Mark Cuban: ‘Shareholders Come Last’ in the Coronavirus Crisis
When the NBA announced earlier this month it was suspending its season due to the coronavirus pandemic, one of the first things Dallas Mavericks owner Mark Cuban did was ensure that arena workers would continue to be paid despite the lack of games.
Since then, he’s not only been managing his businesses through the crisis, but has been a constant media presence, offering advice to small business owners and calling out the politicians and corporate executives he thinks are failing the American people. “I’ve been keeping busy trying to keep everybody up to speed, and trying to do my part,” he told us.
JUST Capital interviewed Cuban over the phone on Wednesday, and while he’s been prone lately to expletive-laden tweets, the billionaire entrepreneur and “Shark Tank” investor sounded optimistic. He said he wished the stimulus bill had been passed much sooner, but was glad the public was going to finally get some relief. And he’s not concerned that we’re going to put workers at risk for the sake of the economy – he said he considers the line about “we can’t have the cure be worse than the problem” to be “empty words” at this point. “It’s just like a public company,” he said. “The first month of the quarter you can only say so much. The third month you can say a whole lot more.”
Cuban told JUST what he wants America’s largest employers to prioritize, what he’s learned running his own companies through the crisis, and what lasting changes he’d like to ultimately see come out of this entire experience. As for corporate leadership, he explained, taking the stakeholder approach we track is absolutely essential for both public health and the health of the economy.
The following transcript has been edited for length and clarity.
Richard Feloni: You were saying you’re prioritizing talking to small business owners, medium-size business owners. But what would your message be to the CEOs of the Business Roundtable, representing around 200 of America’s largest companies?
Mark Cuban: Shareholders come last. You guys have so much impact on the world that you need to take care of your employees and their families first. And if you’re a great company, your shareholders will understand and will expand their P/E out of respect, because they’re all dealing with the same circumstances. This isn’t 2008, where it was built around a financial crisis and dealt with the banks and financial institutions. This is a pandemic, and every single person in this country, and in the world, effectively, is impacted by it. Nobody’s immune to it. Nobody can avoid it. And because of that, you can change your priorities.
Yes, some people are going to say, “Well, my portfolio just got crushed. How can you do this to us?” But the reality is by doing the right thing with your employees, you do more to help stabilize the economy. And from there, we have a better chance of getting back to business as usual.
If you just try to nickel and dime everything to try to optimize your earnings per share and keep shareholders happy, and at the same time your employees suffer and struggle, you’re going to get hit.
New up and coming consumers, the younger generations, Gen Z and millennials, they pay attention. I’ll give you a “Shark Tank” reference: The companies coming on “Shark Tank” all have a social component to them. The Business Roundtable consumers are going to take notes and they’re going to buy based off of how you acted in this crisis.
If you get branded as a company that acted in bad faith, laid off all your employees, or really cut back and you took a bonus or whatever, you’re going to get crushed and your brand is going to go straight into the toilet. You need to look at the bigger picture and recognize that the growing consumer base doesn’t think like [“Family Ties” character] Alex Keaton did in the ’80s. They want to know that you’re doing the right thing. And if you didn’t in the least consider it, your consumers are going to turn their back on you in a heartbeat.
Feloni: And do you think that investors get this, too, at this point?
Cuban: No, I do not. Because everybody’s scared. Do CEOs? I think smart CEOs get it, because I think they’ve seen this before. This isn’t a new concept here.
Feloni: So the challenge, then, is having leadership step up and communicate this to their investors.
Cuban: Exactly. Just say, “Look, if you want to stick with me, give me a little bit higher P/E ratio so that the stock maintains itself. But the reality is you’re not my first consideration right now. And if that doesn’t sit well with you, sorry, because my customers, that’s the way they think, and long term, if we’re looking at five, 10, 100 years from now, that’s what my customers will want. That’s how we’re managing this company and this brand. And if you don’t like it, now’s the time to sell.”
