Deese, Esg, and Stakeholder Capitalism

Floor Speech

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Mr. BARR. Mr. Speaker, I rise today to once again sound the alarm about an increasing danger to retail investors and retirement savers across the country.

We have seen in recent years a trend of asset managers, banks, and other financial institutions prioritizing political and social causes over investment returns, potentially compromising the long-term financial security of their customers.

We have seen companies cede the primacy of shareholders to so-called stakeholders, endangering the longstanding corporate governance principle of directors' and officers' fiduciary duty.

Corporate leaders continue to accede to the calls from the extreme left to shun certain industries, deprioritize financial growth, and comply with a radical corporate governance reform agenda out of fear of being publicly shamed.

I fear that, if left unchecked, this trend will accelerate in the coming years, as government continues to pressure financial institutions to be agents of social change at the expense of savers, customers, and shareholders. Without a strong defense of free and fair market principles, we risk witnessing a decline in American economic exceptionalism that will have long-term material impacts on our constituents.

Earlier this month, former Vice President Biden announced that he would appoint Brian Deese as the chairman of the National Economic Council. Mr. Deese will join the administration from his current post as the head of sustainable investing at BlackRock. In that capacity, he serves as a leading proponent of BlackRock's environmental, social, and governance, or ESG, investing strategy.

BlackRock has been perhaps the most vocal asset manager on restricting access to capital for legally operating fossil energy businesses and limiting choices for their investors based on misguided public relations goals. This, in part, is attributable to the efforts of Mr. Deese, who has orchestrated the curious investment strategy of actively alienating an entire sector of the American economy, the U.S. energy sector, and the millions of jobs it supports, while at the same time enthusiastically providing access to capital to Chinese businesses which threaten American competitiveness and national security.

The appointment of Mr. Deese is a harbinger of things to come. It showcases that, unless we act, we will be on the path to socialism, where the primary goal of a corporation is not long-term growth or hiring more people or providing products and services to the American people, but instead to satisfy the most vocal detractors of corporate America.

So-called stakeholder capitalism, or the left's ideals for it, takes for granted the laws of supply and demand and discounts the market forces that govern businesses' success or failure.

Shareholder primacy is not about elevating the select few. It is about establishing metric-based accountability for corporate leaders to ensure that they are operating efficiently and effectively. That efficacy and productivity then, in turn, benefits employees, communities, and suppliers.

In today's market, a company cannot be successful without a focus on these other constituencies. But it must, first and foremost, make a profit to be viable.

Caring about broader social concerns, treating employees, suppliers, and customers well and ethically, and engaging in philanthropy within the community may all engender social support for a corporation, and in that sense, it may advance long-term shareholder value maximization. But that is not the paradigm those on the far left are urging the business community to adopt. Instead, they want a new paradigm, a paradigm that subordinates the interests of shareholders to the whims of stakeholders who have no ownership interest in the corporation whatsoever.

Replacing the focus on shareholder value with a focus on stakeholder interests unrelated to the core business of the corporation would not only authorize officers and directors to breach their fiduciary duties to the owners of the corporation, it would, in the long-term, undermine the corporation's ability to advance the interests of employees, suppliers, customers, and other stakeholders.

The socialists think that shareholder value maximization is always inconsistent with other stakeholder interests. The opposite is often true.

I believe we are only scratching the surface of how the radical left hopes to remake corporate America in its socialist image. We must act diligently to preserve the spirit of free enterprise, promote healthy economic growth, and protect the long-term interests of investors.

With Brian Deese departing from BlackRock, perhaps that firm can reevaluate its obligation to the investors who entrust their assets to them to prioritize returns over political errands, to focus on maximizing shareholder value, instead of groveling before radical environmentalists, socialists, and the extreme far left.

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