ESG and the ‘Long-Run Interests’ Dodge
Don’t believe it when companies spin social activism as having benefits to shareholders.
By Vivek Ramaswamy, Sept. 29, 2022
I sent shareholder letters recently to the boards of Apple, Disney and Chevron questioning their decisions to embrace environmental, social and governance agendas that don’t appear to advance business goals—including Apple’s racial-equity audit, Chevron’s Scope 3 carbon-emission targets, and Disney’s opposition to Florida’s Parental Rights in Education Act. I detailed the tangible costs to each company of adopting these policies. The most common counterargument is that ESG practices are in the “long-run interests” of stockholders. That argument is a farce.
In each case, the groups that advanced these policies were clear that their primary motivations were nonpecuniary. An official of the Service Employees International Union said it “spearheaded” Apple’s racial-equity proposal because companies have “a negative effect on marginalized communities—including Black people, women, LGBTQ+ individuals, and people with disabilities—by reinforcing systems of inequity and creating products with real-life dangers.” Color of Change, which pressured the company to do the audit, says its mission is “to hold companies accountable for the ways they perpetuate white supremacy.”
Disney employees who pressured CEO Bob Chapek to oppose Florida’s statute—which prohibits classroom sex talk in lower elementary grades and requires it be age appropriate for older children—said they were motivated by “human rights” and the “threat to LGBTQIA+ safety.” The Dutch nonprofit behind Chevron’s Scope 3 proposal said its goal is to “change oil companies from within” by pushing “Big Oil to go green.”
Agree or disagree with these objectives, they aren’t about advancing the interests of stockholders. Each company’s initial response suggested as much. Apple’s board recommended against the racial-equity audit before adopting it. Mr. Chapek wrote in an all-employee email that “corporate statements do very little to change outcomes or minds” and “can be counterproductive,” then changed his mind two days later. Chevron petitioned the Securities and Exchange Commission to exclude the Scope 3 proposal from its ballot, then recommended against its adoption, before eventually changing course.