Transcripts For BLOOMBERG Bloomberg West 20150327

Companies trying to figure out their hr was stopped first, i want to get to matt miller in new york looking at some top headlines. Matt on the east coast, a deliberate act to destroy the airplane. A Prosecutor Says black box recording shows the copilot on the flight locks the pilot out of the cockpit and then flew the plane into the french alps. The ceo of german wings a few hours after having heard this we can only speculate on the motivational the copilot. I would like to very cautiously say this is by far the most terrible event in our company. Matt bryce robin identified the copilot as a junior pilot who started flying in 2013. He passed all of his tests and was fit to fly. Saudi arabia and its sunni allies have launched airstrikes in yemen which at the airport and a nearby military base in the capitol. This comes as rebels advance on the port city which is the stronghold of the embattled president. The yemeni president has arrived in riyadh. The strike sent oil prices higher, hitting their highest price in more than a month with new york crude well over 50 a barrel. In iraq, the u. S. Has joined the offensive against Islamic State militants in tikrit, conducting 17 air strikes against targets after staying out of the offensive for weeks. The iraqis had been relying on help from iran to dislodge the militants from the city, but there defensive has stalled. And the Omega Advisors hedge fund has received a federal subpoena from the u. S. Attorneys office in new jersey. The sec is seeking information on trading. In a letter to investors, they say the inquiries that are at an early stage. Omega said to be cooperating and is confident employees acted properly and lawfully. Shares of sandisk are getting crushed, down the most since 2010. The company cut its revenue forecast citing lower prices and slowing sales from business products. Revenue is down 100 million from an earlier projection. Now back to our special coverage of the ellen pao trial. It could have a dramatic impact on Silicon Valleys culture. Cory johnson is outside the courthouse in San Francisco. Cory this is a case everyone in Silicon Valley is watching. It is a case that may affect businesses all over the country. The jury is deliberating now behind me in the courthouse. Lets look at the case and talk about what was presented. Im joined by two experts. Bill is in new york. Let me start with you. You have been following this case and listening to what they have to say on the stand. What do you make of this . Janine it is a tough case. Usually when you have a case litigated like this, it is a tough case. The fact that there is so much at stake on either side ellen pao is risking her reputation and her career. Kleiner perkins is risking the trials and tribulations that come with the pr and obviously the money. The fact they are going to the mat and doing it on trial shows it is not a clearcut situation. Cory what do you make of what has been presented thus far . Which direction do you think the jury might be leaning . Bill it is difficult to say. When you try cases, youre always trying to gauge what the juror means. But what has happened here is ellen pao portrayed a matter of men behaving badly, not only with respect to promotions, but also with regard to raunchy discussions and inappropriate conduct, excluding women from coming to different social events. On the other hand, Kleiner Perkins is portraying her as someone who was ok, but not at the level of making the big money and it was her skills and personality that caused her not to get where she wanted to go and shes looking for a handout. But based on the information that has been provided, its going to be hard for this jury not to hold them accountable, at least in respect to retaliation because things went down when she complained. Cory talk to me about what you think were the most compelling things in the trial . I have read a lot. Janine what i was listening to the closing arguments, you cannot escape the fact that just looking at the performance reviews, the critiques about her are the same critiques asserted against the male partners will stop looking at her performance, the success of her investments you have critiques leveled at her that are applied differently versus the men and her investments do well, so its hard to not focus on that and think there might be a different standard. Lets start with some specific things brought up in this trial the exclusion from a trip there was an accusation that someone said to bring her along would be a buzzkill. Was that strong evidence . I think all of those jenin comments, you can say they are taken out of context. For me, they are not persuasive because people are disputing it. The most compelling evidence was looking at performance reviews and looking at her success. Cory they really did not have a policy or could not find a policy about equal opportunity and harassment. Is that damming evidence, or does that show they didnt have a policy so they did not know what rules they were breaking . Bill the Supreme Court has addressed this. If you have a policy and the follow it, you are going to be in trouble, but not having a policy shows a workplace that doesnt really make sure the right thing is done for everybody. Thats going to be a negative. In terms of the question you just asked before, by bringing in exclusion from different social events and things that men discuss on airplanes, this is designed to tug at the heartstrings of the jury and have these people, some of them are bluecollar types, put themselves in her position. There is an emotional factor that comes out if they believe her and i think that is important for what they are trying to present. Cory one of her worst days on the stand was when she had to discuss the sexual affair she had with a married partner at the firm. Does that hurt her case or does that show is a crazy place where rules dont apply . Janine i think that incident, like so many