In the past few years, there's been a major backlash to what's called ESG investing. Those letters stand for Environmental, Social, and governance, and they refer to looking at particular risks that a company might have, so not just their short term financial performance, but also how they're looking at environmental risks to their supply chain, for example, or social risks in terms of whether or not they're tracking diversity in
their workforce, things like that. ESG has been around for a really long time, and it's mostly been pretty non controversial up until a few years ago. Now there's this huge backlash. People are calling it quote unquote woke capital, all those kinds of things, and that's been driven by
a couple of factors. First, this increase in the last ten years or so of what's called sharehold activism, so when people who hold shares in a particular company put forth resolutions aimed at improving that company's environmental or social performance. And the second is a move by the Securities and Exchange Commission in the US that started a few years ago to try to provide some kind of consistency in
the way that companies report on climate risk. In particular, it's always been a little bit loosey goosey, a little bit inconsistent, kind of changing from company to company depending on what industry they're in, or maybe who's auditing their reports, those kinds of things. So whenever the SEC sees inconsistencies like that in a space around investment, they see that as their job to provide the sort of consistency and stability that investors are looking for. That's why they started
to tackle this in the first place. And when they first announced that they were going to put out some kind of climate risk disclosure guidance, initially they talked about including what are called scope three emissions. Those are the emissions associated with the entire supply chain, so it's the inputs up top and the way that your product is
used and the emissions associated with that. So you can imagine lots of companies had an issue with this, from animal agg companies to oil and gas companies too, big tech companies whose data centers are responsible for a whole lot of emissions and emissions that are growing every day. We've covered this before in the podcast, but a lot of companies fought really hard against the inclusion of scope
three emissions. Today's guest Andrew Beahar, president of the As You Sow Foundation, which focuses on shareholder activism, traces the backlash back even a little earlier, to a twenty nineteen decision by a group of companies known as the Business Roundtable. These are guys that, for the record, were very involved in pushing climate science denial and generally obstructing climate policy for years. So not big tree hugging liberals by any
stretch of the imagination. They's some of the largest companies in the world. But they sat down in twenty nineteen and decided that the way the companies had been operating, with this laser focus on short term profits being the only thing that mattered, was actually not working, that it was ultimately harming their own bottom lines. So they agreed
to adopt an approach that they called shareholder capitalism. Behar says that's what really kicked off a big right wing fight against shareholder activism, and esg We've been talking about
a sort of activism in this series. That's probably one that comes to mind more often when people hear the word activism getting out in the streets, civil disobedience, protest, But this is also a type of activism and it's also fasing a big backlash right now, so I wanted to talk about it as part of this Real Free Speech Threat series. A lot of the recent fight against shareholder activism has been led by a guy named Leonard Leo, whose name you might recognize if you're a regular listener
of this podcast. He ran the Federalist Society for a long time. He's also often the guy who's pulling the strings behind the Republican Attorney's General Association or RAGA, and in the last couple of years he's been a recipient of billions of dollars of right wing money to continue his crusade against any kind of regulation on industry, especially
regulation on pollution. And it just so happens that he's not a big fan of basic civil rights either, so going after ESG and shareholder activism fits squarely in his wheelhouse. One of the latest battles in this whole anti ESG anti shareholder activism fight has been a string of lawsuits that are trying to make it effectively illegal for shareholders to put forth resolutions around social justice or environmental concerns. Excellons filed one of these suits. The National Association of
manufacturers as filed one American Airlines. These are starting to pick up, and again it's all in the context of this interconnected fight against really looking at any environmental or social justice issues, really trying to separate business interest from that, to block any sort of regulation that would in any way curtail a business's ability to just focus on profit. And of course, again it's a weird fight because in a lot of ways the things they're doing to fight
against looking at these factors are actually harming profit. I had a super interesting conversation with Behar about all of this that's coming up after this quick break. This is drilled the real free speech threat. And I'm Amy Westerbelt. So I want to start with the Exon lawsuit if you could just walk me through what happened there.
The excellent lawsuit against our Juna Capital was in response to a shareholder resolution that they filed that was basically asking for climate disclosure and reduction of emissions. It was not an exceptionally out of the ordinary resolution, but Exxon, rather than going to a no action, going to the SEC and saying we want to take no action on this resolution, which is very standard practice if a company gets a resolution that they feel as ordinary business is micromanagement.
