Episode Details

Friends,

For nearly two decades, major corporations have touted principles known as E.S.G. (short for environmental, social, and governance factors), ostensibly by focusing their businesses on these concerns as well as on profits.

But now Republicans are taking aim at this approach, calling it “woke capitalism” and using it to demonstrate that Democrats and progressives are trying to impose their views on the rest of society.

In other words, the fight over E.S.G. is extending America’s culture war into the C-suites of big American corporations.

On Wednesday, Senate Republicans, helped by two Democratic defectors, voted to block a Labor Department rule allowing retirement plan managers to include E.S.G. considerations in their investment plans. The vote is likely to draw President Biden’s first veto.

Republicans are right about E.S.G. — but for the wrong reason.  

The problem with E.S.G. isn’t woke capitalism. It’s corporate capitalism. Corporate money has corrupted American politics so much that our democracy cannot effectively deal with environmental and social concerns.

CEOs and pension fund managers who tout their records on E.S.G. are engaged in a kind of social greenwashing — designed to burnish their brands and attract investors (including retirees) who want to believe they’re doing good while they’re also doing well.  

But most of this is baloney. Investors don’t want to do good at the expense of doing well. They’re unwilling to sacrifice shareholder returns to advance their environmental and social values. They want high returns and they want environmental and social goals. But they can’t have both. They’d do more good by donating to nonprofits seeking to protect the environment and advance the social causes in which they believe.

Corporations and institutional investors won’t deviate from maximizing short-term profits and shareholder returns unless they are required to do so by law. And even then, only when the penalty for violating the law multiplied by the probability of getting caught is higher than the profits from continuing with the illegality.

When I was secretary of labor, big corporations would violate laws on worker safety, wages and hours, and pensions whenever doing so was cheaper than obeying the law. And they’d fight like hell against such laws to begin with, all the while telling the public what wonderful citizens they were.

The soothing corporate and Wall Street talk about E.S.G. is designed to forestall such laws by creating the false impression that corporations are already doing what needs to be done for the environment or social issues, so there’s no need for more laws or regulations.

In 2019, the Business Roundtable — one of Washington’s most prestigious corporate groups — issued a widely publicized statement expressing “a fundamental commitment” to the wellbeing of “all of our stakeholders” (emphasis in the original), including employees, communities, and the environment. The statement was widely hailed as marking a new era of E.S.G.

Since then, the Roundtable and its members have issued jejune statements about all they’ve done to reverse climat