ProfessorBainbridge.com

Companies aren't talking as much about ESG, DEI, and their other woke efforts

I have a sneaking suspicion that corporate support for woke initiatives is a mile wide and and an inch deep. That suspicion gets some confirmation from a report in today's WSJ:

Companies’ mentions of green and social initiatives during earnings calls have fallen off sharply in recent quarters, reversing a more boastful approach taken over the past few years amid intensifying pressure from some investors and conservative activists.  ...

Executives at U.S.-listed companies mentioned “environmental, social and governance,” “ESG,” “diversity, equity and inclusion,” “DEI” or “sustainability” on 575 earnings calls from April 1 to June 5, down 31% from the same period last year, according to data from financial-research platform AlphaSense. That is the largest such year-over-year decline and the fifth consecutive quarter of year-over-year drops, following a pickup in these discussions and corporate social efforts in the wake of the police killing of George Floyd in May 2020. 

Of course, it's possible that companies are continuing to pursue ESG and DEI agendas, while not advertising it.

The Profit Motive Gets Twitter Love

This book is phenomenal. Great way to kick off the summer. @PrawfBainbridge pic.twitter.com/07v4cgkxtS

— Paul Weitzel (@IThinkIAgree) May 23, 2023

I enjoyed reading The Profit Motive by @PrawfBainbridge, which is a comprehensive and persuasive defense of shareholder value maximization. pic.twitter.com/oCps0BQigG

— Camden Hutchison (@CamdenHutchison) May 15, 2023

It is a mistake to abandon the defense of capitalism and bedrock corporate law to folks on the traditional political right—people whom I deeply respect, like my good colleague @PrawfBainbridge (outstanding new book: The Profit Motive), but hold a different regulatory philosophy.

— Greg Shill (@greg_shill) May 19, 2023

Shareholder capitalism is a system that has raised living standards and reduced poverty across the globe to an almost unimaginable extent. We tinker with it at significant risk.

Read the full review of The Profit Motive by @PrawfBainbridge ▸ https://t.co/KLM4Rmm4SR

— Commentary Magazine (@Commentary) May 20, 2023

The Profit Motive, a new book, by @PrawfBainbridge @UCLA_Law is an informative, well-organized, and even-handed defense of shareholder value maximization. A good, instructive read regardless of one's position in the shareholder/stakeholder debate.https://t.co/CZxUQ9otMi pic.twitter.com/yFuh8rvSd3

— Tom C.W. Lin (@TomCWLin) April 4, 2023

Podcast about my book The Profit Motive: Defending Shareholder Value Maximization

You can also hear the podcast about my book The Profit Motive: Defending Shareholder Value Maximization by the Bite-Sized Business Law Podcast https://t.co/8sHKcXOkd1 You can buy the book here: https://t.co/j4JgvFpDAI

— Steve Bainbridge (@PrawfBainbridge) May 10, 2023

Michael Woronoff Reviewed "The Profit Motive" for Commentary Magazine

Michael Woronoff reviewed my #book "The Profit Motive: Defending Shareholder Value Maximization" for Commentary Magazine.

Review: https://lnkd.in/gFYRJphc

Buy the book: https://amzn.to/3A400Xe

"The book is both descriptive and prescriptive. The first half addresses whether current corporate law requires (or even allows) a corporation’s management to benefit anyone at the expense of its stockholders....

"In the second half of his book, Bainbridge addresses the “ought” question, arguing flat out that shareholder primacy is preferable to stakeholder capitalism. ....

"If I have any quibble with Bainbridge’s book, it’s that he could spend a bit more space making the positive case for shareholder primacy. It’s not that he doesn’t make the case at all. It’s just that he spends the bulk of his argument cataloging the many defects of the alternative. "But my quibble is minor. Bainbridge has provided an enthusiastic and well-reasoned defense of shareholder wealth maximization, one that has become increasingly necessary as attacks against the norm have increased."

It's a fair quibble. I could have spent more time on the positive case. But I intended the book mainly as a rebuttal to all the bad arguments out there. In any case, I'm very grateful for the thoughtful and detailed #review.

