Business Pants – 2023-01-25

Hello. There it is live from the glass Lewis ISS torture chamber. Yes, an ugly place to be. It's 2023. Fourth woke data, Wednesday, featuring map of Scotty, Lord of board saber metrics and me Duke of Earl. Grey tea. And today's Wednesday scented bag called January 25th. Oh, ESG conspiracies. And what do you do? Matt, what do you doing? I am looking at strives excellent votes. Yes, you can spirits. I guess that's kind of both. That's all conspiracy, maybe. Yeah, the meritocracy is a conspiracy I think. Andy is G voting. Matt, our show today is being sponsored by ESG, your ESG Data Solutions providers. Clapping because we have a sponsor or because it's Escape later in the show. Paul Hodgson of SG age will come to the studios and say something He's coming again, he's gonna be yes, he'll be in in here. So before those of you do the thing he did last time where he's like walks in says, the thing walks out for those of you who are here only for Paul Hodgson, just stick around. Just wait. Yeah you gotta wait. That's correct. Here we go. Ready? I was born, ready. So let's not gonna like my segment. Let's do this thing. That might be the appropriate music. I mean it is a ridiculous day. In honor of the Doomsday Clock moving forward. Once again Matt we are now 92 seconds to midnight. I mean, whatever. Where have we been that and honor of my depression? I decided to take the bait and I just dove into anti-esg conspiracies. I just want to, I, I haven't been really been to Twitter. For months. I signed on yesterday on through our, like, our company. Yeah, we have Twitter account because I deleted my personal account because I don't like it, so it was not a great experience. Well, ever since I'm a lurking left to show ya, no one has signed into any of our social media accounts. A good reason. No, here we go. Oh, you're talking about Vivic later, you're talking about Vivic Rama, Swami's company, strive assets. So this is just a coincidence, honestly, but he is the, he's our big fun anti-esg guy. So we're probably the only ESG research and data provider that talks about this. So let's talk about it. We're also probably the only one who has a show that he's come on. He's been on our show, is he? Come on it, but I did Vivica. I know you're listening or at least your people are listening. I, I defy you after hearing Matt segment later to not become a client of ours. How could you not use our data if you if you're trying to no stop it? No, I'm actually serious. All right, come on. Here we go. This is from Twitter. Vivek. Started the conversation. She said, I've traveled the country to meet with State Pension funds treasurers and corporations is staggering how much influence Black Rock and ISS have wielded over these institutions. They captured the system in red and blue States alike. Time to bring new alternatives to the table. Matt, are you talking about us? He's talking about us. We are a data-driven alternative to them. One user replies, ISS and glass Lewis are the worst. Is that the worst? Ouch, that. I mean really everything that we cover that that's covered in our world. They're the worst. Yeah, no. And then he says he says what even are they? Again, this is the this is the anti-esg world. So for all you ESG professionals and analysts listening I mean I know you don't want to have this conversation but maybe you secretly. Do you at least got to know what's going on. You seriously need to know that they don't know what you are but the hate you. Anyway he says they owe duties to know one, but they but tell their clients who are in institutional investors too. Lazy to figure out how to vote themselves. How to vote the shares? Those investors hold as fiduciaries for their clients. No, no that is really active, but do you really want to you want to get into it? I mean, it's a little accurate know. They're not telling anyone how to vote correct. Well, they give advice but they don't actually direct the vote. Here's what. Yeah, I mean, if we're honest about what happened. Okay. Okay, but still I'm just saying like there there is, not a, there's not a cartel, is there? There might be a monopoly but that's where we can step in and help that, but that's not the same as no. No one is being forced to, to, to use a recommended vote by ISS or glass. That's, that's crazy. Yes, No, the reason why they use them though. Is because it's two reasons, right? One, if you own 8,900 companies, of course, and there's an average of nine, directors on every company board. And you share the proposals and then I'm not even counting that. And then you have votes that say 60% of them, you know, because you know, some of the vote's you don't have real votes or doesn't really matter. Let's say 60 or 70% of them. You are conservatively talking about like 50,000 people and or proposals every year, I get it. Matt, if all these people are so worried about, a woke left wing conspiracy run by, you know, Larry Fink type of Jewish men. And then how about this? Just do the opposite of the recommendations and you can close your book and you can have another hot toddy or whatever as you do. That's it. How about that? Simple. You know, if they did that through the opposite, they would vote against 98%. That's, I mean, they would vote against everybody. Yeah. What this show is not gonna talk about, I'm sure we'll talk about it in a future show is that the effect of the votes from Issa. The effect of the recommendation has not exactly turned the corporate world on its head. No, no. All right. No, it's exactly the same as