ESG

Disclosure

The next wave of anti-ESG movement focuses on reduced disclosure

Decrease in Director/NEO bio/photo disclosure in both proxy statements and corporate websites

Anti-DEI board composition

A sharp drop in new directors that are “diverse”

An increase in overall board size; instead of outright replacing diverse directors, an increase of white male directors (who skew younger) are simply added to boards

Musk effect

Greater re-domestication push: incorporate, headquarters, employees: SHPs reflect this

CEO pay reconfigured for higher payouts:

Decrease in “longterm” CEO compensation performance periods to reflect shorter CEO tenure and general CEO greed

New players in proxy cage matches: toxic bros (maybe a bitcoin bro?)

SEC moves to greatly restrict shareholders’ right to submit proposals

Will lead to a significant decrease in E & S proposals: both in SHPs submitted and SHPs removed

SHP support percentage will continue to decrease

But I think we will see a new active conservative SHP machine to go along with the two Centers

Blame game/oversight greenwashing

Increase in board-level committees (partly to due a thing and partly to pretend a thing was being done): AI, Cybersecurity, Succession Planning

Sharp increase in “co-” arrangements: co-CEO; co-Chairs, etc. in order to shift blame

PwC’s figure that 49% of directors want someone on their board replaced (and 25% want two or more directors replaced) increases to 66% and 44%

General

The next “Bud Light” is… Kontoor Brands (Lee/Wrangler)

Something deemed “woke” triggers the MAGA mob and when they discover in the proxy that the company “Increased board gender diversity in 2024” and was “undertaking a search for a potential additional gender diverse director” all hell breaks loose.

Year of Zuck

Even more so if TikTok fails

The obvious prediction is Musk buys a media company but maybe I think Zuck makes a pivotal acquisition

Elon fades due to Tesla sucking and Trump battles

Year of Drones: a CEO is fired for either accidental or illegal misuse of drones

Significant increase in the “banning” of social media and teen smartphone use

People

Buffett dies

Tim Cook steps down

After more than a decade of tenure, Doug McMillon begins leadership transition from Wal-Mart with eyes on 2028 Presidency

AI. Also Generative AI. And headwinds.

Texas is the new Florida

Texas sees an influx of incorporation under the pretense of “regulation easing”, but every company that moves is basically just racist

Goodbye shareholder rights, we hardly knew thee

Abolish say on pay (not even advisory!)

Every board moves to classified board

Why not, investors don’t challenge a single director anyway!

Proxy voting policies are made illegal, as voting against the company in any way is considered discrimination against companies

Anti-ESG bills keep forgetting that G is in ESG… and they’re banning it, which means no proxy voting at all

Wyoming includes language stating “assessing corporate board or employment” as “evidence of” having a social agenda, and therefore banned

Costco isn’t alone

The pushback against DEI pushback will come from the few, the strong, and the highly democratic boards with strong female power:

1,023 mega, large, and mid cap US companies

721 have diversity programs of some kind that are disclosed

644 have disclosed targets or internal training around DEI

Only 94 companies have BOTH highly democratic boards (where power is dispersed evenly) AND top quartile female power on the board AND DEI programs

The most democratic is Costco - 32% female power (top quartile) and less than 3% deviation of power (4th most democratic in the entire US, tops for DEI

Layer in strong stock returns, and here are the companies who are likely to be targeted and push back:

Procter & Gamble

1yr/5yr up 8/31%

Sell Braun, Gillette, Old Spice - man brands

39% female power, 4% power deviation

Altria

1/5yr up 3/25%

Cigarettes are still manly

47% female power, 5% deviation

Men FINALLY get some power

The Meta Method: increase board size, add all men - went from one of the more gender diverse boards (fake, but still) to BELOW AVERAGE in one cycle

There are NINE board that by adding ONE more dude, they would become:

Less than 50% female

From positive to negative power gap

Remain democratic (so dudes get a say) - here are the large caps:

Cardinal Health

HP

Stryker Corp

Honorable mention: Cracker Barrel, which is one Robbie Starbuck away from negating female power

The US vs. Europe divide NARROWS… as the EU moves hard right

Watch 2025 elections: Norway parliament, German federal, Greece presidential, Czech parliament, Irish presidential (in which Conor McGregor is a viable candidate)

The frameworks and regulations around environmental and ESG issues were so badly constructed, it’s the perfect storm for pushback and rollback - watch the EU undo everything to catch up with the US in the race to the bottom

The rise of the director activist

A new model in investor activism - director activism, not corporate activism - built on how people perform and whether they have the skills they should have on a particular board

Finding underperforming PEOPLE and replacing them

Find underperforming companies

Find underperforming teams - globally…

3,406 companies out of more than 10,000 with at least one director who has historically (and currently) performed in the BOTTOM THIRD of all directors on TSR

726 of them, MORE THAN HALF THE BOARD is comprised of bottom dwelling directors

196 of them MORE THAN HALF THE BOARD is comprised of bottom dwellers for BOTH TSR and carbon

Find knowledge gaps

In the 196, Frontier Airlines has 8 directors with Econ backgrounds, but 4 with mechanical backgrounds, 2 with safety, and 2 with transportation backgrounds

M&T Bank’s largest expense is people… but there are ZERO directors with deep knowledge in HR or personnel management for highly paid employees

Begin a data driven vote campaign for cognitive diversity

You don’t need an absurdly long powerpoint presentation with backing from Jeff Sonnenfeld to achieve this - your narrative is simple: we hire based on meritocracy, you guys stink.

The absurd might not be so absurd?

AI

AI sues a company for discrimination

It was unfairly taught DEI

AI is added to a board of directors

And labelled as “gender neutral” for the diversity matrix

AI avatars to go to meetings for you, including your HR meetings

Cowards

In the wake of Brian Thomson’s murder, Mark Zuckerberg figures out the new best use of the Metaverse: a place for boards and executives to meet without leaving their houses

Companies begin disclosing whether directors have guns, the horsepower of the engines of their cars, and whether they are “white” or a new race called “extra white”

Woke

The first “woke parallel economy” investors begin popping up to combat the anti-woke parallel economy investors

Walled-off “woke zones” - like in stores that sold porn mags behind the counter, you can now request to enter the “woke zones” in stores where they keep pride merch and feminine products, but you need an ID to enter and children under 17 must be accompanied by an adult