You’ve likely seen the recent headlines proclaiming that corporate shareholders support DEI by large margins after anti-DEI proposals faced “against” votes topping 90%. But 97% of Berkshire shareholders recently voted against a pro-DEI proposal. So where are the headlines proclaiming that 97% of Berkshire shareholders reject DEI? There’s a lot to unpack here, and it’s important we do so.
To begin with, should we assume votes against anti-DEI proposals equate to legitimate shareholder support for DEI? I’ve written about this before (here), but let’s review all the things those votes could mean other than support for DEI.
First, a vast bulk of the “against” votes may be illegitimate because they are either directly or indirectly traceable to conflicts of interest on the part of the Big 5, which is to say the Big 3 asset managers of BlackRock, Vanguard, and State Street, together with the Big 2 proxy advisers ISS and Glass Lewis. The conflict arises because all 5 make money off ESG, which includes DEI. Related news stories seemingly appear on a weekly basis, but you can find a couple of relevant ones here and here.
Second, management and board opposition and voting recommendations may be illegitimate to the extent they reflect a desire to avoid getting voted out of office by the Big 5 for challenging the ESG/DEI industrial complex. Andy Puzder makes a strong case for this in his recent book, “A Tyranny for the Good of its Victims: The Ugly Truth about Stakeholder Capitalism.” (One can also identify additional potential conflicts in the form of ESG/DEI effectively operating as a “bureaucrats full employment act” and activist insiders prioritizing ideological commitments over fiduciary duties.)
Third, “against” votes may reflect the application of idiosyncratic voting rules that have nothing to do with the substance of the proposal. For example, a proxy adviser employee told me that his company would vote against any proposal seeking a report because it deemed all reports more costly than beneficial. Similarly, Glass Lewis (perhaps reacting to accusations of bias) recently announced it would recommend voting against both the pro- and anti-DEI proposals at the upcoming Boeing meeting. One can argue about the soundness of these policies, but something other than signaling a pro-DEI stance is going on when these firms recommend a vote against, for example, an anti-DEI civil rights audit report.
Adding up all the votes directly or indirectly influenced by these arguably conflicted or misguided forces, and keeping in mind that the bulk of retail investors don’t vote at all, it is not a stretch to conclude that all the “against” votes were potentially tainted or, at the very least, incapable of providing a sound basis for concluding they should be characterized as votes in favor of DEI. (For shareholders seeking alternative voting recommendations, consider the Free Enterprise Project’s Proxy Navigator app.)
All of which brings us back to the recent pro-DEI proposal at Berkshire. Proposal 6 requested “a Board Committee to oversee the Company’s diversity and inclusion strategy across its holding companies.” (You can read the entire proposal on page 18 here.) Feel free to check my math, but my reading of the final vote count (available here) shows 97% of shares present voted against that proposal.
The first thing to note is the apparent bias of all the journalists and outlets that rushed to promote headlines claiming DEI was supported when the anti-DEI proposals lose, but who are apparently nowhere to be found when the outcome doesn’t fit the desired narrative.
Having said that, the better takeaway may be that we shouldn’t assume votes “against” X are votes “for” Y. So, what are we to do with this information?
To begin with, let’s get back to common sense. Do we really think the vast majority of unconflicted shareholders want their corporations to discriminate on the basis of race and sex in the name of DEI? Given the inherent immorality and likely illegality of such “discrimination in the name of anti-discrimination” – along with the divisiveness and value-destruction it fosters – this seems extremely unlikely.
What is far more likely is that the pro-DEI shareholders we should care about (i.e., those who aren’t conflicted or outright neo-racist / neo-Marxist activists willing to sacrifice shareholder value to advance radical aims) want to address problems of inequality that continue to frustrate us but have been misled about the best way to do that.
Accordingly, we should continually return to the reality that issues of inequality can be addressed most directly without incurring all the costs created by proposed solutions that divide us on the basis of race and sex. For example, if gaps in academic performance are creating pipeline problems leading to demographic inequality in hiring and promotion, then we should focus on raising the academic achievement floor for all on a colorblind basis. Similar colorblind solutions can be advanced for every area of inequality.
For all these reasons, you should be very skeptical the next time you see one of those headlines claiming votes against anti-DEI proposals are votes in favor of DEI. Perhaps more importantly, consider joining us in the fight to get our corporations back to neutral and out of politicized race and sex discrimination in the name of DEI. Imagine what we could accomplish if the corporate resources that have been devoted to dividing us on the basis of race and sex in the name of DEI were re-directed to improving corporate hiring and promotion on the basis of colorblind initiatives designed to address troubling areas of inequality directly.
