Working Together to Protect
Our Common Resources
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2019 Draws to a Close
Welcome to the December newsletter of The Shareholders Commons, a nonprofit organization promoting a new market paradigm that can repair capitalism and revitalize our weakening social and environmental systems.
Our current financial system values all profits equally, whatever the source; at TSC we seek a shift to an economy that demands business seek profit only when doing so does not damage the planet or its inhabitants. See this month’s Ramble (below) for an example of the problem with the status quo.
We have had lots of exciting developments since we incorporated in August. After the Ramble, we take stock of what we have accomplished and unveil some of our exciting plans for 2020.
As always, we would be honored if you could share this issue with others who may be interested in this important work. We are building our movement one company, one investor, one employee, one consumer at a time; the bridges you build today can lead to a better future for all of us tomorrow.
Welcome Dan Osusky, who joined as an advisor to The Shareholder Commons this month. Dan is the Director of Standards at B Lab, where he is responsible for managing the standards and content of the B
Impact Assessment, the social and environmental performance measurement and management tool used to certify B Corps. His work at B Lab has included developing and launching Versions 5 and 6 of the B Impact Assessment, development of the SDG Action Manager in partnership with the United Nations Global Compact, engaging with B Lab’s Standards Advisory Council and developing B Lab’s positions on controversial issues related to business (such as tax avoidance, unionization efforts, etc.), and the development of B Corp Certification requirements for large multinationals in conjunction with B Lab’s Multinational and Public Markets Advisory Council. The Shareholder Commons is privileged to have Dan’s wisdom and insights as
an advisor to our work, which will be of particular relevance in the development of and advocacy for a set of universal, pre-competitive guardrails that will create a level and sustainable playing field and ensure that all companies are pursuing profits without degrading vital systems.
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A Visit to Capitol Hill
Last week, the American Sustainable Business Council held its Making Capitalism Work for All summit, consisting of (1) a day-long convening to discuss the policies necessary to ensure that businesses can make profits for shareholders while
treating all stakeholders with fairness and dignity, and (2) a day of meetings on Capitol Hill with members of Congress and their staffs. First-term Rep. Kim Schrier from Washington State met with all of us to discuss a new initiative to address plastic waste, and then we
broke into small groups; my group met with staff from the offices of Senators Rubio and Warner and discussed legislation that could address the serious problems caused by shareholder primacy.
The good news is that while Washington is not the land of Kumbaya, it is not entirely the partisan melee shown on television. As a group representing businesses focused on sustainability, we felt connection to both sides of the aisle. Legislation that will help all Americans, while creating a level and sustainable playing field for private enterprise, remains a feasible goal.
Here we are in front of Senator Warner’s office. That’s Amy Hall of Eileen Fisher, Richard Eidlin of ASBC, Jim Epstein of Blue Ridge Produce, Rick Alexander, Vince DiBianca of DiBianca Associates and Daniel Tam-Claiborne of BSR:
This Month’s Ramble:
New Paper from Harvard
Confirms Investment Laws are Absurd
A Pension Trustee Must Consider Only Profits
The bottom line of the paper was that under US law, fiduciary duty and conscience cannot be reconciled: Professor Schanzenbach explained that pension funds, 401(k) plans and similar trusts are governed by the “sole beneficiary rule,” which prevents trustees from considering any matter other than financial return to shareholders. The rule is very strictly construed; for example, if two investments are completely equal from a
financial perspective, the paper states that a trustee cannot “break the tie” based on the fact that one investment will be better for workers or the environment. Nor could a trustee vote shares in a company in favor of shareholder resolutions that suggested reducing carbon emissions for reasons other than increasing financial return, even if the trustee believed that such reduction would improve the lives of the workers whom the trust was intended to benefit.
In other words, the paper finds that no matter what the cost to our planet and its inhabitants, the law requires that the trillions of investment dollars entrusted to trustees must be devoted to maximizing financial return, no matter the real cost to our planet and the people who live on it.
The Difficulty of Pursuing Responsible Profits
The paper concedes that sometimes a trustee can pursue returns by applying social and environmental lenses to investing (such as divesting from oil companies to avoid the risk of “stranded assets”). However, the implicit message of the article is that even this is risky for a trustee, who must be able to prove that she was pursuing only financial gain, and not trying to save the planet (for which she might be found personally
liable.)
