During the discussion in which BlackRock CEO Larry Fink told his audience that his firm was “forcing behaviors” on companies whose shares it held, he also divulged a key lever of the progressive movement to control corporations: proxy voting.
Fink told attendees at a 2017 New York Times conference that as an index fund manager, “we are the ultimate long-term holder; we have to own all the companies that are in an index.
“If you’re an active manager and you don’t like a company, you can sell it,” Fink said. “I can’t sell. I have only one power, and I’m going to use that power heavily. And that’s the power of the vote.”
Proxy voting refers to the practice of fund managers voting the corporate shares they own on behalf of the individuals and institutions that invested in their funds. With the rise of mutual funds, pension funds and index funds, more than three-quarters of all stocks in the United States today are held, not by individual investors but by a short list of very large asset management firms.
BlackRock, the world’s largest asset manager, has more than $8 trillion in assets under management. Vanguard, the second largest, has more than $7 trillion under management. State Street has about $3.5 trillion under management.
At the same time, two proxy agent companies, International Shareholder Services (ISS) and Glass Lewis, have arisen to advise fund managers on how to vote on numerous shareholder proposals. Critics argue that fund managers and proxy agents now have undue influence over shareholder votes and that they have used that power to successfully push a left-wing agenda known as the environmental, social and governance (ESG) movement on companies.
Congressional Hearings on ESG
In a series of Congressional Financial Services Committee hearings this week, Republican representatives hammered the ESG industry, which the Biden administration has supported, for manipulating free markets for political goals, while Democrat representatives accused the GOP of racism, climate denial and Trotskyism.
“I support shareholder democracy, but it should be their say and not external third parties who exploit the existing process to impose their own social and political beliefs onto American public companies,” Committee Chairman Patrick McHenry (R-N.C.) stated at the July 12 hearing.
In addition, “We must address the burdensome climate reporting and other requirements imposed by the Biden administration Securities and Exchange Commission,” he said. “The SEC has proposed a 500-page climate disclosure rule that would replace voluntary sustainability reports with mandatory disclosures, and the question of materiality is really thrown out the window.”
“The SEC is not a climate regulator, nor has Congress authorized it to mandate environmental policy via the disclosure regime,” McHenry said.
Democrat lawmakers, however, were united in their view that the ESG hearings should not take place and presented themselves as defenders of free market capitalism.
“Today is the first of six areas this month where Republicans will partner with a network of dark money, climate deniers and conspiracy theorists to wage their latest culture war against responsible investing,” Rep. Maxine Waters (D-Calif.) stated.
“For over 100 years, the followers of Leon Trotsky and the Socialist Workers Party have waged war against this capitalist model,” Rep. Brad Sherman (D-Calif.) stated. “Today, elements of the Republican Party join them in that effort. Ronald Reagan would be ashamed.”
How Proxy Voting Works
The hearings focused on how to address the role of proxy agents and how to deal with efforts by financial regulators under the Biden administration to impose extensive climate reporting rules on all listed companies. New regulations by the SEC would require companies to produce audited reports on their CO2 emissions, as well as those of their suppliers and customers.
“Coupled with the recent politicization of the SEC, proxy advisory firms have seized immense power to shift policy … to promote a liberal social and political agenda,” Rep. Bill Huizenga (R-Mich.) stated. “The proxy process is broken; it no longer promotes long-term shareholder value and operates without transparency or accountability.”
The proxy process begins with shareholder proposals, for which the SEC acts as a gatekeeper, determining which can proceed to a shareholder vote and which cannot. Under President Biden in 2021, the SEC shifted its policy to make it easier for ESG proposals to be put to a vote.
“The SEC’s new position is that corporate annual meetings must permit the smallest of shareholders to force shareholder votes on any social or policy concerns whether or not it is material to the company’s business,” James Copland, a fellow at the Manhattan Institute, told Committee members. “This change in policy has predictably led to a significant increase in socially oriented shareholder activism.
“In 2022, the first year after the SEC’s new guidance, the number of shareholder proposals faced by the large companies tracked in our proxy monitor database jumped 33 percent over the prior three-year average,” Copland said. “To date in 2023, with approximately 10 percent of companies yet to file a proxy statement, companies have already seen a record number of shareholder proposals.”
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“Environmental and social proposals now represent a majority of all proposals in Russell 3000 companies, 58 percent of proposals in 2022,” Jonathan Berry, a partner at law firm Boyden Gray, testified at the July 13 hearing. In addition, Berry said, the SEC has shown a bias toward green-lighting pro-ESG proposals while rejecting anti-ESG proposals.
“This last proxy season, my client, the National Center [for Public Policy Research], took a shareholder proposal that the SEC had blessed on a discrimination issue and substituted the terms ‘viewpoint’ and ‘ideology’ for the prior proposal’s terms ‘sexual orientation’ and ‘gender identity,’” Berry stated. “But the SEC said that my client’s proposal could be struck off the ballot, that viewpoint discrimination in the workplace was not a significant social policy question.”
