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How Proxy Advisors Hurt Your Bottom Line

Along with the growing trend of shareholder activism, the influence of proxy advisors on institutional shareholder votes has increased tremendously — and that’s not necessarily a good thing. Proxy advisory firms make recommendations to institutional shareholders on how they should vote on shareholder proposals. But these firms’ motivations go beyond financial considerations, and their impact can be detrimental to retail investors’ bottom line.  There are two…
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Sustainable Finance or Big Bank Censorship?

For the last decade, environmental and shareholder activists have been increasing pressure on companies to move towards sustainable finance and to divest from fossil fuels. Recently, those actions have spurred some major changes from big banks.  Morgan Stanley said they will take responsibility for greenhouse gas emissions from projects that they finance. Similarly, JP Morgan and Goldman Sachs announced they will stop…
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The SEC Updated Rule to Level the Playing Field for Shareholders

Submitting shareholder proposals has traditionally required a fairly low barrier to entry. Currently, if you own $2,000 in stock in a company for one year, you can submit shareholder proposals. At the annual meeting, shareholders review proposals and vote whether to make them part of the company’s guiding principles. Unfortunately, political activists without the company’s best interests at heart have exploited that low barrier to entry. In response,…
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Zappos Adaptive: Doing Good For Others, Doing Good For Business

In 2014, Tonya Richardson called customer service at Zappos, a shoe company known for comfortable, utilitarian footwear. She told the customer service representative she had received the wrong pair of shoes. The representative told Tonya the shoes she ordered were out of stock with no similar options to choose from.  This was a problem for Tonya, because the shoes she had ordered were not ordinary shoes.
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ESG Investing: Which Came First, the Chicken or the Egg?

In modern investing, especially investing targeted towards millennials, Environmental, Social, and Governance (ESG) investing is all the rage. ESG investing involves buying shares from companies with high ratings from at least one of the firms that rate companies on their “social responsibility.” Wealth management firms tell asset managers the best thing they can do is “tilt” portfolios to companies that prioritize high ESG ratings. They cite a “growing” body of…
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The Business of Politics: Where Do We Go From Here?

Mixing business and politics is nothing new. In the first annual message to the US Congress in 1801, Thomas Jefferson penned, “Agriculture, manufactures, commerce, and navigation, the four pillars of our prosperity, are the most thriving when left most free to individual enterprise.” The Founding Fathers deeply understood the struggle against government oppression. Not only does an overcentralized government oppress individual rights, but it also restricts…
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The Negative Impact of Impact Investing

U.S. corporate culture has come to an unfortunate place. Activists demand that companies’ first priority should not be to serve a unique purpose and make a profit, but to be stewards of the social and environmental justice whims of the day. One of the newest ways political activists are promoting this philosophy is through “impact investing.” That means return on investment (ROI) is secondary to being socially and…
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Corporate Social Responsibility: Flawed Inputs Mean Flawed Outputs

Corporate social responsibility is the hot new topic around investing – so it’s worth considering how we decide which companies qualify as responsible. In a recent blog post, we explained why it’s impossible to come to a common understanding of measuring ESG (environmental, social, and governance) metrics, which would be expected to coincide with which funds are socially responsible. But “societal problems” are in the eye of the beholder.
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Unsurprisingly, CEOs’ “Stakeholder Capitalism” Fails to Satisfy Proponents

In August 2019, the Business Roundtable (BRT), led by 181 CEOs of some of the world’s largest companies, introduced its “Statement on the Purpose of a Corporation.” According to the statement, Milton Friedman’s foundational conclusion – that corporations should prioritize maximizing shareholder value – was a thing of the past. Today’s corporations should take a more principled stance, seeking to “maximize value” for all stakeholders. While this fundamental shift…
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The Pipe Dream of Standardizing ESG Metrics

On CNBC’s Squawk Box last week, Bank of America CEO Brian Moynihan introduced his call to streamline ESG (Environmental, Social, and Governance) metrics across companies. Armed with “three Cs” – comprehensiveness, convergence, and clarity – Mr. Moynihan advocated for wide adoption of standardized metrics. He argued this would allow stakeholders, broadly defined, to “bring capitalism to task.” In other words, according to Mr. Moynihan, companies can solve social problems.