PE, ESG & ME: Who are the GOOD Guys?

 

It was supposed to be a great lovestory but that tail is for another day...

today, I want to talk about what happened once the love imploded. It was the Fall of 2017 and I had moved back to Illinois to rebuild my life after a failed relationship. I was in desperate need of a job so my bff Vickie got me an interview with a private equity association. I had no background or even knowledge of how PE worked but I needed the gig so off I went. 

Yada, yada, yada... and I am now working in the industry that killed Geoffrey. Ok, that's a bit dramatic but let's just say as I'm trying to research the industry the hot newsstory at the time was how PE loaded up Toys R' Us with debt, took their profits and then left the longtime employees without a lick of severance after some had decades worth of dedication to the company.

It made me feel icky. Is it how business sometimes goes? Yes, of course!

But is it the best way to conduct business? Best of Capitalism? Best of us? NO! Not even close. 

Want to be clear here, of course not all PE folks are money hungry jerks. No some save businesses from the edge of failure and help them streamline their companies and keep them alive and thriving. 

I learned a lot about PE and the world of finance in the few short years that I worked for the association but when I got laid off during Covid I swore I would never work for an industry I didn't respect again. Fast forward to when I am on a Zoom with a recruiter telling me about a company that is looking for someone with PE experience to take a job at an ESG (environmental, social, governance) consulting firm. Think: carbon footprint, child-labor/anti-corruption policies, fair labor practices, diversity in leadership.

I was so excited! Here was a chance to be part of the solution not just pout about the problem. 

Decades ago economist Milton Friedman popularized in an essay the shareholder theory: 

The Social Responsibility of Business Is to Increase Its Profits.

But we were now in the age beyond simple corporate responsibility to a more broad look at how investors want their money to show up in the world. In a time of unprecedented transparency and if you do something bad it will be found out and splashed across the social media landscapes within hours. It's now not a nice thing to have good PR, but it can cost billions and even kill a company if something goes viral. 

What could be bad about having well run, non-polluting, equitable and good companies? Well... where there's a dollar of profit to be squeezed or a vote to be fought over there will be a group taking shots at it.

ESG is a framework to evaluate if a company was well run, responsible with risk in the way they are manufacturing their products, treating their employees and suppliers, and running their boards but turned into where we now have politicians using it as the latest wedge issue to divided us. So ripe to rip us apart we now have both the Texas and Florida governors passing bills that make it illegal for their states investments to even consider ESG factors. Trump has issued an executive order to identify and stop any enforcement of ESG initiatives. 

I believe non-profits and NGOs are truly fantastic, but the only real change that happens is in the world of business. It's how most the people make their livings and it's the construct we have to work within. So what can be done?

Get back to basics... and call it what it is: Good Capitalism

Good Capitalism is a lens to look at how a company is run and I've created a one sheet that spells it out without fancy consultant speak and simple concepts (coming next). 

This space is where I am going to write about how our country and hopefully the world can put aside politics of division and get back to focusing on integrity, fairness, honor, and decency. Well run companies are not just a necessity to keep our economy going but it's the only way to keep a level playing field for shareholders to invest wisely and industries to stay healthy for the long run.  

If we pollute our environment we are killing off our customers; if we drive prices of suppliers so low they compromise on safety and quality; if we are unethical this new generation of young folks are going to not work with us; and finally if we don't come together to agree on basic business ethics and practices we all- shareholders, employees and society- will suffer for it. 

So here are my ideas and thoughts on how to keep Capitalism: healthy, strong and thriving. I hope you'll join the conversation and let me know your thoughts on what you think will make it Good as well.