OPINION:
It’s said that “with great power comes great responsibility.” It’s a truism, even if it comes from a comic book, that applies everywhere, especially on Wall Street, where money managers can make or break a company.
It was generally accepted until recently that the wizards working their financial magic would put their fiduciary responsibility to produce the best possible returns for their client at the top of the very short list of things that concerned them when exercising the power made available to them by the trillions of dollars in holdings they managed.
Those days are over, according to a new study released by the Committee to Unleash Prosperity that graded the 40 largest money management firms — including Fidelity, State Street and BlackRock — on their votes in favor of 50 intrusive, ESG-related (environmental, social, governance) shareholder resolutions that were opposed by company management.
Many were proposed by left-wing activists who want to change corporate America from a moneymaking institution that makes the U.S. economy the strongest in the history of the world into something more concerned with social welfare, the enforcement of anti-racism provisions in the C-suite, and a commitment to social justice.
Some people may consider those goals admirable, but if a majority of the firms prioritize their desire to change corporate environmental, social, and governance policies — as the committee’s study showed they are — over their obligation to make the most money possible for the people who trust them to invest their money, something is wrong.
“We think investors around the country have an absolute right to know how the firms they entrust their life savings to are playing politics with their money and risking a lower return,” said Committee to Unleash Prosperity co-founder Stephen Moore. “And they are doing so without the approval or even knowledge of their clients.”
Before anyone starts blathering on about corporate democracy and other liberal nostrums, consider that this is not just a moral issue, it’s a legal one. Before President Biden took office, the need for money managers to put financial considerations above all others was the law. It was a necessary safeguard to ensure that social and political concerns would not be allowed to drive investment decisions.
The data is on the side of the people and groups that are concerned about the trend. There’s plenty of solid evidence in the aforementioned study showing that firms pushing ESG measures through proxy votes typically underperform the stock market.
When passed, these resolutions often require publicly traded companies to engage in race or gender quotas in hiring and board representation rather than choosing the highest-quality candidates; adopt net-zero emission policies; or even divest from high-performing activities, such as oil and natural gas production.
The pro-Biden people responsible for these things have weakened the protections afforded to shareholders and made things worse. Why? Because they need the mega-liberal millionaires and billionaires who run these investment houses to be their active allies in pursuit of administration policy objectives that Congress won’t approve and the courts overturn.
The people who lose are the ordinary investors who are more concerned about today’s high temperature in Florida than the projected average global mean temperature at the end of the century.
“When these investment firms prioritize their political biases over company performance, their clients pay the price, in the form of lower shareholder returns that can easily add up to tens of thousands of dollars in losses per client,” the group said.
If an individual investor wants to support ESG, they’re free to do so. These large firms — which have great power because of the number of shares they hold — can set policy without even being at the meeting. They tip the scales, the report said, casting proxies “typically made without the approval, or even the awareness, of their clients.”
If the money managers who run these firms are trying to set policy for the firms in which they invest, maybe it’s time to give the investors who entrust their savings to these firms a vote on how the proxy votes are cast. What’s good for the goose is good for the gander.
If not, the small investors who trust the big boys and girls to handle their money need to get smart and get ready to move their money to the firms that will give them the greatest returns, because that’s what they’re focused on doing.
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