Senior Fellow of Real Clear Foundation Rupert Darwall Sees the Polity of Businesses Becoming Armed Tools of Political Agendas

Senior Fellow of Real Clear Foundation Rupert Darwall Sees the Polity of Businesses Becoming Armed Tools of Political Agendas

 

Live from Music Row Friday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. –  host Leahy welcomed Senior Fellow at the Real Clear Foundation, Rupert Darwall to the newsmakers line to discuss his recent article and defines the design of ESG.

Leahy: We are delighted to welcome to our newsmaker line from across the pond, Rupert Darwell, a senior fellow at the Real Clear Foundation. He just released a study on capitalism, socialism, and a thing called ESG. And if you haven’t heard about it, you got to listen up. It’s very important what he’s written. Rupert, thanks so much for joining us this morning.

Darwall: It’s my pleasure, Michael.

Leahy: ESG, it sounds like a food additive, but it’s much more dangerous. Tell us, what does ESG mean? And why should we care about it?

Darwall: ESG is environmental, social, and government. It’s a form of investing. It’s meant to be for the clean, moral, pure types that want to make the world a better place. And it’s a bit of a con, really, because what it says on the outside is ESG investing, you’re doing well by doing good.

So you’re going to make more money by doing the things that are going to make the world a better place. But actually, it’s all about that at all. It’s politics by other means. It’s the politicization of business and investing. And you’ll say goodbye to those higher returns because that’s just sales chatter.

But fundamentally, it’s about turning capitalism into something very, very different. And it’s also about political power. It’s about giving financial oligarchs on Wall Street and in the big state pension funds like CalPERS in Sacramento and the Neivers New York pension funds, enormous amounts of political power of business.

Leahy: Yeah, that’s exactly it. We’ve noticed, of course, I guess the publicly traded corporations, I don’t know, 90 percent of them seem woke beyond repair. They’re always preening about some moral issue, and it’s just highly destructive it seems to me. When did this really start being a thing?

Darwall: Well, there was a phase of it, I think, in the 1970s because Milton Friedman wrote a fantastic article saying the role of business is judged by how much money it makes for shareholders. It’s about profit. Because if you’re a good business creating and innovating things in the market that customers want, you’ll do well and that kind of thing.

It kind of then went through the 80s and 90s and then receeded. But it’s really come back with a vengeance now. And you may remember, a couple of years ago, the Business Roundtable issued that 181 CEOs signed the Business Round Table statement on stakeholderism.

The businesses are meant to serve a wide variety of interests and demoting the stockholder. So it’s really come in very powerfully. And, of course, the so-called climate crisis, this existential threat to life on earth kind of thing, businesses have got to emit zero. So it’s really kind of taken business and particularly financed by storm might say.

Leahy: I don’t know what your background is other than your finance guy in London and you write about it. I’m a graduate of Stanford Business School. I have an MBA from Stanford way back when. And what I’ve noticed is the ideas that are taught in business schools today seem much more socialist at the highest level than they were when I was in school.

Tell me what you think about this. You have a generation of left-wing socialists now that are influencing these hedge funds like Black Rock and are serving on corporate boards and are in the marketing departments and the finance departments of Fortune 500 companies and they’re forcing that ideology that they’ve grown up with upon these publicly traded companies. Do I have that right or is there another element to it?

Darwall: I think that’s a very important aspect of it. I would also point to there’s also kind of a revolving door between the corporate affairs department of large corporations. At the end of the Obama administration, you saw a load of Obama administration officials exiting the federal bureaucracy and jumping into the C-suites of corporations.

For example, you mentioned Black Rock. One of the Black Rock guys is now a very senior economic advisor in the Biden administration. So it’s kind of this revolving door. It’s this intertwining of business and politics. And in my view, the business of business, the business of business is business. It’s not politics. It’s not politics by other means.

But what we’re seeing is polity of businesses becoming armed tools of political agendas, which I think is very dangerous for democracy, because these questions should be decided through the ballot box and through the Constitution.

The United States has a brilliant, perfect Constitution, if you like, of representative democracy. And the second danger to capitalism because as businesses become woke, they become less innovative and doing less of driving the things that make living standards rise and which makes capitalism the greatest economic system there’s ever been.

