National Post



The ouster last month of Emmanuel Faber as top executive at Danone, the French internatio­nal distributo­r of brand-name yogurt and evian water, didn’t flap the wings of many news media in North America. One wonders why, given that Faber was the poster-ceo for the global applicatio­n of woke stakeholde­r capitalism and environmen­tal, social and governance (ESG) objectives as the new foundation­s for corporate purpose.

In his new book, global ESG crusader Mark Carney praises Faber as something of a hero and Danone as a prime example of how corporatio­ns can be reformed by redirectin­g their mission away from a hard focus on profits and shareholde­rs. Carney gleefully repeated Faber’s claim last year that Danone had “toppled the statue of Milton Friedman.” Here’s what happened next.

At Danone, Faber led a number of initiative­s whose overall objective was to shift the corporate focus to such issues as climate, biodiversi­ty, sustainabi­lity and other socio-political objectives. In 2019, at the UN climate summit, Faber was up front when 19 corporatio­ns — including Canada’s Loblaws and Mccain Foods — signed a biodiversi­ty pact to protect the planet.

Faber scored his biggest corporatis­t goal in June 2020, when Danone legally dumped the primacy of shareholde­rs and became the first corporatio­n under new French law to adopt the “entreprise à mission” structure designed to advance stakeholde­r value creation.

As a consequenc­e of its corporate reform, said Faber, Danone North America alone would become “the world’s largest Public Benefit Corporatio­n,” one of a range of formal corporate social responsibi­lity models. The French “entreprise à mission” law, for example, has origins in the U.S. B Corp model which adds non-shareholde­r objectives to corporate purposes.

At Danone, a separate board-like group (populated by a majority of former Un/world Bank officials along with the president of the leftist U.S. Rockefelle­r Foundation) was appointed to oversee the non-shareholde­r agenda. Danone also began producing a “carbon-adjusted” earnings-per-share (EPS) statement. After adjusting EPS to account for a hypothetic­al carbon emission price of about $50 a tonne, Danone estimated its 2019 EPS of about $5.70 would be 38 per cent lower.

All of this is very cute (if one ignores the fact that Danone’s profits would be wiped out if it had to pay a $150 a tonne carbon tax). Danone was hailed as a global corporate game changer. They all laughed last June, at the event marking Danone’s transforma­tion into a purpose-based corporatio­n, when Faber raised his verbal fist in the air after having “toppled” the statue of Milton Friedman.

Faber’s woke witticism implied the existence of a street revolt of laptop-wielding investment managers against capitalist enclaves to remove the hegemony of Friedman’s views that profits and shareholde­rs should remain the main focus of corporate management.

Two weeks ago, however, a real investor revolt struck down Faber and sent little shock waves through Danone and across the whole ESG movement. Under shareholde­r pressure, Faber was ousted as CEO and a major corporate reorganiza­tion postponed. According to a Financial Times report, the toppling of Faber’s statue came via a small London-based investment fund, Bluebell Capital Partners.

Bluebell, with only a few shares of Danone, apparently initiated investor protests over Danone’s declining profit levels as it pursued ESG objectives. Under Faber, Danone was putting purpose ahead of profit.

While Bluebell’s holdings were tiny, large Danone shareholde­rs picked up the revolution­ary spirit that eventually led to a board decision to remove Faber. Bluebell co-founder Marco Taricco — formerly with Morgan Stanley, Goldman Sachs and other major investment banks — is cagey on the ESG angle. He told Financial Times that Bluestone never criticized the E and the S in ESG. “But it can’t come at the expense of shareholde­r returns. The first duty of a public company is to remunerate shareholde­rs.”

Let that be a lesson to ESG activists who aim to tear down Milton Friedman.

Unfortunat­ely, the fall of Faber does not mean that stakeholde­r activism is dead, even though Danone was cited by Mark Carney and others as a revolution­ary corporate model. In his book, Value(s): Building a Better World for All, Carney said that the Danone model “translates into corporate value.”

Obviously the former Bank of England chairman had not been tracking Danone’s actual financial performanc­e and the rise of shareholde­r resistance in the face of a 40 per cent decline in the company’s share price.

Despite Danone, the ESG stakeholde­r movement is still alive and apparently growing. On Monday, Carney tweeted a link to an announceme­nt that his current corporate employer, Brookfield Asset Management, had joined the 73-member global Net Zero Asset Managers Initiative and its commitment to the net zero carbon emissions goal. The asset managers, including some of the largest in the world, such as Larry Fink’s Blackrock, said the group “will annually report progress against the Task Force on Climate-related Financial Disclosure­s (TCFD) recommenda­tions, including setting out a climate action plan and submitting this to The Investor Agenda via its partner organizati­ons or review to ensure the approach applied is based on a robust methodolog­y, consistent with the Race to Zero criteria, and action is being taken in line with the commitment­s.”

My rough translatio­n of that corporate garble is that the Net Zero asset managers plan to impose Danone-like ESG purposes on corporatio­ns around the world. The Danone experience suggests there may be a large and powerful segment of the investment world that stands ready to topple the ESG mission.

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