Environmental, Social, and Governance…that’s the sht in the sht sandwich being fed to us by an evil cabal of government, large corporations, NGOs and their philosophical guides…the progressive movement (read: socialism). That’s not news…ESG is implicated in most of the behavior of corporations that anyone dedicated to the quaint and apparently antiquated idea that business is in the business of making money for its shareholders would find puzzling at best, and insane at worst.
Of course the long march through the institutions that accelerated in the 1960s has borne fruit, with Human Resources departments (where people go if they can’t actually do anything productive) throughout corporate America infested with post-modern lunacy. But they are powerful…influencing hiring and training, which can push a corporate culture in new and dangerous directions very rapidly.
But what about the C suites? How about the boards of directors…the sober and mature people who are supposed to guide corporations through these bouts of craziness?
We all know about Blackrock, but there are two other investment managers who together control a huge chunk of corporate America…courtesy of your retirement accounts!
Enter BlackRock, State Street and Vanguard, the three largest and most influential financial institutions in U.S. history. They’re known as the ‘Big Three’ on Wall Street, though many Americans have never heard of them. These three companies control more than $20 trillion in assets, almost none of which is their own. Rather, they manage the money held in everyday American’s retirement accounts, pension funds, mutual funds and investment accounts. Together, the Big Three constitute the largest shareholders of nearly 90% of the largest companies listed on the U.S. stock exchange – the S&P 500. The Big Three’s influence is staggering. But if they were managing this money simply to make more money, there might not be an issue. They’re not. The Big Three are proponents of what’s called ‘stakeholder capitalism,’ which is a belief that businesses should be run not only to increase value to shareholders, but to serve all stakeholders, including government agencies, activists, and non-governmental organizations.
So we have activist investment advisors pushing their own brand of socialism from the top by using YOUR proxy votes to manipulate boards across America.
And it gets worse! They also push specific policies designed not to maximize shareholder value, but to push America toward their warped view of a communitarian Nirvana.
The Big Three began to issue guidelines on how they expected their portfolio companies to honor this ‘commitment’ by implementing so-called Environmental, Social, and Governance, or ESG, targets and scores To encourage compliance, the Big Three uses their power as shareholders to influence who sits on corporate boards. In 2021, they voted to replace Exxon Mobil board members with climate experts, who immediately sought to reduce the oil giant’s exploration and drilling output to meet contested climate goals. They subsequently voted for ‘racial equity’ audits at companies like Apple and Home Depot, compelling the companies to impose race-based hiring criteria and implement diversity, equity and inclusion programs. Beyond shareholder voting, The Big Three employ large engagement teams to pressure CEOs for progress on ESG goals and increased ESG scores.
And those ESG scores are used to control capital; preferential rates are linked to ESG, not the quality of corporate governance, cost control, quality control…you know…the stuff that actually makes corporations successful in the market.
And since most people have at least a little bit of retirement money stashed in their company’s 401(k) plans or their own IRAs, it is a good bet that you have given these three companies your shareholder votes. But how to disentangle yourself from them is a huge issue! For instance, if all you want to do is buy an index fund of the S&P500, one of the cheapest and biggest ones is administered by…you guessed it!…State Street.
As Joe Mannix and Buck Throckmorton have written on these pages, direct boycotts targeting a few companies may be the most effective way to get a conservative message across to ESG-obsessed corporations. But we have also ceded a hugely powerful tool — our shareholder votes — to our enemies, and it is extremely difficult to change that, because they control so much of the investment capital in America.
