TheChek News Flow

Claudine Gay faced calls to step down as governing board stood by her

Harvard University President Claudine Gay has resigned after facing mounting criticism over how she responded to antisemitism on campus and, most recently, allegations that she plagiarized the work of other researchers on several occasions.

Gay, a professor of government and of African and African-American studies, became president in July after serving as dean of Harvard’s Faculty of Arts and Sciences for around five years. She had been under pressure for weeks regarding her response to Hamas’s Oct. 7 attacks on Israel. Her remarks at a House committee hearing on the matter in early December drew widespread criticism after she gave an equivocal response to a question about whether calls for the genocide of Jewish people violated the campus code of conduct.

She was also accused of plagiarizing other academics in several published papers and her Ph.D. dissertation. The Harvard Corporation, the university’s top governing board, said in December that reviews of her work uncovered some instances of “inadequate citation,” but that the omissions didn’t meet the bar of outright research misconduct.

Gay has requested four corrections on two academic papers and is updating her dissertation in three spots, according to the school, whose board has released statements standing by Gay.

Some said Harvard had been holding Gay to a standard different from the one that its own students are supposed to meet and called into question Gay’s contributions to her field and her integrity as a researcher.

Gay’s resignation comes after Liz Magill said she would step down from the top spot at the University of Pennsylvania, also in the midst of concerns she wasn’t doing enough to combat antisemitic language and actions on campus.

Gay, Magill and Sally Kornbluth, president of the Massachusetts Institute of Technology, testified before the House Committee on Education and the Workforce on Dec. 5. They were questioned for hours over what might count as harassment at their schools and how they might punish such behavior, as well as what actions they have taken to protect Jewish students from hate speech or threats of violence.

In response to a question from Rep. Elise Stefanik (R., N.Y.) on whether calls for the genocide of Jewish people would be considered harassment, all three said it would depend on the context. The exchange made its way into a “Saturday Night Live” episode.

The billionaire investor Bill Ackman, of Pershing Square Capital Management, was among the earliest and loudest critics of how Gay navigated the terrain of supporting free speech while protecting students from harassment. He said she wasn’t doing enough to support Jewish students and was applying the school’s speech policies selectively.

More recently the family foundation of the investor Len Blavatnik paused its donations, according to a person familiar with the matter. The family has given more than $200 million to Harvard.

Part of the annual defense bill allows the Justice Department to bring criminal charges against foreign officials who demand or accept a bribe from a U.S. citizen or company, or within a U.S. jurisdiction

U.S. authorities can now prosecute foreign officials who demand or accept bribes from Americans trying to secure business, new legal firepower granted in the recently signed annual defense legislation.

For the first time, a provision of the National Defense Authorization Act has made it a crime for a foreign official to ask for or take a bribe from an American person, a U.S. company or within a U.S. jurisdiction.

President Biden signed the defense bill into law on Dec. 22, after Congress earlier in the month voted to pass the sweeping annual legislation that designates top U.S. military priorities. The NDAA increases the national security budget roughly 3% to $886 billion from the previous year’s $858 billion.

The provision, known as the Foreign Extortion Prevention Act, broadens the scope and reach of U.S. antibribery laws in a way policy supporters say will fight corruption, which the Biden administration has said is one of its top national security priorities.

Advocates for the law say it complements the Foreign Corrupt Practices Act, a longstanding U.S. antibribery law that prohibits the paying of bribes to foreign officials to win or keep business. Under FEPA, violators would be fined no more than $250,000 or three times the value of the bribe; imprisoned for no more than 15 years, or both.

The new provision comes after years of campaigning by a bipartisan coalition of anticorruption groups and government watchdogs, as well as the U.S. Chamber of Commerce.

“Without this, the U.S. legal arsenal for combating international corruption was incomplete,” said Tom Firestone, a partner at law firm Squire Patton Boggs who specializes in white-collar crime, noting that the FCPA only covers the supply side of paying bribes, while FEPA addresses the demand side.

