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In their latest attack on “woke” investing, corporate-backed Republicans are passing bills that would install taxpayer-funding lobbyists in the heart of the country’s stock market regulatory agency, a move some say is “straight out of the Protect 2025 playbook.” Also: Rock the boat.
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To Stop “Woke” Investing, Companies Want Taxpayer-Funded Lobbyists
By Freddy Brewster
 The U.S. Securities and Exchange Commission seal is overlaid on the setting sun behind an oil well in Kansas. (AP Photo / Orlin Wagner and Andrew Harnik) [View in browser] Under the guise of combating “woke” investing, corporate-backed House Republicans last week passed legislation that would establish a taxpayer-funded advisory board within the county’s top Wall Street regulatory agency whose sole purpose is to lobby on pro-business and corporate concerns. The two bills — which critics say are “straight out of the Protect 2025 playbook” and double as a corporate wish list for whoever wins the 2024 presidential election — would also roll back shareholder rights, make it easier for companies to hide financial risks related to climate change and restrict local governments from investing pension funds as they deem necessary. The legislation’s authors say they’re working to stop the so-called “woke capitalism” of environmental, social, and governance (ESG) investing, an investing principle that encourages companies to consider diversity staffing, climate-related business practices, and other issues in their business decisions. But others say the ultimate goal of the bills is to allow companies to squash shareholder voting rights, strip away at investors’ ability to control the companies they own, potentially obscure shady business practices, and pay CEOs to lobby regulators. “The bills would be a disastrous interference in decision making by investors, and an ideological attack on this whole category of ESG investing, and on the investors and proxy advisers that do it,” said Timothy Smith, senior policy adviser for the Interfaith Center on Corporate Responsibility, a faith and values-based organization advocating for more environmentally-conscious investing. The bills come after the Securities and Exchange Commission (SEC), which oversees the nation’s stock markets and protects investors, has mounted aggressive crackdowns on corporate malfeasance. SEC Chair Gary Gensler has pushed the boundaries of the commission’s authority by expanding the amount of information that companies have to disclose to investors and broadening the kinds of proposals that shareholders can bring to companywide votes. The two bills — H.R. 4790 and H.R. 5339 — passed the House last week and are a part of a series of anti-ESG bills crafted over the past two years by Republican members of the House Financial Services Committee. H.R. 4790 would establish the Public Company Advisory Committee — an advisory panel made up of 10 to 20 corporate executives, financial advisers, investment bankers, and others who the government will pay to travel to Washington, D.C. to offer their advice and opinions on how the SEC should operate. Similar advisory committees at the SEC were established to protect investors and consumers after the 2008 financial collapse. The corporate advisory committee is supported by right-wing pro-business groups that have spent hundreds of millions of dollars lobbying Congress and regulators. The National Association of Manufacturers, a trade group representing 14,000 companies in a wide range of sectors, said the panel is needed to ensure “public company voices are heard in the SEC’s decision-making process” and to “help guide the Commission toward rules that support capital formation and business growth rather than costly and unnecessary regulatory burdens,” according to a July 27, 2023 letter the group sent to House Financial Services Committee members. The National Association of Manufacturers’ political action committee has given at least $52,000 in campaign donations over the last five years to members of the House Financial Services committee, which oversees the bills. Rep. Patrick McHenry (R-N.C.), chair of the Financial Services Committee, has received $20,000 from the association’s PAC, federal data shows. The bill is also supported by the U.S. Chamber of Commerce, the largest pro-business lobbying group in the country, which claimed that the legislation is needed to push back on shareholders urging companies to consider climate impacts and other issues related to ESG investing. “Due to shortcomings in securities regulations, a handful of activists have been able to hijack the process for how shareholders engage with companies,” the Chamber wrote in its Sept. 16 letter. The Chamber of Commerce has given more than $118,000 in campaign donations to the current members of the Financial Services Committee, federal data shows. The two groups combined have spent more than $210 million since January 2022 lobbying Congress, the Securities and Exchange Commission, and other regulators on corporate disclosure requirements, the shareholder proposal and voting process, and other issues, disclosures show. H.R. 5339, meanwhile, would limit retirement and pension fund managers by restricting them from considering ESG principles when investing. The National Association of Counties, an advocacy group made up of representatives from 2,350 counties that focuses on promoting federal policy that benefits counties, said that by putting restrictions on certain kinds of investing, both bills could hamstring local governments and restrict their daily operations by obstructing their ability to invest pension dollars. “H.R. 4790 is another piece of legislation brought forward by…special interest groups,” wrote Sarah Benatar, Coconino County, Arizona, treasurer and county association board member in a letter to Congress. “Similar legislation to that of H.R. 4790 that has passed on the state level has resulted in restricting the option of local governments and financial institutions, billions lost in pension fund returns, and costing the taxpayer millions more in critical infrastructure projects due to increased municipal bond rates.” On Sept. 18 and 19, the bills passed the House on nearly partisan lines; three Democrats joined Republicans in passing both bills. The bills likely will not pass the Democratic-controlled Senate, but experts perceive them as a wish list from conservatives if former President Donald Trump were to win the presidency. It is also a signal from the business class to Vice President Kamala Harris on how the SEC should be run if she were to win in November.