It has already had substantial implementation. They go to the SEC and in fact, Exon is famous as being the only company or maybe one of a few, it files a no action on every resolution, as you say, has fob no no historically, as you saw, has fouled twenty seven resolutions at Exon since twenty ten, and we've had twenty seven no actions, so we know Exon knows how
to file no actions. But rather than filing a no action, which we expected, they went to litigation, and once the litigation got going, our junis said, you know what, will withdraw the resolution. So essentially gave Exon the win. That's all I was asking for. We want you to withdraw the resolution so don't have to put it on our proxy statement. But rather than saying okay, we won, great, they said, we want to continue. We want to essentially punish this shareholder and we want to make sure that
they can never file a shareholder resolution again. They want to essentially classify that there's two of shareholders, like real shareholders and shareholders whore just owned shares to file resolutions. So essentially what they're trying to do is to rewrite property law. When you buy a share of stock, you have property rights that say that you get to decide who's on the board of directors, you get to file shareholder resolutions, you get dividends, there's basic rules. It's your
property rights associated with that piece of property. And what Excellent's trying to do is to not only newter the SEC's power, but also to rewrite this whole idea of what rights to shareholders have. And this is part of a much bigger crusade that's been going on that we generally refer to as the anti ESG crusade that's been led for most part by a fellow named Leonard Leo, who you might recognize as being the co chair of
the Federalist Society. He was given one point six billion dollars in twenty twenty two mid twenty twenty two essentially to try to stop shareholders' rights, to stop shareholders from doing what they are allowed by law to do. And I can go down that path and tell you exactly how he's been doing it because a three tiered strategy that they're using, and this is just one part of the strategy. So this is a much bigger question, and
it involves the House Judiciary Committee. It involves filing literally hundreds of bills at the state level to make sustainable investing illegal, to make assessing and addressing risk illegal at the state level. And what the ramifications of this have been because it's been a financial disaster for the states that have adopted these laws. So it's much bigger piece of work. And the excellent lawsuit is just one piece of it. There's also several other lawsuits, the National Association
Manufacturer's lawsuit, the American Airlines lawsuit, Chevron deference. It's all one thing, which is take away share holder's basic rights.
Interesting to place it in the context of all that stuff. I guess the anti ESG stuff in general feels like an attack on shareholder activism.
More than a little one. No, that's the centerpiece of it. I mean, really, what it is is in twenty nineteen, there was a major decision made by every corporation essentially in the world that the ideas of Milton Friedman that shareholder premiscy no longer were working. It was just not
working out. I mean, if you think about it, shareholder primacy, which was put forth in the nineteen seventies by Milton Friedman says, you can dump in the commons, you can have slavery in your supply chain, you can poison your customers. That's all okay, so long as you maximize short term profit and for well. Back then in the nineteen seventies, the holding capacity of the atmosphere to hold carbon was much greater, the capacity of the ocean to hold play
sticks was much greater. So you could be dumping in the commons, but it wasn't going to come back and bite you. Like right now, what's happening with corporations is their supply chains. They can't get raw commodities because well just about everything that grows is being harmed by climate change. You know, cotton production massively down, I mean, olive oil Spain and Southern Europe lost their entire harvest. Coca is now the commodity price for coco doubled in the last year.
So everybody who's seeing all these inflation at the grocery store, it's because of climate This is climate inflation, but it's also affecting supply chain. So dumping in the commons is going to harm the corporation that's doing the dumping. That's why in twenty nineteen, one hundred and eighty one companies that make up the Business Roundtable said, these ideas no longer work. This is not good for us, it's not
good for our shareholders. It's not good for all of our stakeholders to adopt this new idea called stakeholder capitalism. You take care of your employees. You want to be able to, you know, to really retain to attract the best and the brightest. Customer loyalty very important. You don't want to poison your customers, want to take care of them. Your supply chain incredibly important. You've got to get that material in order to bring products to market, you know.
And of course the communities where you operate, which that community could be not only like local community, but also the broader the planetary community, because dumping into the atmosphere is going to come back to bite you. And I mean we saw an example of this just just like a couple of weeks ago, Coke and pepsi. They were saving a penny on a pound of sugar, and well that's Milton Friedman like, okay, great, but they were using
slavery in their supply chain. And an expos in the New York Times came out showing what's going on, and so now their brand is associated with it's just horrific treatment of laborers. It's going to cost them hundreds of millions of dollars to rehabilitate their brand, and so it's just it's shifting the time horizon from looking at the
next quarter to looking much broader. And the interesting thing is that most investors are actually much more long term now that the vast majority about eighty percent of most companies investors are sovereign wealth funds, pension funds, borrowin k plans. But people have this mythology that you should be making these decisions, like really structural decisions for the companies based on essentially the fifteen percent of day traders, and that
idea has shifted. So again mid twenty nineteen, Business Roundtable comes out with it and the World Economic Forum endorses it as the Fourth Manifesto. This manifesto the Fourth Industrial Age that we're moving away from an extract of economy to a regenerative economy that's one that's based on justice and sustainability. So we're about five years into the implementation of that. Now when that decision was made that was a real disruption, and that is what the anti ESG
crusade is about. It's trying to stop this transition that's already happening. The market forces are already decided, and they're trying to use the heavy hand of big government. There's really literally one hundred and forty seven bills in twenty five states right now that are trying to suppress freedom to invest, that are trying to tell us how to think.
