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The JUST Report: Did Stakeholder Capitalism Get the Pink Slip? 

This week, Emmanuel Faber, one of the world’s foremost proponents of stakeholder capitalism, lost his job as CEO and chairman of Danone. The easy reaction would be to see this as a blow for proponents of the stakeholder cause. That would be a mistake.

Faber invested heavily in sustainable products and packaging, and acquired France’s legal qualification of a purpose-driven company and B-Corp status for Danone North America. Ultimately, however, it appears activist investors pushed Faber out not because he was so committed to sustainability, but because he wasn’t delivering returns. For the past couple years, Danone’s share price has underperformed both Unilever and Nestlé – two companies, it is important to note, that have also embraced bold ESG initiatives.

Engine No. 1’s battle with ExxonMobil is an interesting parallel; except here, the activist is pushing for stronger climate related investments. What both cases have in common is that they are ultimately about the pathway to greater shareholder returns – where they differ, is on the means to get there.

This focus on long-term value generation is foundational because it knits together everything. Take diversity, equity and inclusion for example. Former Xerox CEO Ursula Burns, speaking on CNBC this week, frames her championing of gender and race/ethnicity equity within companies in terms of performance, and as a way to attract and retain top talent and better serve customers. We took a close look at that topic this week ourselves, with a thorough analysis of the current state of diversity at companies that disclose, and a look at the momentum behind releasing EEO-1 Reports.

It also ties back to the SEC, and their big news this week. In a presentation hosted by the Center for American Progress, acting SEC Chair Allison Herren Lee said that, “Climate and ESG are front and center at the SEC,” noting it’s “precisely because” that’s what investors are interested in right now. She announced the agency has opened a public commenting period on what should be included in upcoming mandatory climate disclosures, and whether those should be part of a broader ESG framework.

Corporate commitments to ESG and stakeholder performance must at some point translate into both strong financial performance and real outcomes on the underlying societal issues at stake. In fact, that is the whole point. Our polling supports this, and business leaders understand it intuitively.

Be well,
Martin Whittaker

 

This Week in Stakeholder Capitalism

Amalgamated Bank becomes the first major U.S. bank to endorse legislation calling for a federal commission to study the lingering effects of slavery – and the merits of reparations.

Bank of America and JPMorgan Chase condemn racism against Asian Americans in memos to staff.

BlackRock releases new guidelines pushing companies to protect the environment from deforestation, biodiversity loss, and pollution of the oceans and freshwater resources.

Goldman Sachs announces that, over the next decade, it will invest $10 billion in businesses that benefit Black women.

JPMorgan Chase updates its bylaws to eliminate any gender designation.

Nike launches its Purpose 2025 Targets, a broad range of sustainability goals encompassing the company’s environmental, social, and governance commitments.

Slack launches a six-month apprenticeship program to help formerly incarcerated people find skilled jobs and succeed in tech.

Starbucks plans to make its green coffee carbon neutral, as well as to halve its water usage in green coffee processing by 2030.

Wendy’s hires its first diversity chief amidst a growing industry push to hold corporate restaurant executives accountable for the diversity of their employees, from the top down.

What’s Happening at JUST

With workforce demographic disclosure on the rise, JUST examines the underlying EEO-1 data underpinning these disclosure efforts in The State of Gender and Racial Representation at America’s Largest Companies. Our analysis finds that women are still largely underrepresented when compared to the U.S. civilian workforce, and that there are stark differences at the intersectional level, with specifically non-White and non-Asian groups most underrepresented.

JUST Chief Strategy Officer Alison Omens explains how the obscure EE0-1 Report became the “gold standard” for disclosure and what lessons this has for people pushing for increased ESG disclosure more broadly.

Alison – along with Rachel Korberg from the Ford Foundation – explores in a new Fast Company editorial featuring insights from our latest survey how, if we are to rebuild equitably coming out of the pandemic, corporate leaders must double down on workplace health and safety.

Insider profiles how PayPal took big steps to increase wages and cut healthcare costs for employees, as well as their collaboration with JUST to create the Worker Financial Wellness Initiative and formalize a plan for other companies to follow.

With ETFs and mutual funds helping to democratize ESG, JUST Director of Business Development Charlie Mahoney discusses why the future of ESG will be customized, personalized, and values-driven, and uses our latest investor product collaboration with Seeds as an example of this emerging trend.

The Neuroscience Institute looks back one year after COVID through the lens of organizational learnings, culture shifts, and brain science, featuring JUST’s research.

 

The Forum

(Investment Adviser Association)

“Investors have been demanding this information [around political spending] for a very long time. … When over 1 million investors speak, the SEC needs to listen.”

  • Allison Herren Lee, SEC Acting Chair, about the 1.2 million public comments the agency received regarding the question of mandatory corporate political spending disclosure

“The conversation has been all over the place…but the good news is that it wasn’t a singular financial conversation. You know – how do we fill the supply chain, cut costs? All those things. It has become a much more complete around the employee, around the safety of the employee, and around the responsibility of the companies to their employees but also society as a whole. It’s become a different kind of rhetoric than what you would normally see.”

“I have long suspected that stakeholderism can easily become a bit of a smokescreen, especially in Europe, for management to ward off awkward shareholder questions about performance, in terms of share price and operating profits.”

Must-Reads of the Week

New data from Stop AAPI Hate, released on Tuesday hours before the Georgia shootings that killed eight people – including six women of Asian descent – shows that businesses are the primary site of discrimination (35.4%) and that women report hate incidents 2.3 times more than men. Additional data and resources on anti-Asian violence can be found here.

The Brookings Institute explores how CEOs can advance racial equity within their regional economies, showing data for most large metro areas on what representation looks like for management, tech jobs of the future, as well as in supplier ecosystems.

A New York Times editorial explains how artificial intelligence technology for hiring may exacerbate racism and sexism and further bake bias into the hiring process.

The Financial Times reports that over half of the FTSE 100 companies link executive pay to ESG goals, a marked step forward from the past decade.

Chart of the Week 


This week’s chart is drawn from a Wall Street Journal article, released on Wednesday, that explores the recent tidal wave of ESG funds and dives into the average expense ratios of U.S. equity ETFs.

 

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