At its annual meeting today, Bank of America shareholders are voting on a proposal calling on the company to commission a civil rights audit of its diversity policies. The vote seeks to discover the extent to which Bank of America has incorporated hiring and employee training methods based on equity and anti-racism.
Such divisive protocols threaten companies’ financial performance, shareholder returns and continued growth. Many other American companies, including American Express, Verizon, Pfizer and CVS, already incorporate such woke employee training programs.
The shareholder effort is the first action taken by a new coalition that I lead called the Boardroom Initiative. Its goal is to empower shareholders and all stakeholders to fight back against the destructive agenda of woke capitalism. Its overriding message to company executives is to stay out of politics that don’t directly impact their bottom lines.
Hundreds of major American companies have taken a stand on public policy issues in recent years. For instance, Coca-Cola, Delta Airlines, Starbucks, Netflix and General Motors, have opposed state laws over the past year to enhance ballot integrity. Wading into such divisive political waters alienates roughly half of companies’ customers, reducing shareholder value and depressing savings accounts like 401(k)s.
This lesson is one that Disney has recently learned the hard way. Disney vocally opposed a new law in Florida that requires teacher-student discussions about sexual and gender identity to be age-appropriate. Disney CEO Bob Chapek called the law “a challenge to basic human rights.”
Disney’s position generated significant consumer backlash. Last Friday, Florida Gov. Ron DeSantis signed legislation stripping Disney of its special distinction in the state that allows it to largely govern itself.
As a result, Disney shareholders have collectively lost tens of billions of dollars as the company’s stock price has cratered, falling over 10% since the controversy started. Disney is the worst-performing stock in the Dow Jones Industrial Average over the last year. CEOs across the country who are considering wading into political issues should take note.
Another example of woke capitalism is Environmental, Social and Governance (ESG) investing, in which massive investment funds like BlackRock use its power to force companies to pursue politically correct goals that can conflict with shareholder interests. ESG index funds, aggressively marketed to savers and retirees, invest in a basket of companies that prioritize ESG over profit. No wonder ESG funds have badly underperformed the broader market lately, hurting ordinary investors and pensioners.
Pension funds across the country have made significant ESG commitments in recent years, threatening the retirement security for millions of Americans who are already facing a cost of living crunch due to historic inflation and pain at the pump. ESG also violates investment managers’ fiduciary responsibility to maximize retirees’ returns.
ESG efforts have been given a government assist by a recent Securities and Exchange Commission proposed rule that requires companies to disclose their emissions and demonstrate how they plan to achieve their climate goals. This rule diverts company attention from value-creation activities that benefit shareholders, employees, and customers.
It is a gift to value-destroying plaintiff lawyers who can use the rule to launch frivolous lawsuits over corporate climate claims that are almost impossible to declare definitively. Even SEC Commissioner Hester Peirce warns the regulation could create a “climate industrial complex” that enriches consultants at the expense of shareholders.
Corporate America needs to recognize there’s no dichotomy between doing well and doing good. When I was McDonald’s USA CEO, we were able to substantially reward our shareholders and hire and promote employees from all backgrounds by focusing solely on delivering a great product at a great price. We empowered franchise spouses because it made good business sense, not for political reasons. Countless minorities and women became millionaires due to McDonald’s’ merit-based approach.
Shareholders and employees who benefit from this business-first approach can then support the political issues that are important to them. Company executives do not have the right to take political actions on their behalf.
No matter how Bank of America shareholders vote today, the Boardroom Initiative — speaking on behalf of most American shareholders and stakeholders — is putting this company and corporate America on notice to stay out of controversial political fights and focus on fundamentals.
Those that don’t listen risk becoming the next Disney.
Ed Rensi is executive adviser of the Boardroom Initiative, a project of Job Creators Network Foundation.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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