Month: September 2025

Another Anti-Woke Charade

For the vast majority of the U.S. population not involved in shareholder activism, Institutional Shareholder Services Inc. and Glass Lewis & Co. are far from household names. Yet these two firms dominate the business of providing advice to pension funds, asset managers, and other institutional investors on how to vote on issues that come up for a vote at corporate annual meetings.

These proxy advisors increasingly find themselves being targeted by those on the right who want to obliterate anything that they see as promoting progressivism. The latest attack comes from MAGA-loving Texas Attorney General Ken Paxton, who just announced his office has launched an investigation of the two firms for “potentially misleading institutional investors and public companies by issuing voting recommendations that advance radical political agendas rather than sound financial principles.”

Whatever restraint Paxton exhibited with the use of the term “potentially” in the first paragraph of his press release disappears by the third paragraph, which quotes the AG as saying: “My office has zero tolerance for these woke corporations smuggling radical, liberal ideology into the companies they advise and into the entirety of America’s financial system.”

Paxton’s witch hunt is just the latest phase of a long-running campaign against shareholder activism that has increasingly zeroed in on the proxy firms. In 2020, during Trump’s first term, the SEC moved to define proxy voting advice as solicitation and thereby impose onerous regulations on the activity.

That policy was rolled back during the Biden Administration, but business groups such as the National Association of Manufacturers sued to restore the restrictions. In July of this year, a federal appeals court ruled against the business groups, finding that the advisory firms are not engaged in solicitation.

Opponents of ISS and Glass Lewis have also tried to hamstring the firms through legislation. Earlier this year, the Texas legislature enacted SB 2337, a law that would have effectively required proxy advisors to tell investors that any voting recommendations based in whole or in part on environmental, social or governance (ESG) considerations were not in their financial interest. The firms sued, arguing that the law violated their First Amendment and due process rights. A federal judge in Texas recently issued a preliminary injunction blocking enforcement of the law while the matter proceeds to trial.

Paxton, who survived a 2023 impeachment trial and is now running for the U.S. Senate, has every reason to paint himself as a crusader against supposed DEI and woke ideology. In doing so, he is one of numerous Republican elected officials who are waging war against the free speech rights of anyone who does not toe the MAGA line.

Yet it is odd that figures such as Paxton seem to be obsessed with the proxy advisors, which do not seem to have much influence over corporate policies these days. Most large companies have retreated from DEI and ESG practices, many of which were not that meaningful in the first place. And it is worth noting that shareholder resolutions are in most cases not binding. If activists overcome the high hurdles in winning a vote, the company is free to ignore the result.

Given this reality and the fact that ISS and Glass Lewis are a lot less radical that Paxton would have us believe, the battle over proxy advice seems to be little more than another MAGA anti-woke charade.

Tough Talk on Deceptive Drug Ads

With the announcement of a crackdown on deceptive advertising by pharmaceutical companies, RFK Jr. is once again showing that he may not be a complete crackpot. At his apparent direction, the Food and Drug Administration said it is sending about 100 cease-and-desist letters to drugmakers found to be making use of broadcast and digital ads that downplay the safety risks of their products.

The FDA’s move was reinforced by a presidential memorandum suggesting that the administration will move to change federal drug advertising policy, which since 1997 has allowed companies to limit the amount of information they have to include on harmful side effects. Today, the pharmaceutical industry spends billions of dollars a year on consumer advertising, a cost that helps drive up drug prices.

Marketing drugs to consumers has a long and contested history. It was the business model of the 19th century patent medicine purveyors, who promoted their dubious products directly to users. To counteract the hucksters, entrepreneurs such as Eli Lilly began to create what became known as ethical drug operations to make safer remedies available to medical professionals. At the same time, there was a move by reformers such as Dr. Harvey Wiley to get the federal government to regulate the industry. The result was the 1906 Pure Food and Drugs Act, which among other things banned false and misleading claims. The 1938 Food, Drug and Cosmetic Act imposed further restrictions.

As a result, for decades, drugmakers focused on marketing to doctors through ads in medical journals and visits from sales representatives known as detail men. It turned out, however, that the ethical drugmakers could be as dishonest as the patent medicine purveyors. In the late 1950s Pfizer was embroiled in a controversy over deceptive ads in the journals.

It was not until the 1990s that the pharmaceutical industry began pushing for greater freedom to communicate directly with consumers. It succeeded in getting the FDA to issue new rules allowing broadcast ads that included only limited safety warnings.

Along with a flood of advertisements came a wave of scandals. In 2000, for example, the FDA warned Pfizer and Pharmacia, co-marketers of the arthritis drug Celebrex, that the consumer ads they were running for the medication were false and misleading. In 2003 Pfizer paid $6 million to settle with 19 states that had accused the company of using misleading ads to promote its Zithromax medication for children’s ear infections.