And the ramifications of those I can tell you the eighteen states that have adopted anti ESG legislation, all of their pension funds are underperforming versus the rest of the country, and significantly because they can't assess an address risk, their treasurers are unable to float municipal bud because all the banks have been banned. So Texas spend next to five hundred million dollars in the first eight months after SB thirteen was put in place just to get their municipal bonds.
The Texas Chamber of Commerce, this is Exxon and Chevron, Conico Phillips are part of that. They reported that Texas has wasted six hundred and sixty eight million dollars and lost three thousand jobs directly resulting from SB thirteen. So these red states are harming their firefighters, their teachers, their police officers, their pension funds, they're harming all the citizens, wasting all these the tax money in these states, and
yet it continues. And that's that's why about eighty percent of these bills get killed because they're so financially just disastrous for the states. But it's political theater, and these folks think that they're scoring points for passing this legislation.
What have you seen in the wake of the SEC finally finalizing its climate risk disclosure guidelines and ultimately leaving Scope three out, which I think a lot of people characterized as them caving to pressure and this kind of relentless anti ESG campaign. So now that that's been chalked up as a win for the anti ESG folks, are you still seeing as much of a push at the state level to pass these laws and or these sorts of lawsuits against shareholders or do you think they're satisfied now?
Oh, no, they're they're insatiable, They're they're just getting revved up. In fact, Leonard Leo just recently said we need to flood the zone with litigation. They're planning hundreds of lawsuits against corporations. These guys are anti business, anti freedom, anti capitalists. That was part of phase one. Now phase two is going to be this massive litigation. And also Leonard Leo's
calling for more white men on boards. The number of white men on boards dropped from eighty two percent twenty twenty to seventy seven percent in twenty twenty four, and that five percentage loss only have a super majority is considered undertennable.
When you say that he's talking about flooding the zone with litigation, Is it more of these kinds of lawsuits like what Exxon filed against our Juna.
No, it's more like filing suits against corporations, for instance, corporations that have diversity on their board or diversity in their workforce.
So like a lack of fiduciary responsibility kind of thing where they're like not supposedly not making enough money because they're too worried about wokeness. And that sort of argument is that, well.
There's a k named ed Blum, Edward Blum who filed the action the Supreme Court, who's.
Now very familiar, very familiar.
Yes, what they're asserting is that that if a company has a diversity, equity and Inclusion department, if they have a diverse workforce, that they're going to be suing them because they say that is not in that's not for short term profit maximization. Now, as you, SAI did a study. We looked at the EEO one reports. That's the Equal Employment Opportunity reports of You looked at six thousand EO
one reports, so sixteen hundred companies over five years. These are the reports that every company puts out to the federal government about their diversity. It's by each you know, you have management, and you've got all the different groups within the company, and then you've got all the protected classes.
And what we found is a statistically significant correlation showing that greater diversity leads to financial outperformance on eight key financial metrics, including ten year stock return, return on capital, return on investment, basically every way that you would judge finance. So if a company does not have diversity, they're actually in breach of their fiduciary duty. Now they're going to try to lip it, and that's why they've been doing
all these webinars about don't believe data. There's actually a whole thing around. It's called DEI lies and at you should not believe. I mean they have a guy from the London School of Economics. Literally he's I've now seen two of his webinars saying don't trust any data that there's yeah, that there's that it's all biased. That don't like basically, don't trust math, don't trust statistics. Just don't
trust data because there's what they call confirmation bias. Now, I know my team that analyzed these one point three million data points over took over a year. There are two PhDs statisticians and I can tell you this data is real and if you do not have a diverse management team, you are not going to be You're going to be underperforming. In fact, we actually found that all
white management teams underperform. So if you want to increase the output of your financial investments, look for diverse management teams that overweight them underweight the all white management teams and you will outperform the BENU. We've seen this now, it's clear, it's over five years and statistically significant.
