How to Address Your Shell-Shocked Troops, by Michael Corbat

Vikram Pandit’s chair may still have been spinning on Wednesday when the man chosen to replace him atop Citigroup (C), Michael Corbat, began a conference call with the bank’s managing directors. The abrupt CEO switch one day earlier had been followed by precious little information: short notes from the two men, a conference call with analysts, and a lot of conspicuous silence from the company’s board. Wednesday’s call was Corbat’s first effort to address the most important employees of what is perhaps the most beleaguered bank.

The seven-minute call, a recording of which Citigroup provided to Bloomberg Businessweek, offers a preview of how Corbat will lead—in style, at least. The former Harvard football star, who’s well liked by colleagues and even regulators, followed these tactics:

Be frank. The first thing Corbat did was acknowledge the elephant in the room: the shock of Pandit’s departure just one day after Citi had announced its third-quarter earnings, with not even a hint given that he was on the brink of leaving. Citi employees found out with the rest of the world when the news broke in the media, not via an internal communication. “I know that yesterday’s news came as a surprise probably to many of you,” Corbat began. “Successions are not easy, but I know we can handle this.”

Thread the needle. Pay lip service to both staying the course and the need for change. “I think it’s all-important for everyone to know that I’m going to maintain the company’s fundamental strategy,” Corbat said, while nodding to “today’s challenging environment” and the need for flexibility.

Encourage questions. Pandit, with two engineering degrees and a doctorate, was criticized as a cerebral introvert who was perhaps not cut out to be the face of a global bank, especially one with morale issues. Corbat, who has spent his entire 29-year career at Citi and its predecessor companies, quickly invited the troops to speak up.

Be good-natured when people are too freaked out to ask any. After some silence, an MD asked Corbat when he would choose a new chief of the bank’s Europe, Middle East, and Africa business. After some more silence, it became clear that no one else was going to raise a hand. “So,” Corbat said, “I’m sure there are questions, but I understand potentially people’s hesitancy in asking. So what I’ll say is that if you do have questions, feel free to send an e-mail. … I think that questions are fair. So please feel free to ask them.”

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Amazon's Robotic Future: A Work in Progress

If you were watching Bloomberg TV recently, you may have seen our correspondent, Cory Johnson, standing in the middle of Amazon’s (AMZN) newest distribution center in Arizona. It’s an impressive facility, brand-new and owned by one of the hardest-charging, most-innovative companies to come onto the retail scene since Sam Walton opened a five-and-dime.

So where are the robots?

After all, aren’t robots supposed to be the future of such places as distribution centers and warehouses? Didn’t Amazon buy a robot manufacturer, Kiva, in March? The online retailer announced in October that it was taking on 50,000 additional part-time workers for the holiday season. Shouldn’t some of those spots be taken up by mechanical arms and wheels?

Maybe not. For all the anxiety over robots coming to take jobs, there are still limitations to what they can do—or what they can do well. Bruce Welty is chief executive officer of Quiet Logistics, an order-fulfillment company that manages the online inventory and distribution for retailers like Gilt, Zara, and Bonobos. He uses robots made by Kiva, the company Amazon purchased, but his warehouse in Massachusetts is not bereft of humans. “Robots aren’t very good at picking up things,” he says. “They aren’t very good at looking at a bin of different things and distinguishing one item from another.”

Welty’s robots do one task and one task only: They move racks of merchandise to workers, who then remove the products from the racks and pack them up for shipping. Saving workers the time and effort to retrieve products offers considerable benefit. “In a typical warehouse, that’s about 60 to 70 percent of the labor,” Welty says.

In addition to what the current state of robotic arts does well, there are further reasons for the continued presence of human beings in warehouses. Labor flexibility is one of the larger ones. “Automation won’t help Amazon in periods of peak demand,” says Stephen Graves, a professor of management science at the Massachusetts Institute of Technology. “People are far more flexible.”

The capital expense to add robots means they need to make sense 12 months out of the year, not two. “The only way to handle spikes in demand is by adding temporary workers,” says Jim Tompkins, CEO of supply-chain consultancy Tompkins International. “If you bought a whole bunch of robots to handle the holiday shopping season, you’d have a whole bunch of robots looking at you, come January.”

