President Calvin Coolidge, in a speech to the American Society of Newspaper Editors on the role of the press in a free market economy, stated in his usual matter-of-fact tone, “After all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing, and prospering in the world.”
One hundred years have passed since Coolidge’s remarks, and Americans are still profoundly concerned with prosperity. But, when it comes to investing, many Americans’ financial interests and core values are being undermined by left-leaning political agendas shoved into the C-suites of American corporations from abroad. Thankfully, President Donald Trump has acted to ensure that Americans’ profound concerns are respected in their investments.
Millions of Americans—whether through their 401(k)s, pension funds, IRAs, or other financial instruments—are invested in publicly traded companies. These companies have a fiduciary duty to shareholders to provide goods and services to the public with one priority above all else: to maximize the return on investment to their owners, the shareholders.
Yet, for years, two foreign-owned proxy advisory services have pressed American companies into contentious issues like discriminatory diversity, equity, and inclusion policies, support for company-funded abortions through their health care plans, and policies founded on snake-oil solutions to climate change that often diminish returns today for the promise of a greener world tomorrow.
Institutional Shareholder Service and Glass Lewis control over 90 percent of the market in proxy advisory services. This duopoly has been pushing corporate America to adopt a political agenda resoundingly rejected by over half the country in recent elections. ISS and Glass Lewis have acted with impunity and without fear of any accountability to the American investing public whose shares and interests they supposedly represent.
However, on Dec. 11, President Trump signed an executive order, Protecting American Investors From Foreign-Owned And Politically-Motivated Proxy Advisors. The days of the ISS/Glass Lewis duopoly using our money against us seem to be numbered.
With input from Alliance Defending Freedom and others within the conservative shareholder community, President Trump’s executive order instructs the U.S. Securities and Exchange Commission to review, rescind, and revise current SEC rules that have allowed ISS and Glass Lewis to prioritize political interests over shareholder returns.
The order directs the Federal Trade Commission to review whether ISS and Glass Lewis are violating antitrust laws. The order also directs the Department of Labor to strengthen the fiduciary standards of the Employee Retirement Income Security Act of 1974 to protect the long-term interests of American retirees who depend on investment income. Americans’ retirement funds should not be spun on the roulette wheel of whatever leftist cause celeb is in fashion at ISS and Glass Lewis this week.
The now century-old wisdom of President Coolidge is also true when stated inversely. The chief business of American business is the people. When corporations abandon the telos of industry (providing high-quality goods and services to customers at fair market prices to generate profits for shareholders and provide jobs for their employees) in favor of politically correct virtue-signaling on issues unrelated to their business, they risk alienating their consumers, employees, and investors. The results hurt not only the company’s bottom line but also their fellow Americans who have a personal stake in their profitability. The American people, particularly investors, are often left wondering why.
The answer, in part, is not “why” but “who.” ISS and Glass Lewis have weaponized millions of Americans’ investments by voting against their financial interests and core values for far too long. Hopefully, President Trump’s executive order will heighten public scrutiny on this duopoly and send a clear signal to corporate America to get back to business. Doing so would make dollars and sense for all Americans.
Lathan Watts is the vice president of public affairs for Alliance Defending Freedom (@ADFLegal) and its sister organization ADF Action. He earned his juris doctor degree from the University of Mississippi.