I know you know Ed Bloom is a fan of these cases, arguing that any kind of diversity approach is violating the equal protection clause of the fourteenth Amendment. Are they taking that kind of an approach here as well, or just saying that the short term financial gains don't just don't take any approach.
They have no principles, They are just trying to achieve an end. And also it's also you know what was his name, Stephen Miller? Who?
Right?
Yeah, he just and he just got a grant of I believe twenty seven million dollars from one of these right wing billionaires. I mean, this is all funded by just a handful like three or four right wing billionaires and oil barons. And they're funding Leonard Leo, They're funding the Federal Society, American Enterprise, Heritage Foundation, ALEC. All these groups are all funded together. So it's really a coord and needed, concerted effort. But getting back to the SEC,
because it's really important, an important point. You have to take the SEC climate disclosure rule in context of why was the SEC created in nineteen thirty four, Well, there was no financial information available and that's when the stock market crashed and the Great Depression happened, and they said, you know what, we need standardized financial metrics, we need
every company to report in the same way. We needed verified by a third party, and we needed in a standardized format so we have comparability, like you can look at a financial report from any two companies and since same format. Well ninety years later, twenty twenty four, they've come to realize that these financial statements are not the only information you need to determine if a company is going to be outperforming, if it's going to be successful,
and how to compare it to its peers. There's other things like I just mentioned. Do they have diversity, that's definitely a big one. What do they do about their supply chains, how do they treat their employees? All these things. You know, companies that treat their employees well have much better retention, they spend less money on training and on recruitment, They will outperform, and so investors need to know these things.
So what the Climate Disclosure Rule said is that these material risk factors need to be disclosed accurately, need to be verified by a third party in a standardized format. Now, the first one of these factors was carbon emissions. So overall, the big takeaway here is, Okay, you've got the financial metrics, and now you've got all of the material metrics. That's a big again philosophical shift that investors need more information to make to do their fiduciary duty and make good
informed decisions. That's the real takeaway. Now. The fact that they don't use Scope three means well, we only get to look at twenty percent of the emissions instead of one hundred percent. Be much better look at one hundred percent. Also, they gave the companies the ability to decide what is material, even though the Supreme Court defines materiality as what a shareholder needs to make a buy, hold or sell decision.
So those are the problematic parts of the new rule, But the fact that the rule exists, that we're now going to start to see standardized disclosure rules particually important because ultimately, right now, companies are just disclosing information that could be completely misleading, and you know companies Sustanalytics MSCAW, they scrape them up and they put them in a database and everybody thinks there's truth behind them when there isn't.
But here's the other good news. In Europe, they've got CSRD and companies are going to have to be disclosing accurately for that so any multinationals already going to be starting to disclose in the next eighteen months. That is pretty much going to help investors to make the right decisions.
And also companies that do disclose voluntarily, accurately have it verified in a sandrised format are going to get a lot more investors because well, if you're an investor, you're going to say, oh, well, this company doesn't have anything to hide, and we have an honest relationship, that there is trust between the company and its shareholders. Now, remember,
the board reports to the shareholders. The shareholders are the ultimate owners of these companies, and that is a critical thing that people don't realize, or maybe they realize it in the background, but that that is the core of
the property rights associated with owning a shareff stock. So while we're disappointed that they don't have Scope three, and we're very disappointed that they gave the companies the right to decide what is material, and also the fact that that's not lea to do that that Supreme Court says it's up to shareholders to decide that there is this new structure that says disclose accurately, verified by a third party and in a standardized format means, oh, now we've
got audited financials and soon we will have audited sustainability and materiality, and that is a critical shift.
Yeah. I won't ask you to speak for the entire climate movement, but how is that as you so responding to this campaign, this onslaught.
We just keep doing what we do. We're trying not let it distract us. We filed eighty nine shareholder resolutions this year, which is down a little bit. We filed one hundred and eleven last year. We're having continued having good relationships with all the companies we engage. So here's the thing. We do a lot of research and then we bring the research to the companies and we sit down and have these engagements. We say, hey, look, you know you scored a seven on racial justice. You're competitors
scored an eleven. Here's here's a better business plan of how you can outperform. And most of the time, I mean most of the companies say thank you. You guys are like amazing, You're like McKinsey for free. Let's go become better businesses. And last year we had two hundred and ten engagements. Ninety nine companies said thank you. One hundred and eleven. We filed resolutions to escalate it, and once we did that, fifty six said, you know what,
if you withdraw, we'll agree to certain terms. We'll agree to start to implement this stuff. It's only about thirty percent go to a vote, and when you go to a vote, those are non binding, and then you sit down and go, hey, thirty percent of your shareholders think this is important, and the companies generally do unless they're an oil company, and then they just basically ignore their shareholders.
