Also: A new obesity drug, ESPN's 'soft-landing,' Arm earnings. 
Good morning.
Our guest this week on the Leadership Next podcast was an ex-CEO whose career I consider to be a profile in courage. So allow me to take a little more space than usual to share some of what he had to say. He is Kenneth Frazier, former CEO of Merck, who held that job for 10 years before retiring in 2021 and joining General Catalyst. Here’s the story he told about his first year on the job:
“I took over Merck January 1, 2011. At that time, Wall Street was encouraging CEOs in the biopharmaceutical industry not to invest in R&D. There was a company called Valeant, you’ll remember, whose stock was going through the roof, and their philosophy was we don’t invest in science, we invest in management.
“My company had five-year EPS (earnings per share) guidance. Twenty-five days into the job, I decided that was the wrong thing for Merck, in the long term. So I called my board and I said: ‘You don’t really know me that well. But I just want to let you know, I intend to withdraw the last three and a half years of EPS guidance.’…The board went into executive session, and I called my wife and said ‘Honey, don’t buy the expensive Formica, okay? It’s not clear how long this is going to last.’ But they let me stay, and the stock plummeted…And every time a share of Merck stock got sold, somebody bought it, and the people who bought it were patient, long-term shareholders for a company that would invest in R&D.”
Before joining Merck, Frazier had been a corporate lawyer. A turning point in his career came when he took on the case of Bo Cochran, a Black man who was convicted of murder by an overwhelmingly white jury and served 19 years on death row in Alabama, until Frazier agreed to take on his appeal.
“He was totally innocent. I didn’t want to take the case, but it was either I took it or he was going to be executed… After about five or six years of going back and finding evidence, we were able to prove him not only not guilty, but actually factually innocent. It was the most important thing I’ve ever done in my life as an individual.”
In 2017, following President Donald Trump’s ambivalent response to the “Unite the Right” rally in Charlottesville, Frazier led the revolt against the president’s business advisory council that ultimately led to its dismantling.
“I called my board, and I said I intended to step down from the president’s council. I was actually advised by my PR people to do it quietly. I said ‘No.’…I said I’m going to withdraw, and it’s going to be a noisy withdrawal, and I’m going to put out a statement, and I’m going to say why I’m withdrawing. And I said to my board: ‘I do recognize that I have a responsibility to the company. And so the question I’m asking you is, in my statement, do you want me to say I’m withdrawing as a matter of personal conscience? Or do you want me to say I’m withdrawing because of our company’s values?’ And I’m happy to say that unanimously, they said we want you to speak to the company’s values. No debate whatsoever.”
Frazier said he never intended to become a political lightning rod.
“I don’t believe that CEOs or businesses ought to be in the middle of political disputes. And I try to be very careful about whether I get involved in political disputes. But I also believe in the long run, we need to have an environment in our country that is conducive to commerce and conducive to people. And that comes down to a set of principles we were all taught early in school in this country. There are certain things like the rule of law, the right to vote, equal treatment, equal opportunity—that fundamental list of American values. And if…elected officials are abandoning or ignoring their responsibility to uphold those principles, it falls to the American people to ensure those principles are upheld. And I happen to think CEOs are among the most influential American people. So if people have a responsibility to stand up for principles, then I think CEOs ought to stand up for those principles.”
You can listen to the full interview on Apple or Spotify. More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
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Another obesity drug
The FDA has approved Eli Lilly's obesity drug Zepbound, which has caused patients to lose up to 18% of their body weight. Zepbound will compete with Novo Nordisk's massively popular obesity drug Wegovy, which is often in short supply. Competition between the two could lower prices of the injectables that are transforming obesity care. New York Times
ESPN's 'soft landing'
On Disney's fourth-quarter earnings call, CEO Bob Iger laid out four "building blocks" of the business: streaming, cruises and theme parks, studios, and ESPN. Transitioning that last pillar—Disney's sports network—from cable to streaming has vexed Iger, since the unit makes up a third of Disney's operating income. Yesterday Iger said ESPN's direct-to-consumer shift needs a "soft landing;" it will still be bundled in pay-TV packages as it becomes available à la carte. Fortune
Arm slumps
Arm reported better-than-expected revenue of $806 million in its first earnings report since its September IPO, but forecast revenue for the current quarter that fell short of analyst expectations. As a result, shares of the chip technology company slumped in after-hours trading, touching below $51, their IPO price. Financial Times
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Holiday Travel Clear for Takeoff Travel spend is up, and 48% of Americans intend to travel between Thanksgiving and mid-January this year according to Deloitte’s 2023 Holiday Travel Survey. What impact will this holiday season have on the travel industry? Read more here.
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