This week, shareholders of Microsoft overrode management's wishes and supported a resolution to force the management of the company to disclose its sexual harassment policies to shareholders and to issue a report on the effectiveness of those policies. Microsoft has had serious problems with this issue, including numerous press reports about founder Bill Gates’ immoral sexual relations with employees. Reports also indicate that one such relationship was the trigger that caused Gates to be forced off the board of the company he founded. Gates’ much-publicized relationship with notorious sexual abuser Jeffrey Epstein was clearly an issue as well. In addition, widespread allegations of abuse surfaced as long ago as 2012, when 238 women filed a joint claim of harassment. As of 2019, email chains from employees were still claiming that the culture of abuse had not been dealt with.
Management argued against the resolution, claiming that it already had a robust sexual harassment policy, albeit one the details of which had not been shared with the public. The company argued that since it planned to release them at some non-specified but "soon" date, such a mandate from shareholders would not be necessary. Shareholders disagreed and overrode the board, which is a very unusual outcome. It seems that the owners of the company were simply unwilling to take management's word for it and insisted on using their authority.
As a member of a team involved with creating investment indices, including one that holds a substantial stake in Microsoft, in which I am personally invested, I advocated that my colleagues vote for the resolution, although they were in no need of convincing.
Here is my argument (slightly edited for matters of proprietary information):
"Whereas sometimes calls for reports on sexual harassment might be attempts at grandstanding over an issue, e.g. for times when the company already has robust reporting and no evidence of systemic problems in this area, that is clearly not the case for Microsoft. The founder of the company has been credibly accused of being a serial sexual harasser and there are press reports of him associating with notorious accused pedophile Jeffrey Epstein. Further, there is a large number of legal complaints about sexual abuse and harassment. If there was ever a case for shareholder insistence on further inquiry and disclosure, this is one. This is not a situation in which activists might be trying to unearth bad things which will then lead to a tarnishing of the brand. The brand is already tarnished. This is a way to try to reclaim public confidence. For these reasons, not only should [we] support the resolution, but would ask management how it could possibly have come to the conclusion that it is in the best interests of it, and shareholders, to oppose this resolution?"
In discussions like this I see two misunderstandings. One misunderstanding is that such actions are inconsistent with a commitment to the free-enterprise system. This argument shows up often among internet trolls and goes something like this: "I thought you capitalists believe that business should be free." The argument is a form of the "poisoning the well fallacy," used as an attempt to discredit conservatives. But it is also a straw man fallacy in that people who believe in the free-market system in no way reject the idea of shareholder authority; quite to the contrary, it is of the very essence of the capitalist system. What makes it capitalist is it affirms private property rights, including the private property rights of those who invest their capital in the businesses as shareholders. Telling shareholders that voting on these matters is a violation of the free-market system is about as coherent as telling voters that they violate democracy by voting instead of leaving the system to make decisions without their input.
Voters have a job, to oversee political leaders. Shareholders have a job, to oversee corporate leaders. Companies are stewards, trustees of our wealth. The Bible deals extensively with the issue of unfaithful stewards; it is a common theme in parables, for example. Modern economists refer to the problem as “agency risk,” i.e., the risk that the stewards will work in their own interest and not that of the investors. Jesus spotted this problem and taught about it 2,000 years before economists did in his parables and in his identification of certain leaders are “hirelings” who have different incentives than the true shepherds who own the flock.
Christians are late to the fight when it comes to dealing with the hireling class of corporate leaders, and that includes hirelings who mistreat God’s precious daughters.
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.”