How not to increase board diversity

Good Tuesday morning and welcome to today's DealBook Briefing. Just in: Amazon will raise its minimum wage for all U.S. employees, including temporary and seasonal ones, to $15 an hour.  (Was this email forwarded to you? Sign up here.)

What’s wrong with California’s board quota plan

The Golden State hopes to increase the number of women sitting on corporate boards by requiring companies based there to meet a quota for female directors. It’s a worthy goal, but I think that it's the wrong approach.

Why? California’s legislature concedes that the law could be unconstitutional. Its requirements may not apply to companies chartered elsewhere. (A big loophole: By one estimate, the only Fortune 500 company affected is Apple.) And sudden disruption could hurt companies’ performance.

Joe Grundfest of Stanford, a longtime advocate for increasing board diversity, told me: “I fear the cure is worse than the disease.”

Instead, individual investors, big and small, should press boards to diversify.

Firms like BlackRock and pension funds like Calpers, the California Public Employees’ Retirement System, are already working to effect change. BlackRock has told companies that it wants to see at least two female board members at the companies it invests in. Calpers wrote to 504 companies in 2017 asking them to improve diversity, and has voted against directors at companies that have failed to respond to its requests.

Hopefully, the constant drumbeat on this topic will only drive additional responsible companies to make progress.

G.E.’s new chief has a lot to fix

General Electric ousted John Flannery after a year as its chairman and C.E.O., by far the shortest leadership tenure in the conglomerate’s 126-year history. It shows how tough things have gotten there.

Mr. Flannery was supposed to turn G.E.’s fortunes around. But like his predecessor, Jeff Immelt, he’ll be handing over a lot of problems: G.E. says it is taking a $23 billion write-down in its power business, and its financial arm and pension fund are messes.

Now, for the first time, G.E.’s board is turning to an outsider: Lawrence Culp Jr., formerly C.E.O. of another conglomerate, Danaher, where he struck transformative deals and greatly improved efficiency.

G.E. shares rose 7 percent yesterday, suggesting at least some investors are confident that Mr. Culp can deliver another miracle. The company looks to need one.

Bonus: Mr. Flannery may not get a golden parachute.

With Nafta solved, Trump turns to China

The dust has settled on the United States-Mexico-Canada Agreement — the successor to Nafta — so it’s time to consider it in detail. Jim Tankersley of the NYT explains how it changes the three countries’ trading relationships. President Trump has declared it a victory, bringing “cash and jobs” into the U.S. For Canada, it’s more of a relief.

But for Mr. Trump, the deal with America’s second- and third-largest trading partners clears the way for what he sees as the big target: China. More on that from Bob Davis of the WSJ:

A renegotiated North American Free Trade Agreement, Trump advisers argue, removes the possibility that a trade war could break out on the continent and will make North America a more attractive place for investment.

When combined with U.S. tariffs against China, which boost the costs of production there, foreign companies will start moving investment out of China, the administration calculates. That would weaken China’s ability to produce next-generation technology and put additional pressure on Beijing to make trade concessions sought by the U.S.

Mr. Trump appears happy to play a long game. “China wants to talk very badly,” he said at a news conference yesterday. “I said frankly it’s too early to talk, because they’re not ready.”

Coming up

Jay Powell discusses employment and inflation. The Fed chairman is speaking at the National Association for Business Economics’ 60th annual meeting in Boston, where analysts will listen for hints about economic tightening.

Automakers publish their September sales figures. New-vehicle numbers have slowed since a peak in 2016 of 17.6 million for the year, but estimates suggest they were robust in September, and could hit 17 million this year.

PepsiCo reports third-quarter results. They’ll be the last overseen by the outgoing C.E.O., Indra Nooyi. Investors will pay close attention to the soda business, as Pepsi pushes toward healthier drinks through moves like its $3.2 billion acquisition of SodaStream.

Why are so many Teslas parked and undelivered?

Rows of new vehicles made by Elon Musk’s electric car company are being detected in unexplained locations across the country — from San Francisco to Salt Lake City, Chicago to Las Vegas. Neal E. Boudette of the NYT has been following a trail of evidence online, which hints at potential issues with production, logistics, quality — and even demand:

Mr. Musk had long promised that the Model 3 would be available for as little as $35,000. But the least costly version available now starts at $49,000, and the price nears $60,000 if a customer wants the Autopilot driver-assistance software and other options. The company has said that more than 400,000 customers are waiting to buy Model 3 sedans, and that each paid a $1,000 deposit. Many who put down deposits may be waiting for the more affordable base model.

More Tesla news: Why a criminal probe into Mr. Musk’s tweets now looks unlikely. How the S.E.C. is trying to foist traditional corporate governance on the company. It may build a new tent outside its factory. And why Mr. Musk is probably still good for the future of electric cars.