Leahy: The title of your study is Capitalism, Socialism, and ESG. But I look at this interconnection between the very large, publicly-traded corporations and government and politics. And to me, the ism that comes to mind is more a form of fascism. What’s your thought about that?

Darwall: Corporatism, because both socialism in its extreme form and fascism, but they both see that the political ideology must trump everything and every aspect of society. And particularly economic ones should be the tools of the state.

Yes, there is. You are absolutely right. It’s a form of corporatism. It’s very nasty. It’s unrepresentative, as I say, it’s about usurping, the Democratic prerogatives of the people through the ballot box.

Leahy: The other element of this to me, for free markets and capitalism to work, the capital markets have to work for all sizes of companies. Large companies and small companies. And of course, startup companies, small companies, entrepreneurial companies, that’s where most innovation does occur.

It seems to me that the rise of ESG, environmental, social, and governance standards among larger corporations has kind of made the capital markets much more difficult for small businesses and those that are providing innovations. Do you see that as well, or am I just looking at it from a small business lens?

Darwall: No. I think what happens is that large businesses call for large woke businesses if you like. When they embrace this agenda they say, well, our business model could be under threat from startups, therefore, because we’re doing what the politicians want and because what Democrats in Washington want, we need protection from startups.

Inevitably you get distortions in markets. You have you know what economists call rent-seeking behavior and businesses trying to protect themselves from businesses that are unencumbered by ESG and are free to perform as they want. I think you’re absolutely right. It’s a big threat to the layer of new businesses which really have driven growth and innovation.

Leahy: The other thing is to look at alternatives to ESG. Is this just a huge group think among hedge funds and Fortune 500 companies? Is there anybody in that world that you see right now that is not embracing ESG? And what consequences are they facing?

Darwall: I would say corporate CEOs are very exposed to proxy battles. If they put their head above the parapet, they’re likely to have a shareholder and stockholder revolt at the next annual general meeting. So they’re quite nervous individuals.

They have to go with the flow. The greatest economist of capitalism was Schumpeter. He wrote that an incredible book, Capitalism, Socialism, and Democracy. And in that, he described the publicly traded corporation as capitalism’s vulnerable fortresses for exactly this reason in that you have a split between ownership and control.

But I think the ESG thing because it’s such a distortion of the capital markets, there will be people who come in and contrarian investors who can make lots of money out of the fools who follow the ESG sales pattern. Because when you have people investing for non-financial reasons, they make mistakes.

They’re the easy ones you can pick off. I think there’s an aspect of it that this is set up so that more savvy investors at some point will make a great deal of money from the investors chasing the fools gold of ESG investing on the basis that they’re going to do well by doing good, which is, as I say, is complete junk.

(Commercial break)

Leahy: Rupert, you mentioned before that ESG actually doesn’t perform well financially, and it’s a bit of salesmanship, if you will, for the left. And you mentioned that perhaps some more savvy investors will come up with contrarian views.

I just sent you an email that includes some information about just such a group based here in Nashville, as it turns out, called 2nd Vote Advisors. And basically, they manage funds and they have private funds that are exchange-traded funds.

One is focused on pro-life. The other is focused on Second Amendment-type issues. They say that without 2nd Vote Advisors as a counterweight to existing asset managers, a progressive ESG agenda will continue when investors can rest assured that we will never vote proxies in support of ESG shareholder initiatives. I don’t know if you’ve heard of 2nd Vote Advisors, but it’s almost as if you predicted they would come into existence.

Darwall: It does sound like that. The smart investors will. When I say smart investors, investors that have got their feet on the ground, and they’re the best ones will see this as an opportunity. Because what will happen is that they will dump lowly rated ESG stocks, which means that they’re cheaper for others to buy.

There’s that thing that Ben Graham, the Warren Buffett guru, said, in the short term, a stock market is a voting machine, and in the long term, it’s a weighing machine. And at the end of the day, what will happen is it will be the cash flows that companies generate. The ESG investing movement is creating a massive investment opportunity for smart investors.

Leahy: But besides 2nd Vote Advisors, is there anybody promoting these contrarian options to ESG investments?

Darwall: That’s one of the things that’s needed to happen because what you’ve got is the big three index providers, ETF index providers led by Black Rock. You’ve got State Street and Vanguard. Those big three, which Black Rock is the largest asset manager in the world have gone woke.