So we're just doing business as usual. The companies are adopting better business practices because they can see that it's better for their businesses. Now the litigation, let's getting back to Exon against our JUNA. First of all, the judge to just dismiss it because Exon already won. Exon said, what we want in this lawsuit is for our junior to withdraw their resolution and for us to not put it on our proxy statement. Okay, done, It wasn't on
their proxy statement. What was on their proxy statement though, is that they mentioned, as you said thirteen times, referencing that shareholders should not have these rights. So they are fundamentally attacking this idea of property rights, which is such a fundamental thing for libertarians and for the conservatives. I mean, it's kind of amazing to me that any of them would even you know, sanction this. But there they are doing it. So you know, we're continuing business as usual.
Companies are quietly adopting the good business practices that we're suggesting. And you know, some people call it green hushing. It used to be that companies would take a victory lap say hey, you know what, we're adopting this new DEI policy or this new climate policy because they wanted to see we're outperforming our competitors in terms of reducing risk for all stakeholders and opening up creating opportunity. Now they're much more quiet about it, but they're still getting it
done because that's what good management does. And I mean, here's the thing. Good managers assess and address risk. Good investors address an assess risk. The eighteen states where it's illegal to assess an address risk, they are suffering and because they are not, it's ill literally illegal. So you think about it, why are their pension funds underperforming? Well,
they're not allowed to assess an address risk. They're not allowed to invest in companies that have a climate transition plan, which are generally the most profitable companies in the world. I recently had a debate in Arizona and the Treasurer of the Arizona Kimberly Yee, was debating anti ESG. I was debating pro ESG, and I asked her about SB eleven ninety five in Arizona. Now, if it goes into effect, literally the state cannot do any business with any company
with a climate transition plan. And I pointed out to her that half of her portfolio was companies that have a climate transition plan and that she would have to sell half of her portfolio, and I asked her what's her plan. I also pointed out that all the banks that are currently funding their bonds, she won't be able to do business with them. They'll all be banned. What's she going to do and how much more interest is she going to be paying because you can't get a
lot of banks to bid on the bonds. I also pointed out that all of her bonds have risk assessment for climate, for water, for air, that she would have to take out of those bond issuances, which means very few people like reinsurers will not allow anyone to to bid and to fund these bonds. And I said, what's your plan? And she didn't have an answer. She said that, oh, you know, it's about freedom and ESG is taking away our freedom. And I was like, no, actually, anti ESG
is saying that we can't assess and address risk. You're taking away our freedom to invest. And so it was a very interesting just to hear her like she hadn't actually done the homework and the Arizona State Legislature. I said, you must have prepared a report for the Arizona State Legislature showing them all these financial risks. She no, she had not in r did she was she even aware that there were these financial risks.
So it's political fear and she's super involved in the State Financial Officers Foundation to write.
Yeah, she's the treasurer and she's very vocal and yeah. Yeah. One other thing we haven't mentioned is the fact that the House Judiciary Committee is investigating, as you sew in thirteen other organizations for anti trust activities.
Right, I saw this, So.
We'll tell you a little bit about that if you like.
Yeah, please, I know that I did a story last year on just on the Texas Public Policy Foundation and the stuff that they were doing to try to push that whole legal theory forward that ESG in general is anti trust in some way, which every lawyer I talked to said was bunk. But you know that doesn't stopped them from moving forward with it to.
The House because the House could frame it as we're writing new law, and therefore we need to do discovery to write this new law. Right, So we got a letter at last August saying that, as you say, is being investigated along with you know, other groups including Black Rock, Vanguard, State Street, ISS, Glass Lewis, CalPERS, the largest pension fund in the country, g FANS, which is five hundred of the world's biggest banks in forty five countries, ENZA, which
is the net zero asset managers. I'm all told the fourteen groups that are being investigated have a total assets under management of one hundred and fifty trillion dollars. We're talking about five times the GDP of the United States. We're talking about one and a half times global GDP.
