This week, Microsoft shareholders overstepped management’s wishes and backed a resolution to force company management to disclose its sexual harassment policies to shareholders and publish a report on the effectiveness of those policies. Microsoft has had serious issues with this issue, including numerous news articles about founder Bill Gates’ immoral sex with employees. Reports also indicate that one of those relationships was the trigger that forced Gates to quit the board of directors of the company he founded. Gates’ high-profile relationship with notorious sex abuser Jeffrey Epstein was also clearly a problem. In addition, numerous allegations of abuse surfaced as early as 2012, when 238 women filed a joint harassment complaint. In 2019, employee email chains still claimed that the culture of abuse had not been addressed.
Management opposed the resolution, saying it already had a strong sexual harassment policy, although details had not been released to the public. The company argued that, since it planned to release them on an unspecified date but “soon”, such a mandate from shareholders would not be necessary. Shareholders disagreed and took precedence over the board, which is a highly unusual outcome. It seemed that the owners of the company just didn’t want to take management’s word for it and insisted on using their authority.
As a member of a team involved in the creation of investment indices, including one that has a substantial stake in Microsoft, in which I am personally invested, I have pleaded for my colleagues to vote for the resolution, so that they didn’t need to be convinced.
Here is my argument (slightly modified for proprietary information matters):
“While sometimes calls for reports on sexual harassment can be attempts to demagogy about an issue, for example when the company already has strong reports and no evidence of systemic issues in this area, it clearly isn’t. the case for Microsoft. The founder of the company has been credibly accused of being a serial sexual harasser and there are press reports that he associated with notorious pedophile Jeffrey Epstein. In addition, there are a large number of legal complaints of sexual abuse and harassment. Shareholder insistence on further investigation and disclosure is one. This is not a situation where activists might try to unearth bad things that will then lead to brand tarnishing. The mark is already tarnished. This is one way of trying to regain the public’s trust. For these reasons, not only [we] support the resolution, but ask management how they came to the conclusion that it is in the best interests of her shareholders and her to oppose this resolution? “
In discussions like this, I see two misunderstandings. A misconception is that such actions are incompatible with a commitment to the free enterprise system. This argument often pops up among internet trolls and goes like this: “I thought you capitalists thought business should be free.” The argument is a form of the “well poisoning fallacy” used as an attempt to discredit the Tories. But it is also a straw man fallacy in that people who believe in the free market system in no way reject the idea of shareholder authority; on the contrary, it is at the very essence of the capitalist system. What makes it capitalist is that it asserts private property rights, including the private property rights of those who invest their capital in companies as shareholders. Telling shareholders that voting on these issues is a violation of the free market system is about as consistent as telling voters that they are violating democracy by voting instead of letting the system make decisions without their input.
Voters have a job, to oversee political leaders. Shareholders have a job, to oversee corporate executives. Companies are the stewards, the custodians of our wealth. The Bible deals extensively with the question of unfaithful stewards; this is a common theme in parables, for example. Modern economists refer to the problem as “agency risk”, that is, the risk that managers are working in their own interest and not that of investors. Jesus spotted this problem and taught it 2000 years before economists did in his parables and in his identification of some leaders as “hirelings” who have different motives than the true shepherds who own the flock.
Christians are late in the fight when it comes to dealing with the mercenary class of business leaders, and that includes the mercenaries who mistreat the precious daughters of God.
Jerry Bowyer is a financial economist, president of Bowyer Research and author of “The Maker Versus the Takers: What Jesus Really Said About Social Justice and Economics”.