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An expert's point of view on a current event.

How to Keep Activist CEOs Honest

New sustainable finance regulations in Europe will raise the bar for green investment.

By , an author on political risk and macroeconomic trends.
The Wave sculpture by Wren Miller commissioned to launch Brita’s sustainability campaign is on display in London on June 15, 2016.
The Wave sculpture by Wren Miller commissioned to launch Brita’s sustainability campaign is on display in London on June 15, 2016. Toby Smith/Getty Images for Brita

In 1613, Edward Coke, England’s chief justice, made a declaration. “Corporations cannot commit treason, nor be outlawed, nor excommunicated,” he wrote, “for they have no souls.” In the centuries that followed—from the Luddites to the Marxist critique, from Sinclair Lewis to the Twitterverse—his assessment seemed largely correct.

That is, until the recent rise of the activist CEO. The events following the Jan. 6 riot at the U.S. Capitol are only the latest crest of this wave. U.S. society may be focused on debating the wisdom of tech companies banning an incendiary president from their platforms, yet a growing number of American CEOs have also taken the curiously soulful action of banning corporate donations to former President Donald Trump and the 147 Republicans who voted to challenge certification of the 2020 election even after the deadly assault Trump directed at the U.S. Congress.

“For those members of Congress that were involved in helping to incite the riot, and support the riot, there’s going to be consequences, no question about it,” said Ed Bastian, chief executive of Delta Air Lines, in a statement that echoed widespread condemnation of Republican behavior. Some went so far as to halt, at least temporarily, any corporate donations or political action contact with these lawmakers, including the banking giants Citigroup and JPMorgan Chase, insurer Blue Cross Blue Shield, hotel chain Marriott International, and Charles Schwab, a brokerage firm.

In 1613, Edward Coke, England’s chief justice, made a declaration. “Corporations cannot commit treason, nor be outlawed, nor excommunicated,” he wrote, “for they have no souls.” In the centuries that followed—from the Luddites to the Marxist critique, from Sinclair Lewis to the Twitterverse—his assessment seemed largely correct.

That is, until the recent rise of the activist CEO. The events following the Jan. 6 riot at the U.S. Capitol are only the latest crest of this wave. U.S. society may be focused on debating the wisdom of tech companies banning an incendiary president from their platforms, yet a growing number of American CEOs have also taken the curiously soulful action of banning corporate donations to former President Donald Trump and the 147 Republicans who voted to challenge certification of the 2020 election even after the deadly assault Trump directed at the U.S. Congress.

“For those members of Congress that were involved in helping to incite the riot, and support the riot, there’s going to be consequences, no question about it,” said Ed Bastian, chief executive of Delta Air Lines, in a statement that echoed widespread condemnation of Republican behavior. Some went so far as to halt, at least temporarily, any corporate donations or political action contact with these lawmakers, including the banking giants Citigroup and JPMorgan Chase, insurer Blue Cross Blue Shield, hotel chain Marriott International, and Charles Schwab, a brokerage firm.

The emergence of CEOs who are willing to put their company’s brand, reputation, and shoulder to the wheel of social and political issues is part of a larger early-21st-century story.

Even beyond the riots, the emergence of CEOs who are willing to put their company’s brand, reputation, and shoulder to the wheel of social and political issues is part of a larger early-21st-century story.

In Europe, for instance, large companies have grown less shy about embracing sustainability or other aspects of the Environmental, Social, and Governance (ESG) movement, which seeks to mobilize investors to pressure corporations to be more transparent about the impact their operations have on the environment, on race and gender issues, and on practices that abuse children or Indigenous peoples, or bolster tyrannical regimes. A survey of 40 large European companies published in November 2020 found that 77.5 percent of CEOs wanted their senior managers to take a public stance on issues of concern to society.

“Ecological, economic and social issues are identified as the most suitable topics for public comment,” the report’s author said in a press release, although partisan politics remains something of a third rail. “Less than one in ten of the CEOs surveyed stated that it is appropriate to take a party-political stance in public.”

Nonetheless, driven by urgent public (read: customer) concerns about everything from climate change to diversity and equality, global firms are embracing activism in the public sphere as never before, pledging greater transparency, lower carbon footprints, and a commitment to “stakeholder capitalism,” which seeks to integrate the needs of society into decisions previously driven solely by maximizing profits for investors.