it's always been moving on, Elon, musk's stepson. And this is why this is why the story is going around the news, Elon Musk replies, five companies to run, you're replying to this. He applies the Vivic and some guy named Tom, he represents. This is what you'll says, far too. Much power is concentrated in the hands of shareholder Services. He puts in quotes companies like ISS and glass Lewis because so much of the market is passive index funds, which Outsource shareholder voting decisions to them, he says, ISS and glass Lewis, effectively control the stock market. See this is where the experience Theory. This is how. All right. Conspiracy theories leap, right by using the word control and just making up facts, right? This is where it gets going. I love that idea. I mean, I, I didn't I didn't realize that the Nerds glass Lewis were controlling the entire stock. Controlling the stock market trolling them. Yeah. Okay. Now here's where Vivint jumps back in and and I'm a little disappointed here because I thought that Vivek was really, I thought the arc conversation was a natural one, but I guess he just he's ready with talking points. Constantly, he's triggered always in the same direction. His First reaction, Matt to elon's reply is this Elon what are you going to do when they propose a racial Equity audit at Tesla? Oh, he is absolutely fixated on the race. He's like baits race Wars, I don't get this mention gender race anywhere in the thing. Like that didn't even come up. He says the ESG cartel it was gonna is gonna force it on essentially. Yes, this is so again, so so they're ramping up the language. This is like the the language of conspiracy notes know. They think you talked to us. Do we see him like a cartel to you? Like I do maybe one of us. I mean, my my drug mule, what am I? What are we talking about here? So he says he goes on another. Another tweet ESG is a cartel that's why I started strive to break it up and Matt, you're going to cover some of the stuff with stripe later. He says it's early days, but the signs are good. Okay, here we go. Here's where Vivica Vivica has learned vivica's clearly a fan of our show because he is learned from our great cooker. Charleson, who are we haven't heard from in a while? He hasn't been calling in, but I do have some. Maybe next we have some notes from him and he says Vivek says this is exactly from The Playbook of a Cocker Charleston. He says here's an interesting question, for a real journalist to ask how much how much money is Blackrock alone spending each month right now in just the red States. The answer will probably shock most Americans and reveal how badly rigged the pension fund game is wait, what does that mean? What's that? I don't know. He drops it. There are there are people who are apply saying things like are you gonna tell us the answer? And of course, he just drops this, you just dropping these, you know, these questions about things being rigged and red States and black rock. So, the other game works, it's so bizarre. It's almost like he's talking when he talks about Excellence capitalism, he hasn't defined, what Excellence is it's almost as if it's very confusing and here's one of the replies, someone says, you're right, but big firms. Like BlackRock are not Outsourcing their proxy voting which in many ways is even worse. So wait a minute. Oh no, the opposite is what. And then he says a consolidation of corporate policy and thereby social policy. Under people like, Larry Fink. So he's so we're already back into this like, game of Like, Larry Fink somehow is the new Bill Gates and devil. He even has a link mat. That goes to a Black Rock Page, really has nothing to do with Larry Fink. So I I don't get, I don't really get the obsession here. So yeah dude, did they settle in these threads? That ISS and glass Lewis are controlling the market and the world outsources, their votes to them. But the world also doesn't Outsource their votes to them. And that's worse. Yeah, never settled. Never settled. So we don't know how much Black Rock spending on quote red States. We don't know what that is. Or what are you doing? I don't know why we'll be shocked. We don't know whether or not they are or are not Outsourcing their votes and which one would be worse if they were doing one of them. All, I do know is this is everyone. So I read through all these threads and replies every once in a while, someone posts a picture of Larry Fink. I don't really know why. Okay, so someone one user asks like so many other areas we need, we need bring back decision, making to the individual, right? And then someone responded, it's not that easy because if you buy, this is your point. If you buy a 1,000 of a fund, that's 500 different stocks, blah blah blah. You get the point, right? Yeah, Matt, nobody liked that that reply. Nobody heard that one. But I mean the guy is right. Like you just it just how how do you I mean other than asking us because that will help you. Like I love a good conspiracy theory. Yeah. But I would love more any solutions here and strive puts itself out as a solution, right? So so maybe that's it. Maybe we just all need to invest with strive and Vivek. Oh, we're gonna get to that in a second but I want to throw some more paint at you. Here we go. Here's a few random other quotes that are that are all part of this conversation with the Vivic and Elon Musk about ESG, continuing to be the devil and a cartel. Now, there are upset ISS and glass Lewis someone says to make matters worse ISS is owned by the Germans, so socialist Germany, controls