NYC Comptroller Lander urges US CEOs: Do not obey Trump in advance

BOSTON: Yesterday I called up New York City Comptroller Brad Lander for his take, as an activist investor, on a move by Institutional Shareholder Services to end diversity considerations in its boardroom recommendations.

We wound up with a much wider-ranging conversation. I have reproduced it below as one investor’s view of how CEOs have responded to a raft of early executive orders and actions by US President Donald Trump and his administration.

Many CEOs have gotten close to the administration, including the technology billionaires at his inauguration, but it’s early to say executives are in lockstep. Just on Tuesday, for instance, Ford CEO Jim Farley said Trump’s new tariffs have added “a lot of cost and a lot of chaos” to American business.

Please don’t view Lander as an average voice – he is running to be mayor of the heavily Democratic city Trump once called home. Lander and his staff, who oversee some $280 billion, have been among the most active pension fund investors in pushing companies for changes on social and climate issues.

But give them some credit for being early to spot issues that became of long-term interest, like their fear the shift to online-only annual meetings could diminish investors’ voices.

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I edited our talk for length and clarity.

Question: What do you think about the move by ISS to end diversity considerations in its director voting recommendations?

Lander: It’s another egregious bending the knee by people who should know better. I can only conclude they’re afraid of increased regulation. Rather than standing up for independent proxy advice, they are preemptively throwing the value of diverse governance under the bus.

Q: I think it’s fair to say that studies on the value of boardroom diversity are mixed?

A: That’s a fair assessment. The value of independent proxy advice is that shareholders can make their own decision on how to vote. But to withdraw from paying attention is putting on willful blinders. One would not be surprised if (ISS) did the same thing on EEO-1 (diversity) disclosures or other approaches to improving diversity across companies.

Q: Since we’re on the topic, what do you make of the corporate response to Trump’s actions?

A: I’m very distressed across the board. I think what you’ll have is companies who believe it’s better to have diverse and inclusive boards (winding down those efforts), or companies who believe that the climate crisis is real acting in ways that are adverse to their interests out of fear.

(Lander cited cases including the rollback of diversity considerations by companies including Amazon, Vanguard and Bank of America.)

Q: Tell me about Tesla? (Another company where Lander has raised governance concerns.)

A: Independent governance is supposed to provide an independent voice for shareholders at the table. When companies are controlled by a set of directors with either family or aligned interests, they tend not to be independent. Donald Trump and Elon Musk are showing something very similar in Washington. Wrecking the Consumer Financial Protection Bureau may be in the personal interests of Trump or Musk, but it’s not in the interests of the American people.

(Tesla and Musk did not respond to messages seeking comment).

Q: Do CEOs really have much choice in how they act or speak, given the political pressure and directives they face?

A: They do. “Obeying in advance” is what authoritarians want and it’s how they corrode democracy. If the federal government brings a lawsuit and finds a corporation has done something wrong, they can negotiate a consent agreement or something. If you obey in advance when they rattle the saber, you can’t.

Q: That sounds like the author Tim Snyder, opens new tab you are quoting? (Snyder is a Yale University history professor and author of several books including “Our Malady,” “The Road to Unfreedom” and “On Tyranny,” which includes the words “Do not obey in advance.”)

A: It is Tim Snyder I’m quoting, I wish we weren’t having this discussion.

Q: Come on Brad! Markets remain high. Maybe CEOs haven’t pushed back so much because they judge the changes Trump is putting in place are acceptable if their profits and shares keep rising?

A: The success of American business and the success of capital markets are built upon shareholder governance, and even more, upon democracy and the rule of law. If corporate leaders allow rapidly creeping authoritarianism to corrode governance and the rule of law, then short-term gains in the stock market will be ephemeral.

Q: As an investor are you talking to companies about these matters? Maybe you’ll take some action?

A: We’re reviewing our options at a troubling time.