others, they can go either way. Her argument is the guy told me he was separated and or divorced, and that was the premise i operated on, whereas the defense turned around and said she is immoral, having an affair with a married man. Same fact, different spin. Cory maybe not convincing either way. This is a firm where, venture firms have gone from 10 women to 6 as of late and Kleiner Perkins 20 of the people there are women. Does that have any bearing . Kleiner certainly made a big deal of it. Janine the defense has used it very well to support their case. Its obviously a good thing. Some of the women were not investment partners. They were operational, they were recruiters, which is important but not the same as the people on the front line making the investments. Cory thank you very much. Speaking of women, news about googles hiring of the new chief Financial Officer who left morgan stanley, 70 million reasons why. She is getting a new salary, and 5 million in a signing bonus, and the remainder of 64 million in Stock Options that will fully vest the end of next year. Googles new chief Financial Officer, we are going to keep looking at this case for the rest of this hour. Matt coming up, full coverage of ellen pao versus Kleiner Perkins. We await the decision in the case that has rocked Silicon Valley. Plus the next big lawsuit facing the likes of twitter, facebook and tax diversity agenda how does this case affect the next batch of recruits . All that over the next hour. First a check of the top headlines will a new smartphone help htc and its sales slump . They will start taking orders for their new flagship smart phone. Once a smartphone brand has gone negative quarter over quarter as we did in 2013, which was a tough year for us, it never rebounded. A lot of people wrote htc off, but we dug deep and now we are reeling off quarter after quarter of profitable growth. We are bullish about our prospects this year. Matt htcs Global Market share has slumped to less than 2 from double digits back in 2011. One reason for the decline has been apple and now apple is starting an iphone tradein program in china. The program may launch a soon as next week. Foxconn will be involved in the program, buying and reselling the iphone will stop a Similar Program has helped boost iphone sales here in the u. S. The ncaa basketball tournament the sweet 16 action. Undefeated kentucky is taking on West Virginia in cleveland, ohio and North Carolina against wisconsin. Through the first week of eternal event, john donahoe has been leading bloombergs brackets for a cause, followed by jimmy dunn and bruce richards. Lets head back now to San Francisco where the jury is deliberating in the ellen pao case. Cory the ellen pao case has resonated because Silicon Valley looks at itself as being different, playing without a rulebook but what does that mean when you get into trouble for breaking the rules . Thats an issue that affects a lot of companies beyond Kleiner Perkins. David lewis joins us now. Hes with a Company Called operations incorporated. The company focuses on human resources. Glad to have you with us today. Talk about the modern state of hr operations for Small Businesses. As vast as the influence is, what is the stateoftheart for Small Companies right now . David stateoftheart as you have a policy manual, some kind of training associated with how to enforce the rules and then provide some level of consistency for everybody within the organization. Honestly that is not common in most Small Businesses. Most Small Businesses view hr as a Necessary Evil and treated as an administrative function until an event like this happens and then they wake up and react to it. Cory specifically when you look at this case, one of the most glaring examples was they could not find their policy about discrimination. What do you see as the worst thing kleiner might have done in this case . Its very typical of the Small Business as it relates to the arrogance that the rules are not necessarily there to apply to us. They are there to apply to other businesses the company runs on. An intuitive level. It thinks is being fair and consistent but most leadership does not like to be told how to run their business or what to do, so they run it that way until they get themselves slapped and take a step back or, maybe in the wake of a decision that goes against perkins, they decide im going to rethink how we do things here to avoid conflict and avoid an issue down the road. Cory is Silicon Valley, Small Companies in particular Silicon Valley seems to not want to play by any rulebook and they think that is the value of the disruption these companies cause. Is that different than the rest of the country . David i dont think its that different its typical of Small Businesses that have a casual approach to business and wear jeans to work. More fun in the workplace and more flexibility. With that, they ignore the need for structure and what should be a good, solid backbone for their organization. Instead, they have something thats not Strong Enough to protect them in the right ways and they find out in the wrong ways by doing something wrong, by getting sued, and then it becomes a real problem to backtrack and change the culture midstream at that point. Cory are there new ways for companies to acquire hr expertise that were not available a few years ago . David there are a ton of hr resources out there, whether its through firms like ours are or Payroll Service providers. At the end of the day, hr is an abundance these days. The problem is most businesses did not get an hr person until they had a hundred employees. That is what businesses are we are talking about. They have no good excuse for ignoring the hrps because it is available as a service and is relatively inexpensive. It does not cost the same as a salary and it is a protection at a minimum and strategic tool at a maximum. Cory is this more important for firms where there are a lot of money like investment terms