless of what the CPI report this week indicates, inflation has been fairly sticky and has not reduced to the 2% benchmark that the board wants to see. Big changes in either direction are not expected. Moore writes that estimates from the Cleveland Federal Reserve predict a 0.08% month-over-month change in the CPI, with a 0.3% change in core inflation.
Adding to persistent sticky inflation, May’s job growth is another reason rates are unlikely to be cut this week. There were 272,000 new workers added to payrolls last month—far more than consensus analyst predictions of 180,000. And while more workers is good from one viewpoint, it isn’t the best news for those hoping for rate cuts. If companies are adding jobs, there’s no overriding need to use an interest rate cut to stimulate the economy. But the unemployment rate is slowly ticking up, hitting 4% in May—an increase from 3.9% in April and from 3.7% a year ago.
Of course, Moore writes, the rate cut decision isn’t the most important thing coming out of this week’s Fed committee meeting. The committee will provide a forecast for economic policy for the rest of the year, and Fed Chair Jerome Powell will host a press conference to talk more about what is to come. And there’s a lot to unpack. The economy seems to be speeding in two different directions with consumers incorrectly believing inflation and economic conditions are at their worst in years, and the S&P 500 and Nasdaq hitting record highs last week.
It’s always a challenge for startups to navigate the roads to becoming viable businesses and scaling up. Ann Anthony, the first CFO of renewable fuel company Oberon Fuels, is in the midst of working through funding, building and executing as the business grows. I talked to Anthony about her journey, and an excerpt from my interview is later in this newsletter.
RETIREMENT + BENEFITS
As a corporation, Google has been taking steps to make more sustainable choices, like pledging to power its offices and data centers with net-zero electricity by 2030. But more than 1,000 employees want the company to push deeper into sustainability in another area: their 401(k) plan. Forbes senior writer Richard Nieva writes that the group of employees sent Google a letter asking for the company to divest its plan from investments in fossil fuel companies.
In conjunction with the letter from employees, climate advocacy group As You Sow presented Google’s parent company Alphabet with a shareholder proposal asking that the company be required to release a report outlining how it is protecting its plan beneficiaries from the increased future portfolio risk of fossil fuel investment. Fossil fuel companies not only contribute to higher levels of pollution, As You Sow argues, but these investments have recently underperformed. A report from the shareholder advocacy group published in April estimates Google employees have collectively lost out on more than $1.15 billion over the last decade due to lower returns from fossil fuel companies.
According to a recording from Alphabet’s annual meeting on Friday, unofficial tallies indicate As You Sow’s proposal failed. But the employees intend to keep the movement going. Sam Asher, the employee spearheading the campaign, told Nieva he hopes the employees can push Google to make a change—and start a new trend. “It would send a big message, not just to [401(k) provider] Vanguard, but to other companies: ‘Oh, if Google’s asking for this, we should probably move on it as well,’” he said.
LEGAL ISSUES
In a move that may have repercussions throughout the venture capital and grants ecosystem, a federal appeals court ruled last week that a fund giving grants to solely Black women business owners may be seen as discriminatory. Last summer, the American Alliance for Equal Rights—the conservative organization behind the successful Supreme Court case that ended race-based college admissions policies—sued the Fearless Fund, claiming that their grant program for Black women discriminated against women of other racial backgrounds. The conservative group argued that the fund’s grant program violates an 1866 law that was initially intended to protect formerly enslaved people from economic exclusion, writes Forbes senior contributor Morgan Simon. And the U.S. 11th Circuit Court of Appeals agreed with them, blocking the Fearless Fund from awarding further grants while the case continues to make its way through court.
Simon points out Fearless Fund’s reason for being is to eliminate actual inequalities in funding based on gender and race. Citing data from digitalundivided’s Project Diane, between 2009 and 2017, Black women received 0.0006% of VC funding—or $6,000 for every $1 billion someone of other genders and ethnicities received. While this case is far from over—the court ruling just puts grant awards on hold for now—it may indicate the direction future legal fights will turn over using DEI principles to help determine grant allocations.
HUMAN CAPITAL
Walmart is bringing a new line of benefits to its hourly in-store workers as a way to boost employee retention. The retailer, which is the largest private employer in the U.S., will offer annual bonuses for hourly employees, ranging from $350 to $1,000 a year, depending on store performance as well as their time with the company, writes Forbes senior contributor Walter Loeb. The company is also instituting more training programs, launching an Associate to Technician pipeline program that can help front-line employees get to higher-paying jobs that run the infrastructure of the stores, and offering more skills certificates to help employees climb the career ladder. This is the latest employee-focused move from Walmart. Earlier this year, it began a program awarding store managers annual stock grants worth up to $20,000.
American Airlines pilots and flight attendants unions are making moves. While ongoing negotiations with the 27,000-member Association of Professional Flight Attendants union seemed to be getting closer to a deal, American Airlines CEO Robert Isom offered an immediate 17% raise in a video message, writes Forbes senior contributor Ted Reed. The union’s board said the airline was trying to directly negotiate with employees instead of the union, and unanimously rejected the offer. Talks are continuing this week.
American Airlines pilots, who are currently represented by the Allied Pilots Association, say they have enough support to vote on joining the much larger Air Line Pilots Association. The ALPA, which Reed writes is the world’s largest pilots’ union, represents more than 77,000 pilots at 41 U.S. and Canadian airlines, and plays a key role in shaping aviation legislation.
