It is no great surprise that a writer for the Financial Times’ relentlessly sanctimonious “Moral Money” (the self-congratulatory name is something of a giveaway) has weighed in on the Twitter fight.
The writer of the article, Simon Mundy, raises some points about Elon Musk’s record that would indeed be of concern to investors who throw ESG considerations (a discipline that rates companies partly by how they measure up against various environmental, social, and governance criteria) into their decision-making process, and quite possibly not just them.
Fair enough.
This, however, is not:
Twitter’s other shareholders — led by Vanguard, Morgan Stanley and BlackRock — have been warned against Musk’s offer by Twitter’s board, which says it undervalues the company. But they should consider the wider societal implications of the bid, as well as its quantum.
No, they should not.
Large institutional investment managers mainly hold the shares they “own” on behalf of their clients. For the most part, it is not their money, but other people’s. If those clients have stipulated (and not just by default), that their cash should be invested in a “socially responsible” way, then the “wider societal implications” of accepting (or, for that matter, rejecting) Musk’s offer could have a legitimate role to play in an investment manager’s decision-making. But this should be true only of those funds in which taking account of ESG considerations is specifically meant to play a significant role in the investment process.
For other funds, investment managers have one task, and one task only, which is to stick to the type of investments in which the fund is meant to invest (value, say, or growth) and then generate the maximum risk-adjusted return for the clients who are paying them to do just that.
Those managers should look at Musk’s proposal on its financial merits (about which there is undeniably plenty of room for disagreement), nothing more.
The idea that asset managers should have any privileged say in determining what is or is not good for society is not only laughable, but, in a democracy, alarming. Such issues, which are frequently both difficult and contentious, are best decided in the polling booth and by legislatures, not in some corporatist conclave.