Who’s stepped up and who’s stumbled
Feloni: I know you’ve been keeping on top of the news and calling out certain companies. I’m interested in who you think has illustrated both the good and the bad response to this.
Cuban: Amazon, they’ve been a good corporate citizen for a while, but I’m seeing new beneficial things from them. I think Walmart has done great things. ShopRite. You’ve seen a lot of grocery stores that have kept their doors open. They’ve opened up early for elderly citizens so they don’t have to fight the crowds. You’ve seen delivery companies and obviously the hospitals have been great. You can’t thank the frontline first responders and healthcare workers enough. There’s not enough we can do for them.
I’ll call out on the negative side 3M. I like the fact they maximized production [of safety masks] – that’s a good thing. But they didn’t communicate with us – and that’s a horrible thing. Here we are, and have been for weeks, in a situation where we see our healthcare providers screaming and crying for N95 masks. There’s a product manager at 3M who sells a boatload of N95 masks who knows this industry intimately. They know where the biggest buyers are, who their distributors are selling to, what the price points are. They could’ve come out and talked about the supply chain.
They could have come out and said, “Here’s what’s happening in the marketplace. Here’s what we’re doing to support it and to try to reduce friction. We’re going to go talk to our competitors and see if we can do something on a combined basis. There’s not a lot of people making them here in the United States, so we might have to go outside the country, but we’re going to do everything we can because we know that the people who are really getting the job done are healthcare providers and we’re going to do what we can to get them that. We’re sorry there’s shortages, and can’t make any promises, but that’s what we’re going to try to do.”
Had they done that, the stress level of all healthcare providers wouldn’t have dissipated, but it would’ve come down because there was somebody accountable. Instead they said that they’re increasing their production, but they did nothing else. Until they started getting called out over this. And then all of a sudden Mike Roman, the CEO, comes down and says, “We’re going to offer masks directly to New York and Seattle because that’s where the biggest hotspots are.” Hello? Why didn’t you do that two or three weeks ago? Why now? That’s being a lousy citizen.
This morning I read in Axios about an interview that the CEO of Boeing gave. He’s saying, you know what, we wouldn’t take a deal where the the government asks us for equity, we’ll look at all the alternatives. Why are you trying to put that onto taxpayers? And I know it’s not your fault, but it’s not the taxpayers’ fault. It’s not your employees’ fault, either. It’s just the wrong thing to say and it’s the wrong thing to do.
Part of the challenge is nobody’s negotiating for the taxpayer. If I, Warren Buffett, or Jamie Dimon walked into the room and started negotiating on behalf of the taxpayers, you better believe we’re getting equity or equity kickers, and we’re doing everything that we can to protect our downside and open the door for the upside. That’s exactly what Boeing is saying they won’t do. That’s wrong in every which way.
Feloni: It sounds like at this point the communication side of things is as important as what the actual policies are going to be at these companies.
Cuban: Absolutely. I mean you can only do what you can do. But you can tell people and be as transparent as you can. This is where heroes are born. When the shit hits the fan, who can step up and do that? And you may not be able to change the game, but you at least can communicate. So if you’re a toilet paper manufacturer, where the hell are you!
Let me add one other thing. I called my bank and I said a small business loan scenario is going to happen at some level and there’s a chance there’s going to be forgiveness involved. So if you have 500 or fewer employees, the government is going to give you initially as a loan up to four months of salaries for any employee making under $100,000 a year plus rent, plus utilities, plus overhead, and money for debt, as well. And if you retain all those employees or increase the number of employees working for your company, they will forgive that loan amount. So effectively for a bank you get to go to your customers, your prospects, and say, I have free money for you if you keep your employees and hire people.