“If it’s enforced effectively, it would hopefully protect U.S. companies operating abroad so they won’t be subject to these demands,” he said.

Transparency International U.S., an anticorruption advocacy group that helped craft the legislation and led the campaign for it, said FEPA could root out foreign corruption at its sources.

“This, without question, is the most consequential anti-foreign-bribery law passed in almost 50 years,” said Scott Greytak, director of advocacy for Transparency International U.S.

Supporters are optimistic enforcement won’t be a problem, as the Justice Department for years has brought charges against foreign officials outside U.S. borders over bribery, but used different laws to do so, for instance, money-laundering or wire fraud statutes.

Under the new provision, foreign officials charged with taking bribes can be arrested when they enter U.S. territory; if they live in a country with an extradition treaty with the U.S., or if they travel to a third country that has an extradition treaty with the U.S., according to Greytak.

Even if some foreign officials are beyond the reach of U.S. marshals, Firestone, a former federal prosecutor, said that isn’t likely to deter prosecution of these cases, as the Justice Department recognizes the value of identifying offenders and holding them responsible.

“The fact they can’t be brought to trial doesn’t mean the U.S. DOJ won’t charge them. That means they can still be arrested if they travel, or they become a prisoner in their own country because they are afraid to travel,” he said.

Though Saks wants to buy, and Neiman's owners could want to sell, market conditions are not ideal for combining the two luxury retailers under one owner.

Will Saks Fifth Avenue ever reach a deal to buy the Neiman Marcus Group?

Price, high financing costs, and sagging business at both luxury retailers are holding up a deal, though Richard Baker, executive chairman and governor of Saks-owner HBC, has long wanted to create a luxury empire in the U.S. while NMG’s owners — Pimco, Sixth Street Partners and Davidson Kempner Capital Management — could be interested in selling if the price is right.

Business at both retailers has been depressed since last spring, so lenders would be wary of bringing two companies together at a time when their performance is subpar. Also, while the true luxury shopper is still spending, it isn’t at the same rate as in 2022 and the aspirational consumer has become more selective in their purchasing, increasingly spending on travel, dining and other experiences, thus leaving fewer discretionary dollars for fashion. When they do buy apparel, it’s more on the casual side of the fashion spectrum.

“The North American luxury customer is going to buy less” in 2024, said Kim Vernon, president and chief executive officer of Vernon Company consulting. “Despite interest rates and inflation settling down, the wealthy shopper is going to question buying clothing and accessories that have had 15 to 30 percent price increases, levied by the luxury houses. Two years into a Russian/Ukraine war, the Israeli/Hamas brutal conflict, upcoming uncertain elections, and disruptions in Red Sea shipping routes are all going to give pause to purchase. LVMH, Kering, Richemont will have to look [more] to the Middle East for growth since I don’t see it coming from the slowing Chinese economy.” They’re battling for the same 2 percent of the population that shop for luxury, said Vernon.

Christmas and overall 2023 results will factor into a possible deal. Interest rates are expected to come down in 2024, which could spur M&A activity in a softening luxury sector.

There is logic to a Saks-Neiman’s deal. Consolidations involving staff, back-of-the-house functions and Neiman’s and Saks stores could occur to cut costs and boost the bottom line of the combined entity. For the past several seasons both retailers have undergone layoffs affecting hundreds of workers.

It’s also possible that another potential buyer for NMG emerges. There has been speculation over the years about LVMH Moët Hennessy Louis Vuitton, Middle Eastern sovereign funds and private equity funds possibly being interested, although it would be unlikely LVMH would want to acquire an entire U.S. department store group.

Meanwhile, the Neiman’s-Saks battle for market share rages as each retailer vies for designer exclusives and distribution rights at a time when luxury brands are retreating from wholesaling in favor of operating their own stores and e-commerce sites. Neiman’s and Saks are digging deeper into customer data to enhance personalization and loyalty, trying to get more business from their biggest-spending customers, and each recently invested in technology to enhance service, omnichannel integrations and dot.com operations. While Saks online has a broader offer, selling cookware, toys, small appliances as well as designer fashion, which executives say is all within the rubric of luxury, Neiman’s remains more focused on designer fashion.

