Economy and Society is Ballotpedia’s weekly review of the developments in corporate activism; corporate political engagement; and the environmental, social, and corporate governance (ESG) trends and events that characterize the growing intersection between business and politics.
Around the world
Switzerland proposes emissions reporting regulations
Swiss officials proposed emissions reporting regulations last week that would align with the European Union’s rules:
The new Swiss Federal Council proposals follow the launch in the EU of the Corporate Sustainability Reporting Directive (CSRD), a major update to the EU’s prior Non-Financial Reporting Directive (NFRD), significantly expanding the number of companies required to provide sustainability disclosures to over 50,000 from around 12,000, and introducing more detailed reporting requirements on company impacts on the environment, human rights and social standards and sustainability-related risk. …
In its statement announcing the new consultation, the Swiss Federal Council said that it has “opted for internationally coordinated legislation,” noting that, given the close economic ties with the EU, “both large and small Swiss companies are affected by the new EU rules – directly or indirectly.”
Switzerland currently requires mandatory sustainability reporting for large companies, such as those with more than 500 employees. Similar to the CSRD thresholds, the new Swiss proposal would introduce sustainability reporting requirements to companies with 250 employees, CHF 25 million (€26 million) in total assets and CHF 50 million (€52 million) in sales. According to the Council, the move would increase the number of reporting companies to around 3,500 from 300 currently.
In the states
AAF report argues BlackRock mismanaged Oklahoma pensions
The American Accountability Foundation—an organization opposing ESG—released a report late last month arguing that BlackRock used Oklahoma public pensions to advance political goals over the last few years instead of focusing on investment returns:
Oklahoma Public Employees Retirement System (OPERS) enlists the services of BlackRock, which managed around $4.4 billion of the system’s investments as of June 2023, according to its annual financial report. BlackRock voted 54 times to back shareholder proposals “supporting policies such as racial equity audits, gender pay gap reports, efforts to defund conservative candidates and pro-business trade associations, and radical climate policy,” according to AAF, based on documents it obtained through a public records request. …
The state of Oklahoma in 2023 blacklisted 13 financial firms after state Treasurer Todd Russ determined they were boycotting energy companies, as prohibited in the Oklahoma Energy Discrimination Act of 2022. BlackRock is one of the firms on the Restricted Financial Company List, but OPERS exempted BlackRock from the ban for fiduciary reasons, Pensions & Investments reported. …
BlackRock similarly used Nevadans’ pension funds to advance racial equity initiatives and climate-related proposals within publicly traded companies since 2022, the DCNF previously reported, based on another report by AAF.
On Wall Street and in the private sector
SFOF pushes back against new Glass Lewis CEO
Glass Lewis, the second-largest proxy advisory service in the world, recently hired a new CEO who took the position in May. Derek Kreifels—the CEO of the State Financial Officers Foundation (SFOF) and an ESG opponent—argued in an op-ed last week that the hiring demonstrated that Glass Lewis aims to force “Leftwing Politics on U.S. Companies”:
Going forward, institutional investors may find it more challenging to lend credibility to the counsel provided by Canadian-owned proxy advisory firm Glass Lewis. In theory, proxy advisory firms help institutional investors navigate risk and make more informed decisions on board proposals. But, as evidenced by the recent vote on ExxonMobil’s board, Glass Lewis has recast its brand as being more about leftist ideology than fiduciary responsibility. …
When Bob Mann was running Sustainalytics (Morningstar’s ESG rating service), doing business with Israel negatively impacted a company’s ESG score. Morningstar found itself under investigation by no fewer than 20 states for violating state laws against boycott, divestment and sanctions activity targeting Israel. Sustainalytics’ processes and products were “infected by systemic bias against Israel,” as one critic put it. …
Institutional clients looking for politically neutral guidance on voting options should think twice before considering Glass Lewis. In fairness, it can’t be said that ISS offers ESG-free guidance, either. And Egan Jones’ newly announced partnership with BlackRock has fallen short of hope that they would stand out as an ESG-free alternative for red states.
Wall Street Journal columnist argues diversity does not boost profits
Wall Street Journal columnist James Mackintosh argued last week that a 2015 study linking executive diversity to corporate profitability was flawed and irreplicable:
When management consulting firm McKinsey declared in 2015 that it had found a link between profits and executive racial and gender diversity, it was a breakthrough. The research was used by investors, lobbyists and regulators to push for more women and minority groups on boards, and to justify investing in companies that appointed them. Unfortunately, the research doesn’t show what everyone thought it showed.
There are obvious benefits of diverse corporate leadership for society, both in providing role models and in showing a commitment to promoting the best people, irrespective of skin color or gender. But doing it because it is the right thing is not the same as doing it because it makes more money.
Since 2015, the approach has been tested in the fire of the marketplace and failed. Academics have tried to repeat McKinsey’s findings and failed, concluding that there is in fact no link between profitability and executive diversity. And the methodology of McKinsey’s early studies, which helped create the widespread belief that diversity is good for profits, is being questioned.
In the spotlight
Tractor Supply ends corporate DEI programs
Tractor Supply announced June 27 that the company would end its corporate diversity, equity, and inclusion (DEI) programs. The decision came after anti-ESG/DEI activist Robby Starbuck posted on X/Twitter three weeks prior about the company’s diversity initiatives:
The beginning of the end of Tractor Supply’s diversity efforts started on June 6. That afternoon, Robby Starbuck, a former Hollywood director turned conservative activist, posted a message on the social-media platform X saying, “It’s time to expose Tractor Supply.”
He laid out a string of complaints about stances taken by the company and its leaders, from a warehouse displaying pride flags to the CEO promoting the Covid-19 vaccine. …
Three weeks later, Tractor Supply delivered its decision: Diversity, equity and inclusion at the rural chain were over, including related job roles, and so were some of its environmental initiatives and other causes frequently championed by social progressives.
ESG critic Stephen Soukup argued the decision was in the company’s best financial interests and realigned Tractor Supply with its most important stakeholders:
For conservatives who’ve been fighting wokeism before it was a word, this is a powerful moment — even a historic one. Stephen Soukup, author of “The Dictatorship of Woke Capital,” can’t believe what he’s seeing. “Political neutrality is extremely difficult to achieve. … The reason,” he explains, “… is because of the politicization of basically everything in society, right? Health care is now political. Investments are political. Everything has been overtly made into a political issue. … [And] when everything is political, it pits us against each other. … And that’s something that we have to try and prevent against.”
Ever since the Bud Light and Target fiascos last year, Soukup told The Washington Stand, “Corporations have become aware that there is a distinction between ‘stakeholders’ and stakeholders. As the scare quotes imply, the first is a group of people who have no real skin in the game and are using the company solely to make a political point. The second, by contrast, are people who have a genuine interest in the company and its well-being — customers, employees, shareholders, etc. Catering to the former at the expense of the latter has proven to be a disastrous business strategy and, as a result, is rightly being abandoned by corporate leaders who understand what their fiduciary duties are.”
After this explosion of pushback, he feels the ground shifting. “… I’m so much more optimistic now than I was three or four years ago about how effective we can be in halting this ideological, political takeover of business and capital markets,” Soukup insisted.
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