were the staff might be small but the stakes are huge . The stakes are huge regardless of the size of the organization, but the larger the pool of money, the greater the chance for a larger settlement or larger judgment that firm will have to see when they get sued or have some kind of formal complaint filed against them. Cory david lewis, thank you very much. Bloomberg west will be right back. Cory welcome back to this special edition of bloomberg west. We are looking at the case of ellen pao versus Kleiner Perkins. Right now, we are joined by a partner that has prosecuted a number of sexual discrimination lawsuits. I wonder if you think this case is special . Theres sex, money, a lot of attraction for that reason. Guest it is special. As the first time the sea and tech have been taken on a public way. A majority of these cases are settled prelawsuit. You never hear about them. I do a number of them. The politics of money and gender is at the forefront. Cory why are these settlements happening and we are not hearing about them . Because they are confidential for Public Policy reasons. Settlements do not go to court. Cory why are they selling and not going to court . There are some reasons to go to court if it does go through. Guest theres a lot of risk in going to court. Public trials is not someone anyone wants to do. You are for sure to be impacted by that. You can see it on ellen paos face, yet she remain brave and stoic. Cory you have won some big lawsuits. Do you see some common themes here . Do you see things in this case . Guest the Old Boys Club is a common theme in many of our cases when you have extremely skewed male dominated power structures like you have in tech and vc. A lot of people there believe they are above the law, and that is not uncommon in corporate america. Cory Kleiner Perkins says 20 of their force is women. What do you make of that . Does that change things . Guest why 20 . Why should we accept that. It should be 5050. Cory this is an individual suing and not a classaction suit. Do you think this will change the way things go down in Silicon Valley or the Investment Business . Guest it has already had an impact. We are here today talking about it. Theres been a classaction suit filed against twitter and theres an individual case filed against facebook. There is no reason why you cant use the ellen pao trial. Cory when we see a case usually there have been many settlements before at these firms. Guest it is the tip of the iceberg and now the dialogue is opened up completely. Lots of companies are looking into policies of making pay more transparent so women will know that they are underpaid. Theres a chance some of these companies could insulate themselves from liability. Cory in the twitter case, they dont have rules about promotion. The nature of being a woman means youll be discriminated against because there are no rules about how promotions work. Guest that is the basis of the twitter suit. There should be codified policies for a lawsuit, so you dont get double dipping as far as whether a woman is seen as shrewd. Cory thank you very much. Bloomberg west will be right back after this. Cory welcome back to a special edition of bloomberg west. Today, were looking at the future of a trial between ellen pao and Kleiner Perkins. The jury is deliberating behind me here in San Francisco. We could get a verdict as early as today. At least 100 million at stake so we are going to talk about what this means for the business of business. First, lets go to matt miller for headlines. Matt the crash of the german wings airbus in the french outs alps was a deliberate act by the copilot according to the french prosecutor after the analysis of the black box report lockbox recording. The copilot locked the pilot out of the cockpit. I think he refused to open the door and he turned the button to get down the plane. Matt the airline said he passed all screenings and was fit to fly. The airline says they are not aware of any link to terrorist irans Prime Minister says talks are moving in the right direction. Hes resuming discussions with secretary of state john kerry. A state Department Official says the u. S. Sees a path toward achieving a deal but its unknown whether it will he reached. The u. S. Labor market continues to stabilize. Jobless claims fell by 9000, hitting the lowest level since mid february. Marty most of the hiring from our Small Business index comes out every month and is in the central part of the u. S. It was driven by energy. You see jobs in texas to north dakota. That may be impacted by lower gas prices. We have not seen that yet. The slowest is in the northeast, new jersey that may be impacted by the tough winter as well. Matt the Bloomberg Consumer comfort index hit its secondhighest level since 2007. The fcc has dumped noise star and voted to give a lucrative contract to ericsson. It calls for them to manage more than 500 million phone numbers including helping customers keep their number when switching carriers. Yale University Says it will expand its Computer Science department, adding seven professors over the next two years. Comes after years of student and faculty complaints the school has fallen behind rivals like stamford. We turn now back to the case ellen pao of against Kleiner Perkins. Cory johnson has more. Cory the issue of diversity and technology in the workplace is talked about all over the world, but specifically in Silicon Valley. Theres a suggestion this could change the way Silicon Valley does business and hires people. Joining me now is the former linkedin Vice President and has a Company Called diversity reports. What is the stateoftheart as it relates to hiring and diversity and how might that change with this case . Guest whats happening that is most interesting as it applies to diversity is there is far Greater Transparency that candidates and employers have around what their profile is. Apple, google, facebook they have all disclosed what their gender mix is and