George Mason Professors: Wrong about ESG, Wrong About Movies, Cagey about Incentives

From VEA Vice Chair Nell Minow:

As an expert in both movies and corporate governance, I can confirm that an op-ed in the WSJ by George Mason and Stanford Hoover Institution economics professors is the most idiotic take on both in a long time.

The professors argue that the new Ben Affleck/Matt Damon movie “Air,” about Nike signing Michael Jordan to create a vastly successful line of basketball shoes, proves that ESG is a “trap.”

The first rule of a debate is being able to state the other side’s position in words they agree are fair. The professors fail this threshold test by describing ESG as meaning “maximum shareholder value is no longer management’s exclusive aim.” This is not true. ESG investing is about using non-traditional indicators to better assess risk and return. Financial risk and return.

But the movie is a textbook example of using ESG analysis effectively. As the professors point out, the film depicts Jordan’s decision not to go with his initial first choice, Adidas, because of poor governance. He (and his wise mother, played by Viola Davis in the film), thought that was, yes, a risk in the ESG category that falls under G. And so they went with Nike, transforming the industry with the first royalty-based compensation package for an athlete, one that, according to the film, makes Jordan $400 million a year in passive income. Good for the G in ESG!

We think professors of economics should understand something about incentives and newspapers should understand something about disclosure of conflicts of interest. Climate-change denying donors to both George Mason and Hoover are well documented and professors writing about ESG should first, get their facts right, second, take a class in film interpretation if they’re going to use it as an example, and third, disclose the funders of their research.

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