As we mentioned in our last newsletter, we hosted a webinar to kick off The Guardrail Project two weeks ago. A recording of the event is available here, and provides a good grounding in the theory behind our work, as well as our plan for shareholder-sanctioned limits (“guardrails”) on corporate activity. These guardrails will protect our social and environmental systems from further degradation by corporate executives in search of profits.
Department of Labor Proposal on ESG Investing
Another webinar recording from July is available here (audio only). This webinar, co-sponsored by The Pre-Distribution Initiative and TSC, provided advice to those interested in filing comments to the rule recently proposed by the Department of Labor. This rule is intended to make it harder for retirement funds to invest in a manner that protects our fragile environment and social fabric. The Trump administration’s theory is that considering so-called “ESG” (environmental, social and governance) investing sacrifices financial returns. This concern has no basis in fact, and TSC has filed its own comment, accessible here and discussed in detail below. Another comment, co-authored by a host of experts who demonstrate that smart investment requires close attention to ESG matters, can be found here.
Political Corruption and Corporate Hypocrisy
One of the guardrails we would like to impose would limit corporate political contributions (something that is difficult for the government to accomplish due to recent Supreme Court precedent extending broad political speech rights to corporations). This recent report from the Corporate Accountability Project shows that corporations like Coca-Cola, Pfizer, Wal-Mart and many, many others who trumpet their sustainability bona fides are in fact contributing to the fight against sustainability through opaque chains of trade associations and dark money pools. These companies are simply hypocritical on climate, LGBTQ concerns, racial justice and other issues, and shareholders need to hold them to account.
Avoiding Tax Avoidance
Another important guardrail will address fair payment of taxes. Companies like Apple and Amazon brag about their climate policies, but then avoid their fair share of the tax burden, leaving governments unable to do the fiscal work necessary to decarbonize the world’s economy in an equitable manner. The Shareholder Commons recently signed this letter in support of HR 5933, requiring corporations to disclose information on a country-by-country basis to expose tax avoidance and ensure that we emerge from the COVID-19 pandemic on a path to a sustainable and fair economy.
Last month’s newsletter reported on the increasing popularity of benefit corporations, which can put people before profits. Since then, another benefit corporation, Vital Farms, has filed with the SEC to go public. Rick has posted a law review article (corporate law nerd alert!) on the direction that the benefit corporation movement seems to be headed. Here is the abstract of the article:
Ever since Adam Smith described the efficiency of markets in an age where freedom and property rights were coming to be seen as key elements of the good society, capitalism has honored the concept that capital return at individual enterprises is a good heuristic for their social return. In a complex and interdependent global economy, however, that concept is being challenged, as many question whether the costs of unfettered profit-seeking outweigh its benefits. This has led some to challenge the utility of the shareholder primacy doctrine, and others to challenge the utility of capitalism itself. This article argues that benefit corporation law represents an important opportunity to establish a better set of ground rules for capitalism that would preserve the capital allocation function of markets while addressing the negative social and environmental impacts that have become associated with capitalism.