How conservatives ‘lost’ corporate America

At the World Economic Forum in Davos, Switzerland, earlier this year, Coca-Cola CEO James Quincey admitted that the forceful backlash to environmentally and socially responsible business practices by U.S. conservatives have made so-called ESG (environmental, social, and governance) principles “toxic” in America. But he explained that the soda giant would not be abandoning them—oh no. “I’m just going to stop saying ‘ESG.’”

Such stubbornness in the face of mounting pushback, not only from Coke but also woke Wall Street banks, woke theme parks, and woke sports leagues, is proof to the nascent anti-ESG movement, which has sprung up on the political right, that there is a mind virus that, to quote one leading critic, the former fast-food CEO Andy Puzder, is “more insidious than communism or the Nazis.” [Read the inside story of how the culture war is coming for your 401(k).]

Anti-woke Republican presidential candidate Vivek Ramaswamy writes about Quincey’s Davos admission in his new book, Capitalist Punishment, arguing that Coca-Cola’s “bid to chase the freshest buzzword while dodging scrutiny” ought to “draw alarm from regulators.”

Ramaswamy, the high-haired, quick-tongued face of the anti-ESG movement, deftly signals to corporate leaders that merely backing off their public extolling of ESG will not satiate their concern that businesses have been captured by the political left. This new counter force has sprung up rapidly in the last few years and united everyone from canceled business execs to evangelical thought leaders to Silicon Valley techno-capitalists. Together, they’re mounting an aggressive response to the belief, now widespread in corporate America, that businesses ought to have a “social purpose beyond financial performance,” in the words of BlackRock CEO Larry Fink, the face of ESG who is the movement’s favorite villain.

This coalition feels strongly that corporate America has abandoned the political right, convincing at least this cadre that Big Business is now threatening freedom as much as Big Government, all because of the rise in companies adopting pro-ESG initiatives such as net-zero emissions and boardroom diversity and the investment products that incentivized this behavior.

Capitalist Punishment is Ramaswamy’s third anti-woke book in just 20 months, and a pack of right-leaning asset management firms have emerged, thanks to conservatives in finance (including Ramaswamy) to offer investors options besides the major players BlackRock, Vanguard, and State Street. Their alternative products include the American Conservative Values ETF and MAGA Fund. Meanwhile, documentaries such as The Shadow State, which circulate among conservative audiences, examine how major U.S. brands have been pressed into service by what critics believe to be a cabal of international string-pullers like Al Gore, Bill Gates, and the World Economic Forum.

One target of this crowd, As You Sow’s CEO Andrew Behar, confirmed when we spoke that indeed “a philosophical shift has been happening” but contends: “The anti-ESG folks are saying, ‘We’re moving from an extractive to a regenerative economy, and we have to slow this down.’ It’s a last-ditch effort to stop a market shift that’s already happened.”

When did this start? Behar pinpoints 2019, when 181 U.S. CEOs belonging to the Business Roundtable committed to create value for employees, customers, suppliers, and their communities rather than focus solely on maximizing shareholder value. Brands had done this intermittently and idiosyncratically for decades. General Motors and Exxon withdrew from South Africa during apartheid. In the 1990s, Disney and IBM first offered healthcare benefits to same-sex couples.

But the anti-ESGers I interviewed asserted that over the last decade the activism has exploded, with many convinced the 2016 election was the primary turning point. “When Donald Trump became president, the idea picked up more steam that companies needed to become more active in political and social issues, to act as the tip of the spear,” says Matt Cole, chief investment officer at Ramaswamy’s firm, Strive Asset Management, who defected from CalPERS, arguably America’s most progressive public pension fund.

Jennifer Sey, who was pushed out as Levi’s brand president last year for opposing mask mandates and school closures, says that this same woke mob caricatured her as “a QAnon, alt-right lunatic,” although she doesn’t identify as conservative. (When Levi’s announced in October 2020 that it would launch an e-commerce site to sell secondhand clothes, Sey, then Levi’s CMO, stressed that buying a used pair of Levi’s “saves approximately 80% of the CO2 emissions and 700 grams of waste compared to buying a new pair of Levi’s.”) “It’s mass-formation psychosis,” she tells me. “CEOs are living in a bubble and don’t know anyone who disagrees with them. They’re out of touch with everyday consumers who made their brand what it is.”

To quantify the shift, anti-ESGers have begun grading companies’ “wokeness.’’ Business watchdog 2ndVote has created a widely cited scoring system that rates companies from a 1 (liberal) to a 5 (conservative). America currently has no 5s, although Patriot Mobile (“America’s only Christian conservative wireless provider”) received a 4.91. There are 51 businesses—among them CNN, YouTube, Bath & Body Works, Cricket Wireless, and Victoria’s Secret—that have received a 1.

“A great many conservatives were busy taking over government successfully and ignored the left taking over corporations,” commentator Erick Erickson recently wrote, in support of Florida Governor Ron DeSantis’s aggressive attacks on Disney. This is “political realignment happening in real time,” he told fellow conservatives. “If you’re going to bitch and moan that this is a bridge too far and you can’t support it, that’s fine. But do at least have some self-awareness of which way the winds are blowing.”