This is a Problem
While some may argue that the article gets some of the law wrong, it is clear that many trustees believe their duties may be circumscribed in this fashion and worry that doing anything that might seem altruistic should be avoided.
Let me try and be clear: THIS IS NUTS!
Yes, retirees want to save enough for a good retirement; but they cannot do so if companies compete by poisoning our food chain and depriving the government of revenue or engaging in other practices that damage our national and global commons. Moreover, they will not be able to enjoy their riches in a planet of refugees, flooded coasts and crumbling infrastructure. But even putting aside their own long-term interests, I doubt
that many savers are interested in squeezing the last nickel out of an investment by employing children to sew clothes in firetraps. However, this is apparently precisely what the sole beneficiary rule requires.
One of the things I asked staffers about during our visit to the Hill was whether we could change the federal laws governing pension plans and actually reconcile our humanity and our investing strategy. If this is important to you, and if you want to help make change, please email
me. In the months to come, I hope to be able to report that we are making progress, and that the system can be altered to ensure that trustees need not act like sociopaths in order to do their job.
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The Party's Just Getting Started
When I incorporated The Shareholder Commons in August, I did not know what to expect. Was it crazy to start a sustainability organization with so many veterans out there? Would anyone want to hear yet another message about improving the business climate? Would anyone care enough to join in the effort?
Four months later, I cannot believe where we are. Days after we announced the initiative, the Business Roundtable made its new Statement of the Purpose of the Corporation public. Corporate purpose has captured the zeitgeist. To be clear, these things did not happen because of our announcement, but as a result, our concepts are at the center of public discussion.
We got off to a running start in our first few months. This fall, we:
- Led a panel discussion on universal ownership at the Berkeley Institute for Business and Society
- Inspired and participated in a Roundtable on universal ownership and climate change (the first of its kind) at Vanderbilt Law School
- Published in the proceedings of a convening put on by NYU and Stanford, A New Deal For This New Century: Making Our Economy Work For All
- Had a paper accepted for 2020 publication in the prestigious Oxford Review of Economic Policy
- Undertook a significant consulting project for B Lab to establish a policy platform
And the truth is, we haven’t really even begun. Jenn and I are spending time establishing our case for support, mapping our strategic plan, and preparing to launch our website. We are excited to roll all of these out in early January, and to begin systematic campaigns in the areas of advocacy, guardrails, policy and litigation throughout 2020. If
you would like to get involved more deeply in the new year or can help us connect to others that can support this important work, please reach out!
It Does Take a Village
Speaking of Jenn, the most amazing part of my experience has been the willingness of people to pitch in. Without Jenn’s precision, care, wisdom and ear for the arresting phrase, there is no way we would be ready for primetime so soon. And without the help from Stefie Loev in establishing the building blocks of an organization, there just wouldn’t be one. Special
thanks to Alan Horowitz and Dan Osusky, who are lending their deep expertise to a growing advisory board.
Very deep gratitude to the team at Wilson Sonsini, who treated my application for tax exempt status like it was the most important project on their plate, despite the pro bono status of the representation. Thanks to B Lab for all the hassle involved in being our fiscal sponsor, and for all the other support you have lent. Thanks finally to Elly Alexander, my editor-for-life who is responsible for any clear writing you detect.
Here is an important article from Jeff Sommer of the New York Times explaining how small investors can effect big changes by making sure their mutual funds are doing the right
thing.
And if you don’t think shareholders can change things, check this out.
Finally, for a great talk on true leadership, listen to this inspiring Ted Talk from Lorna Davis, former Danone CEO and B Corp Global Ambassador. Bonus: when she talks about running a sustainable
business, she says “we don’t compete on human rights.” That, ladies and gentlemen, is what we are talking about.
I’m always happy to link to important content, so please let me know if there is other material you think readers would be interested in.
That’s it for this month—and this year.
Onward to 2020, my friends. And don’t forget to breathe.
Founder, The Shareholder Commons
Fellow, B Lab
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