Sunday Misc and Stuff

  1. “but it is the early events that are important for understanding what I have been trying to do.” – [A Short Intellectual Autobiography, pdf page 92]
  2. Did Julius Krein write the definitive framing of ESG? It doesn’t quite say it but implies that something like industrial policy can and maybe should be an alternative corporate finance option to ESG? Or… a new localism?! [Compact: Why the Right Can’t Beat ESG]
    Some quotes:
    • ESG acted to “improve transparency and disclosure” in a way totally in line with shareholder supremacy frameworks “an emphasis on shareholder value implies and inevitably leads to the development of frameworks like ESG”
    • They claim to offer specialized products that meet the particular needs and profiles of various investors. ESG offers almost infinite possibilities for such “bespoke” investment products, and even if it didn’t exist for other reasons, fund marketers almost certainly would have invented it
    • The fact that [Ackman] doesn’t, and that there is no wave of activist investors successfully opposing ESG, though there are several cases of shareholder activism in support of ESG issues, is perhaps the strongest indication that shareholder primacy offers little basis for opposition to the ESG framework
    • It would be better to develop investment criteria that take into account these material political risks (energy security, national security, supply-chain resiliency, productivity and innovation, family-friendliness, geographic diversity, enhancing a non-college workforce, and so on) and promote capital allocation to secure supply chains.
    • A final possibility to consider is the gradual unraveling of shareholder primacy. Insofar as ESG is a product of shareholder primacy, a shift away from that corporate-governance paradigm would also entail a decline in the importance of ESG investing (though it wouldn’t eliminate political issues from the calculus of business and finance, just as the move toward shareholder primacy only altered how these issues were articulated). In response to recent controversies, BlackRock and other major asset managers have begun devolving voting power back to the investors in their funds. Should this change become widespread, it would mean that public-company shareholders would become more dispersed and harder to organize, as they were in the pre-Reagan era. It is hard to predict the ramifications of such a shift today, but it would likely strengthen the power and independence of corporate management. Ironically, a move to counter ESG by reasserting shareholder primacy may end up making management teams less accountable to shareholders.

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