it is horrible. Cory its such an interesting thing because they are so in the spotlight. All the numbers look bad for all of these companies, but if the suits are out there, those stats look bad. They will be called in to update those stats will they look any better . Thats the big question. What companies are faced with now is all of this effects their brand. Brand is so influenced by how well you are doing in terms of hitting diversity initiatives. One of the interesting things happening right now is these companies are offering what they are but not putting forth what their plans are to address this. I would be shocked if there isnt an executive room or boardroom where this is in front and center, where they say what are we doing and what we want to say about what we are doing . Cory what has changed in terms of the way they are doing hiring after these reports out there in light of this trial . Guest honestly, i have not seen a lot change. The conversation about gender diversity has been around for a while. I think people are struggling to find ways to stand out and do this more effectively. Going full words, is this trial going to present the game materially . Its raising the conversation raising the this ability of this topic and that is important. How often are they getting promoted . Is this a place they are going to that is important to me . It is going to continue to move but i havent seen any material big changes. Cory this region has the lowest unemployment in the nation. Do you think companies are in such a race to succeed and will hire any warm body that can fulfill the tasks that diversity takes much more of a backseat because they dont have the choices i would like to have . Guest this gets to the heart of the question. For executives and board rooms to buy into diversity, theyve got to buy into the concept that it is a Winning Strategy that leads to greater profit. Im calling that an offensive strategy. What i fear is that this will force people to take more of a defensive position because it could hurt our brand versus it will make us greater. Thats what the big difference is going to be. Its better for us, better for our profits, better for our brand if we do this. Cory what are the most common tools used by companies to move toward a more Diverse Workforce that are stupid . That seemed like a good idea but do not work well . Guest i think you create a separate Diversity Office that is over here versus every executive owns diversity. We have a special team focused on diversity it becomes seen as a token effort. It is that persons job to continue with diversity where the right way of approaching it is that we are all in. It is in our dna. I dont think its wrong to have someone helping you drive creative approaches because there are schools and areas you can go after to find people, but a comprehensive strategy that says we are going to have women who become stem majors that is a holistic approach. Cory it sounds like it is planting seeds and having to look way out into the future before fixing it before your diversity report. Guest absolutely. Facebook is a great example. They are bringing kids into the office to show them what is possible. This is engaging families. This is a holistic approach will i know. I know. This is the thing. Every team has players that are going to be happy, unhappy. People are people in this is why i love what i do. Its hard. Even if you do the right thing sometimes youre going to twist people the wrong way. Cory bloomberg west will be right back. Cory welcome back. We are out here covering the ellen pao trial against Kleiner Perkins. The lawyers argument in this case are interesting ones. A wellknown lawyer representing ellen pao and the lawyer representing Kleiner Perkins is a colorful character. The judge has these lawyers in front of her and joins us right now. Thank you for joining us. Lynn is famous for forcing an attorney to vomit repeatedly she is a legend in these parts. What is she like in the courthouse . Judge first of all, these two lawyers you mentioned are top quality. If you are fortunate enough to have either of these lawyers represent you, you are in really good hands. That said, their courtroom styles are very different. They are the odd couple of the legal profession. Lynn is high energy, very smart, always prepared. She is showy, charming, witty, formidable she has been described as a warrior and indeed tried a civil jury trial in my courtroom and i got a front row seat to watch her in action. Alan axelrod on the other hand is low key, very deliberate, always repaired, very smart. Theres not a lot of humor in it but people understand hes very focused and it is true jurors listen when these lawyers speak. You will not find a lawyer or judge dozing off when these lawyers are in the courtroom. Cory interesting. There have been reports during the trial she was cognizant of the jurors watching, making eye contact with the jury, trying to be charming but then very aggressive in crossexamining witnesses. Is that typical of her style . Judge no question. She understands in this trial her job is character assassination, to tear ellen pao down, but do not come off as a bully. She is actually able to do that quite well and effectively because she knows. Part of trying a case is show business. Your job is to persuade jurors to your way of thinking and you dont do that by alienating them. She has walked the fine line between im tough, i will tear you apart, this is war, versus im still a nice person and i want you to appreciate what im trying to do because it is the right thing. Cory its interesting that some of the various things shes trying to portray in a negative light for being unkind, for being difficult, shes using those same techniques while she is grilling the witness. Judge i dont know she is being unkind. Shes doing her job. Crossexamination takes real skill and you have to be on your game to do it. She is conveying the message that this is Serious Business