Leadership in the New Normal: Business Leaders Respond to COVID-19 - Conference Call Series

Session Overview & Logistics

• Event: Milken Institute session titled "Leadership in the New Normal: Business Leaders Respond to COVID-19."
• Moderator: Kevin Clowden, Executive Director of the Center for Regional Economics.
• Panelists:
  • Jane Frazier, President of Citigroup and CEO of Global Consumer Banking.
  • Barbara Humpton, President and CEO of Siemens USA.
  • Mike Milken, Chairman of the Milken Institute and Faster Cures.
• Format: Recorded video call with Q&A features; future sessions planned for Asia, mental health, media, and long-term care.

Siemens Strategic Response & Business Continuity (Barbara Humpton)

• Core Philosophy: Siemens operates as a "business-to-society" (B2S) company, prioritizing societal contribution alongside commercial goals.
• Four Key Priorities:
  • Employee health and safety is the primary focus.
  • Ensuring business continuity to maintain the capacity to serve society.
  • Leveraging corporate expertise to solve societal challenges (e.g., hospital capacity expansion, manufacturing efficiency).
  • Forward-looking resilience planning to make the future more robust.
• Operational Adaptations:
  • Medical Support: Utilized expertise to help hospitals expand capacity and build infrastructure (e.g., State of New York).
  • Manufacturing Pivot: Redirected manufacturing experts to increase efficiency and produce new goods; employees used personal 3D printers to create PPE for local hospitals.
  • Global Coordination: Maintained daily global calls with CEOs from China, India, and Germany to share operational data and recovery strategies.
  • Infrastructure Maintenance: Deployed virtual reality tools allowing remote experts to guide on-site technicians for power grid maintenance.
• Future Outlook:
  • Proposes a "strategic digital twin reserve" to archive intellectual property of critical medical devices and industrial products for rapid scale-up during future crises.
  • Emphasizes "now normal" over "new normal," acknowledging perspectives will shift monthly rather than resetting to a static baseline.

Citigroup Crisis Management & Banking Adaptation (Jane Frazier)

• Three Immediate Priorities: Protect employees, protect clients, and protect the firm.
• Remote Work Scaling:
  • Remote access peaked at 35,000 concurrent users; current capacity supports 220,000 with 130,000 active users.
  • 70% of global workforce works remotely; 90% of employees outside branch networks work from home.
  • Successfully closed bank books a day early with zero global physical presence.
• Client Engagement Model:
  • Shift to Digital: Significant pivot away from physical branches and cash ATMs toward digital channels.
  • Hybrid Approach: Implementation of a "high-tech, high-touch" model where digital speed is paired with human advice and support.
  • Relief Programs: One million people signed up for credit card relief via a simplified two-click digital process.
• Support for Vulnerable Populations:
  • Maintained physical branch access for elderly, low-income, and minority clients lacking digital literacy or credit cards to cash stimulus checks.
  • Implemented strict social distancing and hygiene protocols (hand sanitizers) at open branches.
  • Moratoriums: Industry-wide pause on foreclosures and evictions to prevent displacement of economically vulnerable populations.
• Supply Chain & Cybersecurity: Focused heavily on helping corporate clients access capital and address supply chain disruptions; reported a decrease in state-sponsored cyber threats due to reduced office traffic.

Economic Analysis & The "New Normal" (Mike Milken)

• Economic Impact Metrics:
  • Estimates U.S. economic cost at $1 trillion per month, with global costs reaching $5 trillion.
  • U.S. economy contracted by 4.8% in the reported quarter.
  • Market divergence: Bioscience, food distribution, and health insurers hit all-time highs; hospitality and travel industries face fundamental shutdowns.
• Positive Response Indicators:
  • Medical Research: Virus genome distributed on Jan 1; first human vaccine administered on March 16 (9 weeks vs. historical 9 years).
  • Testing Infrastructure: Major retailers (Walmart, Kroger) unprecedentedly provided on-site testing, leveraging foot traffic of 11 million+ weekly visitors.
  • Government Coordination: Unprecedented collaboration between BARDA, NIH, FDA, and private industry (e.g., J&J, Moderna, AstraZeneca partnerships).
• Future Projections:
  • Vaccine Timeline: Expects testing accuracy to be solved within 30 days; anticipates U.S. becoming an exporter of PPE and vaccines by end of May.
  • Structural Changes: Permanent shifts in healthcare (telehealth), education (online learning), and social interaction; increased respect for bioscience careers.
  • Capital Allocation: Advocates for lower leverage and increased investment in public health and medical research.
• Global Inequality:
  • Highlights "human tragedy" gaps regarding education loss for minority and low-income children lacking broadband access.
  • Notes disparity in stimulus packages (e.g., Mexico at <1% GDP vs. U.S. response) and calls for U.S. generosity in exporting masks and ideas to emerging markets.

Sector-Specific Challenges & Social Resilience

• Small Business Reliance:
  • Small and medium-sized enterprises (SMEs) represent 48% of U.S. jobs (80% of total business).
  • SBA loan distribution increased 20-fold (from $30B/year to immediate massive volume) under two months, requiring intense bank cooperation.
• Healthcare & Public Health:
  • Deferred treatments for cancer and chronic disease patients due to pandemic focus; significant risk to immune-compromised populations.
  • Milken predicts a cultural shift similar to the post-Sputnik era, with increased prestige and enrollment in bioscience fields.
• Mental Health & Social Capital:
  • Rising concerns regarding suicide rates and loss of financial security among families.
  • "Social capital" remains strong; essential workers (grocery baggers, drivers) recognized as first responders, leading to increased community gratitude and new meaning for low-wage jobs.
• Supply Chain Disruptions:
  • Severe misalignment between production and consumption: farmers pouring milk and slaughtering hogs due to distribution bottlenecks, while food insecurity looms in sub-Saharan Africa.

Strategic Collaboration & Policy Implications

• Public-Private Partnership:
  • Siemens Healthineers developing total antibody tests for FDA Emergency Use Authorization by end of May.
  • Collaboration with state governors to map lab capabilities and deploy testing resources locally.
• Regulatory Environment:
  • Federal Reserve and CARES Act actions deemed critical for market liquidity; however, financial measures are described as "therapeutic" without a parallel healthcare solution.
  • Need for long-term capital allocation strategies to address vulnerabilities in minority, elderly, and youth populations.
• Global Interdependence:
  • No single industry (e.g., airlines) can be saved in isolation; recovery depends on the safety and functionality of the entire interdependent ecosystem.
  • Milken Institute launched Africa COVID tracker to monitor demographic shifts and health challenges on a continent expected to account for 100% of global population growth this century.