Larry Fink is leading the charge on ESG, climate, and on stakeholderism. He has threatened encumbered management to vote against them if they don’t bow to the God of ESG. That means that if you don’t subscribe to that view of politics and that is what it is, it is essentially politics and ideology, you need to find the ETF provider who will vote your proxies the way that you want and not the way Larry Fink wants.

I think in time you will see alternative providers. The market should respond in the way that people who want politically free investing can have that demand satisfied. But as yet, I haven’t seen those ETF providers come over the horizon. America is still the most dynamic economy in the world, the freest economy in the world, and that over time that will happen. There will be a market reaction against this.

Leahy: How is it that a guy like Larry Fink, who is, in essence, a financially sophisticated left-wing ideologue, how is it that we have so many guys like that now?

Darwall: He was a bond trader who correctly spotted the diverse portfolio and index investing. These are both low costs and over time give very good performance. And he’s ridden that. And now he’s made as much money as he can ever hope to.

And he’s got the whiff of political power in his nostrils. And sitting in as chairman and CEO of Black Rock, he has the best of both worlds of having immense financial power on Wall Street and also access to every political leader he ever wants. So there is a lot of that.

There’s something that he said. Every year he writes to corporate CEOs just telling them what to think. And last year he wrote to them and said all this disclosure stuff, ESG and climate disclosure, and so forth. He says the goal cannot be transparency for transparency’s sake.

They normally say, well, the market needs more transparency and more data. Then he went on to say disclosure should be a means to achieving more sustainable and inclusive capitalism. Now, that is politics. That is pure politics and nothing to do with boosting investor returns or anything like that.

This is the guy acting as a politician wielding political power. The proxy votes that are embedded in ETF index funds, he’s stripping the proxies out of them, and he’s casting them according to his ideological prejudices.

Leahy: The founders, Alexander Hamilton, James Madison, Thomas Jefferson, didn’t agree on a lot. But one thing they did agree on that if an aristocratic manufacturing class ever arose in America, it would be bad for the constitutional Republic.

We have now this aristocratic leftwing financial class, and they have no constraints. I think what has arisen here with guys like Larry Fink is exactly the kind of aristocratic modern feudalism that Jefferson, Hamilton, and Madison would have absolutely loathed.

Darwall: I absolutely agree with that. These Wall Street oligarchs are essentially usurping, the prerogatives of the Democratic and constitutional political state. That’s exactly what’s going on. This is a parallel government that is not really accountable to anyone and certainly not accountable to voters. When Larry Fink talks about inclusive capitalism, he’s actually talking about exclusive capitalism, insider capitalism.

Leahy: Exactly.

Listen to the full interview here:

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Tune in weekdays from 5:00 – 8:00 a.m. to the Tennessee Star Report with Michael Patrick Leahy on Talk Radio 98.3 FM WLAC 1510. Listen online at iHeart Radio.

 

 

 

 

 

 

Maury County, Tennessee State Rep. Cepicky Reflects Upon the Winding Road to Public Office

Maury County, Tennessee State Rep. Cepicky Reflects Upon the Winding Road to Public Office

 

Live from Music Row Thursday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. –  host Leahy welcomed State Rep. Scott Cepicky in studio to talk about his former life as a professional baseball player and how he came into politics.

Leahy: In studio with us State Representative Scott Cepicky. We’re learning a lot of very interesting things about his career in sports as a professional baseball player. So spring training, what 1980 or something?

Cepicky: We are in 1994.

Leahy: Spring training 1994. You’re down with the White Sox?

Cepicky: White Sox organization, spring training, Michael Jordan is playing baseball.

Leahy: You’re left field, he’s centerfield somebody else is right field.

Cepicky: He’s in right field.

Leahy: He’s in right field.

Cepicky: He’s not playing right field. But he’s in right field.

Leahy: And he loves baseball like you do, right?

Cepicky: Well, he does like baseball. He doesn’t love baseball, but he likes it.

Leahy: He likes it. He’s trying it out.

Cepicky: And he made a promise to his father. And I understand that. And when your a White Sox owner and Chicago Bull owner, and winner of three world championships, and you’re the best basketball player, in my opinion, who’s ever lived, you get to do what you want.

