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Are we witnessing the retreat of woke capital?

By Stefan Padfield
web posted April 22, 2024

Have the reports of woke capitalism's death been greatly exaggerated?

Let's start with some background.

People regularly use "woke capital," "stakeholder capitalism," and the use of "ESG" (environmental, social, and governance) factors interchangeably. What these terms and phrases often have in common is a rejection of the profit maximization or "shareholder capitalism" or "shareholder wealth maximization" norms that have left even struggling students today better off than kings and queens of bygone eras—and brought us to the cusp of eradicating poverty.

To be fair, some proponents of woke capital argue that ESG is "good for business" in that it merely helps avoid short-termism and better captures all the risks impacting long-term value. To this, critics respond by noting that profit-maximizing capitalism already takes all material information into consideration and already includes time horizons in its expected value calculations. Thus, one should rightly be suspicious of ESG operating as a Trojan horse for pushing a leftist agenda that advocates can't get implemented via democratic means. This becomes a particularly compelling concern once one notices that there appears to be little, if any, light between standard ESG platforms and the wish lists of Bernie Sanders, Elizabeth Warren and Alexandria Ocasio-Cortez. Protestations that this is all just shareholder democracy in action rightly fall on deaf ears once one notices that what ESG proponents call shareholder democracy is actually powerful institutions like BlackRock, Glass Lewis and the SEC leveraging other people's money to advance the ideological preferences of their managerial elite.

So, what are we to make of it when BlackRock CEO Larry Fink says "he's 'ashamed' to be part of the ESG debate?" Has the tide really changed? Perhaps a recent vignette will be illuminating.

I work for the Free Enterprise Project of the National Center for Public Policy Research (NCPPR), and we recently filed a shareholder proposal with Best Buy that effectively asked the corporation to audit its partnerships with organizations that advance a radical gender ideology associated with things like chemical castration and genital mutilation of minors. As is not uncommon, we were able to negotiate a quiet withdrawal of this proposal in exchange for a commitment by Best Buy to end/screen at least some of the donations it makes to such organizations. Inexplicably, some apparently carefully curated emails related to these negotiations were subsequently disclosed in an SEC filing by Best Buy. As far as we can tell, the emails were irrelevant to the filing, as indicated by the fact that they were not mentioned in the body of the filing. (As an aside, Best Buy's lawyer informed us that they interpret the relevant SEC guidance as requiring disclosure of all correspondence between the parties occurring before the filing, though they admit other interpretations are possible. We view that interpretation as absurd, given that it effectively eliminates the possibility of any value-enhancing quiet withdrawals of proposals. Importantly, what Best Buy had included was not a complete record of prior correspondence but just some selections, an action for which we repeatedly sought explanation without satisfaction.) These tucked-away emails were somehow subsequently found and reported on by an "NBC Out" reporter with no financial reporting history in an article that reported Best Buy had essentially walked back its commitment to us and instead doubled down on its support for radical gender ideology after pushback from the Human Rights Campaign. While much more can and will be said about all of this, the bottom line is that for all the talk of woke capital being in retreat, the reality is that corporations like Best Buy (or at least executives and counsel acting with the full authority of Best Buy) appear to be still very much beholden to radical leftists.

As for leftist climate change alarmism and activism, it is worth reviewing Larry Fink's most recent letter to investors. While Fink was true to his word by not mentioning ESG once, he nonetheless reiterated BlackRock's commitment to the left's net zero delusions by referencing some version of "carbon" roughly twenty times, and reiterated that BlackRock would continue to use its substantial influence to push companies towards more value-destroying and security-destroying green energy commitments.

Finally, turning to the "G" in ESG, it is worth noting Nasdaq continues to push its board diversity disclosure rule (essentially, a comply-or-explain diversity quota rule) despite the SEC having been unable to cite a business case for diversity as justification after a review of all relevant studies. In fact, the prior empirical work DEI advocates cite to argue the business case for diversity has been "proven" has subsequently been utterly debunked. (Note, NCPPR is currently challenging the Nasdaq rule.)

While mainstream America should certainly applaud any evidence of woke capitalism's retreat, we must always remember that Mao used tactical retreat as an integral part of his path to installing his deadly, totalitarian regime. To at least some extent, ESG proponents freely admit using retreat as a tactic, saying things like: "Though the language around ESG might change, the discipline itself isn't going anywhere."

Advocates for free market capitalism must thus stay vigilant and continue to push for a return to sanity in corporate governance. ESR

Stefan Padfield is deputy director at the National Center's Free Enterprise Project (FEP), whose stated goal is to oppose the woke takeover of American corporate life. This was first published at Human Events.


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