How Charles Schwab tries to keep up with fintech

Charles Schwab turned his budget-basement retail brokerage into an investment giant that manages over $3.6 trillion of customer money. But fintech start-ups are after those customers.

In an interview with Bloomberg Markets, Mr. Schwab, now the company’s chairman, and Walt Bettinger, its C.E.O., explain how they’re fighting back:

While tech is becoming ever more dominant, Bettinger says the human element is what will help the company ward off the threats posed by online competitors. When it comes to financial services, he says, clients ultimately want to talk to a live person — in a web chat, on the phone, or at a branch office. In 2016, less than a year after introducing its robo-adviser, Charles Schwab began offering fee-based personal consultations for accounts of at least $25,000.

Companies such as Ant Financial or Amazon, which analysts have speculated will eventually move into finance, would be challenged to build those kinds of offerings at Charles Schwab’s scale, Bettinger says. “I’d like to think that we’re a blend of Amazon and Nordstrom,” he says.

Who wants an M.B.A.?

Applicant numbers have been falling for years — but now even top schools like Harvard Business School and Wharton are feeling the pinch, writes Kelsey Gee of the WSJ:

Harvard Business School received 9,886 applications for this fall’s entering class, down 4.5 percent from last year — the biggest drop since 2005. Applications to Wharton fell 6.7 percent to 6,245. At Stanford’s Graduate School of Business, they slid 4.6 percent to 7,797. Such top schools are still receiving many more applications than they can accept, but the declines mark a reversal after years of growth.

Reasons for the slump? Rising college debt has made M.B.A.s too expensive for many people, and higher hurdles for work visas have pushed foreign students to international schools instead.

One legal fight a Silicon Valley billionaire was glad to lose

For nearly a decade, the Silicon Valley venture capitalist Vinod Khosla has waged an unusually high-profile legal battle over a beach access path that cuts through a coastal village he owns near Half Moon Bay, Calif. He wanted it closed. But while he lost the fight, he’s apparently happy about it.

Nellie Bowles of the NYT explains why:

As the case wound its way up to the Supreme Court, it threatened to gut California’s Coastal Act of 1976, which enshrines public access to beaches as a right.

“If I were to ever win in the Supreme Court, I’d be depressed about it,” he told The New York Times this year. “I support the Coastal Act; I don’t want to weaken it by winning. But property rights are even more important.”

Revolving door

Ian Read will step down as Pfizer’s C.E.O. at year end, but stay on as executive chairman. (His successor, Albert Boula, could consider doing more deals.)

Adam Mosseri will become Instagram’s chief; its co-founders Kevin Systrom and Mike Krieger resigned last week.

Sridhar Ramaswamy is stepping down as Google’s ad chief. He will join the investment firm Greylock Partners.

Gita Gopinath will become the I.M.F.’s first female chief economist.

Matt Cohler and Mitch Lasky are stepping down as partners at Benchmark, the venture capital firm.

The speed read

Deals

? More unprofitable companies are filing for I.P.O.s — and investors don’t seem to care. (WSJ)

? Dan Loeb thinks Campbell Soup could sell itself for $58 a share. (Yesterday’s closing price: $36.45.) (Bloomberg)

? A Delaware judge ruled that Fresenius can walk away from its $4.3 billion takeover of fellow drug maker Akorn. (Bloomberg)

? A top Emirates executive denied that the company was interested in buying Etihad. (Bloomberg)

? Aston Martin cut the top end of the price range for its I.P.O., scheduled for this week. (FT)

Politics and policy

? The White House let the F.B.I. expand its background check into Brett Kavanaugh, but insisted it finish this week. (NYT)

? The I.R.S. is prosecuting fewer tax fraud cases. (NYT)

? The Trump administration reportedly considered a ban on student visas for Chinese nationals. (FT)

? New Jersey is setting up a $500 million venture capital fund. (NYT)

Trade

? Who is winning exemptions from U.S. steel tariffs? Japan and Thailand, mainly. (FT)

? How Brexit could cause airline chaos. (Bloomberg)

Tech

? Irish regulators will reportedly investigate the latest Facebook data breach. (FT)

? Why Made in China 2025 might be running behind schedule. (SCMP)

? Beijing is doubling down on data regulation. (FT)

Best of the rest

? The 2018 Nobel Prize in Physiology or Medicine was awarded to two researchers who developed ways to turn the body’s immune system on cancer. (NYT)

? The Microsoft co-founder Paul Allen says his cancer has returned. (Forbes)

? Manhattan’s real estate market has been in a correction for a year. (CNBC)

? Omid Malekan created a viral YouTube hit criticizing quantitative easing. He now says he was wrong, mostly. (DealBook)

Thanks for reading! We’ll see you tomorrow.

You can find live updates throughout the day at nytimes.com/dealbook.

We’d love your feedback. Please email thoughts and suggestions to [email protected].