What the Harvard drama says about DEI
The resignation yesterday of Claudine Gay, Harvard’s first black president and the second woman to lead the university, was linked to a growing crisis over accusations of plagiarism. But it had also been criticized for months for what critics said was an insufficient response to the Oct. 7 Hamas attacks on Israel.
Her departure, weeks after Liz Magill resigned as president of the University of Pennsylvania, sheds light on the increasingly difficult landscape of policies known as DEI (diversity, equity and inclusion) and raises questions about the power of donors over the schools.
Gay’s position became increasingly tense. His credibility was weakened by his testimony before Congress last month about universities’ responses to anti-Semitism on campuses. His troubles worsened after conservative activists published a growing litany of plagiarism accusations.
Alumni were also dismayed to learn in recent days that applications for early admission to Harvard had fallen 17 percent this year to a four-year low.
Gay has become a lightning rod in the DEI debate He took office six months ago, just as the Supreme Court rejected the use of race-sensitive admissions at Harvard and other universities. Political clashes dominated her tenure, the shortest of any Harvard president, and some conservatives argued that she was unqualified for the job, an accusation her supporters rejected as racist.
Christopher Rufo, a conservative educational activist who helped publicize the plagiarism accusations, celebrated his resignation about X as “the beginning of the end of DEI in US institutions.”
The companies have been reducing your DEI initiatives During the past year as conservative politicians have targeted such programs. Some on Wall Street have suggested that DEI programs were flawed because they did not include a reaction against anti-Semitism.
Others criticized the treatment of Gay. “This is an attack on every black woman in this country who has put a crack in the glass ceiling,” the Rev. Al Sharpton told CNN, adding that he would protest the New York offices of Bill Ackman, the billionaire financier who had repeatedly criticized Homosexual.
Harvard’s board of trustees is also under scrutiny. The Harvard Corporation, run by billionaire and former Obama administration official Penny Pritzker, initially supported Gay after the congressional hearing. In its statement supporting Gay last month, the corporation acknowledged that it had been aware of plagiarism allegations beginning in October.
Although many Harvard professors expressed dismay at Gay’s decision, some called for a reorganization of the board of directors. “We need several new independent members of the Harvard Corporation who are untainted by recent events and failures,” Frank Laukien, a visiting chemistry scholar, told The Times, adding that Pritzker should resign immediately.
And the debate about who should lead universities has been reopened. Alan Garber, Harvard’s chancellor, will be the school’s interim president. But the process to elect full-time leaders of Harvard and Penn is likely to be heated, especially as increasingly outspoken alumni weigh in.
Ackman mocked Sally Kornbluth, the MIT president who also testified at the House anti-Semitism hearing in December and remains in office. “et tu sally?” published in X.
THIS IS WHAT’S HAPPENING
Wall Street expects a big release from the Fed. At 2 pm ET, the central bank will release minutes from last month’s rate-setting meeting, when it surprised markets by suggesting three cuts were on the cards this year. The Fed’s message sparked a big rally at the end of the year, but stocks are off to a lackluster start in 2024 as investors wonder whether the bank will start cutting in March.
Donald Trump sues to get his name back on Maine’s Republican primary ballot. The former president accused Shenna Bellows, the state’s secretary of state, of being “biased” after Maine became the second state to exclude him from the vote. Challenges to Trump’s candidacy have been filed in at least 33 states.
Maersk extends a pause in its Red Sea voyages after the missile attacks. The Danish shipping giant said it would continue to avoid the area and the Suez Canal after Yemen-based Houthi militants tried to board one of its ships over the weekend, sparking a shootout with US forces that killed 10 of the attackers. Concerns are growing that the war between Israel and Hamas could expand into a broader regional conflict after a Hamas leader was killed in Lebanon.
Disney gains a noteworthy ally
As the entertainment giant faces renewed pressure from billionaire Nelson Peltz (and the two disgruntled former executives who joined him in his proxy fight), it has secured the backing of another notable activist investor: ValueAct Capital.
ValueAct will support Disney board candidates, the entertainment giant said in a statement Wednesday. Disney added that it would enter into an agreement to consult with the $16 billion hedge fund, including through meetings with its board of directors.
“ValueAct Capital has a history of collaboration and cooperation with the companies in which it invests,” said Bob Iger, CEO of Disney. “We appreciate your contributions as long-term shareholders.”