the vote of most us shareholders. And therefore, the boardrooms I was the gonna go with the Nazi angle. They didn't go with Nazis. They what was socialist? Well they were, the notes were so special social party, I know. But but like I think they're talking about socialist Germans like as in like they provide Universal Health Care kind of thing. Right? How about this comment Matt? This is where it gets a little weird when you think about Elon musk's Pay. Here's this statement. They're almost a perfect correlation between the rise of CEO pay and the rise in popularity of Institutional Investor proxy voting. But they didn't realize the irony there. Yeah, nobody gets it. Yeah, maybe that was a joke. That's like a joke post. And then it just gets, it's just, and then we just get into creepy world. If I assess and glass Lewis aren't eager about protecting the interests of those. They're supposed to represent and they're they've, they're wait, wait, yeah. Who do they represent? They're not elected officials says of the could be their interests or some external influences working in the dark with them against the interests of their clients. That, why would you want to be? But if you but if you were glass Lewis or ISS, why would you want to be in the dark? I don't here's the funny thing. We actually well, you know, but we actually have connections, too. The people who started ISS, mm-hmm. Like the founders of ISS and modern. The founder of ISS, was actually the founder of the first company ever worked in the corporate governance field. So yeah, we know those people. At no point. Did they a work in the dark? They always had a light on, right? Yeah. They love lights. They. They really like electricity. And B, the founding of ISS was not about Like a cartel to control the stock market now, which is really smart business, it was just a guy who realized that there's a lot of data and information and cronyism that's happening on boards that investors should know about. That was kind of it, right? Yeah, yes. Okay, and then before I hand it off the conversation devolves, of course, into how it's a crime and they're Crooks. The crime was the criminal glass Lewis and ISS. Whats the crime, what do they commit? Perjury Did it say? Oh, here's the outlier comment, and, and there were hundreds, hundreds. Here's the outlier comment. I'd say that at Tesla. Far too much power is in the hands of their of the Twitter CEO and the and the Board needs to crack the whip and Reign him in. There you go. Wow, that was a representative from ISS. Her glass Lewis, write a few more. The bigger question, who controls ISS and glass Lewis? Actually, you can look that up. Oh, that's I actually think that's searchable. Yeah, that's a Google search. Someone says, and now, black rock is rebuilding Ukraine. I don't really what that when did they start doing that? Yeah, yeah. And that's about it. That's about it. That's it. I had to I had to get in there and look around. This is what happening? And it's the perfect segue to you. Matt, I didn't know what you're covering. But again this conversation started with Vivek ramaswamy and Elon Musk. So you have some information about vivix that was the best conspiracy ESG. Smash Up segment we've ever done by far again. I mean, I ever done anywhere. Yeah, I didn't make any of this up. This is all from us Twitter. That's that's a little bit terrifying. Yeah, so let's do Some data, let's find out. What was going on capitalism? Looks like. So here's why are you saying, Excellence? Capitalism? Because that's what Vivic said. So, we call him, Auntie said anti-esg, and he said to us, he doesn't think of himself as anti-anything. He's Pro. Excellent. Yes, the head of corporate governance. A strive asset manager management. Justin Dan Hof says that strives, Five Pillars of Excellence capitalism guide our decisions as we vote. Yeah. So this is what I wanted to get, not making out already, we're not making any of that up, that is right from their website. If you're interested in what Vivica and elon's back and forth about ISS is for for Vivic, we know it's about Excellence capitalism. So here's what we did. We looked they had to do some proxy voting at the end of the year. They sure there were about 150 or so. Well, directors up for vote and a couple of shareholder proposals so that they had to I mean they loved they won. They That's the fun part for them. Yeah. So their ETF in case is structured, they have an S&P 500 ETF. They bought the market and its structured that they will vote with their conservative voices of pro Excellence. That's, and that's the antidote to ISS, and BlackRock, and glass Lewis and all that, right? So, the dough is to introduce Excellence into the equation. You already did a preview of this, some of the votes, you looked at how they voted versus male and female. Now, Vivic would say, yeah, there you've reduced this to, I think he would say the heuristic of a binary gender rather than discussing the meritocracy. Yeah. Right. What he would say is what he would be hinting as that. The reason why they're voting against more women is because they don't represent Excellence, that's because we come, right? But that's what he always goes to immediately. They are voting on. Nearly two to one against women, right? When given the opportunity, something that we predicted before we even dove into the data. Unfortunately, unfortunately heard from that vote, that women are less excellent than men. That's not an inference. I mean that's that's like, right there. That's I'm just gonna say, I am heard. You might have just taken right out, but I wanted to do a real dive into what Pro Excellence means. So here at board sabermetrics. Yeah, unlike, you know, glass Lewis and I ISS and strive who say, a bunch of things, but may not have any data or reasons for those. They don't reveal the data, they have, you know, strive does put together a list of voting guide but again, it's all. But the voting guide says, we will vote against ESG committees this Billy. If you why it's basically if you support ESG will vote against you or if you're not excellent and you don't and you use too much cinnamon volt against you. There's there's actually no, there's no real hard evidence and Again, they lean on the Excellence pillar. They lean on this. Like idea that, you know, the things are either four or against shareholders. But they don't actually ever prove why things are good or bad for shelters. Never any proof. Not well. So this is what I wanted to do. Because here at board paper metrics, we build a I guess. Are we anti Excellence? We're pro. Excellent. So I think we're, I mean, who is Aunty? Excellent. Well, I don't know, but I don't know. How do you want to say? You're Pro. Excellent. That's like saying I'm Pro breathing. I mean, what are we doing here? Comfortable. If vivica's uncomfortable with the the gender descriptors do, we have to be uncomfortable being pro or anti Excellence, he's not gonna steal Excellence away from the glory so we are all so Pro Excellence, here, we are metrics. But what we did was, we used five years of data on over 200,000 directors and 8,900 companies across multiple performance, indicators to say, whether or not any individual director over all of their 10 years at all. The companies they sit on performed. Well, right, Joker or badly and I want to highlight that. Unlike our friends at strive asset, I'm looking at you just in Dan Hoff, and YouTube, Vivic. We're not triggered emotionally by a debate. Because we're ESG people were actually not taking. We're we have methodology is in place. We're looking at the data, we're not actually triggered, we're not feeling emotional about this. We're just We're just doing our jobs. I'm just telling you what the data suggests. So the thing we built was a measure of influence for every director. And the thing we used it for was to say, how those directors, perform using empirical data, like total shareholder, return and return on assets. And we can do it with stuff like carbon. And the number of women who work in a place we do with all sorts of things, it doesn't matter because we're pro Excellence, we don't care what the data point is. We are just saying whether someone performed their return was in the top quartile. The middle two quartiles. The average everybody else did that to and or the bottom quartile against appear directors at the similar firm in similar country? Very simple. It's not like a complicated. Here's what strive did in their vote ready. Yeah. About 150 votes on directors, not Hunters directors of those votes 43 of them were women and 107 or so were men. Um, we already covered the fact that nearly two to one votes against women, but here is I looked at specifically TSR total shareholder return and Roa return on assets. Those sounds excellent data points. Yeah, doesn't feel excellent. Like if you are a capital free marketeer. Yeah. All about Excellence. That is shareholder returns Above All Else. Yeah. So if you perform in the, if you're a strong performer in that, you are in the top quartile, right of people returning, massive amounts of money to shareholders, and by the way you're you're welcome strive asset because we're actually quantifying Your Excellence. We're not yes. Sprinkling not me around. Well here's the problem because we're also quantifying their lack of data about what. Exactly. Okay. But that's the that's on them. It's a little bit of the problem. Yeah. Because two thirds 66% of the directors they voted against Yeah, we're strong or average in TSR in the last five years. Okay. So basically sitting in the excellent chair or excellent. Jason. They voted against it wasn't even that many people. They voted against out of the 150 about 19 or 20 of them. They vote again. Okay so we're not talking about huge amount of people. They if you count abstentions as of against, which they pretty much do, right? Yeah. Which the ESG analysts do. Yes. So then you're talking about 33 out of the 150. Okay, okay. So that's, that's all that's a lot, but it's 33 directors that day 12 to support, they withheld, support, they withheld support from those people, okay? But two thirds of those people were actually good at being. Excellent. That's the way I'm going to talk about but again, like I I read their entire voting proxy guide. They don't have any way of quantifying what Excellence means on the other side of this though, okay? They voted four 10% of the directors they voted for. Were weak at TSR as in. They were as bad as it gets at returns to shareholders, they were good. They were they were not great. In fact, there were only five directors out of the 150 that were weak at both. Ra return on assets and TSR they devoted for all five. They voted for all of them. That is a vote for anti Excellence. We just discovered what Excellence looks like and look at their methodology is the only reason why they vote for or against directors, is if you if you if you smell like ESG, If you, if you if your initials are yes, G. If you know, if you're, if you have a tattoo that says, yes, if your ESG adjacent in any way, they'll vote against