Author Topic: Republicans Try to Limit Free Markets  (Read 249 times)

Wayward Son

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Republicans Try to Limit Free Markets
« on: March 02, 2023, 01:55:58 PM »
It may not seem so at first, but really that's what they are doing.

The House and the Senate have passed a resolution to overturn a Department of Labor rule that allows retirment funds to consider E.S.G. (Environmental, Social, and Governance) factors when choosing companies to invest in.  Basically it allows investment companies to decide whether these factors could influence the companies value in the future and invest appropriately.

Notice I emphasize the word "allows."  There is no rule that requires the investment firms to take these factors into account, nor what conclusions they should come to.  It just allows them to consider them when making investments.

Unfortunately, some investment firms have decided that certain investments--like oil companies--are too risky in the long run to invest in because of their influence on climate change and other environmental factors, and so have not invested in them. 

But this choice is too "woke" for Republicans.  It is a choice that they feel is too liberal for businesses to make.  And so they are trying to stop it, with the help of a few Democrats.

Think about it.  Republicans want to tell financial investment companies that they should not consider certain factors that the firms believe are pertinent to the long-term health of the companies they invest in.  Factors like climate change, which will affect us all, should not be considered in making that decision.  Because some of their members hate the ideas, and don't want them to be true.  So they want to tell these firms NOT to think about them.

Republicans used to be for the free market, where individuals and companies could make their own decisions about how to run their business.  But now their ideology trumps freedom.  Kinda like what they've been criticizing others of doing for while, as I recall. ;)

TheDrake

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Re: Republicans Try to Limit Free Markets
« Reply #1 on: March 02, 2023, 03:08:17 PM »
The whole situation is not new. In the trump era, they made a rule that prohibited managers from considering anything other than getting the highest return. So if there's good money in blood diamonds, you can't fulfill your fiduciary duty unless you ignore the slavery and wars. It went way beyond green energy. So we really need any more examples that the only thing Republicans care about is cash, gdp, more more more right off the cliff?

Fenring

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Re: Republicans Try to Limit Free Markets
« Reply #2 on: March 02, 2023, 03:09:18 PM »
WS, I think I agree with your basic position, although I'm trying to come up with the contrary position to see how strong a case it may have. I think the case would have to be one of two things: either a company is not acting in its shareholder's interests for non-business reasons, or it's operating in response to a kind of pressure that itself is anti-competitive. For an example of the former, imagine that the board and CEO of a company want to shine up their resumes by showing that their company is doing all this ESG stuff, but that this stuff actually helps their image but not their company. I could see the rationale that their public shows could be self-serving rather than a legitimate business decision. Or another example of this could be if you viewed certain ESG initiatives as fraudulent or deceptive (I watched a video about one case where an environmental initiative was a plain boodoggle), the board and CEO should perhaps not be entertaining this type of investment due to its dangers.

For the second idea, about anti-competitive practices, if we were to assert that ESG moves by companies are often not done out of an innate self-interest but out of public pressure, it could be argued that this pressure forces companies to either comply or else face harassment (including internally). And likewise, a company or fund looking to invest may be attracted to those ESG participants for similar reasons, i.e. not because they in fact think it's strategic but because they are afraid not to. Making it illegal to consider that would remove the threat against them and allow them to judge a business decision purely on its merits. The ESG-attribute would be anti-competitive because it effectively bars companies from choosing to be different from other companies without being attacked.

I'm not actually saying either of these scenarios is certainly the case, but maybe they're worth protecting against if they were?

TheDrake

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Re: Republicans Try to Limit Free Markets
« Reply #3 on: March 03, 2023, 07:28:46 AM »
No, they are not worth protecting against if it means fund managers are forced to invest in unethical companies. Another example of this is being able to pressure a country, like apartheid South Africa, by private action without having to wait on the government to force them to divest those assets.

Let's say a 401k manager takes it upon themselves to divest all holdings of companies involved in the manufacture of vaccines or birth control or using foetal tissue in research. I wouldn't say that ought to be an illegal violation of fiduciary duty. I'd be pretty upset about it if I had my retirement in that fund. But there are mechanisms to replace fund managers. I don't see anything illegal about vanguard having a pro-life fund. But yeah, they would face a lot of public opinion about it that might sway them to dissolve that fund.

This is not a thing to be avoided. We should care more about ethics than about rate of return and certainly not zero.

Tom

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Re: Republicans Try to Limit Free Markets
« Reply #4 on: March 03, 2023, 09:06:10 AM »
The idea of fiduciary responsibility to shareholders is one of the most corrupt things to spring from modern corporate law, and frankly completely undermines the ethical justification for incorporation statutes in the first place.