Monday, June 14, 2021

How the Government Makes Corporations Woke

When corporations promote left-wingery, free-market conservatives are met with a taunt: “You want companies to have freedom of speech, and you want the free market to decide, so what are you complaining about? This is what you wanted.”

Of course, private, free-market de­cisions are never immune to private criticism. But “woke capitalism” is also not purely the result of private, free-market decisions. Behind the invisible hand of the market is the mailed fist of the government, pushing companies to the left in ways direct and indirect, in areas ranging from climate policy to workplace and hiring rules.

There are four major capacities in which government pressures companies to go woke: government as corporate shareholder, government as customer, government as capital-market regulator, and government as workplace regulator.

Government as shareholder: Who owns corporations? The shareholders. In theory, corporations work equally for the financial benefit of all the shareholders. But not all shareholders have an equal voice. Those with large holdings and organizations get more attention. In today’s America, many of the largest and most active investors are state and local public-pension funds that manage enormous pots of money, such as the colossal California Public Employees’ Retirement System (CalPERS) and the New York State and Local Retirement System (NYSLRS). These are, in theory, merely investment fiduciaries, seeking the best returns to support the retirement benefits paid out to each state’s retired government employees. In practice, many of the pension funds are shot through with left-wing activists who see a government-controlled stake in public companies as a lever with which to move the world.

For example, the California State Teachers’ Retirement System (CalSTRS) is the second-largest pension fund in the U.S., with approximately $275 billion in assets. It owns $300 million of Exxon­­Mobil stock. It could reap the profits of owning ExxonMobil for the benefit of California teachers, or it could sell the stock if it felt morally obligated to divest. Instead, it is the largest share­holder involved in a “Reenergize Exxon” campaign that recently in­stalled three dissident directors on the board with the aim of moving America’s largest oil company away from carbon-based fuels.

In a March 2021 blog post on the Harvard Law School Forum on Corporate Governance, the head of sustainable investment and stewardship strategies at CalSTRS, along with a member of her staff and an Oxford professor, wrote that “CalSTRS is working on develop­ing its model so that it can be sub­stantially scaled in order to address the many environmental (e.g., global warm­ing, loss of biodiversity, and plastics in the oceans) and social (e.g., racial, gender, and income inequality)” issues it wishes to address through its share­holdings. She described the anti-ExxonMobil campaign as a “pilot” for strategies to storm the “Corporate Castle” of companies that decline to follow the activists’ directives. That model includes an “army of investors (could be few but mighty) who will support attacking the castle walls,” “NGOs and other stakeholder repre­sentatives who can be marshalled to apply pressure,” “executive search firm(s) for identifying the slate of new executives and directors” to be installed, and “appropriate media outlets who can amplify the message.”

This pressure campaign goes beyond environmental issues, which are just one of the three corners of the “ESG” formula of environmental, social, and governance topics on which government shareholders are active. CalPERS has been investing in private as well as public companies and then using its stake to pressure the companies to meet racial and other “diversity” quotas. In 2018, CalSTRS announced that it would use its financial heft to pressure retailers anywhere in the country to stop selling guns that are banned in California — overriding the laws of other states. It signed on to a collective effort of state pension funds declaring “Principles for a Responsible Civilian Firearms Industry,” with a roster that also included CalPERS and the pension funds of Connecticut, Florida, Maine, Maryland, Oregon, and San Francisco. These are all arms of government, seeking to own the means of production in order to dictate what may be produced and sold.

As discussed by Patrick Pizzella elsewhere in this issue, the Trump administration promulgated a rule re­focusing shareholder fiduciaries on pursuing the economic interests of their beneficiaries over their own political causes. The Biden administration blocked the rule from going into effect.

Public-shareholder activism is not limited to American government entities. Pension funds and sovereign-wealth funds of foreign states have their own lists of demands and priorities. Norway’s trillion-dollar sovereign-wealth fund, whose revenue comes from taxes and fees on the country’s oil industry, is the largest single owner in the world’s stock markets. Taking its marching orders from the Norwegian parliament, it sets “clear expectations” that “the companies in our portfolio should address global challenges in their corporate govern­ance” that “largely coincide with the UN Sustainable Development Goals.”

Government as customer: Government doesn’t just invest, it also buys and spends. Collectively, government con­tracts can provide a large share of a business’s income. In some industries, such as military contractors or health providers, it is effectively impossible to survive solely by selling to private customers. Federal, state, and local governments are especially aggressive about requiring contractors to sign on to their environmental and racial agendas. This phenomenon, too, is global in scope. A 2016 OECD paper observes that “public procurement expenditures amount to 13% of OECD countries’ gross domestic products” and urged that this large governmental footprint be used as leverage to promote “ambitious low-carbon innovation strategies.”

Contracts do not involve just the government spending its own money; governments also control access to public facilities. Chick-fil-A, for example, was banned from operating in airports in multiple cities — San Antonio, Buffalo, San Jose — by government officials angered at the company for the political views of one of its executives on same-sex marriage.

