Tuesday, April 27, 2021
ESG and the Discipline of Secrecy
The ESG movement (or EESG, if you want to follow Leo Strine on this) has been in the business and legal news quite a lot recently.
In a Bloomberg article about the tax perks of trillions of dollars in Environmental, Social, and Governance investing by Wall Street banks, tax specialist Bryen Alperin is quoted as saying: “ESG investing isn’t some kind of hippie-dippy movement. It’s good for business.”
This utilitarian approach to ESG, and social enterprise in general, has made me uncomfortable for a while. The whole “Doing Well by Doing Good” saying always struck me as problematic.
ESG and social enterprise are only needed when the decisions made are not likely to lead to the most financially profitable outcomes. Otherwise, it is just self-interested business.
Over my spring sabbatical, I have been reading a fair bit about spiritual disciplines and the one that is most relevant here is “Secrecy.” The discipline of secrecy is defined as “Consciously refraining from having our good deeds and qualities generally known, which, in turn, rightly disciplines our longing for recognition.” In The Spirit of the Disciplines, Dallas Willard (USC Philosophy) writes, “Secrecy at its best teaches love and humility…. and that love and humility encourages us to see our associates in the best possible light, even to the point of our hoping they will do better and appear better than us.”
As a professor with active social media accounts, the discipline of secrecy is not an easy one for me. But I do think it is a good aspiration for all of us. Not every good deed has to be kept in secret. There can be good reasons for broadcasting good deeds (for example, to encourage others.) However, regularly performing good deeds in secret can help us build selfless character.
Similarly, socially conscious businesses and investors should be focused on the broader good being done, not on the personal benefits. Granted, I don’t think investors can blindly trust the ESG funds or benefit corporations --- the screens are simply unreliable. Also, it may be difficult to determine which companies are really doing social good if they are practicing much of it in secret. But the truth has a tendency of leaking out over time and investors can focus on companies they see doing the right thing without excessive marketing.
As for the companies themselves, I remain optimistic that there are at least a few businesspeople who truly want to benefit society for mostly selfless reasons. Combatting selfishness is not easy, but the discipline of secrecy is one way to fight it.
I tried to post this comment (a question really) to a much earlier blog post on Delaware law concerning controlling shareholder cash-out mergers. I think the time to post comments had expired. Perhaps a member of this blog will be kind enough to help me understand how Weinberger v. UOP (1983) and Kahn v. M&F Worldwide ("MFW") (2014) fit together. Here is the comment:
With regard to controlling shareholder cash-out mergers, I'm having trouble reconciling Weinberger v. UOP (1983) with MFW and other cases that allow cashed-out minority shareholders to challenge the transaction, except by way of seeking an appraisal. I read Weinberger to say that after Feb. 1983 the remedy of a minority shareholder in such a merger is an appraisal under the broader standards of valuation permitted by the Weinberger court. How is it, then, that we continue to have cases in which shareholders are able to bring suit rather than seeking an appraisal? Weinberger does say that in some cases appraisal may not be sufficient, but the kinds of cases seem extreme: "fraud, misrepresentation, self-dealing, deliberate waste ..., or gross and palpable overreaching." The kind of "self-dealing" the court references has to be something more than just that the controlling shareholder is cashing out the minority; that was true in Weinberger. So I'm puzzled. Any help would be appreciated.
Posted by: Mark Scarberry | Apr 27, 2021 8:48:05 PM