How YOUR 401,000 savings are being used to shake up our biggest brands, revealed by ex-CEO of Anheuser-Busch

Anson Frericks is a co-founder of Strive Asset Management and a former executive of Anheuser-Busch

Every day it seems another iconic American brand has entered the raging buzzsaw of public controversy head-on.

Last month, Bud Light’s sponsorship of transgender activist Dylan Mulvaney sparked a massive backlash from customers.

Now Target is the subject of boycotts after releasing a line of women’s clothing intended to be worn by organic men with “pleat-friendly construction” and “extra crotch room.”

The companies saw their share prices plummet and wipe out billions of dollars in value – almost overnight.

They are not alone. Nike, Calvin Klein, North Face, and even the Los Angeles Dodgers have been criticized for venturing into America’s culture wars. What is going on? Why is it that companies that once loved to sell clothes and beverages and nostalgia to Americans of all political persuasions now seem to be taking sides in controversial political battles?

The answer is simple: follow the money.

As an Anheuser-Busch executive for more than a decade, I witnessed the calculus of running a large company being hijacked.

That’s why I left.

The pursuit of the almighty dollar — within the bounds of morality and law — is no longer the sole purpose of so many of America’s top corporations. Today, the country’s largest corporations have been transformed into vehicles for social change.

Allow me to explain.

Target and Bud Light are publicly traded companies, which means that ultimately their investors – aka Wall Street – are in control.

Enter BlackRock, State Street and Vanguard, the three largest and most influential financial institutions in US history. They are known as the “Big Three” on Wall Street, although many Americans have never heard of them.

These three companies hold more than $20 trillion in assets, almost none of which is owned. Instead, they manage the money held in everyday U.S. retirement accounts, retirement funds, mutual funds, and investment accounts.

Together, the Big Three are the largest shareholders of nearly 90% of the largest companies listed on the US stock exchange – the S&P 500.

The influence of the Big Three is astounding. But if they managed this money to make more money, maybe there wouldn’t be a problem.

They are not.

The Big Three are proponents of what has been termed “stakeholder capitalism,” the belief that businesses should not be run simply to increase shareholder value, but to serve all stakeholders, including government agencies, activists, and non-governmental organizations.

‘Stakeholder capitalism’ differs from traditional ‘shareholder capitalism’, which holds that companies have only one responsibility: to generate profit for the individuals who own shares in the company.

The ‘stakeholder’ movement has been around since the 1970s, with even earlier philosophical roots, but it didn’t really begin to gain a foothold in US investment circles until about five years ago.

2019 was a turning point.

That year, the Business Roundtable, a group of CEOs of America’s largest companies, adopted a new statement of corporate purpose, declaring that all companies “share a fundamental commitment to all of our stakeholders” to advance the greater social good.

188 American CEOs joined.

They included the CEOs of the Big Three and other major financial institutions such as JP Morgan and Bank of America, and many of the companies they own, including Target, Disney, and Coca-Cola.

Bud Light, it should be noted, is owned by a European parent company and is not eligible to participate. But nevertheless it has been influenced by this new vision of ‘purpose’.

The Big Three began issuing guidelines on how they expected their portfolio companies to deliver on this ‘commitment’ by implementing so-called environmental, social and governance or ESG goals and scores

To encourage compliance, the Big Three use their power as shareholders to influence who sits on boards of directors.

In 2021, they voted to replace Exxon Mobil board members with climate experts, who immediately sought to reduce the oil giant’s exploration and drilling output in order to meet disputed climate goals.

They then voted for “racial equality” audits at companies like Apple and Home Depot, forcing the companies to impose race-based hiring criteria and implement diversity, equality, and inclusion programs.

In addition to shareholder voting, the Big Three employ large engagement teams to pressure CEOs to make progress on ESG goals and higher ESG scores.

Blackrock has more than 70 employees dedicated to stewardship efforts. In 2022 alone, they had 3,880 orders from 2,580 companies.

The Big Three also have a huge influence when it comes to executive compensation. As many as 73% of S&P 500 companies now link executive compensation to ESG measures, according to one study.

If a CEO doesn’t think quickly enough about the latest social issue, his or her bonus could be in jeopardy.

Many ordinary consumers have no idea that their money can be used as leverage by major financial institutions to influence popular American brands. But as the results are confirmed in divisive product launches and marketing campaigns, the impact becomes clear: “stakeholder capitalism” hurts businesses.

Previously loyal customers no longer buy these products and opt for alternative brands that remain outside the political battle. This is bad news for shareholders who rely on these companies to meet their investment goals. It often puts CEOs at odds with their employees and customers.

It is also bad for society.

America settles traditionally contested political issues through an accountable electoral process. The ‘stakeholder capitalism’ movement undermines this system. Questions about environmental issues, parental rights, gender equality and the like should be resolved at the ballot box, not the boardroom. And many Americans seem to agree.

They start spending their hard-earned dollars on companies that focus on customers, not stakeholders.

Businesses would be wise to recognize this, as Americans increasingly speak up at the checkout.