WSJ : Why Sheryl Sandberg Quit Facebook’s Meta

Why Sheryl Sandberg Quit Facebook’s Meta
One of the world’s most powerful executives became increasingly burned out and disconnected from the mega-business she was instrumental in building. That dovetailed with a company investigation into her activities.

Sheryl Sandberg’s departure from Facebook FB 5.42%▲ parent Meta Platforms Inc. FB 5.42%▲ came as a surprise even to many people close to the tech giant. In reality, it was the culmination of a yearslong process in which one of the world’s most powerful executives became increasingly burned out and disconnected from the mega-business that she was instrumental in building.

More recently, there was a fresh irritation: Earlier this year, The Wall Street Journal contacted Meta about two incidents from several years ago in which Ms. Sandberg, the chief operating officer, pressed a U.K. tabloid to shelve an article about her former boyfriend, Activision Blizzard Inc. Chief Executive Bobby Kotick, and a 2014 temporary restraining order against him.

The episode dovetailed with a company investigation into Ms. Sandberg’s activities, which hasn’t been previously reported, including a review of her use of corporate resources to help plan her coming wedding to Tom Bernthal, a consultant, the people said. The couple has been engaged since 2020.

As of May, that review was continuing, the people said.

“None of this has anything to do with her personal decision to leave,” said Caroline Nolan, a Meta spokeswoman. She earlier said that the Kotick matter had been resolved.

Earlier, on the Activision issue, a spokeswoman said at the time Ms. Sandberg had never made a threat in her communications with the Daily Mail, the U.K. tabloid. Mr. Kotick said it was his understanding that the Daily Mail didn’t run the story because it was untrue.

The broad company review added to a difficult period for Ms. Sandberg, which included the personal challenges of blending two families as part of her coming marriage and dealing with multiple family members with Covid-19, according to people close to her.

A long-planned sabbatical, as part of the company’s program to offer 30 days of paid leave every five years, was postponed multiple times this year, first when her fiancé came down with Covid and then, a few months later, when she and her children did. At the recent World Economic Forum in Davos, Switzerland, Ms. Sandberg was notably absent among the confab of global business leaders. Instead, Meta’s chief product officer Chris Cox and head of global affairs Nick Clegg, who was elevated to president in February, were the top executives present.

Ms. Sandberg, 52 years old, stayed in the U.S. to attend the bat mitzvah of her daughter, according to people familiar with the matter. She told people close to her that she was relieved not to have to go to Davos, an event that for years was a highlight of her annual calendar, the people said.

Burned out
Ms. Sandberg has been telling people that she feels burned out and that she has become a punching bag for the company’s problems, the people said. “She sees herself as someone who has been targeted, been tarred as a woman executive in a way that would not happen to a man. Gendered or not, she’s sick of it,” said one person who worked alongside Ms. Sandberg for many years.

Ms. Sandberg hasn’t been closely involved with the company’s high-stakes plan to execute Chief Executive Mark Zuckerberg’s pivot to the development of virtual worlds in the so-called metaverse, the people said.

That vision, which Mr. Zuckerberg has said will require billions of dollars in investment and take more than a decade to implement, is less dependent on advertising, which has long been Ms. Sandberg’s fief. She didn’t attend many of the leadership meetings related to the strategic shift, and people close to her said she felt the effort didn’t play to her strengths.

Ms. Sandberg, who will remain on Meta’s board, informed Mr. Zuckerberg on Saturday of her intention to resign. While her relationship with some other board members, including Mr. Zuckerberg, had become strained at times, Ms. Sandberg’s decision to step down was voluntary, according to people familiar with her decision.

In an interview earlier this week after her planned resignation was announced, Ms. Sandberg said her departure shouldn’t be taken as a sign that Meta is moving away from the advertising business, which last year accounted for about 98% of the company’s $118 billion in annual revenue. Under the reporting structure that will succeed her, Javier Olivan will both head Facebook’s product engineering and ad sales business.

“I think this is the right moment to create those units where businesses are closer to product,” she said.

Ms. Sandberg said building the business that allowed Meta to grow into one of the world’s most successful companies was a principal pride. But tech product design was never her focus, and Meta’s dream of building a sprawling, interlocking set of virtual realities is still young. While she said she supports the effort, it wasn’t clear that the products were ready for monetization.

