DealBook Briefing: Can Tech Change the Senate Tax Bill?

Good Tuesday morning. Silicon Valley is up in arms over a provision in the Senate Republican tax plan that would change how stock options are taxed. G.E.’s new chief unveiled his big plan to turn around his company — and investors weren’t impressed. And a new digital pill could transform medicine and health care policy.

Tech companies’ angst comes from a provision in the Senate tax plan that would tax stock options and restricted stock units, which comprise a big part of their employees’ compensation, at vesting, rather than when they’re exercised.

Some start-up employees could owe big tax bills without being able to pay, since privately held companies’ shares are generally harder to sell. Bigger unicorns could draw money from outside investors to let employees cash out — Uber already has — but younger start-ups have no such recourse.

Companies could pay more cash compensation, using up precious cash flow. Or they could go public — if they make it that far. Meanwhile, tech employees might forego working at younger companies because they couldn’t pay as much. “We legitimately can’t figure out how this is going to work,” one start-up adviser told DealBook’s Michael J. de la Merced.

Here’s one founder’s perspective, as given to Reuters:

Companies like Airbnb, Lyft and Uber, as well as investors like Sam Altman and Max Levchin, signed a letter to Congress demanding the provision be dropped. And Fred Wilson of Union Square Ventures is urging tech employees to call their senators.

It may not be so bad: Some critics of Silicon Valley’s current pay system say that the stock-heavy model hurts some employees, like those diluted by down rounds, or wiped out if a start-up fails. Anand Sandwal of CB Insights said to Wired of the potential change: “That means the types of start-ups getting built would change as well. Depending on your perspective, that may be a good or bad thing.”


Today’s DealBook briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Amie Tsang in London.


Tying into themes touched on in our conference last week, here are some of the ways businesses are trying to future-proof themselves:

• Target and other big retailers haven’t given up on brick-and-mortar stores just yet.

• The airline industry’s response to consumers using cameras on flights might be for flight attendants to use cameras too.

• Is it time for companies paid us for using our personal data?

• Five technologies that could change the world.

Read all of our special section coverage on DealBook.

Just look at G.E.’s stock performance yesterday, after the company unveiled its big turnaround plan and dividend cut:

Here’s what Janna Sampson of OakBrook Investments told the WSJ:

G.E.’s chief executive, John Flannery, said that he wasn’t surprised by the price move. But he asked for more time to turn around a company whose shares have fallen 38 percent over the past 12 months. “This is the opportunity of a lifetime to reinvent an iconic company,” he told investors at a presentation yesterday.

Who might have even more say now: Ed Garden of Trian Fund Management, who took a board seat at the conglomerate after pushing for change. He will stay put throughout a planned culling in which the number of board seats will be reduced by a third, to 12.

Critics’ corner

• Brooke Sutherland of Bloomberg Gadfly argues, “General Electric Co. may have a new leader, but the pattern of over-promising and under-delivering is the same.” (Gadfly)

• Rob Cox of Breakingviews asserts, “The about-face from Mr. Immelt to Mr. Flannery has outdone the usual kitchen-sinking that accompanies the passing from one chief executive to the next.” (Breakingviews)

• Charley Grant of Heard on the Street writes, “The difference here is that Mr. Flannery has laid out a clear plan by which investors can judge his progress. He will have to proceed quickly, though, while maintaining a delicate touch.” (WSJ)

• President Trump has a suggestion to pay for a $1.5 trillion tax cut — repealing the Affordable Care Act’s mandate that most people have health insurance. (Politico)

• President Trump nominated Alex M. Azar II, the former president of Eli Lilly, to be secretary of health and human services, a role with responsibility for regulating the pharmaceutical industry. (WaPo)

• The hasty drafting of the House and Senate tax plans has led to some very interesting loopholes. (NYT)

• Some 1,500 former Capitol Hill aides have signed an open letter to House and Senate leaders demanding that Congress bring in mandatory harassment training and revamp the Office of Compliance. (NYT)

In leaving Draper Fisher Jurvetson amid the firm’s investigation into his conduct with women, Mr. Jurvetson has become one of the biggest names in Silicon Valley to be caught up in tech’s self-evaluation of how women are treated. He has also taken a leave of absence from the boards of Tesla and SpaceX.

This was Mr. Jurvetson’s tweet about his move:

The context: From Sheelah Kolhatkar of The New Yorker:

In other sexual harassment news

• Two independent directors at the Weinstein Company said they did not know that David Boies had a business relationship with the company while he was negotiating a contract on Harvey Weinstein’s behalf. (WSJ)

• Goldman Sachs has written down the value of its stake in the Weinstein Company to zero, according to a person familiar with the matter. (Reuters)

Amazon said that it had sold the physical equipment for its Chinese cloud business to its partner there to comply with new data laws. While Jeff Bezos’s company isn’t leaving China altogether — it will still hold the intellectual property for the business — the move highlights the hurdles that Western tech companies face there.

From the WSJ:

Think about the implications — in health, in policy and in business — of the newly F.D.A.-approved digital pill, which has a sensor that can tell doctors whether, and when, patients take their medicine.

Pam Belluck of the NYT notes some possible consequences:

• Anheuser-Busch InBev named Michael Doukeris as head of its American operations, as it struggles with slowing sales of mainstay brands like Bud Light. (WSJ)

• Apollo Global Management promoted Scott Kleinman and James Zelter to the newly created positions of co-presidents, setting them up as potential successors to the firm’s co-founders. (FT)

• Irene Rosenfeld, who’s preparing to step down as Mondelez’s C.E.O. next week, reflects on a career spent building Kraft up — and then breaking it apart. (NYT)

• If its planned takeover of Time Warner goes to a trial, AT&T intends to ask for the communications between the White House and the Justice Department about the deal, according to people familiar with the matter. (Bloomberg)

• Goldman Sachs investment bankers are targeting smaller companies often neglected by Wall Street’s white-shoe advisers. (Bloomberg)

• Missouri’s attorney general has opened an investigation into whether Google’s business practices violate the state’s consumer protection and antitrust laws. (NYT)

• A Tesla employee who is suing the company has said that its black workers suffer severe and pervasive harassment. (Bloomberg)

• Elliott Management has amassed a stake in the mall owner Taubman Centers and plans to push for changes, including a potential sale, according to people familiar with the matter. (Bloomberg)

• An investment firm backed by a Chinese tycoon, Zhongwang USA, has called off its planned acquisition of the aluminum maker Aleris after it failed to win Cfius backing. (Reuters)

• The private equity firm Roark Capital Group made a takeover bid worth more than $2.3 billion for Buffalo Wild Wings, according to people familiar with the matter. (WSJ)

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Follow Andrew Ross Sorkin @andrewrsorkin, Michael J. de la Merced @m_delamerced and Amie Tsang @amietsang on Twitter.

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