 

Recent Publicity for my book The Profit Motive

Interviewed on Andrew Jenning's Business Scholarship Podcast re The Profit Motive: https://andrewkjennings.com/2023/04/10/stephen-bainbridge-on-the-profit-motive/

Short review on Twitter by law professor Tom Lin: https://twitter.com/TomCWLin/status/1643255909760524288?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1643255909760524288%7Ctwgr%5Eeb93c5c05f8fdc79abab54481d8f5dd1635507a9%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.professorbainbridge.com%2Fprofessorbainbridgecom%2Fdept-of-self-promotion%2F

Interviewed on the Board Governance Podcast with Evan Epstein discussing the Profit Motive: https://boardroom-governance.com/episodes/stephen-bainbridge

The book was cited by Delaware Vice Chancellor Travis Laster in a recent judicial opinion: “And directors have a natural affinity for stockholders, because that is the constituency who elects them. See Stephen M. Bainbridge, The Profit Motive: Defending Shareholder Value Maximization 73–74 (2023).” In re Riviera Resources, Inc., 2022-0862-JTL, 2023 WL 2567897, at *8 (Del. Ch. Mar. 20, 2023).

Interviewed by the UCLA School of Law Communications Office: https://law.ucla.edu/news/elephants-jungle-stephen-bainbridge-his-new-book-about-corporate-purpose

Reviewed by Samuel Gregg for the Law and Liberty web magazine: https://lawliberty.org/book-review/a-stake-through-the-heart-of-stakeholder-capitalism/

 

Interviewed on Andrew Jenning's Business Scholarship Podcast re The Profit Motive

@PrawfBainbridge The Profit Motive https://t.co/OdKvMlCNLC via @amazon

— Steve Bainbridge (@PrawfBainbridge) April 10, 2023

Tom Lin reviews The Profit Motive

The Profit Motive, a new book, by @PrawfBainbridge @UCLA_Law is an informative, well-organized, and even-handed defense of shareholder value maximization. A good, instructive read regardless of one's position in the shareholder/stakeholder debate.https://t.co/CZxUQ9otMi pic.twitter.com/yFuh8rvSd3

— Tom C.W. Lin (@TomCWLin) April 4, 2023

Yours truly appears on the Board Governance Podcast with Evan Epstein discussing the Profit Motive

I discuss my new book The Profit Motive with podcast host Evan Epstein.

Alex Edmans on following the science with respect to 10 ESG propositions

@aedmans on following the science on 10 propositions about #ESG https://t.co/LYV8sMEnV1 pic.twitter.com/7b8M6KCQm7

— Steve Bainbridge (@PrawfBainbridge) March 31, 2023

Martin Lipton advocates extending Caremark liability to ESG issues, which I think is a serious mistake

Lipton writes:

... the complex stakeholder issues that companies face today are integral to corporate sustainability, responsible risk management and value creation; indeed, addressing these risks is consistent with directors’ fiduciary duty of care and the board’s legal obligation under Caremark to implement and monitor systems to identify material risks and to address risks once identified.

Personally, I think that is a serious misstatement of the law and a fundamentally misguided policy recommendation. See my article Don’t Compound the Caremark Mistake by Extending It to ESG Oversight, 77 The Business Lawyer 651 (2022). The published version is behind the ABA's paywall, but a working draft is available at SSRN. There's also a summary at the CLS Blue Sky blog, from which the following excerpt is taken:

First, Caremark was wrong from the outset. Caremark’s unique procedural posture, which precluded any appeal, gave Chancellor Allen an opportunity to write “an opinion filled almost entirely with dicta” that “drastically expanded directors’ oversight liability.”[8] In doing so, Allen misinterpreted binding Delaware Supreme Court precedent and ignored the important policy justifications underlying that precedent.

Second, Caremark was further mangled by subsequent decisions. The underlying fiduciary duty was changed from care to loyalty, with multiple adverse effects. In recent years, moreover, there has been a steady expansion of Caremark liability. Even though the risk of actual liability probably remains low,[9]there is substantial risk that changing perceptions of that risk induces directors to take excessive precautions.[10]

Finally, applying Caremark to ESG issues will undermine Delaware’s clear law of corporate purpose by extending director oversight duties to areas of social responsibility unrelated to corporate profit. Caremark can be justified as ensuring that a corporation complies with applicable laws, but ESG compliance remains voluntary. Advocates of extending Caremark to encompass ESG compliance thus likely hope doing so will push companies to adopt what they regard as socially responsible policies but which they have not been able to mandate through the political process.[11] Asking corporate executives to take on governmental functions not only asks them to undertake tasks for which they are untrained and for which their enterprise is unsuited, it also subverts the basis of a liberal democracy. Government efforts to solve social problems are inherently limited by the checks and balances baked into the American political system. Mandated board attention to ESG risks would erode those checks and balances by asking unelected executives to undertake solving social ills.

