This is an adapted excerpt from “Go Woke, Go Broke: The Inside Story of the Radicalization of Corporate America” (Center Street, August 6). Note: ESG is shorthand for investing principal that prioritizes environmental issues, social issues, and corporate governance).
You could maybe, just maybe, stomach all the phony virtue signaling surrounding ESG from the woke capitalism crowd if they applied it equally to all public companies. They don’t. Not even close.
Take what’s happening at the Nasdaq, a big stock exchange that caters to the tech industry. If you’re a CEO of a company who wants his stock to trade seamlessly, you apply to “list,” or have it traded on a major stock exchange, like the New York Stock Exchange or the Nasdaq Stock Market, the two largest such venues. Meeting Nasdaq’s so-called listing standards should be standard stuff like disclosure of profits, losses, and other logical corporate governance metrics to make sure the CEO isn’t robbing the place blind.
Not quite. In 2020, Nasdaq’s obsession with ESG and wokeness grew to unfathomable levels. The exchange adopted a rule that all but set quotas in the corporate boardroom, forcing all listed companies to disclose boardroom diversity. Critics called it a public shaming exercise; companies are forced to “explain why they do not have at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an under-represented minority or LGBTQ.”
Guess who’s exempt from all of this? The Chinese. China’s economy is on the verge of rivaling our own in size. Its companies list their shares on all the major exchanges, including the Nasdaq. Chinese companies are also some of the world’s biggest polluters; they’re controlled by one of the world’s most repressive regimes, known as the Chinese Communist Party (CCP). They would fail nearly every ESG metric if they were also held to them, but they’re not, by Nasdaq or any other adherent to the dictates of corporate wokeness.
I discovered this devious wrinkle in corporate progressivism a few years ago while covering the IPO of Alibaba, the China-based competitor to our online retailer Amazon. A real entrepreneur, Jack Ma created Alibaba in his Beijing apartment. But even self-made men in China answer to the commie apparatchiks at the CCP.
In the IPO docs, there was a not-so-subtle risk factor about the CCP and its tendency to “exercise significant control over China’s economic growth…providing preferential treatment to particular industries and companies.” Translated into English: If the CCP doesn’t like someone at Alibaba, it’s off to the gulag, and shareholders might suffer. That’s kind of what happened to Ma, who disappeared for months after mildly rebuking the CCP.
Yet Alibaba’s ESG score didn’t suffer. Boardroom politics in the woke era is a twisted phenomenon. It allows China Inc. to get rich while it oppresses the LGBTQ community on the mainland and persecutes (some would say commits genocide on) its Uyghur ethnic minority without Nasdaq demanding Uyghur board seats on listed Chinese companies. The reason? It has something to do with money.
Nasdaq would lose potentially billions of dollars if these metrics were applied equally. So would Goldman Sachs. David Solomon’s Goldman Sachs may channel wokeness at work and love investing according to ESG, but not enough to turn its back on underwriting the stocks of Chinese companies like the Alibaba IPO even if its founder eventually finds himself sitting in a cell.
Disney also preaches some of the most woke politics from its boardroom and C-suites that filter into its programming and theme park experiences. And it also excuses China’s human rights abuses as it seeks to expand in the mainland. Ditto for BlackRock, a leader in ESG on its US portfolio companies but that doesn’t use ESG screens when buying Chinese stocks. To do so would piss off the Chinese government that approved BlackRock’s recent foray into selling its funds to China’s massive and growing investor class.
Yes, BlackRock is the first US money manager to offer mutual funds to Chinese investors, and it certainly won’t be the last. JP Morgan’s CEO, Jamie Dimon, too loves to tout corporate wokeism, even taking what looked like a BLM-inspired knee during the 2020 social unrest. He also loves the Chinese market; JP Morgan is buying stakes in Chinese banks and opening branches. The firm also serves as an underwriter for Alibaba, also ignoring Jack Ma’s plight. US tech giant Apple, from woke Silicon Valley, builds its iPhones there; EV sensation Tesla is saving the world, but has plants in China.
Mark Cuban, the billionaire tech entrepreneur and until recently owner of a professional basketball team, attempts to make the case in this book that woke does sell; the younger generation is into social justice and products that reflect progressive politics. He says the NBA is all in on social justice. Its success in attracting a younger fan base that will soon dominate sales is proof no one is going broke on going woke.
Aside from a lack of obvious evidence that woke sells to most Americans, let’s explore the hypocrisy of the NBA’s progressive virtue signaling. Until recently, Cuban was also the owner of the NBA’s Dallas Mavericks. The NBA is the only professional sports league that’s in business with the CCP to air games on the mainland. So much money is on the line for pro basketball that the NBA has been known to discipline any executive who speaks up against real oppression in China, the brutal crackdown on pro-Democracy protesters in Hong Kong.
How’s that for supporting social justice? I asked Adena Friedman, the CEO of Nasdaq and the author of those crazy listing rules, how all this makes sense. The morally corrupt CCP — the Chinese Communist Party — runs every Chinese company, even those listed in US exchanges. Will Nasdaq force Chinese companies to institute DEI and meet the same ESG standards she’s demanding here in the United States? Her flacks told me progress is achieved incrementally; for now they’re willing to accept two female board members on Chinese companies even if they’re both hardcore commies.
Okay, but my Wall Street sources say Friedman’s new diversity rules aren’t purely about achieving some sort of kumbaya moment; she’s running cover for some powerful political players in the woke corporate movement. She is close to Gary Gensler, the SEC chair appointed by President Biden, who is leading an effort in Washington to push corporate America to the left, as we discuss in upcoming chapters.
A former official in the Justice Department under George W. Bush, who also serves on corporate boards, tells me that Gensler is behind the Nasdaq effort because these so-called diverse corporate boards channel progressive politics into company policy. And it’s working. Roughly since the time the Nasdaq rules took effect, the McKinsey corporate consulting firm says 70 percent of all directors appointed to corporate boards are no longer straight and white and male.
That’s one big reason DEI and ESG have become touchstones of corporate behavior: They’re being enforced by woker and woker board members. These members owe their jobs to the preservation of the woke circus at some of the nation’s largest companies.
