Anson Frericks is a co-founder of Strive Asset Management and a former Anheuser-Busch executive
Every day it seems as if another iconic American brand has gotten head-on into the heated mood of public controversy.
Last month, Bud Light’s sponsorship of transgender activist Dylan Mulvaney sparked massive consumer reaction.
Now Target is the subject of boycotts after it launched a line of women’s clothing meant to be worn by organic men and featuring “friendly construction” and “extra crotch room”.
Corporate share prices plummeted and billions of dollars in value were lost almost overnight.
You are not alone. Nike, Calvin Klein, North Face and even the Los Angeles Dodgers have been criticized for getting involved in America’s culture wars. What’s up? How is it that companies that once happily sold clothes, drinks and nostalgia to Americans of all political persuasions now seem to be taking sides in controversial political disputes?
The answer is simple: follow the money.
As an executive at Anheuser-Busch for more than a decade, I have witnessed the calculus of corporate leadership being hijacked.
That’s why I left.
The pursuit of the almighty dollar – within the bounds of morality and the law – is no longer the sole purpose of so many of America’s leading corporations. Today, the country’s largest companies have been transformed into agents of social change.
Allow me to explain.
Now, Target is the subject of boycotts after it launched a women’s clothing line (above) meant to be worn by biological men and featuring “friendly construction” and “extra crotch room.”
Last month, Bud Light’s sponsorship of transgender activist Dylan Mulvaney sparked massive consumer reaction.
Target and Bud Light are public companies, which means their investors — aka Wall Street — ultimately call the shots.
There are BlackRock, State Street and Vanguard, the three largest and most influential financial institutions in US history. They’re known on Wall Street as the “Big Three,” though many Americans have never heard of them.
These three companies control more than $20 trillion in assets, almost none of which are their own. Rather, they manage the money that’s in Americans’ retirement accounts, pension funds, mutual funds, and investment accounts.
Collectively, the Big Three make up the largest shareholders in nearly 90% of the largest companies listed on the U.S. stock exchange – the S&P 500.
The influence of the Big Three is breathtaking. But if they were just managing that money to make more money, there might not be a problem.
You are not.
The Big Three are proponents of what is known as “stakeholder capitalism”, which is the belief that companies should not only be run in a way that enhances value for shareholders, but for all stakeholders, including government agencies, activists and non-governmental organizations , serve.
“Stakeholder capitalism” differs from traditional “shareholder capitalism,” which asserts that corporations have a single responsibility: to generate profits for the people who own shares in the company.
The “stakeholder” movement has been around since the 1970s and has even earlier philosophical roots, but it only really began to gain a foothold in American investment circles about five years ago.
2019 was a turning point.
This year, the Business Roundtable, a group of CEOs from America’s largest companies, adopted a new corporate purpose statement, declaring that all companies “share a fundamental obligation to all of our stakeholders” for the greater good of society support financially.
188 American CEOs have registered.
Among them were the CEOs of the Big Three and other major financial institutions such as JP Morgan and Bank of America, as well as many of the companies they own, including Target, Disney and Coca-Cola.
It should be noted that Bud Light is owned by a European parent company and is not eligible to participate. Yet it was influenced by this new vision of “purpose.”
You are not alone. Nike, Calvin Klein (above), North Face and even the Los Angeles Dodgers have been criticized for getting involved in America’s culture wars. What’s up?
There are BlackRock, State Street and Vanguard, the three largest and most influential financial institutions in US history. They’re known on Wall Street as the “Big Three,” though many Americans have never heard of them. (Top right) BlackRock CEO Larry Fink at the New York Times DealBook Summit in November 2022
The Big Three began issuing guidelines on how they should expect their portfolio companies to meet this “commitment” by implementing what they call environmental, social and governance (ESG) goals and scores
To encourage compliance, the Big Three use their power as shareholders to influence who sits on company boards.
In 2021, they voted to replace Exxon Mobil’s board members with climate experts who immediately sought to scale back the oil giant’s exploration and drilling production to meet controversial climate goals.
They then voted for “racial justice checks” at companies like Apple and Home Depot, forcing companies to adopt racial hiring criteria and implement diversity, equity, and inclusion programs.
Beyond shareholder voting, the Big Three employ large engagement teams to pressure CEOs to make progress on ESG goals and improve ESG scores.
Blackrock employs over 70 people dedicated to the stewardship effort. In 2022 alone, they had 3,880 engagements with 2,580 companies.
The Big Three also have enormous influence when it comes to executive compensation. According to one study, a staggering 73% of S&P 500 companies now tie executive compensation to ESG measures.
As an executive at Anheuser-Busch for more than a decade, I have witnessed the calculus of corporate leadership being hijacked. That’s why I left. (Top right) Strive Asset Management co-founder Anson Frericks
At Bud Light and Target (above), stock prices plummeted and billions of dollars in value were lost almost overnight.
If a CEO isn’t quick enough to comment on current societal issues, their bonus could be in jeopardy.
Many ordinary consumers have no idea that their money could be used as leverage by big financial institutions to influence popular American brands. But the more the results show up in controversial product launches and marketing campaigns, the clearer the implications become: “stakeholder capitalism” hurts businesses.
Previously loyal customers no longer buy these products and opt for alternative brands that stay out of the political conflict. That’s bad news for shareholders who depend on these companies to meet their investment goals. This often leads to conflicts between CEOs and their employees and customers.
It’s also bad for society.
America traditionally settles contentious political issues through a responsible electoral process. The “stakeholder capitalism” movement is undermining this system. Questions about environmental issues, parental rights, gender equality and the like should be resolved at the ballot box, not in the boardroom. And many Americans seem to think so.
They start spending their hard-earned money at companies that focus on customers rather than stakeholders.
Businesses would do well to recognize this as Americans increasingly raise their voices at the checkout.