and we believe this person is not serious. She has to do that in order to get that point across. Cory theres an interesting quote about her written in 2002, oddly enough by alan axelrod. It says i feel shes honest direct them a can value cases properly and i know shes going to do a thoughtful and thorough job and figure out the weakness in my case. Those were kind words that. What does he think now . Does his style change as the trial goes on . Judge what you heard there is very straightforward i dont think his opinion has changed whatsoever in this case. He doesnt use a lot of words and is able to get his point across. During this trial, he asked a question of one of the witnesses about an evaluation of a female employee at the firm. The evaluation was she was patient, smart, good and the mother of two young children. All he asked was read the evaluation of the male employee and the evaluation was one sentence will stop at said this person is considered to be one of the best. Then he asked one question does that man have children . The answer was yes and then he just left alone for the jurors to realize why are they bringing up the fact this woman has children, well, so does the man, but that is not an issue at all. Hes understated and the jurors get it and hes very likable and thats how he gets his point across. They have two different styles. One brings in the bells, whistles and props, the technology and alan axelrod does the opposite. He counsels the jurors to pick up the questions and answers either able to get from the witnesses. Cory interesting stuff. Thank you for getting us that insight. Let me get to matt miller with more top headlines. Matt lets get you caught up on what we are following this hour a line of strong storms expected to be tornadoes hit oklahoma and arkansas. At least one person was killed in a Mobile Home Park outside tulsa. Thousands of residents are without power. These are the first reported tornadoes this month in what had been one of the most calm tornado seasons in 45 years. Winnebago breaks down shares of the rv maker fall after they post a 16 drop in profit. Sales rose from a year ago but growth is slower. Deliveries of its highend luxury vehicles fell 22 . The chairman of pirelli is calling on minority shareholders to accept a billiondollar takeover offer. He says any counter offer will be detrimental to the tire makers health will stop the chairman tire makers health. The Company Makes tires, fertilizers and other chemicals. We continue our coverage of the case now in the hands of the jury, bloomberg west after this. Cory welcome back to bloomberg west. Its time for the bite. Here to tell us a lot is brad stone. You have been covering this trial. What do you have . Brad the bite is 3 million. It is a key number in the trial. It is the amount that general partners earned every year. Alan is not a general partner. She says some of her peers were promoted. Mostly the men, and she was not. Thats at the heart of the case that is about to be decided. Cory there is also the suggestion all of the documents that were part of the case have not been fully released yet. The judge was asked when everything was going to be released, maybe trying to get ready for the blowback. Do you have any sense of what Kleiner Perkins is afraid of that has not been released yet . Brad we could certainly use our imagination. I imagine sensitive negotiations with portfolio companies, with perspective startups that came in for investment thats usually a negotiation that happens in private that can sometimes get acrimonious. They are putting their reputation on the line and im sure they are not eager to air that, particularly since the firm has taken a beating during these past few years as the case has been moving through the process. Cory maybe its not the Investment Firm that it was. Maybe it was, but not so much anymore. Brad they were a grand slam hitter. We had amazon and google. There is no venture capitalist with a larger profile than john doerr. They have bigger competition now when you think of greylock and andreessen horowitz, kind of the new kid on the block. But lets not count them out. They were in nest, which sold to google. They were in snapchat. I think they need an influx of fresher talent but it is still one of the eager names and i think it will survive this case despite the bad publicity. Publicity tom perkins brought to the firm with his infamous oped piece about the 1 , where he compared the persecution of rich people, saying i would call attention to the parallels of fascist nazi germany and its 1 , namely it jews, to the progressive war on the rich. Is that something about their culture where they just think they are different from everyone else . Brad i dont think so. Even though one of the founding names, he was no longer at the firm. No organization is judged by its alumni. I think they have distanced themselves i dont think that hurt the brand as much as this trial has. It has been such a slow buildup to the case. I think they did not enjoy those comments a few years ago, but i would not compare that to this where the firms harbors have partners have been hauled out into the public spotlight. They have been among the most progressive firms trying to create a diverse set of partners. It does do better than some of its pure companies, yet it is being penalized. We will see what the resolution is in the next few days. Cory thank you very much. Thank you for joining this special edition of bloomberg west. There will be more bloomberg west tomorrow. Betty this is titans at the table. Welcome aboard. Betty we are taking you to the high seas to find out how one vacation industry is keeping up with the modern age. The cruise industry raked in more than 37 billion in revenue last year, and more than 21 million passengers. What does it take to be the biggest fish in the sea . We find out from the two biggest ceos in the business. This is the biggest and best out there. Betty to stay on top, his