Skeptics rightly point out that talk is cheap, and indeed many of the same firms gushing over their newfound social responsibilities can be credibly accused of hypocrisy. The Conference Board, a powerful coalition of multinationals, made a splash in 2019 by declaring that social good should be given at least as much weight as profit in corporate decision-making. It includes the CEOs of Dow Chemical, Duke Energy, Bechtel, and Raytheon, whose devotion to sustainability, labor rights, and other staples of the ESG movement might be most kindly described as “aspirational.”

For precisely this reason, and true to its tendency to favor proof over puff, the European Union in March will begin requiring that financial services firms—banks, brokers, insurance and financial advisors, asset and fund managers, private equity groups, and others—make detailed disclosures on any activities or investments they claim are advancing the cause of sustainability. Under the new law, firms must produce an annual report on up to 50 metrics related to the impact of their work, potentially bringing significant pressure on firms to improve their practices or face disinvestment.

As with the EU’s earlier efforts on data privacy, the General Data Protection Regulation, which came into effect in 2018, the new Sustainable Finance Disclosure Regulation is given teeth in the form of potentially crushing fines for any firm violating the rules. Also like the data privacy regulation, the new regulation is consciously designed to leverage the EU’s size and extraterritorial reach, forcing corporations with only nominal interests within the EU to step up to the new standards. After its introduction in 2018, GDPR forced even the largest firms to adjust their data management practices, and within a month of its enactment, Google was hit with a $57 million fine that it is still appealing.

The Sustainable Finance Disclosure Regulation also aims to stop “greenwashing,” the practice of corporations claiming to be sustainable and humane even as they flatten a rainforest or leak millions of gallons of oil into a coastal waterway. “The main rationale for providing transparency about the underlying ESG approaches is to prevent misleading the investor,” said a report last month from Ernst & Young. Now, fund managers, financial advisors, and others will be required to sign off on marketing claims, making them personally liable for false claims and potentially putting their licenses at risk.


Before you construct a home altar to JPMorgan Chase CEO Jamie Dimon or some similarly woke titan, however, it’s important to note that the bottom line still plays a powerful role in fueling the ESG trend. The size of ESG and sustainability funds has grown exponentially in recent years, and here, money talks. As of 2020, these funds, offered by everyone from giants like Morgan Stanley and HSBC to tiny green advisories, now represent 33 percent of the $51.4 trillion in total U.S. assets under professional management, according to the U.S. Forum for Sustainable and Responsible Investment. PwC, the global consultancy, surveyed 300 of the largest investment firms in the world this year and found that more than 75% of them plan to shift all assets from conventional (values-neutral) funds to ESG products by 2022.

This certainly reflects reputational concerns among these investment giants. Yet it also reflects demographic shifts, specifically the rise of the millennial investor, who on balance will benefit from the greatest transfer of wealth in history when they inherit the estates of their baby boomer parents. As any financial advisor will tell you, millennials care a great deal more than their elders not only about how their money is doing, but also about what it is doing.

“This is a generation that will change jobs if they don’t feel that their work has purpose,” Jeffrey Gitterman, co-founder of New York-based ESG pioneer Gitterman Wealth Management, told me in 2019. “They will spend money differently based on brand and purpose identification.”

Finally, reports now abound on the performance advantages that companies prioritizing sustainability and scoring high on ESG metrics have over their values-neutral peers. To cite just one, the McKinsey Global Institute studied the performance of 615 large U.S. corporates between 2001 and 2015 and found those with strong environmental, social, and governance norms recorded higher top-line growth, lower costs, fewer legal and regulatory interventions, higher productivity, and optimized investment and asset utilization.

For all these reasons, expect the activist CEO to remain part of the 21st-century firmament, at least as long as ESG investments continue to overperform and please the crowd. And even if that’s not quite the same thing as having a “soul,” it’s a big evolutionary leap from Gordon Gekko.

Michael Moran is an author, documentarian, and commentator on global affairs and a senior executive at Microshare, a global Smart Buildings data intelligence and sustainability firm.

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