Activist investors push companies to choose virtue-signaling over profit

American companies face increasing pressure from activist investors to pursue more noble purposes than profit. In response to this clamor, virtue-signaling by corporations has run amok. Starbucks is the poster-child for self-styled sustainable companies, issuing $500 million in “green” bonds and pledging a “commitment to create global social impact.”

The coffee conglomerate announced earlier this month it will phase out plastic straws after caving to pressure from environmentalists. Nevermind that Starbucks, by ditching straws in favor of plastic “nitro” lids, will almost certainly increase its use of plastics by volume. Moreover, the Associated Press reported that plastic straws account for just 0.02 percent of plastic waste estimated to litter oceans each year. Starbucks’ decision to go suckless received fawning coverage in media outlets, many of which cited a debunked “study” by a then-9-year-old claiming that Americans use more than 500 million straws per day to justify the initiative.

This policy will have a negligible, or perhaps negative, environmental impact while imposing real costs on Starbucks as a profit-generating enterprise. This example illustrates one of the most challenging aspects of Environmental, Social and Governance (ESG) investing: How can a company’s social responsibility be accurately and fairly measured for investors?

Read the full piece at the Washington Examiner:

Curb the Power of Shady Proxy Advisory Firms!

The average American who owns stock in a public company through a 401(k) or a brokerage account has likely never heard of Institutional Shareholder Services. The firm is perhaps the most influential proxy advisor, advising pension funds and other institutional investors how to vote on shareholder proposals. Nonetheless, the secretive firm holds a vast amount of influence over how public companies operate.

ISS has great potential for conflict of interests because it provides shareholder voting recommendations on publicly traded companies and consulting services to those companies.

In the case of ISS, this means the subtle threat of adverse shareholder votes if companies don’t pay fees to ISS to become clients. Even Glass Lewis, which is owned by two activist pension funds, opposes the ISS model, calling the provision of consulting services “a problematic conflict of interest that goes against the very governance principles that proxy advisors like ourselves advocate.”

Read the full piece at The Weekly Standard: