Sadly, investors too often see, hear and speak no evil. Their failure to protest at Donald’s Trump’s entry ban is only the latest example.
Critics of this dog-whistle politics include big brand CEO, the presidents of Ivy League universities, leaders of key allies and even leading right-wingers. But not a word from investors.
Why? ‘Investors aren’t in the business of saving the world.’ ‘He won, even if he lost the popular vote, and he said clearly what he’d do.’ ‘We do policy advocacy behind the scenes, unless our interests are directly threatened.’
These reasons work in normal times. But the world is facing an international crisis that transcends business-as-usual politics. And, as Europeans, Trump’s desire to weaken the EU can’t be ignored.
There is another reason for investors engaging. Trump’s administration embodies the worst of corporate America and investors share responsibility for this.
The Economist highlights that the Trump cabinet is “paler, maler and staler” than any since 1981. But lack of diversity is well known across many US corporate boards.
At a time of huge concern about economic inequality, the wealth of Trump’s likely cabinet is about five times greater than Obama’s and about 34 times greater than George W Bush’s.
The parallels between Trump’s narcissism and that of corporate CEOs, not least the sycophancy of followers, is well described by Michael Macoby. The minimalist step of an independent chair is rejected by over half of S&P 500 companies.
The administration has made obvious its indifference to transparency about business relationships and conflicts of interests. But powerful corporate trade bodies have been pushing for lax action for decades, with investors saying little.
The cabinet is packed full of climate sceptics and the new regime has erased reference to climate change from government websites, threatening scientists who dare to challenge the new norm of ‘alternative facts’.
On all of these issues, institutional investors have tolerated or actively enabled dysfunctional cultural norms. Trump is no aberration but rather a predictable Frankenstein from decades of not-so-benign neglect and worse.
And then, of course, there are the negative implications of Trump’s policies for long-term returns and the interests of savers if protectionism cuts growth and triggers instability – even if share prices do well in the short term.
Some might say investor CEOs cannot speak because of their accountability to boards, shareholders and customers. Nonsense! EY justified the membership of Trump’s advisory panel on the grounds that the CEO was taking part in his personal capacity.
Speaking out in public is only the first step. Investors could, collectively, help fill the leadership vacuum.
So what is wrong with investment CEOs showing leadership by expressing their personal repugnance at what the Trump administration is doing? And those that agree with him should speak out too. Investment leaders are real human beings with real feelings and real values, after all. There is plenty of business school research showing that people like to be led by real people, not robots, and that organisations led by real people perform better.
The warning by Mark Carney, the governor of the Bank of England, is timely: “Just as any revolution eats its children, unchecked market fundamentalism can devour the social capital essential for the long-term dynamism of capital itself”.
As a result of what they have incentivised and tolerated, investors have shared responsibility for the crisis we face today. If now is not the time to get off the fence and show real leadership, then when will be?
Dr Raj Thamotheram is CEO of Preventable Surprises and a visiting fellow at the Smith School, Oxford University and Rob Lake is an independent responsible investment adviser
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