DEI, ESG, CSR: the "alphabet soup of extortion” - Part 2

Andrew Olivastro is the Vice President of Outreach for the Heritage Foundation. Heritage believes people should not be made to feel bad when they buy or use products or invest in companies that deride their beliefs and take controversial stances against their values.

I recently talked with Andy, on my podcast "Meeting of Minds" and he made the case that the left agenda in corporate boardrooms has gotten overextended and is collapsing in the face of public backlash. Below are a few highlights from that discussion, lightly edited for clarity and length.

This is part 2. You can read part 1 here.

  That's an interesting point you make about them being diverse, because they have a global workforce. Well, okay, what about headquarters? Is the board diverse? Does diverse includes different ways of thinking? If you've got a lot of people of different races and different genders but they all went to an Ivy League school, and they all bought the Ivy League ideology, that's not diversity.

Andy: I think that might work...if your product is an Ivy League college textbook, perhaps. But I think that's right. I think that should force us to unpack diversity. Once you put a checklist together, are you still diverse? Once the government comes in and mandates some diversity, are you still diverse? Boston Consulting Group, Mackenzie, Harvard Business Review, they'll publish scores of studies about how diversity will help a business or diverse businesses will grow faster. But once you put borders on what that is or somebody else defines it for your business...

Jerry: no longer reflects the culture. Yeah, I've thought about this. I've actually done analytics on gender diversity in boards. I just wrote a white paper last week on this: companies whose boards of directors have no women do indeed underperform. That would make sense to me, and it's not politics if that's what the data is saying. But you can look at that and say okay, that's true. And then if California comes along, or the European Union comes along, and says we command: thou shalt and must have a woman on the board. That's not the same dynamic as a corporation that chooses to do that. What you're going to get then is a tiny pool of preapproved women who are going to be on 30 or 50 boards, making a fortune and you're not going to have any more diversity.

Andy: And at some point you can slice it so thin that you actually are not broadly reflecting the pool that you would want to. One of the things that's been great about this ADF conference, where you and I have been been working with a lot of great partners and colleagues, is that there's a sense that there's more awareness about this. There's a better understanding about how DEI, or ESG, has sort of poisoned the well, and is purely cover for leftist politics.

Jerry:  I'm feeling that too. They went too far. We can so sense how overextended their lines are.

Andy: But let's not take our ball and go home. ADF has released the Viewpoint Diversity Index. You and I are on that Advisory Board . The launch of something like that, it isn't a one-off celebration. You establish a baseline. Now, if I'm a corporation out there, if I'm a CEO of a corporation, I want my business in that index. I want to show that I respect and honor and treasure viewpoint diversity.

Jerry: All right. Tough question: ESG. Fix it, redeem it, or destroy it?

Andy: Destroy it. Look at somebody like Larry Fink, who has decided that the umbrella of ESG gives him the authority to take people's money and use it to attack their own values, to take investor money and to bet on China, and to do it in a way that he will then say to the Wall Street Journal, to the New York Times, and his own investor shareholder letter, to say that "we are going to change behaviors. We are going to achieve Net Zero." To do all the things that nobody voted for him to do at all. And the more he's put to the test on it, the more, I think, the fissures will be seen, and I wouldn't be surprised if he's looking for a new job at the beginning of next year.

Jerry: What did Sam Zell say? "When did Larry Fink become God?" That's a lot of power. I guess the way I look at it, ESG was created from the very beginning because there's something they didn't like: the thing they didn't like is shareholder capitalism. They didn't like the Milton Friedman model, which is: the job of the business to make a profit for the shareholders,. Otherwise why even create the thing? Why create this new brand if you already agree with shareholder capitalism? This is the alternative: "well, everybody's a constituent, you know. The planet is a constituent, and the polar bears and the penguins are constituents, and the union is, and we work for everyone." And if a CEO's got things arranged so that he works for everybody, that really means he works for nobody, because he alone decides at any given moment which stakeholder he's working for.

Andy: I agree with that completely. I think the antidote to that line of thinking is to go back and look at what Milton Friedman wrote. It probably needs to be updated for our time even though the ideas are still right and true. Friedman said: I'm not telling anybody that you can't take shareholder dollars, and use them to spend on anything you want. Just tell them that that's what you're doing. And if you want to empower a managerial class to take resources, to take capital that would be otherwise invested in product design or product creation or employee salaries...just say so. Say that's what you're doing. Don't say that's a decision the shareholders want. Put it to the shareholders, and they may choose to vote for it...

Jerry: ...but they never have!

Andy: They never have.

What's interesting is there are people on the academic left, and others, who want to also chastise Larry Fink, or even the Business Roundtable, because they don't believe that these commitments are real. And they want to see it codified through SEC regulations, and by the Biden administration. They want to lock them into law and into the regulatory agencies. That's the point. They're looking for mechanisms and control, and power. ESG has been the shoe horn by which the left has done what they couldn't accomplish through the ballot box.

Jerry Bowyer is financial economist, president of Bowyer Research, and author of “The Maker Versus the Takers: What Jesus Really Said About Social Justice and Economics.”

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