If a deal happens, the Federal Trade Commission and the antitrust division of the Justice Department might be all over it, and possibly block it over concerns about the potential for HBC to raise prices, close stores, lay off workers and increase pressure on vendors. Recent history shows that these federal agencies have challenged transactions involving well-known businesses in other industries, such as Microsoft, Meta, American Airlines and JetBlue.

Tapestry CEO Joanne Crevoiserat is making a bet on both the power of brands and the power of scale.

Last summer’s surprise deal to bring together Tapestry Inc. and Capri Holdings and create a fashion group with more than $12 billion in sales is about to become a reality.

The transaction is set to close this year, putting Tapestry’s Coach, Kate Spade and Stuart Weitzman brands and Capri’s Michael Kors, Versace and Jimmy Choo businesses under one roof.

Head of the household will be Joanne Crevoiserat, Tapestry’s chief executive officer and architect of the transaction.

Crevoiserat sees the deal as a testament to the strength of Tapestry’s approach to building fashion businesses, the importance of scale in a fragmented market and the power of brands.

“When a consumer can buy anything they want, anywhere they want, any time they want, brands matter,” she told WWD last month. “We’re a global business and we have truly iconic brands that matter to consumers. They have a space in the consumer’s mind. We have an opportunity then to make this business bigger and make these brands even more relevant.”

Tapestry certainly gets bigger by swallowing Capri — and that will give it more influence when it comes time to fight for the best real estate or invest in AI or do any of the million things big corporations need to do to compete today.

But even though the combination is expected to produce $200 million in annual cost savings within three years, the company is still borrowing to bring on Capri at an enterprise value of $8.5 billion.

That has the industry’s dealmakers slicing and dicing the new combined portfolio of brands in their heads, wondering if maybe Jimmy Choo or Stuart Weitzman — or even Versace — could be sold off to help pay down that debt.

The deal has also sharpened the focus on Tapestry and Capri’s competitors like Ralph Lauren Corp., PVH Corp. and others.

Is the rest of the industry going to feel the need to get bigger too? Once the dealmaking starts up, it can take on a life of its own.

With work-life balance primordial, retailers are testing more flexible arrangements, and burnishing their "employer brands."

The glamour and prestige of luxury brands is not strong enough to insulate them from the employee attrition plaguing the retail sector in the post-pandemic period.

That means luxury retailers must not only experiment with remote working and flexible hours, but also burnish their “employer brands,” compensation and benefits so sales associates embrace their mission and culture.

So say Delphine Vitry and Jean Revis, cofounders of Paris-based luxury consultancy MAD, which estimates that staff retention, staff engagement and client experience topics comprise up to 30 percent of its consulting practice today, up from 5 to 10 percent before the COVID-19 pandemic upended employee values and expectations.

MAD estimates minimum attrition levels of 15 to 20 percent for sales associates in luxury stores, reaching a maximum of 40 percent in some markets.

According to Vitry, some luxury flagships in Paris operate with 20 percent less than a full staff complement, underscoring how sales associate jobs are decreasing in desirability and becoming more complex and demanding in an omnichannel, 24/7 world.

In the past, attrition was a problem for HR departments, whereas today it’s become a hot topic in the C-suite of many luxury brands, Revis said.

And since future growth for luxury goods players depends on either boutique openings or on increased productivity, high-caliber sales associates are key.

Citing data from Workiam, Vitry noted that 63 percent of retail companies are operating with a frontline employee deficit. Studies also suggest the majority of retail employees in China suffer from anxiety, some chronically.

“The U.S. and Europe are struggling with staffing,” agreed Christophe Cais, chief executive officer of Dubai-based consulting firm CXG Marketing, noting that “Asia is maybe a little less impacted.”

French luxury giant LVMH Moët Hennessy Louis Vuitton is forecasting that it will need to recruit 22,000 new workers by the end of 2025 — about two-thirds of those positions for sales associates and hotel employees.

