Sen. Tom Cotton Warns Companies Joining ESG: “You’d Better Lawyer Up”

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Tom Halla
July 15, 2022 6:05 pm

If it is a person with a fiduciary duty, using the assets of the company to further a political cause is a clear violation.

Reply to  Tom Halla
July 15, 2022 6:10 pm

They might get off the hook if they explain to the court they were bullied into doing it, if they felt it would be impossible to continue conducting business if they didn’t sign up.

Ron Long
Reply to  Eric Worrall
July 15, 2022 6:18 pm

It is explained to all persons with investors money under their control that they have a fiduciary responsibility to utilize the funds in the agreed manner. If they were bullied to the degree that it constituted criminal coercion and manipulation they probably need to file charges with the appropriate District Attorney. If they just went along to be part of the group they need to lawyer up. That’s my semi-simple minded take.

Reply to  Eric Worrall
July 15, 2022 9:04 pm

Normally that would be called extortion, but not in today’s Alice in Wonderland world. Sigh…

Gerard Flood
Reply to  Eric Worrall
July 16, 2022 2:00 am

IMVHO, their awareness of that situation would not excuse offending against their imperative fiduciary [“legally bound to act solely in their (clients etc) best interests”) obligations, as their proper course would be to resign their office. A fiduciary’s officer’s giving in to coercion for an improper purpose is possibly a “red rag to a bull” for an honest judiciary. If a court were to admit a defence of such coercion, what test might that court set to separate allowable excuses from disallowable excuses? And what arrangements must those officers make to advise the relevant parties – investors, shareholders, corporate board etc – of their decision to abrogate their primary obligations?

Last edited 2 months ago by Gerard Flood
D. J. Hawkins
Reply to  Gerard Flood
July 16, 2022 8:44 am

So much goodness in such a short post; well done!

Reply to  Gerard Flood
July 16, 2022 10:55 am

The challenge is that ‘fiduciary duty’ becomes a real challenge when activist shareholders and the US government align to push a company’s management to make decisions not aligned with simple financial returns and growth. Exxon will argue that it had to divert funds from producing oil and gas to ESG activities because both Engine #1 and the federal government were pushing them to do so. Companies have non-revenue operating expenses all the time (lobbyists, for example) that don’t produce earnings but DO preserve the company’s freedom to operate.

I agree with the comment below- the punishment IS the process, but Republicans will only alienate corporations by investigating them for doing the exact thing that a Democrat-controlled administration are forcing them to do. Cotton would be wiser to ally with energy companies to throw the democrats out.

Reply to  Eric Worrall
July 16, 2022 2:45 am

The outcome isn’t important. The process is the punishment. The left does it all the time.

Reply to  Eric Worrall
July 16, 2022 8:20 pm

They might get off the hook if they explain to the court they were bullied into doing it”

Failing to perform their fiduciary duty and you believe a ‘pity appeal’ will be viewed kindly by the jury, judge and opposing counsel?

In a normal court, they would be reminded of their duty and then asked how they plan to make restitution. Since the ‘pity appeal’ is essentially admission of guilt.

Reply to  Tom Halla
July 15, 2022 6:47 pm

Not if the political cause increases the profits of the company. Now, when it reduces their profits, then, yep, the Board and CEO need to be held personally responsible to the shareholders.

Reply to  Drake
July 15, 2022 8:46 pm

Yup, that’s the one and only edict they need to follow – increasing profits should equal increasing share price. That’s all that really matters in US corporate law: increasing share price. As long as they do that their fiduciary duty is likely satisfied. So if that means prostrating before ESG they will do it and good luck suing them for breach.

The Dark Lord
Reply to  Ebor
July 16, 2022 1:36 am

fiduciary duty applies to money management not corporate governance

Reply to  The Dark Lord
July 16, 2022 5:27 am

Is that still true under Dodd-Franks fiduciary rules?

Reply to  The Dark Lord
July 16, 2022 6:07 am

Not is US law:

“The duty of care is a fiduciary duty requiring directors and/or officers of a corporation to make decisions that pursue the corporation’s interests with reasonable diligence and prudence. This fiduciary duty is owed by directors and officers to the corporation, not the corporation’s stakeholders or broader society.”

D. J. Hawkins
Reply to  The Dark Lord
July 16, 2022 8:47 am

Ehh, maybe not. The CEO, CFO, etc for publicly traded corporations are acting on behalf of the stockholder, who are the owners of the company. If they clearly act against the best interests of the owners, the SEC (in the US) may have a few things to say about that. This is separate from simply making bad business decisions.

Paul Johnson
Reply to  Tom Halla
July 16, 2022 9:27 am

Some ESG advocates claim to be working in the best “long-term” interests of their clients, but who invests for a 30-year time horizon, much less an 80-year?

Reply to  Paul Johnson
July 16, 2022 5:12 pm

As a retired Boeing manager, I know that we had to set out our 20-year goals, and had to discuss how we were preparing for 30 years down the road with particular attention to new hires, training, and process retention. That was for mid-level managers. Directors and execs were responsible for the long term vision.

When I was in college, it was pounded into us by one professor that we had only 40 years of oil remaining, until one student pointed that that had been true for nearly 100 years. Oil companies had a 40 year business horizon; once they conformed their business horizon, they quit looking. Kind of like when you find a lost cuff link, you don’t keep looking for it. But you keep looking to maintain that 40 year outlook.