So basically the entire global economy is being investigated by the House Judiciary Committee for Anti trust Activities, saying that that shareholders having a conversation is collusion, and that by getting companies to reduce their carbon emissions, we're infringing on the freedom of all Americans. So that's what they put forward to as their legislative purpose, and so well, we had a lot of questions about it. First of all, we're in nonprofit, so how could we be doing anti
trust activity. We don't have a product. I'm not fixing any prices because we don't have any prices. And so we wrote them a letter saying could you clarify? They sent us a subpoena and said, just turn over all your documents anything to do with carbon or with net zero,
all your documents from twenty sixteen. So you know, we gave them twelve thousand pages of documents that we're mostly our our shareholder resolutions, our exemp solicitations, our reports that we felt satisfied their legislative purpose, that we're pertinent to their legislative purpose. They said, not enough, We need to hear from you. We come on in to we want
to have an interview. So we sent our chief counsel and she went in and had eight and a half hours of being interviewed and answer all their questions, they said not enough. So I said, okay, I'll come in voluntarily at the end of March. And so within a couple of days they sent us a letter saying we're going to hold you in contempt of Congress. So our lawyers said, well, if you're going to hold them in contempt, then we can't answer questions around document production because that's
what they were saying. That was the contempt that we hadn't given them enough documents, So we can't answer answer questions around that because that would be self incrimination. So they immediately sent a subpoena that said show up on the same day you've already said you're coming. Odd. So I showed up on the day that I said I was coming, and they proceeded to ask me five and a half hours of questions. Most of it was really
kind of explaining to them how capitalism worked. They didn't quite understand that the boards of directors report to their shareholders that when three new directors were added to the Exon board or were replaced on the ex On board in twenty twenty one, it was because Excell had been
losing money. Their stock had been dropping for ten years they'd been thrown off the Dow, and what's a shareholder to do, like, of course you're going to replace an incompetent board, a board that had no capital discipline, Like, of course you would do that, and that's just that's our right. They did not like that at all. So it was mostly talking about that kind of thing where I just kept having to explain how the power structure of capitalism worked. And so now they keep telling us
that they're going to be holding us a contempt. We keep saying, we've given you all the pertinent documents, we cooperated completely with the committee, and we'll see what happens. Now it's in their court. What's interesting is just how they are essentially trying to intimidate shareholders from essentially doing what is not only our legal rights, but our fiduciary obligation to get the companies that we own to perform better, to have less risk. That's really interesting.
I know we talked about some of the state laws. Can you talk a little bit about the haggard Y Bill and what that is aiming to do and where it's at at the moment. He introduced it in February February first, twenty twenty four.
And there's a companion bill in the how it's called the Respite for Businesses Act, and its respite stands for rejecting extremist shareholder proposals that inhibit andport enterprise.
Right. Look, as you said, it's been doing this for thirty two years, and we work with groups like all the faith based groups that have been doing it for fifty years. And every shareholder resolution that we file is about helping a company to reduce material risk for all stakeholders and to create opportunities. It's helping them assess and address risk that they might not see. And the fact that they see this as some sort of a threat.
When seventy percent of the companies we engage say thank you, thank you for caring enough to bring us good data and good ideas, and thirty percent go to a vote, and then almost all of those then after the vote say thank you for bringing us good ideas. You're making us a better company. So it shows just how out of touch they are and how much this is just political theater. What they're trying to do here is trying to take away shareholders' property rights. This is about participatory democracy.
This is about capitalism. And this is about freedom. And it seems like mister Haggerty does not like those things and doesn't quite understand that that is how the system works, and it works quite well. I got to say, these are non binding resolutions. I mean, we have ninety six percent votes in the company doesn't have to do it now.
In those cases and the company says, no, we're not going to do anything, well, then the shareholders go, you're not listening to us, and therefore we're going to vote against this board. We don't have confidence in this board. We're going to vote and no confidence vote, and oftentimes that leads to running new board candidates, often much more competent. I mean. Interesting thing about the Engine one directors at Exxon. There was no one on the Exxon board in twenty
twenty one that had any energy experience, none of them. Wow. Okay, two of the four Engine I directors had experience working with an energy company, and there's a lot of outside influence. But since the day, since May of twenty twenty one, Excellon stock has done pretty much nothing but go up
after a ten year decline. So anyone who says these directors harmed the company, well, first of all, ninety one percent of the shareholders voted for some of them and been re elected every year after, and the company has done much better financially since then. They're just not looking at the data. But again they don't necessarily like data either. And what's interesting is, you know I talked about in twenty nineteen there was this big decision on a new philosophy.
Well right after that, the Catholic Church they came up and said, you know what, this papal law that gave basically all the explorer ships would put a priest in it, and it was called the doc of Discovery. You get to a new land and you claim it for for the church, and then you could do anything. The people there were, could be subjugated, could be enslaved, et cetera. Just kind of quietly, the Catholic Church said, you know, by the way, that law is no longer in force.