According to Cais, the proactive steps brands are taking include training and apprenticeship programs for sales advisers all the way up to full-fledged retail academies, at Richemont in Asia and America, and Chalhoub Group in Dubai.

“Compensation in retail typically is not very high, and people are always looking for better opportunities,” Cais explained in an interview. “Many people don’t see that as a long-term career. Brands have not always looked at this, and invested in people the way they should have.”

Cais said many commission schemes and other key performance indicators for sales associations are transactional, whereas the sharpest brands are cultivating relationships, pampering and delighting customers with a view to their lifetime value. “So the short-term transaction is not really what brands need in order to thrive moving forward,” he said. “Some brands are looking at it very, very seriously.

“When you talk to Gen Z, they are really looking for not only the work-life balance, but also personal development, and what are brands providing when it comes to training and developing people on a retail job.”

“Our view is that brands should really be focusing their efforts on training people on soft skills, and to help people do what digital assets cannot do for them, which is creating relationships and making people feel at home and creating this feeling of well-being,” Cais said.

Giving more flexibility is also key. Cais suggested retailers could leverage AI to determine optimal staffing levels and recognize that “people don’t need to be on the shop floor as much as before” and can leverage clienteling tools, like Zegna X.

In Cais’ view, “a good employee experience leads to a good customer experience.”

MAD’s Vitry and Revis are adamant that luxury brands are well positioned to overcome the challenge of employee attrition, noting that fashion houses broadly have a reputation for being inclusive of minorities and women, for dealing in durable products that are inherently more sustainable, and for being connected to cultural movements and in tune with shifting values.

Conglomerates like Richemont, Kering and LVMH, home to more than 75 brands across various sectors, also offer sales associates a richer selection of possible career paths and likely more training and education opportunities.

Vitry draws a direct parallel between the customer journey and the employee path, with the online desirability being the first deciding factor if a customer will “push on the door” of a boutique — or a worker will knock on the HR office. Likewise, the first boutique experience is as crucial for the client as the onboarding process is for the employee.

She said luxury retailers are taking a test-and-learn approach, realizing that “clienteling” work — distance relations between sales associates and clients — can represent 20 percent of the workload, and needn’t be executed on the shop floor. “They’re asking, ‘How could we get organized so that maybe you could do this job at home?'”

Likewise, some brands are experimenting with apps that allow sales associates to trade on-floor shifts directly with colleagues, instead of going through laborious HR-department permissions.

Lululemon took a “lifestyle” approach, inviting wellness and yoga enthusiasts to join as sales associates, offering them vaccinations, fitness allowances, reasonable hours and other rewards they appreciate. In Vitry’s estimation, Lululemon’s “employer brand” may be more well known than the activewear retailer.

Then there is Starbucks, which is facing substantial efforts by staff in some its units to unionize. Recognizing that long commutes for most of its employees diminishes the work-life balance, the coffee chain gives workers first dibs on positions should a branch open nearer his or her home, Revis pointed out.

Fourth-quarter sales from Elon Musk’s group beat estimates but fall behind Chinese rival

Tesla has lost its position as the world’s most popular maker of electric vehicles to Chinese rival BYD despite quarterly sales that beat analysts’ estimates.

The US company, run by Elon Musk, delivered 484,000 cars in the fourth quarter, Tesla said on Tuesday, more than the 473,000 anticipated by analysts polled by LSEG.

BYD on Monday reported record sales of battery-only vehicles of 526,000 for the fourth quarter, helped by a strong end to the year for the Chinese electric vehicle market.

The Shenzhen-based company was founded by Wang Chuanfu, a former university professor, in the mid-1990s. After focusing on manufacturing rechargeable batteries, including for early cell phones, the company expanded into the car industry in the early 2000s.

The Chinese group’s early success prompted Warren Buffett’s Berkshire Hathaway to invest in the company in 2008. Despite relying on existing industry technology for many years, BYD is now considered a leader, with a focus on stripping out costs from the production process.