you. But they'll vote for everybody else, even if you suck that's what is that you're saying, man, that's what I'm saying. And and here just in case you want to eliminate other variables. The average age of the votes for and against were almost exactly the same, the average 10 year, they actually voted for slightly longer tenured. Directors. I don't think I don't think they believe in. Yeah, I think they think that looking at 10 year does not a mark of what I'm saying is it's not like they voted for or against some other factor that we can see in our daily. Oh, yeah, yes, true, true. We have a lot of data, so we are can eliminate a lot of factors. We can eliminate like carbon, we can eliminate like whether you're on a sustainability committee. We can eliminate whether or not your friends with a guy named Bobby. We can't eliminate how you voted political lie. So we can't say that. They only chose Republicans to vote for or whatever, but we can, eventually we're just a data set away from that what we can't tell. Is why they voted against so much excellence and for so much anti Excellence, that's what I got. That's that, that was, that's all I have. I strive for you. I hope you're listening. Wait, oh Who did talk some more? That was Paul, actually, Paul, Paul just walked in and hit the oh, the music. Yeah, let's let Paul talk before we get out of here. All right, let's let Paul talk. Paul right. Paul have a seat. Relax. You can do it standing if you want. No, just sit out. Do you want some? I'll get you some tea here. Just tell you guys comes with his own. Hey, Matt, Damon, how's it going? It's good Paul good. How are you? Well, honestly, I'm making a special effort to come into the studio. And he just staring at me and don't say anything. Oh I said how are you Well, I guess I'll just give you the skates statistic of the week, fine. so, a couple of weeks ago, I Told you about stock ownership guidelines and retention requirements, and the kinds of numbers of CEOs and other Executives in the S&P 500 that would be covered by those and they're pretty widespread. But I also said at the time that, you know, that's one thing being covered by a stock ownership guideline to make sure that your vested in the company that you're supposed to be managing, but it really depends on what that stock ownership guideline is, whether it's got any teeth or not. So I asked the team at ESG to put together some statistics on that right now. They put together a variety of Statistics, some on, you know, the kinds of stock that's counts. Ownership obviously. Common stock ownership that counts, definitely unvested restricted stock or even stock units. All so counts, that's the majority number there. And also retirement Shares are pretty popularly. Included in that total amount of ownership for calculating what it is. But I also asked them to say okay what's The stock ownership levels the guidelines as a multiple of base salary, because that's typically how it's calculated and the vast majority of CEOs. For example, 57%, this is so modern half. The multiple of base salary is 6 times base salary. Now, when you think that most CEOs receive enough stock every single year, At a level of two or three times base salary. That's a new accounting, unvested restricted stock. That's two years or maybe three at the most. It takes them to get to that level of ownership. Now, tenure for CEOs is going down. I know, but it's still around five, but, you know, we're talking not a particularly onerous one. Now, 10x salary 10 times, salary is a stock ownership guide line would seem to me, something like a bit of, you know, have some teeth in it, for example, but it's a pretty vanishingly small percentage of CEOs who are held to that high standard. So only 5.6% and only just over 1% more than 10x so more than 10 times salary. So for named executive officers, it's again more than half 58.5% the multiple base salary is 3x. Well again most named executive officers are getting at least one and a half to two times salary every year in stock in deferred stock, units restricted, stock units, performance shares, etc, etc, etc. So again, it's not going to take them very long to build up that ownership. There's a couple, the 10% that has four times based salary ownership guideline. But again, they're not particularly onerous and not very toothy as far as I'm concerned. So, it's great that we have this widespread stock ownership guidelines in the S&P 500. It's great that people have adopted that as a good thing to do, so that people are invested in the company, and they have to retain those shares and not just sell them all the time, but I think we need a little bit more teeth. So that's Paul Hodgson with the sdh statistics of the week. And I'm not gonna bother coming into the studio anymore, guys. Oh, I'll see you around. Okay, bye. Wow, I I didn't realize actually, we were gonna spend that long time about teeth. Thank you skh. That was Paul Hudson talking about teeth and having them and Damien Rollins. And I met mascardi, and this is free float. If you like this. I don't know why, but come back tomorrow. You don't like this. Then just buy board saber metrics because honestly, if you don't like the cartel of ISS and glass Lewis, but you still need data to make decisions about your proxy votes, they're really is only us left, that's it. How about this? Wake up, make a promise if you buy board super metrics. We won't make you download our podcast. I don't know that. We can make that promise. That's all we got. Come back tomorrow. We See you then. Goodbye.