Leahy: You get to do what you want. So there he is. He’s playing the right field. So tell us the rest of the story.

Cepicky: We’re just having conversations with him every day, like I’m having a conversation with you, How’s life going? We are just sitting out in the outfield shagging fly balls. And I’m sitting here with Michael Jordan every day in spring training. I ended up getting traded to the Twins. So the Twins optioned me from AAA down to AA. You know, the movie Bull Durham?

Leahy: I sure do.

Cepicky: Well, my role with the Nashville Express was Kevin Coster.

Leahy: Okay.

Cepicky: I was seasoned baseball player. I knew how to play the game. I knew how to play 142 baseball games a year. And I knew in my heart what it took to be a professional.

Leahy: So there was a very brief period in time where a AA team called the Nashville Express was moved up to Nashville.

Cepicky: Larry Schmittou.

Leahy: Larry Schmittou. Great guy. Former Vanderbilt baseball coach and was involved in the Sounds. And then the Express,.

Cepicky: I believe the Express became the Jackson Generals.

Leahy: I think so. But the Express for two or three years.

Cepicky: Three years.

Leahy: Okay. So you’re back now playing for the Express AA, the same league as the Birmingham Barons. Where Michael Jordan…

Cepicky: Where I just played a year before winning the southern league championship.

Leahy: Right.

Cepicky: So there’s a time when Michael comes to town.

Leahy: And I went to those games and let me tell you what my initial reaction was. Man, that guy is tall and skinny. That was my first thought, watching Jordan play baseball because you watch him on the basketball court and he looks muscular compared to the other guys. But on a baseball field, he looks very skinny.

Cepicky: Well, there was a picture that was circling for a while back then. He had just walked because he wasn’t going to get a base hit to get on base. But he walked. And I teased him all the time about it. He walked in one day when I was with the Express and I’m standing there at first base. I was playing first place in his game. And I was 6’4, 240 pounds.

Leahy: And you knew Jordan.

Cepicky: And he got down to the first base and he’s standing there, and he’s talking to me. I’m like, I just want to let you know that is the most awful swing I’ve ever seen in my life. And I said if it wasn’t for you being able to shoot the basketball, you’d never be standing here. That made him laugh. And he said, Well, I got to go because I’m gonna steal the second base here. And he did.

Leahy: He was fast.

Cepicky: He was fast. But in the day game that night, we played. And the next day was the Sunday day game on their getaway day. And we played there. And if you ever come to my office and everybody you I always invited to it. It’s not my office.

Leahy: It’s the rep office.

Cepicky: Well, it’s District 64’s office.

Leahy: There you go.

Cepicky: And so if you come to District 64 is office up in Cordell Hull. You’ll see the newspaper article from The Tennesseean and back then that he signed. And it’s a picture when he first got into town the night before of me and Michael just having a conversation. And so it’s in my office, one of my prize possessions. He was a super good guy.

I finished that year with the Express. Like Bull Durham, they were going to release me at the end of the year. And you know what? As I’ve told your listeners, I’d done everything I could to get to the big leagues. And I called my dad on the phone and I just said, I’m done. I’m going to leave the sport on my terms. I’m not going to hang around forever. I was 28 years old by then.

Leahy: You put six years in. You don’t make the big money in the minors.

Cepicky: You make some.

Leahy: You make some.

Cepicky: You don’t make a lot of money. And so I just decided I was going to move on with my life. And it was the best thing I ever did. I met my wife. We were living in Atlanta, Georgia, and people said, well, how did you get to Tennessee? I said, well, we had a cattle farm in Southeast Missouri, and I’m a cattleman right now driving back and forth from Atlanta to Southeast Missouri every week.

And it got old. My wife was pregnant. And we’re like, look, we’ve got to either live on a farm or we got to move closer. So we happened to be in Nashville when she said that to me. And I said, well, we both like country music. And so we decided to move to Nashville. And I found my way in a couple of different areas. And finally, in 2008 we moved to Maury County. In 2010 I ran for the County Commission.

Leahy: In 2008 you moved to Maury County. And what do you do there for a living?

Cepicky: I’m a banker.

Leahy: Oh, that’s your primary job.

