Slacktivist Investing: How Corporate Activism Goes Wrong
Good intentions? Or just good PR?
November 2022
Script
Click to reveal bonus content (fun facts and additional insights) within script.
Big business in America. A brutal, dog-eats-dog world.
Titans of industry in cutthroat competition.
The only goal is making money. As much of it as possible. And there are no lines they’re not willing to cross to get there.
That’s the story we’ve been telling ourselves for a long time anyway. And, sure, it’s true of some companies at some times.
But today? I don’t know. You don’t see a lot of top hats and canes anymore. I mean, have you noticed how much of
American business today is just … guys in oddly casual clothing telling you how much good they’re doing? How their companies are making the world a better place?
Y’know, unless there’s a little extra money to be made by having … flexible principles.
That never hurt anyone. Right?
[OPENING SEQUENCE]
We are living in a golden age of corporate responsibility — at least if you’re going by the press releases.
Today, many major corporations spend just as much time telling you about the good they do in the world as they do pitching you the products they want to buy.
And there’s good reason for that. Consumer surveys show that the public’s desire to buy products from ethical companies is at an all-time high. i
All of which sounds great, but … what happens when you start asking follow-up questions?
Like, which issues is it most important for a company to be ethical about? How can we tell if they’re actually being ethical? And … are we all just getting strung along here?
Let’s consider some of the evidence.
Maybe you’re passionate about social justice. So is the NBA. The league has actively encouraged its athletes to speak out on social issues.ii So much so, in fact, that it even allowed players to replace the names on their jerseys with activist slogans. iii
But that concern with social justice doesn’t seem to extend to, for instance, China’s human rights issues. Perhaps because the Chinese arm of the NBA was valued at $5 billion in 2019.iv
That’s when a Houston Rockets executive simply tweeted "Fight for Freedom, Stand with Hong Kong." A tweet that quickly got deleted. And led to an official apology from the NBA — the Mandarin version of which was a little more groveling than the English version.v Because, as the NBA’s commissioner later admitted, the tweet cost them "hundreds of millions of dollars."vi
Now, maybe the tweet legitimately offended the Chinese people, but it’d be hard to know — since Twitter is banned in China.vii
Maybe you’re passionate about empowering women. So were the folks at State Street, the financial services firm that erected the "fearless girl" statue in New York, staring down the famous Wall Street bull. Upon its installation, the sculpture was hailed in some quarters as a feminist triumph… viii
…Which made it awkward that the company erected it in the middle of a federal investigation that eventually led to a multi-million-dollar settlement for underpaying female employees, but … you know, details.ix
Maybe you’re passionate about gay rights. So is Amazon. In June of 2021, the company celebrated pride month by hoisting the pride flag above its Seattle headquarters.x And in June of 2022, they celebrated by…
…removing LGBTQ products from their website in the United Arab Emiratesxi — where the State Department warns that homosexuality can be punished by execution. xii
Now, sure there are always going to be some companies who don’t quite live up to the values they proclaim. Which is why some people think we have to make much more sweeping changes to ensure good corporate citizenship.
That’s the idea behind the recent trend of ESG investing — which stands for environmental, social, and corporate governance.
ESG is supposed to inject investors with a new sense of responsibility, getting them to focus on sustainability and corporate citizenship in addition to the bottom line. Which seems reasonable, right? But here’s the bad news: So far, it hasn’t done much of either.
An analysis of more than 20,000 mutual funds found that the ones with the most "sustainable investments" underperformed the ones with lower levels of sustainability.xiiiWhich is maybe ok. After all, the whole idea is that investors might accept a lower return if they think it will make the world a better place.
But … about that. Research from Columbia University and the London School of Economics actually found that the firms in ESG funds had worse track records for complying with environmental and labor laws than those in non-ESG ones.xiv
All of which points back to one point: It’s easy to say you’re in favor of some noble cause. And, look, if you’re a CEO, it also tends to be good for business. But actually following through on those principles … usually comes with sacrifices. And it’s not clear how many people are really willing to make them.
Are American businesses ready to leave money on the table to stand by their beliefs?
Are American consumers willing to pay more or endure more inconvenience to stand by theirs?
You can make reasonable arguments for either answer to those questions.