In 1999 a federal judge ordered Eli Lilly to stop promoting its osteoporosis drug Evista with what were said to be false claims that the medication reduced the risk of breast cancer. Lilly later pled guilty and paid $36 million in connection with the illegal promotion of Evista. In 2005 the FDA warned Lilly that its television advertisement for Strattera, a drug for attention deficit hyperactivity disorder, understated the risks associated with the medication.

In 2004 the FDA sent a warning letter to GlaxoSmithKline charging that a TV advertisement for the antidepressant Paxil was false and misleading.

In 2008 Merck agreed to pay $58 million to settle charges brought by more than two dozen states that the company’s advertisements for the arthritis medication Vioxx deceptively downplayed the health risks of the drug.

The list could go on. The upshot is that drugmakers frequently abused their new marketing freedom. The FDA and other regulators took some actions against the companies, but there is no evidence that their enforcement actions had much of a deterrent effect.

This brings us back to the present. It is good that the Trump and RFK Jr. are voicing concern about deceptive marketing, but they are not proposing any specific new initiatives. It is also unclear that they are serious about enforcing existing rules more vigorously. After all, this is an administration that has generally demonized regulation and has retreated from strong action against corporate miscreants.

Time will tell whether what they are doing amounts to anything substantial or is just another empty political gesture.

Serving One Special Interest

Presidential administrations usually lean in one of two directions: they tend to be more pro-business or more pro-labor. Some will emphasize deregulation, free trade, and corporate tax breaks. Others will focus on stronger enforcement of workplace safeguards, targeted tariffs, and a higher minimum wage.

The second Trump Administration does not fit neatly into either of these categories. It claims to be  promoting the interests of both business and labor, but it is not clear that its policies fully benefit either one.

Trump has presented himself as a fierce opponent of business regulation. Since January his administration has crippled agencies long targeted by corporate interests, especially the Environmental Protection Agency and the Consumer Financial Protection Bureau. At the same time, other agencies such as the Federal Trade Commission and the Federal Communications Commission have taken aggressive stances against particular companies for what often appear to be ideological reasons.

As for trade policy, Trump’s extravagant use of tariffs has pleased a few industries beset by foreign competition, but it has also created a burden for domestic producers which rely on components from abroad. After long pretending that tariffs are paid by foreign suppliers, Trump is now pressuring U.S. retailers to absorb those costs, at the expense of their profit margins. Meanwhile, many small businesses in sectors such as construction and hospitality are struggling to deal with labor shortages caused by immigration raids.

The corporate sector is now facing another challenge that is unprecedented: demands from Trump that companies such as AMD and Nvidia hand over to the federal government a portion of their revenue from chip sales to China, while Intel was pressed to convert billions in grants it was to receive under the Biden-era CHIPS and Science Act into a 10 percent equity stake to be held by the feds.

These moves have free marketeers up in arms, warning that the U.S. is moving toward a system of state-run capitalism like that of modern China. Traditional Republicans knew they were taking a risk supporting a tariff-loving Trump, but this new focus on direct government involvement in major corporations has taken everyone by surprise.

There is also confusion in Trump’s posture toward labor. His administration likes to depict itself as pro-worker. It is true that Trump got tips and overtime pay exempted from federal income tax, yet those perks will benefit a small portion of the workforce. There is no indication that Trump’s tariffs are boosting wages or are bringing back a substantial number of offshored jobs anytime soon. Nor will Trump’s corporate interventions do anything to help the employees of the affected companies.

At the same time, Trump’s wholesale attack on the collective bargaining rights of one million federal workers has gotten him dubbed the biggest union buster in American history. Private sector workers will suffer from the firing of top officials at the National Labor Relations Board, which is currently unable to rule on worker complaints.

Budget cuts and staff reductions at agencies such as the Wage and Hour Division and the Occupational Safety and Health Administration are leaving workers more vulnerable to wage theft and to injury on the job. The dismantling of the Office of Federal Contract Compliance Programs is making it harder for workers experiencing pay discrimination at firms receiving government funds to get redress.

In short, many of Trump’s policies are working to the detriment of both business and labor. Yet there is one group thriving under this administration: Trump himself and his family interests.

Trump is able to indulge his seeming obsession with controlling everyone and everything while blowing past all the previous norms about not using the presidency for personal enrichment. His sons are traveling the world, trading on the Trump name to make business deals of many kinds.

Most brazen has been the foray into cryptocurrency that works hand in glove with the administration’s moves to deregulate that business. The Trump family is estimated to have gained some $5 billion in paper wealth just the other day when trading began in a digital token issued by World Liberty Financial, a firm controlled by the Trumps. Given everything else going on with the administration, this enrichment has generated relatively little controversy.

While the current administration is not consistently pro-business or pro-labor, it unwaveringly promotes one special interest: all things Trump.