It’s easy to see why Adam Aron is so popular with the meme stock crowd. The eccentric AMC Entertainment Holdings CEO is refusing to take a pay increase in 2023. A few days before the new year, he tweeted that he and his leadership team plan to freeze their salaries as the struggling movie theater chain attempts recovery from pandemic lockdowns.
“No increase for those at the top is the right thing to do,” he said.
Aron’s move caps off a year in which many CEOs came under ferocious attack for actually doing what’s right. With apologies to Milton Friedman, the notion that corporate leaders can prioritize people and the planet while also striving to grow profits seems pretty unassailable. Still, as the economy struggles, critics are vigorously condemning companies’ efforts to become more sustainable, more inclusive in terms of gender, race and sexual orientation, and generally more ethical, as examples of rigid, “woke” thinking that hinders entrepreneurship, innovation and growth.
For some years now, forward looking investors have been increasingly measuring progress on these environmental, social and corporate governance principles—or ESG—as a way to determine which companies they’ll back. But last summer, The Economist declared ESG an “unholy mess” as a means to solving thorny societal problems. The approach “risks setting conflicting goals for ﬁrms, fleecing savers and distracting from the vital task of tackling climate change,” the magazine’s editors concluded.
Elon Musk called it a scam that’s been “weaponized by phony social justice warriors.” His former Paypal pal, Peter Thiel helped bankroll the founding of a self-proclaimed anti-ESG asset management firm called Strive that invests heavily in fossil fuel companies. The new firm is looking to counter BlackRock—not in size (the latter has a whopping $8 trillion in assets under management), but in its philosophical outlook. BlackRock’s chief executive, Larry Fink is among those who get a lot of credit for helping kick off the “stakeholder” or “conscious” capitalism craze among CEOs. In his surprising 2018 annual letter to the heads of companies BlackRock invests in, Fink wrote that companies must look to benefit not only their shareholders, but stakeholders—including employees, customers, and the communities where they operate.
“To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” he wrote.
Now Fink is under fire too. In November, Florida said it was pulling back $2 billion it had invested with BlackRock, over objections to the firm’s ESG philosophy. West Virginia, Missouri, and Louisiana have also taken back money from BlackRock. Fink is facing calls to step down from at least one activist investor, who’s calling the CEO’s embrace of ESG “hypocrisy”.
The coming weeks and months will be a difficult time for those of us who still believe that the world is a better place when companies are held to higher standards than shareholder returns. Nearly every CEO is planning for an imminent recession, and the pressure to cut costs—coupled with the growing anti-ESG criticism—will test whether leaders continue promoting their newfound values. Look for CEOs to set a new, austerity-first tone at their annual World Economic Forum confab in Davos, which begins on January 16.
Davos impresario and WEF founder, Klaus Schwab says too much of a retreat is a risk. That’s especially true if companies expect Millennials and Gen Zs to work for them–and happily shell out money for their $1,000 phones or luxury electric vehicles. “This generation expects from a company not just to serve shareholders, but to take care of people and the planet,” Schwab told TIME in a recent interview. “The company who keeps this in mind will have much better talent in the future and will have much higher attractivity with its customers.”
Also coming soon: Larry Fink’s annual letter to CEOs, in which he’s likely to take stock of how ESG—and this new form of kinder, gentler capitalism—has fared in the half-decade since his seminal 2018 missive.
Even for a true-believer, I’ll admit, it’s hard not to be a bit skeptical of all the CEO talk at this point. In 2022, we saw many big multinational companies raise prices at the highest rates in decades while sporadically laying off workers and fighting off unionization movements. Meanwhile, any shares we held in publicly traded companies plummeted. For some, even our efforts to outmaneuver Wall Street with investments in cryptocurrencies and other new-fangled assets failed miserably, as crypto cratered on the heels of the FTX exchange’s insolvency and fraud charges against its founder Sam Bankman-Fried.
We were out of luck all over again if we turned to popular entertainment, hoping for an escape. In 2022, our favorite streaming TV services dredged up the misdeeds of disgraced corporate geniuses from our recent past and mined them for theatrical effect. AppleTV+, Hulu and Showtime each aired scripted dramas (respectively) featuring WeWork’s Adam Neumann, Theranos’ Elizabeth Holmes, and Uber’s Travis Kalanick. (Yes, I watched them all—and I eagerly await the inevitable SBF mini-series!) Entertainment value aside, it didn’t help the cause of conscious capitalism that each of these shamed leaders—including Bankman-Fried—cloaked their alleged dark dealings in the trappings of do-gooder business babble.
I’m frustrated with empty grandstanding, and I suspect most of the world’s “stakeholders” are, too. As the global economy sours, it’s a good time for business leaders to let their actions define what they and their companies stand for. Since late 2019, more than 250 CEOs of the world’s largest companies have signed the influential Business Roundtable’s redefining Statement on the Purpose of a Corporation, pledging to, among other things, invest in their employees, foster diversity and inclusion, deal fairly and ethically and serve as good partners to other businesses, and protect the environment by embracing sustainable practices. Many of the signatories are struggling to live up to those commitments. What we need is more leaders like Adam Aron—and companies simply doing the right thing.
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