OFF THE LEDGER
Oberon Fuels CFO Ann Anthony On Scale-Up Challenges
Many new tech companies start with an idea and a couple of experts who can put processes in place. Oberon Fuels, a startup developing renewable fuels to decarbonize the propane industry, hired its first CFO in December as it works toward scaling up. I spoke with CFO Ann Anthony, who brings years of experience helping energy companies scale, about her new role and its challenges. This conversation has been edited for length, clarity and continuity.
What are some of the things that are challenging about being in the renewable energy space and being at a startup that is ready to scale?
Anthony: The more immediate challenge right now—and this is not unique to me, it’s really for any kind of a role today that has anything to do with energy transition—there’s a lot of uncertainty about what’s going to happen. The [Inflation Reduction Act] is a tremendous boon for this industry, but there’s still a lot of guidance that we’re waiting to get. We have an election coming up, and regardless of who ends up sitting in that chair, there’s still a lot of uncertainty because Treasury has to promulgate guidance. Depending on when that guidance comes out, it could go back to Congressional review. So a lot of people are sitting on the sidelines, not only from a funding perspective, but in terms of trying to make any kind of long-term commitments. It does feel like if we don’t get that guidance, and you’re not able to deal with someone—whether it’s offtake, investment, whatever, in the next short period of time, you’re probably going to be sitting on the sidelines until we get past this election and really have some sense of how things are going to shake down from a regulatory perspective.
The second part is—again, not unique to me, and plenty of people have said this—it’s hard to build a business. You’re constantly having to look around the corner, think about what else is out there, right? Not that it’s easy when you’re in an established business, but it’s sometimes a little bit easier. You’ve got processes, you’ve got people, you’ve got systems. It really is a lot of trying to fly the plane while you’re building it. Being able to step back and prioritize and say, we can’t do all of it. What are the things that are absolutely critical to the mission of the company?
How is fundraising in the current climate, with VCs being more selective and the uncertainty around renewable energy?
Let’s step back, forget about the current climate and all the uncertainty that we talked about earlier. I think there have been some relatively high-profile issues with some companies in our space where investors have put significant dollars in, and unfortunately, they’re writing down. They’re not going to get a return on that investment. There’s clearly an additional level of scrutiny that maybe should have been there all along. But now people, they don’t want to take technology risk. Everything really has to be tied up in a bow. And if there’s any question, they’re going to dig in and spend more time there. It takes longer than what you expect. If you are a project that doesn’t fit nice and neat within the mandate, either people are not going to spend the time, or if they are spending the time, there’s no stone unturned. While investors are savvy around energy transition and the various technologies, they don’t do the deep dive every day. That’s not their job. There’s still a lot of education that needs to be done in the space, if you’re not solar or wind.
What does your next year as CFO of Oberon Fuels look like?
We’re watching and waiting to see these regulatory outcomes. The pace of guidance, where the election goes, any type of cues in terms of overall regulatory policy will be key.
Aside from that, working with the team, very focused on how do we build this company out. One of the things that I am a believer in—and every organization has some version of this, but it’s key in startup land—is milestone-based hiring. We’ve all seen companies grow too quickly. So if we need talent, if something absolutely has to get done, you either go outsource it—and you may be paying as much money as you would pay if you brought something in house, but the flip side is you don’t want to bring people [permanently yet].
Identify through the milestones: If we’re going to be building a facility, when is the right time to bring on the plant manager, the senior operators? What do those milestones in the construction and commissioning process look like, where it’s time to pull the trigger? Should we be out talking to community colleges now in the location where we’re going to build, to try to build that partnership and start to attract and retain talent, particularly for some of those roles are going to be entry level. That’s also a good thing to be doing as a community partner. It’s a win-win for the organization.
I mentioned technology before. That’s a big thing we're going to be focused on in the year ahead, because we’ve gotten to a point where the systems that we have, we’ve outgrown them. What is that right tool, and when’s the right time to actually pull the trigger and implement?
FACTS + COMMENTS
In a recent survey, Bankrate found that more than one in three Americans think tipping culture has gotten out of control.
59%: Proportion of Americans who viewed at least one aspect of tipping negatively—including thinking businesses should pay employees better and being annoyed by pre-entered tip screens.
14%: People who would be willing to pay higher prices to do away with tipping
‘Tipping has become a hidden tax’: Bankrate Senior Industry Analyst Ted Rossman said
STRATEGIES + ADVICE
All business leaders get overwhelmed sometimes. Here are some things to think about when you’re feeling like you’re on the edge.
Data has shown that many business leaders are out of step with their teams—and are often overly restrictive—when it comes to AI use. Here are some tips that can help leaders and teams alike get more out of AI platforms.
VIDEO
QUIZ
Krispy Kreme’s shares have been up more than 7% since markets closed last Friday. What has driven the rally?
A. A partnership to sell Krispy Kreme doughnuts at McDonald’s restaurants
B. A new recipe for glazed doughnuts
C. A series of limited-time celebrity-inspired treats and merchandise, starting with Dolly Parton dozens
D. A new refrigerated dough product for consumers to bake doughnuts at home
See if you got the answer right here.