“In recent years, third parties have hijacked the proxy process,” said National Association of Manufacturers Vice President Christopher Netram. “Activists use the proxy ballot to advance political and social agendas.”
“Proxy firms dictate corporate governance decisions, and the SEC is empowering these groups while also proposing ESG disclosure mandates of its own,” Netram said. “Turning the proxy ballot into a debate club diverts time and resources away from shareholder value creation and forces companies to wade into controversial topics over which they have no control.”
Examples of companies wading into controversial topics include Disney’s fight in 2022 against parental rights laws in Florida, Coca-Cola’s fight in 2021 against voter I.D. laws in Georgia, and Anheuser Busch and Target’s recent attachment of their brands to the transgender movement. In many cases, venturing into politics proved harmful to brand perception, has reduced sales, or caused a substantial decline in the company’s stock price, all to the detriment of end investors.
Those who support ESG say it is merely a means of getting important information to investors and that the SEC’s green accounting mandate and permissive approach toward ESG shareholder proposals is simply the free market at work.
“Investors need to know how companies are addressing climate risk, how they pay their employees, how diverse their workforce is, and more investors want this information, because it’s good for the performance of their investments, which is also good for society,” Waters said. “Rest assured that committed Democrats will continue to thwart this anti-capitalist, anti-investor, anti-business and anti-American effort.”
But ESG critics say there’s more to it than that.
“ESG efforts are not primarily about providing information,” Scott Shepard, director at the National Center for Public Policy Research, told The Epoch Times. “They’re about forcing companies to adopt political-schedule decarbonization, equity-based discrimination and hard-left positions on social policy.”
According to Will Hild, executive director of Consumers’ Research, much of the information that comes from environmental or racial audits that companies are compelled to produce will not be used to increase shareholder value but rather “to give far-left activists a cudgel to use against these companies” via lawsuits, negative publicity campaigns, and additional shareholder proposals.
The Proxy Agent Duopoly
The proxy agency market is a duopoly in which ISS and Glass Lewis together represent more than 90 percent of the market.
“Both earlier and recent regulatory actions by the Securities and Exchange Commission have created a duopoly in the market for proxy advisory services and powerful incentives for firms and funds to retain proxy advisors and to adopt their recommendations often on an automatic basis,” Benjamin Zycher, a fellow at the American Enterprise Institute, told lawmakers.
“The advisors themselves have weak incentives to consider the fiduciary interests of shareholders and fund participants, thus freeing them to indulge their own political preferences and little or no cost to themselves,” Zycher said. “Unsurprisingly, environmental social and government’s political objectives have come to influence proxy advice heavily.”
Steven Friedman, ISS general counsel, testified that ISS is a registered investment advisor that “provides institutional investors with objective, timely and expert proxy research and vote recommendations based on the proxy voting policies selected by the clients.”
“ISS and other proxy advisors play an important but narrow role in the proxy voting process,” Friedman said. “It’s the client who creates and selects the voting policy guidelines that reflect their own fiduciary obligations and investments strategies.”
A 2018 report by the Harvard Law School Forum on Corporate Governance stated that “proxy advisory firms have significant influence over the voting decisions of institutional investors and the governance choices of publicly traded companies. However, it is not clear that the recommendations of these firms are correct and generally lead to better outcomes for companies and their shareholders.”
According to this report, ISS and Glass Lewis are able to swing between 10 percent and 30 percent of shareholder votes in line with their recommendations.
A 2018 report by the American Council for Capital Formation stated that 175 asset managers, with more than $5 trillion in assets under management, followed the advice of ISS more than 95% of the time.
A July 12 Wall Street Journal article stated that both ISS and Glass Lewis supported an audit of Starbucks’ employment practices this year, which shareholders passed with a 52 percent majority, and that the duopoly backed a racial equity audit at McDonald’s that passed with 55 percent support.
Policy recommendations included breaking up the proxy advisor duopoly and passing laws to check the administrative overreach of financial regulators like the SEC.
“One thing they should do is look at why it’s a duopoly in the first place,” Hild said. “Generally speaking, we don’t allow that in any major industries and certainly not something as big and important as the proxy advising services.”
“I urge Congress not to focus on the large asset managers, BlackRock, State Street and Vanguard,” Zycher stated. “Their incentives are roughly efficient, however silly their public pronouncements.
“I urge Congress instead to reform the SEC regulatory framework,” Zycher said. “I urge Congress to enact legislation constraining the efforts of regulatory agencies to pursue climate policies not authorized in the law, uninformed by actual evidence and justified on the basis of fundamentally dishonest benefit-cost analysis.
“Such regulatory efforts continue to engender vast costs and no benefits.”
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Article cross-posted from our premium news partners at The Epoch Times.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.