"Money management firms quickly formed ESG-focused funds that poured money into seemingly countless "green" start ups and sided with social purpose proxy proponents and shareholder activists on most issues. For their part, the proxy advisory firms began grading directors based on climate impact and other ESG topics instead of the financial performance of their companies. Not surprisingly, companies, especially big ones, raced to be out front on these issues."
"But, as so often happens in a connected world, things went too far too fast, so much so that we are now in the midst of a radical realignment of fundamental corporate governance concepts. It would be mistaken to dismiss this as just partisan politics - it is more than that and also more than just a Newtonian, equal-and-opposite reaction to exploiting stakeholder governance to achieve political objectives."
Ordinary people, not faceless financial firms or Wall Street titans, own Corporate America, raising the basic corporate governance question of a company's purpose. The stakeholder capitalism movement, endorsed by nearly 200 public company CEOs via the Business Roundtable, rejected long-standing shareholder primacy. Special interest groups and some policymakers elevated ESG over financial interests, and money managers created ESG-focused funds that invested heavily in green start-ups and aligned with social-purpose proxy proponents. Proxy advisory firms began grading directors on climate and ESG rather than financial performance, prompting many large companies to prioritize ESG. Excesses prompted a radical realignment of corporate governance, driven by multiple forces.
Read at Fortune
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