Anson Frericks is a co-founder of Strive Asset Management and a former Anheuser-Busch executive
Every day it seems that another iconic American brand has marched head-on into the furious buzzsaw of public controversy.
Now, Target is the subject of boycotts after releasing a line of women’s clothing intended to be worn by biological men with ‘tuck-friendly construction’ and ‘extra crotch’ room.
The companies saw their stock prices plummet and billions of dollars of value erased – almost overnight.
They’re not alone. Nike, Calvin Klein, North Face and even the Los Angeles Dodgers have been criticized for wading into America’s culture wars. What is going on? Why is it that companies that were once happy to sell clothes and beverages and nostalgia to Americans of all political stripes are now appearing to take sides in contentious political fights?
The answer is simple – follow the money.
As an executive at Anheuser-Busch for more than a decade, I witnessed how the calculus of running a major corporation has been hijacked.
It’s why I left.
No longer is the pursuit of the almighty dollar – within the bounds of morality and the law – the sole purpose of so many of America’s top companies. Today, the country’s greatest enterprises have been repurposed into vehicles of social change.
Allow me to explain.
Now, Target is the subject of boycotts after releasing a line of women’s clothing (above) intended to be worn by biological men with ‘tuck-friendly construction’ and ‘extra crotch’ room.
Last month, Bud Light’s sponsorship of transgender activist Dylan Mulvaney sparked massive customer backlash.
Target and Bud Light are publicly traded companies, which means that, ultimately, it’s their investors – a.k.a. Wall Street – that’s calling the shots.
Enter BlackRock, State Street and Vanguard, the three largest and most influential financial institutions in U.S. history. They’re known as the ‘Big Three’ on Wall Street, though many Americans have never heard of them.
These three companies control more than $20 trillion in assets, almost none of which is their own. Rather, they manage the money held in everyday American’s retirement accounts, pension funds, mutual funds and investment accounts.
Together, the Big Three constitute the largest shareholders of nearly 90% of the largest companies listed on the U.S. stock exchange – the S&P 500.
The Big Three’s influence is staggering. But if they were managing this money simply to make more money, there might not be an issue.
The Big Three are proponents of what’s called ‘stakeholder capitalism,’ which is a belief that businesses should be run not only to increase value to shareholders, but to serve all stakeholders, including government agencies, activists, and non-governmental organizations.
‘Stakeholder capitalism’ is distinct from traditional ‘shareholder capitalism’ which contends that companies have one responsibility – to generate profits for the individuals who own shares in the company.
The ‘stakeholder’ movement has been around since the 1970s, and has even earlier philosophical roots, but it truly began to gain traction in American investment circles only about five years ago.
2019 was a turning point.
That year, the Business Roundtable, which is a group of CEOs from America’s largest companies, adopted a new Statement on the Purpose of a Corporation declaring that all companies ‘share a fundamental commitment to all of our stakeholders’ to promote the larger social good.
188 American CEOs signed on.
Among them were the CEOs of the Big Three and other large financial institutions like JP Morgan and Bank of America, and many of the companies they own, including Target, Disney and Coca-Cola.
Bud Light, it should be noted, is owned by a European parent company and is ineligible to participate. But nonetheless, it has been influenced by this new vision of ‘purpose.’
They’re not alone. Nike, Calvin Klein (above), North Face and even the Los Angeles Dodgers have been criticized for wading into America’s culture wars. What is going on?
Enter BlackRock, State Street and Vanguard, the three largest and most influential financial institutions in U.S. history. They’re known as the ‘Big Three’ on Wall Street, though many Americans have never heard of them. (Above, right) BlackRock CEO Larry Fink at New York Times DealBook Summit in November 2022
The Big Three began to issue guidelines on how they expected their portfolio companies to honor this ‘commitment’ by implementing so-called Environmental, Social, and Governance, or ESG, targets and scores
To encourage compliance, the Big Three uses their power as shareholders to influence who sits on corporate boards.
In 2021, they voted to replace Exxon Mobil board members with climate experts, who immediately sought to reduce the oil giant’s exploration and drilling output to meet contested climate goals.
They subsequently voted for ‘racial equity’ audits at companies like Apple and Home Depot, compelling the companies to impose race-based hiring criteria and implement diversity, equity and inclusion programs.
Beyond shareholder voting, The Big Three employ large engagement teams to pressure CEOs for progress on ESG goals and increased ESG scores.
Blackrock has over 70 employees dedicated to ‘stewardship efforts.’ In 2022 alone, they had 3,880 engagements, with 2,580 companies.
The Big Three also wield enormous influence when it comes to executive pay. According to one study, a shocking 73% of S&P 500 companies now tie executive compensation to ESG measures.
As an executive at Anheuser-Busch for more than a decade, I witnessed how the calculus of running a major corporation has been hijacked. It’s why I left. (Above, right) Strive Asset Management co-founder, Anson Frericks
Bud Light and Target (shown above) saw their stock prices plummet and billions of dollars of value erased – almost overnight.
If a CEO doesn’t weigh in on the latest social issue quickly enough, his or her bonus could be in jeopardy.
Many ordinary consumers have no idea that their money may be used as leverage by major financial institutions to influence popular American brands. But as the results are borne out in divisive product launches and marketing campaigns the impact is becoming clear – ‘stakeholder capitalism’ is hurting businesses.
Previously loyal customers have stopped buying these products and they’re opting for alternative brands that remain out of the political fray. This is bad news for shareholders who rely on these companies to meet their investment goals. It often puts CEOs at odds with their employees and customers.
It’s also bad for society.
America traditionally settles contested political issues through an accountable electoral process. The ‘stakeholder capitalism’ movement subverts this system. Questions over environmental issues, parental rights, gender equality, and the like should be settled at the ballot box, not in the board room. And many Americans seem to agree.
They are starting to spend their hard-earned dollars at companies that focus on customers, not stakeholders.
Corporations would be wise to recognize this as Americans increasingly make their voices heard at the cash register.
Source: | This article originally belongs to Dailymail.co.uk