And plus, given that there’s going to be a lull between the approval of this legislation and the time that checks get into people’s hands. Banks now have the opportunity to say we are ready to advance up to $1,200 to any individual with a 1% fee or 2% fee. If you’re already one of our customers, come get your check right now, and if you’re not a customer, come open up an account. And if you’re a small or medium sized business and you’ve been doing business with us, come in and get your $30,000 loan. We’ll certify it. When the government’s ready, we’ll just pay it off with the new money from them. And when the term is over in four months, boom, we’ll take care of all that paperwork for you and we’ll wipe it off the books. That is a banker’s dream! And you haven’t heard a peep from a single retail banker or small business banker yet. That is so ridiculously stupid.
How he’s led his own businesses through the crisis
Feloni: For your own organizations, how have you handled the calculus of what is worth the short term hit for long-term health? And what can’t you compromise on?
Cuban: The way I prioritize is safety first – you can’t compromise that at all. It’d be unconscionable for me to think that I would put somebody at risk. I don’t care what anybody says, I’m locking it down until I’m certain it’s safe. That’s number one: taking care of my employees.
Number two: making sure they have not just their safety but stay on the payroll. We have a restaurant I’m a 50-50 partner in, Westside Tavern in LA. They’re closed, but we’re paying everybody and we’ll keep on paying everybody. We did the same thing with Live Nation, another one of my companies. Any company where I have enough of it to make payroll decisions, they’re all getting paid. The marginal value of a dollar to me is a whole lot different than the marginal value of a dollar to them. And I recognize that.
Number three: some of my “Shark Tank” companies, I own about 5 or 10% and I’m not the active management — I’m counseling them. I’m saying be ready, call your bankers, and be proactive because it’s your responsibility to your employees. We know you have no revenue coming in. We know that if you haven’t already, you want to lay off employees. But now with this money coming through, through this new legislation, it’s your responsibility as a CEO, as an entrepreneur, to your employees for you to get it right and go to your bank and make sure you get this money. Period, end of story. That is the one thing that you have to do and that’s what I’ve been beating them over the head with.
And the corollary to that is I’ve got some companies that are doing really, really well. Anybody who sells to grocery stores, and bikes are skyrocketing right now. I’m encouraging them to hire people, don’t put the money in your pocket. Even though it’s not sustainable, hire people temporarily and pay them at least $15 an hour because you want them to be able to live. Go out and hire people because it’s the right thing to do.
Feloni: What about for those who are more cash strapped or don’t have as many resources as you’re able to tap into?
Cuban: You have to communicate with your employees. You have to be honest. It’s an obligation and it’s an opportunity. There’s more downtime than usual right now for even the big businesses, maybe not the CEO or executive management, but for somewhere in the chain. And that’s an opportunity to sit down and talk to your employees. Let them know exactly what’s going on in the business, same with your suppliers, same with your customers, same with any other stakeholders you might have. That’s where you have to really be a leader and let people know what you see, what you’re doing and why, and say here’s the support for it.
What we can all learn from this experience
Feloni: What do you want to see, on a policy or management side, come out of this crisis? And when I say that I mean everything – the pandemic, the economic crisis that may eventually become a financial crisis, and then the recession we would have to deal with.
Cuban: One, “black swans” aren’t so black anymore. We’ve had, it seems like one every 10 years. And with this pandemic, it could happen again. Now you’ve been warned, right? Your fiduciary responsibility is not to think this can’t happen, but to think this can.
Number two, I think there’s going to be some incredible businesses that come out of this. You know, I don’t know what the new abnormal is going to be, but there’s somebody out there who can anticipate it.
And three, I hope we get some leadership, because that’s what’s been sorely missing in this country, for at least a couple years. And so if politicians are not our leaders – I’m a big believer in that you don’t have to be the leader to be a leader – hopefully corporate leaders will do the right thing and step forward. Hope is what we really need right now.
The thing about the United States of America is we’re more entrepreneurial than any other country in the world. The true entrepreneurs realize the American Dream is alive and well. And this is where capitalism gets to shine, when your back is against the wall. This is where it gets to say it’s this innovation, this creativity, and all these entrepreneurs that stepped forward and gave us what we needed at the right time.