It’s a kind of symbolic victory. as ValueAct’s stake in Disney is believed to be much smaller than the 33 million shares Peltz controls. But ValueAct is highly regarded on Wall Street as a constructive collaborator with corporate boards.
And it’s still unclear exactly what Peltz and his allies are: Ike Perlmutter, the irascible former president of Marvel Entertainment; and Jay Rasulo, former Disney CFO, are asking.
Tesla’s problem in China
Investors are ignoring the news that Elon Musk’s automaker has lost its crown as the world’s largest seller of electric vehicles, ceding that position to BYD, a Chinese rival backed by Warren Buffett. But industry observers say the changing of the guard is a potentially key moment.
Tesla shares fell a bit in premarket trading on Wednesday after their latest sales update yesterday. The company sold a record 1.8 million vehicles last year, backed by discounts. That included selling nearly 485,000 cars last quarter, about 41,000 fewer than BYD in the same period.
BYD is the dominant electric vehicle manufacturer in the largest automobile market in the world. The company initially focused on making batteries before moving into making its own cars. It sells vehicles cheaper than Tesla, but its profit margins have held up, in part because it owns its battery supply chain and sources less expensive raw materials.
BYD is now looking abroad, putting more pressure on Tesla. The Chinese market accounts for about 90 percent of BYD’s sales. But BYD’s international business – it focuses on Europe, Japan and Brazil, and has largely avoided the United States amid trade tensions between Beijing and Washington – took off in the second half of last year.
Whether BYD will be able to translate its domestic success “to a global stage is one of the big questions of 2024,” Matthias Schmidt, industry analyst and director of Schmidt Automotive Research, told DealBook. BYD announced plans last month to build an electric vehicle factory in Hungary, even as the European Union, the world’s second-largest electric vehicle market, investigates Chinese companies for illegal subsidies.
The market is changing profoundly. Federal tax credits and other incentives are running out in Europe and the United States, and governments are considering more protectionist measures. The growth comes from more cost-conscious consumers.
Those changes may show up in Tesla’s future numbers. “Its growth locomotive appears to be derailing despite deep discounts, increasingly characterizing it as a traditional automaker chasing volume over profits,” Schmidt said.
Cryptocurrencies Soar Despite Legal Loss
It looks like the big crypto rally of 2023 has a lot of firepower left. Bitcoin surpassed $45,000 this week, its highest level since April 2022, and cryptocurrency bulls raised the price of bets that regulators will approve the first spot Bitcoin exchange-traded fund (ETF) as soon as this month.
The increase came amid a broader regulatory crackdown. The SEC scored a big victory against cryptocurrency company Terraform Labs last week, which could have major implications for other digital asset cases. A federal judge found that the company, which caused a market crash in 2022, prompting its trash-talking co-founder Do Kwon to flee for months, sold crypto tokens that were unregistered securities.
This has become an existential problem for the industry. SEC Chairman Gary Gensler maintains that most crypto tokens qualify as securities. The industry has resisted that approach in courts and on Capitol Hill, spending millions fighting cases and pushing for an alternative regulatory structure.
The latest ruling bolsters the agency’s position just months after it lost a separate court fight against Ripple, which complied with SEC rules in the way it sold its XRP token.
Old laws apply to a new industry. In his ruling, Judge Jed Rakoff of the Southern District of New York rejected Terraform’s claim that a 1946 Supreme Court case establishing a test for securities was irrelevant because it came from a “bygone era.” In that case, the court said that “a contract, transaction or scheme by which a person invests his money in a common enterprise and is caused to expect profits” from the promoter’s efforts falls under securities law.
Judge Rakoff concluded that the test applied to crypto tokens, adding that Terraform and Kwon “made specific and repeated statements” that would lead a reasonable investor to expect a profit based on their efforts.
Kwon is in prison in Montenegro on charges of document falsification and faces accusations in several countries. He fled his native South Korea after the epic Terraform crash and could be extradited to the United States or South Korea to face prosecution.
Fisher Investments, the money manager founded by Ken Fisher, said it was not in sales talks, denying a report that it was negotiating with Advent International. (Reuters)
Fidelity has written down the value of its stake in X, the social network owned by Elon Musk, by 72 percent. (Bloomberg)
The best of the rest
We would like to receive your comments! Email your ideas and suggestions to [email protected].