But it’s hard to make one for getting all of the benefits of having taken a stand … without bearing all the costs.
So, maybe we should all adjust our standards just a tad.
Maybe businesses should only make pledges they can actually follow through on.
Maybe consumers should be a little more skeptical of slick corporate marketing.
And maybe, just maybe … the CEOs could wear a tie every now and again? Is that really so much to ask?
Sources
- Is Good Still Growing? — Conscious Consumer Spending Index
- "NBA Encourages Players To Engage on Social Issues" (Ahiza Garcia) — CNN
- "With the Words on Their Backs, NBA Players Take a Stand" (Ava Wallace) — Washington Post
- "As Impasse Over Pro-Hong Kong Tweet Simmers, What’s at Stake for the NBA in China?" (Jeff Zillgitt, Mark Medina) — USA Today
- "NBA’s Apology to China Draws Outrage Across Political Spectrum" (Patrick Brzeski) — Hollywood Reporter
- "NBA Commissioner Adam Silver Says League Lost 'Hundreds of Millions of Dollars' Due to China Fallout, Touches on Brittney Griner Situation" (Jack Bantock) — CNN
- "NBA’s Apology to China Draws Outrage Across Political Spectrum" (Patrick Brzeski) — Hollywood Reporter
- "The 'Fearless Girl' Statue Turns 1 Today. Here’s What She’s Inspired." (Jena McGregor) — Washington Post
- "Firm Behind 'Fearless Girl' Statue Underpaid Women, U.S. Says" (Matt Stevens) — New York Times
- Amazon Enters June Bursting "With Pride" — Amazon
- "Amazon Restricts L.G.B.T.Q. Products in United Arab Emirates" (Karen Weise) — New York Times
- United Arab Emirates International Travel Information — U.S. Department of State
- "An Inconvenient Truth About ESG Investing" (Sanjai Bhagat) — Harvard Business Review
- "Do ESG Funds Make Stakeholder-Friendly Investments?" (Aneesh Raghunandan, Shivaram Rajgopal) — Review of Accounting Studies
Shownotes
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Sources
- Conscious Consumer Spending Index
Is Good Still Growing? - CNN
"NBA Encourages Players To Engage on Social Issues" (Ahiza Garcia) - Washington Post
"With the Words on Their Backs, NBA Players Take a Stand" (Ava Wallace)
- USA Today
"As Impasse Over Pro-Hong Kong Tweet Simmers, What’s at Stake for the NBA in China?" (Jeff Zillgitt, Mark Medina)
- Hollywood Reporter
"NBA’s Apology to China Draws Outrage Across Political Spectrum" (Patrick Brzeski)
- CNN
"NBA Commissioner Adam Silver Says League Lost 'Hundreds of Millions of Dollars' Due to China Fallout, Touches on Brittney Griner Situation" (Jack Bantock)
- Washington Post
"The 'Fearless Girl' Statue Turns 1 Today. Here’s What She’s Inspired." (Jena McGregor)
- New York Times
"Firm Behind 'Fearless Girl' Statue Underpaid Women, U.S. Says" (Matt Stevens)
- Amazon
Amazon Enters June Bursting "With Pride"
- New York Times
"Amazon Restricts L.G.B.T.Q. Products in United Arab Emirates" (Karen Weise)
- U.S. Department of State
United Arab Emirates International Travel Information
- Harvard Business Review
"An Inconvenient Truth About ESG Investing" (Sanjai Bhagat)
- Review of Accounting Studies
"Do ESG Funds Make Stakeholder-Friendly Investments?" (Aneesh Raghunandan, Shivaram Rajgopal)
Delve Deeper
Learn more with a sampling of expert analysis and opinion from a wide variety of perspectives.
Article(s):
- "NBA Silence on China Proves It’s Less Interested in Human Rights Than the Bottom Line" (MSNBC)
- "Company Behind 'Fearless Girl' Settles Gender Pay Dispute" (CNN)
- "Amazon Restricts LGBTQ Products in United Arab Emirates" (New York Times)
- "An Inconvenient Truth About ESG Investing" (Harvard Business Review)
- "The Self-Styled Scourge of 'Woke' Boardrooms" (Financial Times)
- "The Case Against Corporate Social Responsibility" (Wall Street Journal)
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