July 15, 2022 6:46 pm

Sounds good but according to some, Sen. Cotton is ‘controlled opposition’ appearing to stand for issues in the national interest but as an anointed Young Global Leader in 2015 of the WEF, it’s possible he has another agenda….

There are quite a few others of his ilk in US politics, such as Pete Buttigeig, Dan Crenshaw, Gavin Newsom, Tulsi Gabbard, etc.

Reply to  alexei
July 15, 2022 9:33 pm

That’s unfounded slander.

Tom Cotton is from Yell County Arkansas, the same county as Matty Ross the heroine of True Grit. He is also a graduate of the Ranger School and earned a Bronze Star when he was in the 101st Airborne in Iraq.

Are you also saying the fact he went to Harvard makes him suspect too? If he had ever given the slightest nod to climate hysteria, weak minded acquiesce to political correctness I’d say you have a point, but lots young ex-soldiers do some resume furnishing post military before starting a political career.

Nothing wrong with that as long as he stays true to himself, and there is nothing in his record to indicate he hasn’t.

Oh yeah, he also got a NY Times editor fired, that ought to be worth a few credibility points.

Last edited 2 months ago by Kazinski
Reply to  Kazinski
July 16, 2022 12:50 am

Libel, not slander methinks.

Old Retired Guy
July 15, 2022 7:02 pm

Maybe it’s a bigger issue. If there is collusion that drives up the price of a commodity, a legal commodity, are those involved exposed to liability to everyone who incurred higher costs? The exposure to damages to virtually every US consumer would be a chunk of the US annual GDP. Might be a few tort law firms willing to take that on.

Reply to  Old Retired Guy
July 15, 2022 8:49 pm

That’s some fancy tort you’re dreaming up there. Good luck, ain’t happening in US courts, maybe the EU except I don’t think they have common law concepts like torts.

Last edited 2 months ago by Ebor
Chris Hanley
July 15, 2022 9:42 pm

‘The Fiduciary Duty in the 21st Century programme finds that, “far from being a barrier, there are positive duties to integrate environmental, social and governance (ESG) factors in investment processes”‘ (Wiki).
The ‘programme’ has Al Gore’s fingerprints all over it.
Like so many commonly accepted meanings the term “fiduciary duty” is being corrupted by the Left to serve their dodgy ends.

Tom Abbott
Reply to  Chris Hanley
July 16, 2022 4:11 am

“there are positive duties to integrate environmental, social and governance (ESG) factors”

What is a “governance factor”?

Last edited 2 months ago by Tom Abbott
Reply to  Chris Hanley
July 16, 2022 1:42 pm

Program is American English, so the wiki was written by a foreigner.

I don’t care what someone from Europe thinks about US businesses.

Philip CM
July 15, 2022 10:22 pm

Sort of like using the back door to enter into a monopoly under the auspices of environmentalism and sociopolitical corporatism. More of those nasty isms in play.

The Dark Lord
July 16, 2022 1:35 am

Money managers pushing ESG investing are violating their fiduciary duty because investing for some event 20-30-50 years out by definition is beyond their client’s lifetime and thus not relevant … also they are making investment decisions based on assumptions (the “models” and the claims of doom) they themselves have not independently verified … again a violation of fiduciary responsibility …

Tom Abbott
Reply to  The Dark Lord
July 16, 2022 4:21 am

“also they are making investment decisions based on assumptions (the “models” and the claims of doom) they themselves have not independently verified … again a violation of fiduciary responsibility …”

There you go. Give us some of that “independently verified” stuff. At present, they are just taking someone else’s CO2/climate doom word as reason for doing what they are doing.

And the politicians, of both parties are doing the same thing. How about some independent verification, guys, of climate doom, before you go off half-cocked and send this nation off the cliff trying to fix something (CO2) that doesn’t need fixing.

Idiocracy combined with socialism/communism. We are in for a wild ride.

Also, it looks like Trump is running for president again, he just hasn’t decided when to announce it. The ride is going to get wilder. But it’s necessary in order to oust the socialists/communists from their stanglehold on power and on our personal freedoms.

Trump/DeSantis sounds real good to me.

July 16, 2022 4:40 am

Jessie Jackson pioneered this form of corporate blackmail

July 16, 2022 11:03 am

ESG will fail either with legal issues or consumer backlash. My .02 says non ESG committed companies will grow strictly based on people’s inherent freedom of choice and dislike of being told what/who/where to buy and even a small reduction in profits due to these actions will make ESG companies think twice.

July 16, 2022 3:44 pm

Tom for President

Bill S
July 17, 2022 9:18 am

The difficulty of making a case that ESG sustains fiduciary responsibility is that there are no standard accepted definitions and measurements for E, S, or G. The ESG ratings are all over the lot between companies in the same industry, and between companies in different industries. Tesla is excluded in some rankings, included in others, while Ford and GM make the grade in most rankings.

On the other hand, well established, commonly understood GAAP accounting, financial filings with the SEC, meeting standards established by the SEC and that apply equally to all business (for the most part), rules established by the FSAB etc provide a very solid bases on which to determine whether or not fiduciary requirements are being met.

That companies are launching off into a realm of make believe based on subjective political opinions about ESG definitions and measurements is a prima facia case that such companies are not meeting their fiduciary responsibilities.

The Democrats in particular and we as a society are losing our grip on underlying reality, whether ESG, or what is a woman, in addition to climate change that threatens the foundations of our freedom based on a free market economy and our Constitutional republic.

July 17, 2022 10:35 am

Racketeering ?

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