I saw that he'd got no attention in the press. But that is a major philosophical shift. That is like literally they just announced on it was March twenty third, twenty twenty, that colonialism is no longer law. It's no longer legal, you know, And kind of no one noticed it, but we're seeing this level of a philosophical shift. Now, we've got a long way to go to get to a glide path into this new paradigm, and there's a
lot of reparations that have to happen to rebalance. But the folks who have been in power for all of this time, they're not liking it. And his thing. You know, when you have all this power and you see it potentially going away, like the eighty percent of white males on boards to seventy seven, that little bit of change is seen as outrageous and it's a massive attack on the structure that we know and love and have for
you know, for centuries. Whereas the people who haven't had any power are seeing like, oh, I'm having a little bit more power there. So the pushback is very intense. But you know what, you cannot stop market forces. You can try. It's a ripple that's become a wave and is soon to be a tsunami, and they can stand out there and hold their hand up against the tsunami, but they will just be swept away by it. And that is what Leonard Leo knows. That is what they
are desperately trying to slow down. They know they can't stop it, but they're trying to slow it down as much as possible. And it has to do with the way the oil companies control well, you know, all the governments and that right, everyone is beholden to them. Well, guess what the internal combustion engine is going obsolete.
Interesting data point this week. I think it was just today or yesterday the Wall Street Journal called oil and gas a sunsetting industry.
Well it is. I mean it's the Kodac and I often say, you know, shareholders went to Kodak and said, hey, we got to think about think about our business model. We got to think about digital photography and they said, no, we make films. And we went to blockbustering. We said, you know, this internet thing, it's not just a fad. Really look at Netflix and they go, no, you know, we have brick and mortar and we have these vhs. Right,
same thing with Excellon. It's been again twenty seven resolutions over ten years saying let's think of ourselves as an energy company, not an oil company. I mean we've come up with really innovative resolutions that were trying to reward give bonuses to executives that actually started to transition the company. We had this idea that rather than base bonuses for executives on what's called barrel replacement. You sell a barrel, you got to go discover a new barrel, but rather
on BTUs on British thermal units or energy. So if in each barrel of oil or each unit of gas, all the fossil fuels have BTU equivalents, So you just do the math and you just go oh and so, and you report to the SEC both your barrel replacement and your energy replacement, and then you can see, oh, look they replace seventy percent of their barrels, but thirty percent is but they have one hundred percent energy replacement. That's a company that's transitioning. I want to overweight them
in my portfolio. And we actually talked. It was interesting. We have these meetings with chevrons. We fold this resolution. I remember sitting in this meeting and we explained it to them, and these executives at a high level people said, like CFO level people said, you know, we're going to make a lot of money, like I'm going to get really rich doing this, and we're like, yeah, exactly, you
guys should get rich transitioning this company. They were like, Okay, let's maybe let's go together to the SEC and talk about this. We're like, that's cool, we'll do that anyway, Then they invited ex on Alan and somehow by the end of that week the whole thing was put the kabash on it. Interesting again, we're a shareholders trying to figure out how do we make this company viable in the long term because we don't think they are long term.
Their viability is seriously compromised in the long term.
So, yeah, is there any kind of either legislative or judicial approach to batting back some of this stuff? Is suing them back or trying to propose policy that would tamp down on some of this anti ESG fervor, or people just kind of trying to ignore it and get on with their day.
Well, people aren't ignoring it, which you're seeing at the state level, like in South Dakota, for instance, they're anti ESG. Bill lost I think it was ninety to three. That's because the South Dakota bankers got in and said this is going to crush our state, this is going to just harm us. So you're seeing at the state level they're realizing the economic harm, which is why about eighty
percent of these bills don't make it. And then the ones that do, some of them are specifically illegal, and it's been very hard to find plaintiffs willing to stand up to them. So right now it's a work in process to actually push back in terms of suing. Edward Blum.
Yeah, is he actually the one that's bringing some of these cases, the Leonard leode ones? Is it Blum and his crew?
Well, he brought the case against Fearless Fund. Okay, so that's the fun you know, that gives grants to black women entrepreneurs and you know, and as a VC. So he's doing that. And then there's Miller who's doing his stuff at Target, you know where he'll basically, you know, create a hate mob against LGBTQ and then he'll sue the company for having a hate mob. So there's those troublemakers.
And again Miller just got twenty seven million dollars to run more litigation from I think it's the Bradley Fund, which is.
