It didn’t take long for the notion of stakeholder capitalism as introduced last year by the Business Roundtable to spill over into political correctness and social justice politics. In an op/ed entitled “The Stakeholder vs. the People” last month, Vivek Ramaswamy made the claim that stakeholder capitalism empowers capitalist leaders to “play a larger role in defining and implementing the country’s political and social values”. Not so, says a reader in response, as follows: “In reality, stakeholder capitalism is nothing more than an extension of liberal-progressive activism”. The reader has it nailed, and stick around, the notion is becoming well-embedded in the political campaigns and in the financial services industry. And the latest manifestation of it should give everyone concern.
I’m talking about the Sustainability Accounting Standards Board (SASB), a non-profit entity substantially funded by Mike Bloomberg, modeled after the Financial Accounting Standards Board (FASB), which for many years has governed acceptable practice in how businesses report financial information. SASB goes beyond generally accepted accounting practices (GAAP) and establishes guidelines based on the kinds of “sustainability” it believes businesses should disclose to investors that are “material” to its success. Their standards range across 77 industries based on what its “stakeholders” consider relevant to a company’s success beyond simply financial performance that enhances shareholder value. The standards vary by industry group, but almost all include metrics developed by Bloomberg which measure a company’s performance in the ESG categories–environmental, social, and governance. No surprises there, and the ESG categories include such things as racial and gender board diversity, compensation policies, and “climate risks”.
Almost all the major public accounting firms have evidently signed off on this and why not? More billable hours for the compliance audit. And investment managers are already charging higher fees for funds with an ESG mandate, so follow the money there and to the plaintiff attorneys for misreporting claims.