Justin Danhof, the pioneer of conservative shareholder activism, likes to say that Corporate America divorced the right during the Trump years, and conservatives only recently found the paperwork shoved in a desk drawer. But, he tells me, the two were actually estranged by 2010, when “basically every group you could imagine on the left” was leveraging small-ownership stakes to pressure public companies to take positions on social and political issues. “Under the banner of corporate social responsibility, Big Business was now carrying water for the left,” Danhof says.

He spent a decade seeking to copy progressives’ successful mold, to reverse that tide. But by the time CEOs codified their intent in that Business Roundtable statement, he concluded that the revolution was already over. Danhof was getting labeled a Klansman and book burner in the parking lot outside shareholder meetings. At the start of 2023’s proxy season, corporate shareholders had filed 542 proposals. According to an analysis done by the law firm Orrick, only 34 of them could be classified as conservative.

“Biblically responsible” investor Jerry Bowyer—who’s been inveighing against ESG on his podcast for the past year—recently tried to clue his side in. “We were winning elections, we were winning policy debates, we were winning court cases,” he began. “Then we were losing elections for boards of directors and proxies at corporate annual meetings, and we essentially lost corporate America.” Once the left discovered cancel culture, it started shutting down debate on college campuses, and in the mainstream media as well. “But in corporate life, we can have the debate,” Bowyer insisted. “We can force the debate.”

He meant legally, as in under U.S. securities law. (Bowyer did not respond to an interview request.) But resolutions opposing anti-racism training on grounds that it is itself “deeply racist,” working to limit women’s access to reproductive health, and pushing boards to add conservatives have enjoyed little success. Carolyn Frantz, cohead of Orrick’s public companies and ESG practice, says of conservative activist proposals, “None of us is aware of one that has ever passed.”

Yet, shareholders passed 21 ESG-related proposals in just 2022 alone, according to Orrick. Anti-ESGers harbor a sense that, absent an energetic counterattack—which, to be sure, they’re already trying to marshal—corporate America will only become more woke. It made sense, in conservatives’ eyes, when wokeness and virtue-signaling crony capitalism were outed during the collapse of the crypto exchange FTX last November and then Silicon Valley Bank in March. But when Fox News fired Tucker Carlson, conservatives began noticing that BlackRock owned a sizable chunk of the network’s parent company (15%), and some whispered: Did the World Economic Forum help orchestrate Carlson’s ouster, too?

The suspicion that even Fox News might be captured by the World Economic Forum hints at a grievance I heard in interviews from those under attack, like As You Sow’s Behar, about how to handle people who perceive an object to be in motion when they’re the ones moving. It, in fact, mirrors the criticism that Elon Musk got last year after he tweeted a meme bemoaning how liberal America was becoming. The image depicted the left, center, and right in the years 2008, 2012, and 2021. The center and right do not move. But liberals do, leaving center-leftists marooned in conservative territory. Musk included himself among these new political orphans. But in recent days, he’s called evidence that the Texas mall shooter was a neo-Nazi a “very bad psyop” by the left, and, at the very least, appeared very receptive to Tucker Carlson’s producing original content on Twitter, which he owns.

“If you ask CEOs what’s their rationale for veering into ‘woke capitalism,’” says Tim Smith, founding member of the Interfaith Center on Corporate Responsibility, the organization that pressured General Motors in 1971 to leave South Africa, “they will tell you, ‘This is who we are as companies. We are not simply aligned with Milton Friedman and narrowly making profits.’” He says that conservative opponents have not evolved with corporate leaders, who are making changes to attract younger employees, manage reputational risks, and avoid future regulations or fines.

Surely, the Business Roundtable’s policy agenda would not pass as law in most red states, and its supporters include the obvious conservative targets—Tim Cook, Jeff Bezos, BlackRock’s Fink. But most of them speak for companies that one might have put on an anti-ESG “safe list”: ConocoPhillips, Boeing, Home Depot, John Deere, Comcast, even Fox itself, via Lachlan Murdoch. Indeed, signatories of the Business Roundtable’s statement of purpose include the heads of large public companies that have an outsize presence and association with Middle America, from Walmart to Union Pacific Railroad to the underwear brand, Hanes.

Last year, Danhof left his perch as a shareholder activist to join Ramswamy at Strive, which is now pitching itself as being “post-ESG.” Danhof uses a football analogy to explain to me this unanticipated evolution. “The As You Sow cohorts, Larry Fink, BlackRock—they’re all on the 1-yard line about to punch it in for a touchdown,” he says. “I was waiting at the other 1-yard line.” He’d gotten used to coaching fellow conservatives to not “stand at the 50 and yell at companies to come back.”

Scoreless a decade later, Danhof decided that it was time for a new approach. In 2022, he joined Strive, the asset manager cofounded by Ramaswamy. It has a new playbook, one whose offensive strategy is attempting to leverage that wide-open midfield.