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“The SEC will play a big regulatory role,” said Jon Golinger, an attorney and democracy advocate for Public Citizen, a consumer protection advocacy group. “They certainly can’t do all the things that these bills set out to do, but they can play a big role so that the elections will have a consequence.” A “Flat-Out Gift” For CEOsThe corporate advisory committee provision in H.R. 4790 is likely a reaction to similar committees established after the 2008 market crash under the Dodd-Frank bill. That bill created the Investor Advisory Committee, which holds hearings and writes reports and recommendations for the SEC on issues ranging from fee structures, disclosures, and securities products. The committee is made up of pension and retirement fund advisers, law professors, and other investment experts appointed by SEC commissioners. “[Corporations] believe that corporations should have the same thing,” Golinger said. The corporate advisory committee would be made up of 10 to 20 “officers, directors, or senior officials of public companies,” and others appointed by the SEC that would meet twice a year to provide advice on rules, regulations, and other matters to the SEC commissioners. The corporate appointees to the committee would receive paid travel and lodging expenses, a per diem stipend, and a paycheck — all funded by taxpayers. “That’s a flat-out gift for the corporate CEOs to give them effectively taxpayer-funded lobbying to influence the people who are supposed to regulate them,” Golinger said. While corporations can already spend millions of dollars lobbying SEC regulators, critics say the advisory committee could take matters a step further by effectively paying corporate CEOs to lobby the SEC on behalf of business interests that can run counter to investors’ wishes. The National Association of Manufacturers supported the advisory committee in their 2023 letter to Congress, stating that the committee would help promote the interests of publicly-traded companies and “provide the SEC with advice on how its rules and regulations impact public companies.” But these companies already have an overwhelming advantage in lobbying regulators like the SEC, said Golinger. The National Association of Manufacturers represents companies in many sectors, including in tech, weapons manufacturing, pharmaceuticals, consulting, oil and gas, and others. The association’s board includes executives from Johnson & Johnson, Pfizer, General Motors, Deloitte, RTX (formerly Raytheon), the Koch Government Affairs lobbying operation, the consulting firm McKinsey & Company, and other major corporations. General Motors, Deloitte, Koch Government Affairs, and ConocoPhillips have together spent more than $79.3 million since January 2022 lobbying Congress, the SEC, the White House, and other regulators on corporate disclosure issues, corporate governance matters, shareholder rights, and other issues, disclosures show. Days before the final vote, Rep. Sean Casten (D-Ill.), introduced an amendment to H.R. 4790 that would have stripped away the Public Company Advisory Committee — but the amendment failed. “On the verge of a government shutdown, House Republicans wasted time this week forcing votes on bills that, if enacted, would fundamentally weaken the foundation of America’s free markets and limit Americans’ freedom to make their own investment decisions without interference from the government,” Casten said in a news release. “These bills are straight out of the Project 2025 playbook and bad news for American workers.” Attacking Shareholder RightsESG investing has come under attack in recent years by conservatives who claim the practice wastes company time and dollars by forcing companies to focus on issues not relevant to the core of a certain company’s business. While many examples of ESG investing have been knocked for prioritizing social contributions over shareholder returns, experts say conservatives are using anti-ESG efforts to attack shareholder rights more broadly. A recent survey of New York-based voters in six House swing districts found that voters were skeptical of anti-ESG policies. The SEC has the final say on allowing shareholder proposals to go to a vote during annual shareholder meetings, and the agency has allowed proposals that would force companies to disclose their staff diversity rates, environmental impacts, how they deal with pollution, and other issues. These kinds of disclosures have angered some CEOs and conservatives.