The Bradley Foundation. Okay, this is wild because I did a two year project looking at the all the anti IQUA cases, the anti Indian Child Welfare Act cases that were mostly being they were being argued by Gibson Dunn, which is why I got interested in it because I was like, wait a minute, that's Chevron's law firm. Why are they involved in this child welfare case? And the more we looked at it, it was it was a whole thing that had been started by the Bradley Foundation,
who have also like funded Bloom for years too. Those guys don't get as much attention and as they deserve.
No, no they don't. But I mean this is the you know, I call them the oil barons and right wing billionaires.
Yeah, it's a pretty small group, but they.
Have a very small, very small group. This is the regressive elites, if you will, And they just want to kind of go back to I mean, look what's going on in Arizona eighteen sixty four. That was a pretty good year.
That's seriously what they want. I mean, I feel like Leonard Leo has basically said that at various points, like you know, pre Lockner and Industrial Revolution kind of days.
I don't know, well, certainly certainly back to the nineteen seventies and Milton Friedman. But yeah, here's the thing. The University of Chicago I think it's the Freedman Becker School, which was, by the way, was renamed because the universe of Chicago professors did not want to have it just be the Milton Friedman School because they disagree with his theories.
They're teaching stakeholder capitalism. Why, because it works, because your companies out perform because you take care of your employees, When you take care of your customers, you know the communities where you operate and your supply chain, you are going to be a better company that's going to have long term sustainable growth that it's going to be good for all your shareholders. So there's just no question about that.
I often cite an example of if you've got a company and it's dumping toxic waste into the local river from your factory. Yeah, okay, you don't have to pay for water treatment and you've saved a little bit of money there. That looks good the first month, But then your own employees are drinking the water and they're sick, they're not showing up at work, and then you get sued and your brand is now tainted. Okay, you've got such a deep economic problems it's going to last you
for years. That the trade off is not worth it. Again, short term ism long term, and people are just thinking much longer term now because the investors in their companies are much longer term. When somebody pass a law that says it's illegal to look at risk, then you really want to look at the risk and say, what are they hiding? Now? What they're hiding is that the oil companies are no longer viable. That is what they're hiding,
and it's in plain sight and everyone knows it. But frankly, the Saudis keep it pumped up and people don't realize this. There's one hundred million people with ten trillion dollars of assets in four to one K plans that are invested in the entire extract of economy. If you're invested in Blackrock, you own Saudia Ramco. Saudia Ramco CEO is on their board.
People don't know this. Now. Not only are you invested in in rainforest destruction and fossil fuels and private prisons, but you've handed off your right to vote to vanguard that votes with management ninety eight percent of the time. So we've all handed over all of our power. Our power is in our money and we've said oh okay in Vanguard, Yeah, you can do whatever you want to do, and all you have to do is, you know, it's
like it's your money. The person who earns the money should decide how it is invested, and they can use it to capitalize a future that they want to live in. The person who owns the money should have the right to vote. They have the right to vote, but they should actually use it to express their values to the companies they own. It's so basic, and we're getting to the point now. It's a new thing called pass through voting.
As you sow as four oh one k plan, we are literally piloting starting in a few weeks, we're all going to every employee, as you say, will be voting every one of our shares. So if we own a target date fund, that's two thousand companies or so, we're voting everything on everyone, and we're doing it with one click.
We call it as you Vote, and we also offer this for free anyone who owns shares individually, Like if you just have if you're getting your proxy statements, your ballots into your inbox, literally one click, you can sign up for as you Vote and all those ballots going forward will be voted in an ESG aligned way according
to our policy. That means you're voting against eighty percent of the CEO pay packages, you're voting against seventy percent of the board, you're voting for all the good shareholder resolutions, and you're voting against all the anti ESG resolutions, which, by the way, another that's another piece of the Leonard Leo puzzle is they're following these resolutions. They're calling them racial justice resolutions, but what they say is white men are discriminated against.
Yes, it's the reverse racism thing. They've been trying to make this argument since the nineties.
The good news is they wouldn't be pushing back as hard if we weren't making progress, and we are making good, solid progress, and we have the market forces at our back, and they are trying to stop the unstoppable.
That's it for this week. We'll be back with a few more episodes in our Real Free Speech Threat series over the next month or so. This episode was engineered by Peter Duff. Her music is Bird in the Hand by Foreknown. You can find a transcript of this interview and lots of other related articles and podcast episodes on our website at drilled dot media, and you can follow us across social media at we Are Drilled or I'm at Amy Westerveldt. Thanks for listening and we'll see you next time.