Should ESG skeptics make an exception for corporate patriotism?

Michael Peregrine suggests that corporations serve stakeholders by providing "a public, and practical, reminder of the civil rights and liberties guaranteed to American citizens." 

Peregrine's proposal raises the question of whether skeptics of corporate social responsibility should make an exception for corporate patriotism. Tentative view: No. Government should decide if there are national security implications to a business and, if so, regulate it.

Query whether those of us who are skeptical of #ESG and woke corporate political speech ought to make an narrow exception for this sort of civic education about freedom. Tentative view: No. But it's a project for the future.

David Yosifon devotes a chapter to corporate patriotism in Corporate Friction: How Corporate Law Impedes American Progress and What to Do about It.

Interviewed re The Profit Motive

An interview with the UCLAW news department about my new book The Profit Motive.

Samuel Gregg reviews my book, The Profit Motive, for Law & Liberty, and says I drove a stake through the heart of stakeholder capitalism

Dr Gregg calls his review "A Stake Through the Heart of Stakeholder Capitalism":

In his new book, The Profit Motive: Defending Shareholder Value Maximization, Stephen M. Bainbridge has systematized his many criticisms of the BRT’s 2019 statement and used it as one of his “principal foils” for a systematic takedown of the very idea of stakeholder capitalism. This is accompanied by a rigorous defense of shareholder primacy on Bainbridge’s part. He not only shows that maximizing shareholder value is “descriptively accurate” of the corporation’s purpose. He also claims that it can be “normatively appealing.” Bainbridge thus seeks to steal the ethical thunder that stakeholder theorists generally assume to be their ace-in-the-hole. ...

Bainbridge’s general approach is reminiscent of the classic scholastic method: he states a clear proposition, the best case for views contrary to his own, critiques their arguments, answers objections, and then explains why his own position meets the tests of reason. ...

Thus, having put a stake through the heart of stakeholder capitalism, Bainbridge provides a powerful moral rationale for shareholder primacy—one far more robust than those which underpin stakeholder theory.

I am, of course, delighted. Please go read the whole thing.

I asked ChatGPT to write a review of my book The Profit Motive

Here's the result:

Stephen Bainbridge's book The Profit Motive is an insightful and thought-provoking exploration of the role of profit in modern business and society. The book is divided into two parts, with the first half providing a historical and philosophical overview of the profit motive, and the second half examining its practical implications for business leaders and policymakers.

One of the key themes of the book is the importance of understanding the profit motive in its broader context, beyond simply making money. Bainbridge argues that profit is not just a financial metric, but also a measure of a business's ability to create value for society as a whole. He highlights the importance of entrepreneurship, innovation, and risk-taking in driving economic growth and improving people's lives.

Bainbridge also examines the various criticisms that have been leveled against the profit motive, including concerns about income inequality, environmental degradation, and corporate social responsibility. While acknowledging these concerns, he argues that they can be addressed through a combination of market forces and regulatory interventions, rather than by abandoning the profit motive altogether.

Overall, The Profit Motive is a well-written and engaging book that offers a nuanced and balanced perspective on a topic that is often oversimplified or misunderstood. Whether you are a business leader, policymaker, or simply someone interested in the role of profit in society, this book is definitely worth reading.

Obviously, the review’s positive tone pleased me to no end. But then I thought about how students could use this technology to produce surprisingly polished analyses in essay exams and research papers.

One word came to mind: Yikes.

Here's a screen grab as proof:

And here's your chance to buy the book:

Companies retreating on the DEI component of ESG

Bloomberg reports:

• Over the last six months, more than 300 DEI professionals have exited companies across the economy, including Amazon.com Inc., Twitter Inc., and Nike Inc., per research from workforce analytics firm Revelio Labs.
• Observers are questioning whether pledges made during the wave of protests in 2020 were merely reactionary, superficial moves to lower reputational risk. The situation could get complicated at companies where investors have pushed for disclosure of workforce diversity data.

In my book The Profit Motive, I argued that much (arguably most) ESG activity is greenwashing. The retreat on DEI would seem to support that argument.