States Are Complicating Corporate Pandemic Planning

Disney suspended its vaccine mandate for its employees in Florida because of the state’s regulations.Credit…Joe Burbank/Orlando Sentinel, via Associated Press

Red tape, red states

Now that the Biden administration’s nationwide coronavirus vaccine mandate for large companies has been overturned by the Supreme Court, employers are left to navigate a thicket of state and local rules. In New York, that means private employers have to require vaccines. In Florida and Texas, laws limit the pandemic protocols they can put in place.

And so, the companies that flocked to states like Florida and Texas in search of low taxes and light regulation have found themselves dealing with lots of red tape, at least when it comes to Covid policies. For companies with national footprints that introduced vaccine mandates, or were preparing to do so before the Supreme Court ruling, this makes designing workplace policies more complicated.

The states of play:

In Florida, where 65 percent of people are fully vaccinated, businesses must allow for an extensive list of exemptions to vaccine mandates, effectively making them moot. Violations of the rules can cost as much as $50,000 per incident.
In Texas, where 59 percent of people are fully vaccinated, Gov. Greg Abbott issued an executive order in October declaring that no employer could compel vaccination for someone who conscientiously objects to it. And businesses that ask customers for proof of vaccination can face stiff penalties, including the loss of a liquor license.

How big companies are reacting:

Disney suspended its national vaccine mandate for employees in Florida, as it works to keep the requirement in place for workers in California.
The Related Companies, which mandated vaccines for all of its employees in April, is no longer requiring them of its staff in Florida.
Several financial firms, including Vanguard and Blackstone, are maintaining vaccine mandates that apply only to people entering their offices.
BP, whose 3,500 Houston office employees are working remotely, is requiring employees to be vaccinated or tested twice weekly once they start going back in person.

Beyond taxes and regulation, vaccine rules could become a factor as states compete to attract business. “It’s a line that they need to straddle very carefully,” said Ian Carleton Schaefer, a partner at the law firm Loeb & Loeb. “To make sure that their politics on the vaccination issue don’t drive away the bigger-ticket issue — like making it an employer-friendly state to do business.”

HERE’S WHAT’S HAPPENING

Pfizer will seek approval for its coronavirus vaccine for children under 5. The drug maker said it will ask the F.D.A. to authorize the expanded use; U.S. officials hope that permission will come by month’s end. Meanwhile, Moderna received full approval for its vaccine, and Novavax was seeking emergency approval for its non-mRNA vaccine.

Fed officials suggest they’ll move quickly to cool the economy. Four of the central bank’s regional governors implied yesterday that the Fed will move decisively, not gradually, to withdraw emergency financial support, given the strength of the economy.

AT&T will spin off its stake in its media business to shareholders. The telecom giant said it will give its holdings in the newly merged WarnerMedia and Discovery to its investors after that deal is completed, cleanly breaking from the media industry. It will also cut its dividend accordingly, as it had previously said it would.

Sony will buy the video game studio Bungie for $3.6 billion. The deal to buy the developer of Halo and Destiny follows Microsoft’s $69 billion deal for Activision Blizzard and other takeovers in the industry. (Ironically, Halo is exclusive to Microsoft’s Xbox; Sony said Bungie will still make games for other platforms.) Bankers say that many of the privately owned game studios are happy to remain independent — but could be swayed by richly valued bids.

Speaking of gaming M.&A. … The New York Times Company (hey, that’s us!) is buying Wordle, the hugely popular word-guessing game, for a price in the “low seven figures.” The deal is part of The Times’s plan to grow its subscriber base, but the company said the game will remain free for now.

Follow the money

As the midterm elections approach, both political parties have been amassing war chests. Yesterday was the deadline for the latest campaign finance disclosures, which show that Republicans are way ahead of Democrats, in part because of well-heeled business donors.

House Republican leaders’ super PAC ended 2021 with $61 million, far ahead of the Democrats’ counterpart, thanks to seven- and eight-figure donations. Among the biggest contributors were Ken Griffin and Patrick Ryan, the founder of the insurer Aon.

Big business donors have also given to Joe Manchin and Kyrsten Sinema, the two Democrats who have thwarted some of President Biden’s legislative agenda:

Manchin, of West Virginia, raised nearly $300,000 days after publicly opposing Biden’s social spending plan. That came from corporate PACs tied to the likes of Anthem, CVS Health and Meta; it also came from traditional Republican donors like Ken Langone and Richard LeFrak.
Sinema, of Arizona, raised $1.6 million in the fourth quarter from G.O.P. stalwarts like Langone, George Roberts of KKR and Nelson Peltz; she also took money from groups like the American Petroleum Institute. (Her grassroots donations, however, have largely dried up.)

“We tried to figure out, ‘Where did the money go?’ — and it turns out it didn’t primarily go to workers who would have lost jobs. It went to business owners and their shareholders and their creditors.”