So if Amazon just spent nearly a billion dollars buying Kiva, but the robots they produce can’t make a huge difference in how the company operates, what are Amazon’s intentions?

For starters, it’s still early. An acquisition like that of Kiva will take a while to digest, during which time new applications for the robots will surely be devised. “They’re really in a test mode,” says Welty. “They’re going to work on getting it right before any major rollout.”

The Kiva acquisition may have had as much to do with software as it does with hardware, adds Tompkins. “Mechanically, there’s nothing that special about Kiva,” he says. “But what they do have is software that makes sure the robots are in the right place at the right time. This was a software play.”

That’s not exactly how most people would view the deal. But it may be just the head-fake that Amazon CEO Jeff Bezos intended. “I bet Jeff Bezos loves that people are running around trying to put more robots in their distribution centers,” Tompkins says.

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Can Business Leaders Promote Inclusive Capitalism?

Capitalism can get a bum rap these days: If free markets are so great, why are there so few jobs, a shrinking middle class, and so many companies that still put profits ahead of the common good?  With all this rhetoric about the “one percent” and the “47 percent” and who pays taxes on what, it’s no wonder that some worry about public faith in the system itself. If that faith were to falter, the result could be policies that truly sabotage growth. That’s the premise of the Henry Jackson Initiative (HJI), a trans-Atlantic group of leaders who are pushing their peers to devote more energy to fixing the system’s flaws.

The group, which is co-chaired by McKinsey chief Dominic Barton and Lynn Forester de Rothschild, held its U.S. launch on Oct. 11 with a gathering of business leaders at Bloomberg’s New York headquarters to talk about priorities. Their message: Let’s focus on the need to increase skills training, support smaller companies, and improve governance so the benefits of capitalism flow to more people. De Rothschild said that unless they start to acknowledge their personal responsibility to share in the bounty,  the offspring of the “greatest generation” will be remembered by their kids as the “greedy generation.” But the motivation for business leaders to take action is not just moral; it includes the specter that politicians might come up with a fix that they don’t like.

At first glance, it would be easy to characterize HJI as an effort to preserve the status quo by stepping up the good deeds of corporations. The task force, after all, lists individuals who have benefited from the status quo, from former Hewlett-Packard (HPQ) chief Carly Fiorina, Accel Partners’ Joe Schoendorf, and Citigroup (C) Vice Chairman Samuel Di Piazza to a set of titled U.K. luminaries. But the initiative points to a growing realization among leaders that the private sector needs to take on more of these issues if it’s going to thrive.

Many of the attendees are already doing a lot, from USA Networks founder Kay Koplovitz, who connects venture-backed companies with large corporations, to former Chrysler chief Bob Nardelli, who has helped the Savannah College of Art & Design establish innovative partnerships with businesses such as Microsoft (MSFT) and Coke (KO).

Is it enough? No. Kathryn Wylde of the Partnership for New York City pointed out that too many of these corporate efforts aren’t taken to a national scale, where they can really move the needle. Many companies, though, are starting to take their hodgepodge of philanthropic initiatives and be more strategic in organizing around a central principle. Time Warner Cable (TWC) CEO Glenn Britt talked about the value of doing that with his company’s “Connect a Million Minds” initiative.

More important, as my colleague Josh Tyrangiel points out in his piece on the inequality incentive, capitalism can’t become truly inclusive until everyone can see a clear path from where they are to where they want to be. The growing income gap doesn’t just tear away at opportunity, it has eroded trust.  As former Treasury Secretary Larry Summers, another task force member, argued to the group, real inclusion can only come if the top tier takes on a higher burden in taxes to help fund investments that promote greater opportunities. In that regard, it’s interesting that on Thursday Goldman Sachs (GS) CEO Lloyd Blankfein told CNBC he would be willing to pay higher taxes if that would cut the U.S. debt.

While the private sector can lobby all it wants, what happens on the policy front is largely out of business leaders’ hands. What they can do is take concrete action to address some of the scariest problems, such as massive youth unemployment. Some of the most intriguing experiments to watch are John Peace’s youth employment fund, which is creating sustainable employment in the U.K., and such innovative high school models as P-Tech in New York. The latter, which stands for Pathways in Technology Early College High School, is a partnership that brings together IBM (IBM), City University of New York, and the New York Department of Education to train kids for careers in information technology. A few years ago, many would have balked at the idea of a corporation getting so involved at the high school level to create the kind of skilled workforce it needs. Today, with so few students equipped to get good jobs, such efforts are welcomed.

