A shareholder proposal asking Intel to square its business in China with its ESG commitments looks like a Trojan horse.
The proposal (Proposal 7, p. 130) argues that “Intel’s environmental promises and human rights commitments are belied by its cozy relationship with China, a country that is controlled by the dictatorial and inhumane Chinese Communist Party.”
Doing business with China, which is the largest greenhouse gas emitter in the world and which commits genocide against ethnic minorities – [sic] runs counter to everything that Intel claims to stand for. It is therefore critical that the Board commission and publish a third party review that includes experts who are fully aware of the dangers that China poses to ensure that Intel’s actions as a company live up to its words.
It’s brought by the Free Enterprise Project at the National Center for Public Policy Research, a conservative organization that has been around since the Reagan era, with longstanding ties to the American Legislative Council (ALEC) and the State Policy Network. The Center also counts among its allies the National Legal and Policy Center (NLPC), which last year scored a small victory at 3M when one of its proposals on China and human rights garnered an impressive 12 percent support. Intel is a new target for these groups, who claim to be outraged by the company’s about-face apology on Xinjiang in 2021 as well as its sponsorship of the 2022 Olympics.
These days, the Free Enterprise Project is (predictably enough) all about “Woke Capitalism,” a product of “the Left’s Radical ESG Agenda” that will result in “the leftist capture of American corporations.” Or, as they put it in their 2022 Investor Value Voter Guide, “the ESG boosters, both in and out of C-suites, want to make our lives poorer, less reliable and less safe, while enriching the enemies of the West, for no possible good outcome except their own self-aggrandizement.” This is the reasoning behind their opposition to everything from DEI to decarbonization.
This year’s Proxy Preview from As You Sow includes an entire section dedicated to bad faith proposals that sound an awful lot like this one and are in reality “anti-ESG.” The Free Enterprise Project and its allies tend to copy
verbatim the resolved clauses of their ideological opponents, or use language in resolved clauses that makes the resolutions appear to support sustainability objectives—although the rest of the proposals cite right-wing opinion pieces and argue against their purported goal.
The objective is to find a point of leverage, call out corporate hypocrisy, and demonstrate that ESG commitments are a costly and destructive diversion of company resources.
When it comes to human rights in China, right wing activists see that this strategy can get results: “this human rights issue – involving both slave labor and genocide of the minority Muslim Uyghur population at the hands of the CCP – animates factions from both the political right and left.” That’s from the Free Enterprise Project Investor Value report, cited above. As You Sow concurs:
The ideas in anti-ESG resolutions have no traction with investors—nor with many companies—and on average earn 4 percent support or less. The sole exception concerns doing business in China, where the left and right agree that China’s authoritarianism is deeply problematic, as is its persecution of the Uyghur people.
That “exception” helps explain the self-righteous, combative tone of the Free Enterprise Project proposal, and the copy-paste approach they and the NLPC have taken for this year’s proxy season:
The question before Intel shareholders is what practical effect voting for this proposal might have. The board of directors opposes it, for all the usual reasons, so it is unlikely to pass; but it could garner enough support to qualify for re-submission. That would bring the Free Enterprise Project back again next year.
More importantly, the proposal would require that Intel engage “experts who are fully aware of the dangers that China poses.” Those are not necessarily human rights experts or even China experts, but people who qualify as experts because they are “fully aware” — that is, ideologically aligned on China with the National Center for Public Policy Research. Think Peter Navarro (or worse): that’s who would be engaging with the company, and whose views the company would “publish.” This doesn’t sound like a constructive way to push the company to raise human rights standards (or improve its business performance); it just sets the stage for right wing bluster, fake outrage, and ideological preening.
It is difficult for me to vote against any measure that asks companies to do more in the area of human rights, and I am disappointed by the Intel board’s boilerplate response. They could do so much better. But in this case I am voting with them and against Proposal 7.
Update. The proposal received 4.31 percent support at the 11 May Annual Stockholders’ Meeting, falling short of the 5 percent needed to qualify for re-submission next year. For more on Trojan Horse proposals, see the brief write-up in this 2021 report (page 59) from Glass Lewis, which I had not read before I wrote this post.