— David Autor, a professor at M.I.T. who studied the effects of the $800 billion Paycheck Protection Program, one of the government’s most expensive pandemic relief efforts. Only about a quarter of the money spent by the program paid wages that would have otherwise been lost.

A nuclear option on Russian sanctions

The Society for Worldwide Interbank Financial Telecommunication, or Swift, is a messaging service that connects more than 11,000 financial institutions to enable them to transfer money. The global cooperative has tried to be apolitical, but at times it has been caught up in diplomatic disputes.

The Biden administration has threatened “severe economic consequences” for Russia if it invades Ukraine. To that end, cutting Russia off from Swift is considered a nuclear option by sanctions experts.

“The Russian economy is a different beast,” said Adam Smith, a senior sanctions official in the Obama administration. “It is twice the size of any economy the U.S. has ever sanctioned.” Last week, Biden administration officials met with big American banks to discuss the market impact of sanctions on Russia, including the ramifications of cutting it off from Swift.

Swift has been used in sanctions before. In 2012, Swift expelled Iranian financial institutions, including its central bank, to comply with E.U. sanctions. In 2014, when access to Swift was discussed as part of sanctions on Russia after it annexed Crimea, Russian leaders called it a “declaration of war.”

How would Russia respond? Russia has developed an alternative payments system since 2014, reducing the threat of losing access to Swift. “It won’t be as painful for Russia as Western officials envision,” said Maria Snegovaya, a visiting scholar at George Washington University and a co-author of an Atlantic Council report on U.S. sanctions on Russia. Sanctioning Russian banks directly, especially by cutting their ability to trade in dollars, would represent a more targeted strike.

Exclusive: Carlyle to announce 2050 net-zero commitment

The private equity firm Carlyle will announce today that it will pledge to have its portfolio companies get to net zero greenhouse gas emissions by 2050, DealBook is first to report. That makes Carlyle one of the first major private equity firms to join a net-zero pledge already signed by BlackRock, Goldman Sachs, JPMorgan Chase and other big financial institutions.

The move by Carlyle, which has more than 250 portfolio companies and nearly $300 billion in assets under management, could put pressure on rivals like Blackstone and KKR to follow suit.

Private equity firms have been holdouts on net-zero pledges. The diverse array of companies that these firms own makes it difficult to take a standardized approach. It also typically takes much longer to “decarbonize” a company than the three to five years that private equity firms tend to own their portfolio companies. But private equity is coming under pressure from pension funds, regulators and capital markets to take part in net-zero pledges.

The big question: To invest or divest? Selling carbon-intensive companies is one way to reduce a private equity portfolio’s emissions, but Carlyle’s C.E.O., Kewsong Lee, said it was “imperative that the private equity industry focus on investing, rather than divesting,” to facilitate “real progress” in the transition to cleaner energy. “We won’t invest in or finance coal-fired power generation — except if we see an opportunity to decommission those assets and repower them to lower-carbon energy sources,” said Megan Starr, Carlyle’s head of global impact.

The scope of Carlyle’s commitment: The company will report on its progress every year and by 2025 it aims for three-quarters of its portfolio companies to align with the Paris Climate Agreement. After that, it will require companies to adhere to those standards within two years of buying them. This covers so-called Scope 1 and Scope 2 emissions, which companies can directly control, but not Scope 3 emissions, the pollution generated by a company’s suppliers and customers, which are often the most material. Carlyle’s 2050 net-zero goal does, however, include Scope 3 emissions.

What does it mean for returns? In terms of the cost to Carlyle, the firm will tackle each company by starting with investments in decarbonization that quickly make the most difference. After that, “it does get more challenging and there might be a longer payback period,” Starr said.” But because the markets now “value climate strategy so highly,” she said, the work will be worth it.

THE SPEED READ

Deals

Apollo Global Management will invest $760 million in Legendary Entertainment, the movie studio behind the remake of “Dune” and other blockbusters. (NYT)
Gabe Plotkin, the hedge fund manager who lost billions last year betting against meme stocks like GameStop, will launch a new fund — and it won’t do any short selling. (Bloomberg)
E.S.G.-minded activist investors are increasingly demanding that retailers provide more sick leave for employees. (Axios)

Policy

Representatives Michael McCaul, Republican of Texas, and Ro Khanna, Democrat of California, were the biggest stock traders in Congress last year. (MarketWatch)
White House officials are reportedly frustrated with how Xavier Becerra, the secretary of health and human services, has handled the pandemic. (WaPo)

Best of the rest

Inside Facebook’s pivot to focus on the metaverse, which has led to huge disruption within the tech giant. (NYT)
Despite labor shortages, part-time service workers don’t feel like their jobs are secure. (NYT)
“Teachers Are Quitting, and Companies Are Hot to Hire Them” (WSJ)
The college student who built a bot to track Elon Musk’s private jet flights is launching a business to track other billionaires’ travels. (Bloomberg)
The Smithsonian will put Jeff Bezos’ name on a building in recognition of a $200 million donation, but the agreement lacks a “morals clause” to remove his name if it becomes a liability. (MarketWatch)