Government as capital-market regu­la­tor: It’s not possible to access American capital markets without getting past the gatekeepers. These include the Securities and Exchange Commission, which sets disclosure rules, the markets (the New York Stock Exchange and the NASDAQ), the ratings agencies, and the accounting firms. The SEC is the government; the markets exercise directly delegated governmental authority, which in some circumstances can even preempt state law; the others live in that vague space where compliance is effectively compelled by the need to keep government happy. Then there are the central banks, which have been quite insistent in imposing their own woke visions on lenders, with the aim of raising the cost of capital for disfavored businesses and industries.

SEC disclosure requirements, and rules for what proposals can be raised by dissident shareholders, have been a hotly contested field for political activism. Joe Biden’s presidential campaign called for “requiring public companies to disclose climate risks and the greenhouse gas emissions in their operations and supply chains.”

Government pressure can be indirect, too. Climate envoy John Kerry spent this spring pressuring Wall Street banks to commit to “climate-friendly finance” that aims to redirect lending and investment towards “zero emissions” targets — with the understanding that collective refusals to do business made at the prodding of government may be less vulnerable to challenge under the antitrust laws.

Government as workplace regulator: Finally, the government’s rules shape the workplace. Civil-rights laws were originally written to guarantee equal opportunity under the law, even in private workplaces. But, in practice, many diversity-related corporate initia­tives have gone far beyond equality. They have instead created sinecures in human-resources depart­ments for left-wing activists who use the implicit threat of lawsuits to persuade corporate management to give them a free hand in leftist indoctrination. Maybe the most naïve joke among conservatives in recent years is to ask what kind of job you could get with, say, a gender-studies major. The answer is that you can get a job in a big corporation that puts you in a position to decide who gets all the other jobs. That power structure would not exist without substantial coercive govern­ment pressure.

If we want corporations to get back to the business of business, and out of politics, the first step is to get government out of their business.


TX Gov. Abbott says Texas will build its own Mexican border barrier

Texas Gov. Greg Abbott announced on Thursday that he has immediate plans to build border barriers along the state’s border with Mexico in an effort to assist law enforcement apprehensions of immigrants attempting to cross into the United States illegally.

“President Biden’s open-border policies have led to a humanitarian crisis at our southern border as record levels of illegal immigrants, drugs, and contraband pour into Texas,” Abbott said. “While securing the border is the federal government’s responsibility, Texas will not sit idly by as this crisis grows.”

Abbott said the state will immediately begin construction on barriers in easily accessible and unsecured areas like Del Rio.

“The influx across the border is out of control, and the Biden Administration has shown that is not going to step up and do its job,” Abbott told Breitbart exclusively prior to a border summit on Thursday. “And amidst reports of even more people coming in across the border, we know we have to step up and do more.”

Customs and Border Patrol statistics revealed that the Del Rio Sector saw 27,890 illegal immigrant apprehensions in May this year, a 1,118 percent increase from the same period last year.

“The reason why we are here (Del Rio) is because of the massive increase,” Abbott stated, noting that unlawful border crossings were once “concentrated in the Rio Grande Valley. “Now, you know we’re upstream from the Rio Grande Valley in the Del Rio Sector and the Del Rio sector is suffering from some of the largest increases.”

Abbott said local residents are reporting “a lot of very bad dangerous people” coming into Texas illegally.

“They’re seeing a lot of very bad dangerous people come across the border,” Abbott said. “People that they are afraid of encountering, people who are causing damage to their fences, their livestock, their crops, their neighborhoods, and their homes.”

“Bad things are happening around here, and so they need help from the state to help them address this exploding crisis,” he continued.

Abbott said the Biden administration seems to be “welcoming these people into the United States,” but that Texas won’t send the same message. He said Texas will use it authority under a State of Emergency to ramp up enforcement of laws along the border.

“If you come to Texas, you’re subject to being arrested. You’re not going to have a pathway to roam the country,” Abbott said. “You’re going to have a pathway directly into a jail cell.”

“We want to be very aggressive in working with local officials and begin making mass arrests,” he continued. “In working in collaboration with a large number of counties — that means we’re going to be arresting a lot more people.”

Abbott acknowledged the increase in apprehensions will necessitate additional jail space, and he has partnered with Arizona Gov. Doug Ducey to seek assistance from governors nationwide with the crisis.

“With your help, we can apprehend more of these perpetrators of state and federal crimes before they can cause problems in your state,” the governors said. “Texas and Arizona have stepped up to secure the border in the federal government’s absence, and now, the Emergency Management Assistance Compact gives your State a chance to stand strong with us.”

Abbott said he predicts a “high level of participation,” adding, “The immigration issue and the border issue is not just the number one issue of Texas, it’s the number one issue in America. And so all of these other governors, they hear the same concerns that we hear about in Texas.”

Abbott said Texas is going to do whatever it can to secure the border, but “in the end, only the federal government and Congress can fix this.”

“…but as it stands right now, the state of Texas is going to step up and we’re going to start making arrests — sending a message to anybody thinking about coming here, you’re not going to get a free pass to the U.S. They’re getting a straight pass to a jail cell,” he concluded.




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