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People fret about politicians: Can Congress achieve anything? Can or should the Democrats eliminate the filibuster? Which political party is doing more to destroy America’s greatness — the “cancel culture” of the left or the destruction of voting rights on the right?
It’s enough to make your head spin.
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Meanwhile, corporations — yes, corporations — are taking the lead on many issues.
Think about diversity and inclusion. Politicians may or may not be able to pass laws, but corporations can move ahead fairly easily. Increasingly, public companies have board subcommittees assigned to monitor progress on the diversity front. Is the board diverse and inclusive? Is the company? And, of course, critically: Are managers’ bonuses affected by whether the corporation is becoming more diverse and inclusive? Once money is on the line, results will follow.
Who cares what the politicians think?
It’s the same for many other issues, which now travel under the rubric of “environmental, social, and governance.” A quarter of the money that flowed into stock and bond mutual funds last year flowed into ESG funds. That’s a lot of money. ESG funds captured $51 billion of new investments in 2020, up from $21 billion in 2019. That’s a lot of momentum.
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If companies want to attract investments from ESG funds, the companies must have ESG-friendly policies. Companies that oppose climate change and favor inequality need not apply.
Who cares what the politicians think?
And companies themselves are of course getting ahead of the curve. You’re not seeing auto manufacturers commit to producing electric vehicles because that seems like a nice idea. You’re seeing those commitments because money is (or is anticipated to be) flowing into those products.
CEOs aren’t announcing the dates by which their corporations will be carbon neutral as an academic exercise. CEOs make those announcements because the CEOs fear being grilled by analysts at the next quarter’s conference call if the corporation isn’t doing the things that money perceives to be correct.
Corporations don’t have opinions on the culture wars: Corporations generally don’t favor or oppose abortion or the death penalty, and corporations don’t care who uses which bathroom. But on things that can affect profitability, corporations are remarkably astute. And on those issues, corporations are pursuing a new, and different, agenda.
Mark Herrmann spent 17 years as a partner at a leading international law firm and is now deputy general counsel at a large international company. He is the author of The Curmudgeon’s Guide to Practicing Law and Drug and Device Product Liability Litigation Strategy (affiliate links). You can reach him by email at [email protected].