From the Harvard Law School Forum on Corporate Governance — an excerpt:

Not to suggest that they are making up their mind before hearing the evidence, but the House Subcommittee on the Administrative State, Regulatory Reform, and Antitrust may be suggesting their conclusion by titling the June 12 hearing “Climate Control: Decarbonization Collusion in Environmental, Social, and Governance (ESG) Investing.” Having failed to persuade anyone last year that there was some improper behavior that might be violating securities laws[1], the same forces have persuaded a subcommittee of the Judiciary Committee to try to find a violation of the antitrust laws. At this point, they are just throwing darts at a list of federal legislation to see if they can find a way to explain that it is illegal for shareholders to raise concerns about corporate strategy and conflicts of interest. When the attempt to find a fit with antitrust law fails, they may come back next year with a claim that the FDA should look into shareholder requests for information because they cause queasiness and weak knees in corporate executives.

Essential legislative protections underlying the integrity and vitality of our capital markets, making the US the most successful in the world for almost a century, come from Congress, and, for the specifics of corporate governance, state legislatures, with Delaware the most prominent. These laws are all designed to promote transparency, the essential requirement for market efficiency, and to the extent feasible, to level the playing field, again to prevent self-dealing. The antitrust laws do that to prevent predatory pricing, bid-rigging, anti-competitive mergers, and collusion. As the founder of modern capitalism, Adam Smith, wrote: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

There is nothing anti-competitive about investors sharing information.  There is no evidence of agreement to act together, and if there was, there are very extensive rules already in place to govern what shareholders working together must disclose and what they cannot do. Most important, there is no evidence that any decision made by the institutional investors called to testify or their independent information providers is based on anything other than the strictest, most quantifiable analysis of risk and return, as required by their obligation under the strictest standard of our legal system, the rigors of free market competition, and, in the case of the public funds, the obligations, accountability, and electoral mandates of government.

Shareholders are Not An Antitrust Problem

Shareholders are Not An Antitrust Problem

Andy Behar has a terrific piece on his experience with the Subcommittee. An excerpt:

All of this led to what the majority hoped would be a damning public hearing last Wednesday. It was clear from the start that the majority had no interest in antitrust law. Instead, their purpose was to grandstand and appear to have accomplished something. 

Public debates about sustainable investing tend to be awkward for conservatives who follow Milton Friedman’s economic theory of shareholder primacy. On the one hand, Friedman despised the idea that corporations should have any “social responsibility.” On the other, he despised government intervention even more. 

In the case of Friedmanites that want to write laws to outlaw sustainable investing, they must awkwardly overcome that inherent contradiction. It’s why the majority of conservative voters are against such draconian laws.

Minority members of the committee seemed genuinely confused: “I don’t understand why we’re here,” said Rep. Eric Swalwell (D-CA) to the Republican lawmakers. “You believe that Democrats regulate too much, but you call these three here because you don’t like how they’re investing in the free market?”

“Mr. Chairman,” said Rep. Hank Johnson (D-GA), “we are here because MAGA Republicans are doing the bidding of dark money groups with ties to former Trump administration officials, the oil and gas industry, and far right donors like Leonard Leo and the Koch brothers.” He may have been referring to the $2 million that the members of the majority on the Committee received in donations from fossil fuel firms. 

“I’m really sorry that you had to witness some of this,” Rep. Becca Balint (D-VT) told the witnesses. “It’s frankly embarrassing.”

As You Sow took no offense. We welcome every opportunity to have this discussion in a public forum because we are confident in our work. We strongly believe there’s an important role for policy to provide guardrails for markets – we just don’t believe it is the proper use of governmental power to intimidate, or propose laws that restrict competition, freedom, and limit shareholder rights.