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In January, ExxonMobil took the extraordinary step of suing two investment firms holding Exxon stock for repeatedly filing climate-focused shareholder proposals. Exxon filed the case in the Republican-dominated Fifth Circuit Court of Appeals, which has become a go-to court for corporate victories, and continued with the suit even after the proposals in question had been rescinded. Observers saw the effort both as an intimidation campaign against mounting shareholder activist efforts, and a way to get federal judges to supersede financial regulations on shareholder proposals. The suit was dismissed in June. The National Association of Manufacturers, which has ExxonMobil executives on its board of directors, said H.R. 4790, the anti-ESG bill establishing the corporate advisory committee, would rein in the SEC’s regulatory overreach and help keep “activists out of the boardroom.” “Politically motivated activists and underregulated proxy advisory firms have been empowered by recent actions by the SEC,” the association wrote in a July 2023 letter. “And the SEC has taken steps to advance an ESG agenda of its own via prescriptive and inflexible disclosure mandates.” The new anti-ESG house bills are the latest attempt by Republicans and conservative activists to attack shareholder rights. “Under the Biden-Harris administration, rogue regulators are weaponizing independent agencies to pursue the ESG objectives of the far-left at the expense of our financial system and everyday investors,” said Rep. Bill Huizenga (R-Mich.), House Financial Services Committee member and author of H.R. 4790. Huizenga is chair of a Financial Services subcommittee and authored a report released in August that found the SEC had “overstepped its statutory authority by finalizing a climate disclosure rule, which exploits the securities regulatory and disclosure frameworks to advance the Biden Administration’s climate policy goals,” among other issues. Huizenga’s bill would also roll back the shareholder proxy process — a procedure that allows shareholders to issue proposals to companies on how to guide companies’ business practices and force them to disclose certain practices such as climate change risks and labor uses — by making it harder for shareholders to bring proposals to a vote at annual shareholder meetings. The bill would allow companies to have control over what proposals get voted on during annual meetings. “Part of the bill would raise the bar to nearly insurmountable heights for shareholders to put things to a vote,” Golinger said. “And that is something driven by the National Association of Manufacturers and the Chamber of Commerce to try to keep companies insulated from accountability.” Additionally, Golinger said the bill would diminish the SEC’s role in the shareholder process and make it harder for investors and the public to know about illicit business practices that a company may be engaged in. The bill would limit disclosure requirements to only information that a company deems is “material” — or economically relevant — to their stated business. Golinger said this provision in the bill could block investors from seeking information on how companies are addressing climate change, and other issues. “This is really a battle over whether corporations should have to disclose information about their business record, how they treat the workers…, their environmental practices, and other things to investors, or whether corporations should get to decide whether to keep that information secret,” Golinger said.
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Earlier this year, the SEC enacted a rule requiring companies to report their greenhouse gas emissions and climate risks to investors. However, that rule is on pause as the agency defends the rule in court. A lawsuit seeking to block the rule was brought by a slew of states and the Chamber of Commerce, alleging that the SEC rule exceeds its legal authority. The White House said Huizenga’s anti-ESG bill could be detrimental to shareholders and federal agencies working to hold companies accountable. “H.R. 4790 would disempower stakeholders and investors, including by preventing the SEC from compelling companies to notify investors of other shareholders’ proposals and by limiting the types of proposals that shareholders can introduce,” the White House wrote in a Sept. 17 policy statement. “Deep Impact On Retirees”Though not as sprawling as its counterpart, H.R. 5339, authored by Rep. Rick Allen (R-Ga.), would radically change how retirement and pension fund advisers operate by blocking them from considering ESG principles when investing for employer-sponsored funds. Conservatives argue that advisers who consider ESG principles are putting outside factors ahead of their clients’ best monetary interests. However, advisers are already required by law to invest in the best monetary interests of their clients. What’s more, the White House claims that the bill could undermine core parts of the Employee Retirement Income Security Act (ERISA), which sets minimum standards for employee retirement plans, by preventing advisers from considering the long-term effects of business practices. “Artificially limiting fiduciaries’ ability to consider material information in making sound investments will reduce savings and retirement security for Americans and runs contrary to the purpose of ERISA,” the White House wrote in a Sept. 17 statement. The bill is opposed by the AFL-CIO, one of the country’s largest unions, which said the bill would “have deep impacts on retirees.” “This bill would effectively disfranchise retirement plan participants from having their shares voted on important ESG issues,” the union wrote in a Sept. 17 letter to Congress. “ESGs are critical factors in assessing and mitigating risks and creating opportunities for enhanced returns. Therefore, AFL-CIO urges you to oppose H.R. 5339.” According to a recent study, public pension funds in Democratic-controlled states that are open to ESG principles have outperformed public pension funds in Republican-controlled states which tend to be more dismissive of ESG investing. The study also found that states with anti-ESG laws on the books performed worse than Republican-controlled states that have not enacted anti-ESG laws. During a Sept. 19 debate on the bills, Rep. Casten highlighted how Kansas’ state budget office estimated that anti-ESG laws will result in retirees losing $3.6 billion over 10 years, and problems in other states. “Americans in red states are losing money today because of these policies,” Casten said. “In Texas, anti-ESG laws like the one you’re proposing are costing the state nearly $700 million in lost economic activity and more than 3,000 jobs… That is what you are imposing on the rest of the world.”
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