If the initiative, named after former Democratic Senator Henry “Scoop” Jackson, does little more than provide a platform for other companies to learn about these kinds of efforts, capitalism may soon get a better name.

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The Corporate Case for Affirmative Action

On Wednesday, Oct. 10, the U.S. Supreme Court will hear arguments on whether universities may favor racial minorities in admissions. The case presents a delicate constitutional question about the meaning of “equal protection” and poses a major test for John Roberts, the Republican chief justice who last June outraged many conservatives by joining four Democratic colleagues to uphold President Barack Obama’s health-care overhaul. Will Roberts again defy ideological expectations to endorse affirmative action in undergraduate admissions? Or, more likely, will he reiterate his past opposition to race-conscious policies—and in the process, make clear that his deciding vote on Obamacare was an anomaly in political terms?

If large corporations have their way, Roberts will lean left and find a way to justify racial preferences. Business, especially big business, began to embrace affirmative action in the 1980s. Corporations do not want the Supreme Court to condemn preferences in broad terms, potentially exposing employers to a new wave of reverse-discrimination suits filed by white applicants and employees.

Business also contends that, constitutional principles aside, affirmative action works. To succeed, corporations “must be able to hire highly trained employees of all races, religions, cultures and economic backgrounds,” asserts a “friend of the court” or amicus brief (PDF) filed on behalf of 57 of the best-known names in industries ranging from manufacturing to insurance, high-tech to retail. “It also is critical” to employers, the brief adds, that “all of their university-trained employees have the opportunity to share ideas, experiences, viewpoints and approaches with a broadly diverse student body.”

The corporations making this plea for racial pragmatism run the alphabetic gamut from Abbott Laboratories (ABT) to Xerox (XRX) and include Aetna (AET), Dow Chemical (DOW), General Electric (GE), Halliburton (HAL), Microsoft (MSFT), Northrop Grumman (NOC), PepsiCo (PEP), Pfizer (PFE), Procter & Gamble (PG), and Wal-Mart (WMT), among many others. “The only means of obtaining a properly qualified group of employees,” the businesses add, “is through diversity in institutions of higher education, which are allowed to recruit and instruct the best qualified minority candidates and create an environment in which all students can meaningfully expand their horizons.” Jenner & Block, a prominent corporate law firm, wrote the amicus brief.

The case, Fisher v. University of Texas, was originally filed on behalf of Abigail Fisher, a white woman rejected by UT. Fisher argued that the school violated her constitutional right to equal protection under the law by considering race as one factor in admissions, a policy designed to boost black and Hispanic enrollment. Fisher’s appeal constitutes an attack on a 5-4 ruling in 2003 in which the Supreme Court said colleges and professional schools could consider race as part of a “holistic” assessment of an applicant’s credentials. Justice Sandra Day O’Connor wrote the majority opinion in the 2003 case; she has since retired and been replaced by Samuel Alito, who, like Roberts, is an appointee of former President George W. Bush. Both Alito and Roberts are outspoken skeptics of racial preferences.

Under Texas law, the university admits most of its freshman class solely on the basis of class rank. As explained by Greg Stohr of Bloomberg News: “Because many Texas high schools are heavily Hispanic or heavily black, the system guarantees admission to thousands of minority applicants.” Roberts “has made clear he sees race neutrality as a constitutional imperative. In a 2007 ruling that put new limits on efforts to integrate public grade, middle, and high schools, he wrote that ‘the way to stop discrimination on the basis of race is to stop discriminating on the basis of race.’”

The University of Texas case elicited an extraordinary 73 amicus briefs backing the school’s attempt to defend its admissions rules, including one (PDF) filed by the Obama administration. Seventeen briefs, from conservative organizations and others, were filed on Fisher’s side. (You can find the entire roster here.)

The Jenner & Block brief notes that in its 2003 ruling, the Supreme Court relied in part on the argument—offered in a corporate amicus brief–that “the skills needed in today’s increasingly global marketplace can only be developed through exposure to widely diverse people, cultures, ideas, and viewpoints.” Nine years later, Jenner & Block adds, that perspective has proved truer than ever.

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