On Changing Corporate Goalposts:
9-19-2021
For 36 years the Steel Valley Authority, led by Tom Croft, has provided unique services that seek to avert layoffs, provide an early warning system for troubled companies and seek ways that workers can guide their pension and other investment funds in a way that doesn’t work against our own interests. The SVA has become a respected voice locally in Pittsburgh, statewide and nationally. Lately SVA has focused on the “responsible investment” part of its work as the national discussion increasingly includes rising corporate power and its impact on the economy and us all.
SVA, through its Heartland Capital Strategies efforts, seeks to guide corporation decisions through investor pressure. The basic idea is that worker pension funds and other huge savings pools provide significant investment money that can be used to leverage how corporations act. To that end, SVA has adopted a number of non-financial measurements that can be used to judge the worthiness of investing in a particular enterprise. These principles are grouped under the title of ESG’s or environmental, social, and governance issues such as human rights, diversity, sustainability, and pollution. The “S” has at its core, worker rights and treatment. This approach challenges the idea that the only purpose of a corporation is to enhance shareholder value. In fact, application of the ESG principles has been shown to increase productivity, profitability and lower the cost of borrowing money. Of course, this is heresy to the current crop of corporate robber barons.
Because we are dealing with Wall Street and the upper crust of the financial world, SVA and its like-minded advocates have decided to give a fancy name to the worker component of these principles, “Human Capital Management”. Other parts are labeled “Socially Responsible Investing”. The idea of all this is to change the very purpose of our corporate entities from short-term profiteering to long term investment and growth. Why this all matters to workers and the general public is that it really aims to reduce the income inequality that is destroying the middle class in this nation. It also seeks to grow real wealth instead of strip mining our enterprises. The wealth hoarding and financialization in our nation have worsened our impoverished and increased our social fracturing.
Strategically, SVA would increase the number of worker representatives on Boards of Directors, carry out shareholder campaigns to stop the fleecing of solid companies, combat the use of anti-union consultants by corporations, convince a huge pool of investment funds to weigh the ESG principles in any investment decisions, and generally bend corporate behavior to consider more than immediate profit and outsized executive compensation.
SVA, and the proponents of these ideas, readily admit that current corporate law and Securities and Exchange rules contain hurdles to effectively using these tactics. They advocate changes in our corporate charters and governance to mirror a number of laws that other nations have used to curb corporate short-sightedness and greed. A debate that essentially raises the question of if our economy is solely for profit, or is supposed to serve people.
Some will see all this as pie in the sky. Shareholder initiatives are expensive and so far, have had limited success. Unless workers have a significant number of Board seats, they are essentially inside observers without power. Some will defend any curbing of a sole corporate focus on profits, as destructive to how the economy operates. The sky will fall in if people are part of the economic equation.
Our current approach is to let corporations rule the world, and we pick up the droppings. These proposals are just one part of a serious effort to yield a successful economy for people in a global world. There are other pieces of the puzzle. Unions, where they have strength, are a direct curb on corporate excess. Tax laws that moderate how much the top tier can grab from the overall GDP, is another. Programs that invest in people’s ability to be productive, add to the nations capacity to grow. Reducing social friction makes way for a more unified approach to challenges. With all of this considered, the SVA and ESG advocates, do us a service by raising these issues on the financial side of the problem. In fact, how corporations are required to behave, goes to the heart of getting a grip on an economy that is now tilted toward the accumulation and consolidation of wealth into fewer and fewer hands. Solving that problem is one of the critical challenges of our time.
igh 9-19-2021
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