Cepicky: I’m a banker. And in 2010, I was sitting there next to my very good friend and neighbor complaining about the situation of our county, our state, and our county. And he said, I’m tired of you complaining about it. Why don’t you fix it. So I put my name on a ballot in 2010. I was elected to the County Commission and served as their chairman for four years. I served as a chairman for two years. And then I ran for County Mayor in 2014 and I lost by 137 votes in the primary.

Leahy: Close race.

Cepicky: Sheila Butt was the state representative.

Leahy: Well known to us.

Cepicky: She asked me if I would be the chairman of the Republican Party. And so I did that for another four or two years. And then in 2018, I got a phone call from Representative Butt saying she’s going to retire. And I said, That’s a shame. I wish you wouldn’t. She said, Well, it’s okay because I want you to run.

Leahy: There you go.

Cepicky: So I ran in 2018. The people of Murray County decided that they wanted to send me up to Nashville to fight for them and the people of Tennessee. And I’ve been doing it ever since.

Leahy: But you also owned a beef cattle farm.

Cepicky: My wife and I own a cattle farm in Culleoka, Tennessee.

Leahy: In Culleoka. You have a full-time gig as a banker.

Cepicky: I also do a radio show.

Leahy: Where’s your radio show on? Is it the Columbia station?

Cepicky: WKLM.

Leahy: Good station down there.

Cepicky: Every Friday I give a legislative report. Talk about sports. I used to coach little football. I dabble in high school football and a little bit helping out of Columbia Academy, wherever. A

Leahy: Columbia Academy. The Bulldogs down there.

Cepicky: And just do a lot of stuff.

Leahy: Yeah, you’re a busy guy. So what’s interesting about this is you started off, though, at the county commission politically. Now tell us about that job. To me, it looks like an awful lot of work and a lot of responsibility and not a lot of kudos.

Cepicky: It is the purity of politics at its greatest because you walk amongst your citizens, your electors every day of your life. They have direct access to you. Which I tell people all the time, the federal government can hurt you. The state governments can hurt you a little bit more. But the ones that can really affect your lives are your County Commissions and City Councils. They have direct taxation over you.

Leahy: So in Maury County now, I think in Williamson County, where I live, that’s like 25 members of the County Commission. Something like that. How many members of the County Commission in Maury County?

Cepicky: 22.

Leahy: 22. Now, that’s a lot of people to get something done.

Cepicky: It’s tough. It’s tough. You got to be very persuasive in your argument.

Leahy: So this is interesting, though. The big benefit, and it’s very time-consuming from what I can tell.

Cepicky: If you want to serve people correctly, you have to devote your life to it. You have to devote your life to it because they expect you to be well versed in as many things as you possibly can because most people won’t call their neighbor for the answer. They’ll call their elected official for the answer.

Leahy: Yeah, exactly.

Cepicky: You either have to know it or find it.

Leahy: So you represent a district there.

Cepicky: Spring Hill.

Leahy: So you represent Spring Hill and how often do you meet?

Cepicky: You meet once a month. But you have committee meetings, probably three or 4 times a month. Plus, you have other one on 1 meetings with other commissioners.

Leahy: So it’s a big chunk of time. What’s the biggest thing that you learned from that process?

Cepicky: School boards and county commissions don’t like each other.

Leahy: You said something very important there. Very important. Why do they not like each other?

Cepicky: Well, school boards have the job to run the school systems, and they have to manage their school system. You have to figure out how many teachers you need. What buildings you are going to build. Things you are going to purchase. But the people who hold the purse strings are the county commission. And the county commissioners have to make sure that they run the County in a fiscal way, that it’s going to survive. And sometimes those two ideas don’t mesh.

For instance, the school board may say, hey, we need to build a new school. And the county commission says, look, we can’t afford a new school. And the school board says we’ll just raise taxes. And the county commission, depending on who you elect, may say yes or may say no. So there’s an adversarial relationship kind of established in the way it’s all set up. Good county commissions overcome that and figure out what’s best for the people.

Leahy: That’s playing out in 95 counties in Tennessee every day.

Cepicky: It’s very difficult. Tough job.

Listen to the second hour here:


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Tune in weekdays from 5:00 – 8:00 a.m. to the Tennessee Star Report with Michael Patrick Leahy on Talk Radio 98.3 FM WLAC 1510. Listen online at iHeart Radio