05 Jul 2018 New Leftist Preference: Boardroom Diversity
If you’ve been wondering where Jesse Jackson has gone, you’re obviously not attending corporate shareholder meetings. Justin Danhof, Esq., director of the National Center’s Free Enterprise Project, ran into him twice in just the past month.
Jackson is the harbinger of the left’s latest tactic to impose their agenda on the business community. Justin explained this new strategy for “exponentially expanding” affirmative action in corporate boardrooms in a commentary published by Investor’s Business Daily.
While Jackson’s stature and the shares of Big Labor were the drivers of this change, Justin noted that the “outsized role” of mysterious and shadowy proxy advisors also plays a major role. Unless something is done to curb proxy advisor influence, he wrote, “conservatives may as well cede this entire space to liberal firms and watch corporate America drift further to the left.”
Drawing from his own experiences at these meetings, Justin wrote:
In recent weeks, Amazon, Alphabet, and Facebook have announced updated diversity policies for selecting new directors. Rather than simply selecting the best candidate, each company will interview a female and an under-represented minority for each open board spot. These policies resemble the National Football League’s so-called Rooney Rule which requires that each team interview a minority candidate for open coaching slots.
What’s the problem with a little diversity? Nothing, as long as it’s not quotas imposed for the sake of diversity. There’s a return on investment that shareholders expect and companies need to remain in business. To guide the company by a knee-jerk liberal agenda, Justin, noted, could be disastrous:
Amazon, Facebook, and Alphabet were founded by, and still run by, white men. They have created tremendous wealth and many millions of jobs for women and men of all races and ethnicities. But in light of its new procedure, it’s fair to ask: would Amazon reject Jeff Bezos from its board because he’s a white male? That would be a disaster for Amazon’s investors.
It’s also fair to ask if the race-hustlers and far-left unions that are pushing these racial and gender diversity initiatives care about corporate profits or return on investment. Liberal policies that their ilk promotes, such as high taxation and regulation, diminish corporate profits.
In the case of Amazon, it seems the company settled and did not choose to fight the preference proposal with the same vigor it fought other proposals. The compelling reason may have been support for it from the Institutional Shareholder Services (ISS) proxy advisor:
ISS is one of only two major proxy advisory services. Operating with almost zero scrutiny, these firms increasingly exert outsized influence on environmental, governmental, and social issues. That because, according to research from the American Council for Capital Formation, “when proxy advisors recommend voting in favor of a proposal, large institutional holders support the resolution 80 percent of the time. And some funds automatically vote with the proxy advisors nearly 100 percent of the time.”
ISS has become little more than a rubber stamp for liberal activist investors. From climate change, to gender pay issues, to board racial and gender composition, ISS’s supports a full slate far-left shareholder proposals.
It’s entirely possible that Amazon caved to the SEIU’s proposal under pressure from ISS. If ISS can exert that much power over Bezos and Amazon – the richest person in the world and one of the world’s largest publicly-traded companies – what choice do other companies have but to bend to ISS’s liberal will?
Justin mentions legislation in Congress to curb the “unchecked power” of proxy advisors, but also suggests non-governmental means can be used to help them more accountable and fair.
To read Justin’s Investor’s Business Daily commentary – “NFL’s Rooney Rule Runs Amok in the Corporate Boardroom” – in its entirety, click here.