Ms. Sandberg noted her team’s ability to scale Facebook from a company with $153 million in revenue and 500 employees in 2007 to its current size, with more than 77,000 employees. She also said the company has learned from its mistakes and is now in a good place.

“I’m proud of all the good that happens on our platforms, all of the time every day. And I’m excited to see what Meta does going forward,” she said. “I really believe in Mark, and I really believe in my teammates.”

Ms. Sandberg, a former chief of staff to Treasury Secretary Lawrence Summers, was already a rising star when Facebook snatched her away from rival Google. Her mandate was to take a free social network, and build a business around it in large part by using the vast swaths of data it collects on its users—and allowing Mr. Zuckerberg to focus on the engineering side of the company.

Advertisers loved it, with Ms. Sandberg as the primary liaison between the company and Madison Avenue. Her profile rose alongside that of the social-media company’s. After Facebook went public in 2012, Ms. Sandberg became an icon for women in business following the release of her 2013 book “Lean In.”

She wrote about how ambitious women in the workplace are often misconstrued as aggressive. She encouraged women to “sit at the table,” speak up, vie for important assignments and not talk themselves out of certain positions or projects for fear of not being able to manage work and life commitments.

A second book, “Option B,” chronicled her grief and recovery from the death of her husband, who died in 2015 while they were on vacation in Mexico.

As her reputation grew, so too did whispers of her political aspirations. There were enough rumors in 2016 that she could leave Facebook for a cabinet role for presidential candidate Hillary Clinton that Ms. Sandberg felt the need to shoot the rumors down.

“I really am staying at Facebook. I’m very happy,” Ms. Sandberg said in October 2016 at a conference.

But Ms. Sandberg’s standing within Facebook began to change after that election. The company was mired in allegations that it didn’t do enough to circumvent Russian interference in the 2016 U.S. election.

Controversy surrounding the election grew for the company in March 2018 when the Guardian and the New York Times reported that political consulting firm Cambridge Analytica had improperly accessed the data of 50 million Facebook users. That data was then used to target voters on Facebook to get them to support Donald Trump in the 2016 presidential campaign, according to the reports. The number of affected users was later revised to 87 million.

Cambridge fallout
After the fallout of Cambridge Analytica, Mr. Zuckerberg told Ms. Sandberg that he blamed her and her teams for the scandal, the Journal previously reported. Ms. Sandberg confided in friends that the exchange with Mr. Zuckerberg had rattled her and she wondered if she should be worried about her job.

The two scandals resulted in Ms. Sandberg being called by Washington to testify on foreign influence on American social networks.

Ms. Sandberg was further embattled by a 2018 New York Times report alleging that she had overseen an aggressive lobbying campaign to combat Facebook’s critics, including hiring a Washington-based opposition research firm.

In the wake of those events, Ms. Sandberg became a less visible presence around Washington and ceded many policy issues to other executives, said former employees who worked with her.

At times, Ms. Sandberg expressed frustration that she was being blamed for issues that arose in parts of the business she didn’t control, the former employees said.

Her overall influence also waned, in part because Mr. Zuckerberg in recent years asserted tighter control over all aspects of the company’s operations.

Last year, when the Journal published a series of investigative articles called The Facebook Files based on thousands of internal documents, Ms. Sandberg stayed largely silent. She is a strong advocate for women, and her muted public response was noted inside and outside the company in part because one of the revelations was that the company researchers had repeatedly found that Instagram was harmful to a sizable percentage of its young users, most notably teenage girls.

Data from the internal documents also showed that Ms. Sandberg’s share of employees had shrunk in recent years. At the start of 2014, 43% of the company’s staff reported to her, but that amount fell to 31% by 2021.

Ms. Sandberg also has been anxious about how coming film and television projects on Facebook will depict her tenure as one of the top women in tech. “There’s no scenario in which a successful businesswoman is not portrayed as a raging bitch,” she told one adviser.

In recent years, there was persistent speculation about her leaving, though some speculated that the controversies surrounding Facebook left Ms. Sandberg with fewer opportunities.

Ms. Sandberg, who received total compensation of $35.2 million in 2021, has a net worth of $1.6 billion, according to Forbes.

The company’s huge advertising operation, of which she was the architect, is also under increasing pressure, in large part due to changes from Apple Inc. regarding how data can be collected and used to target advertisements.

Meta said in April that its revenue growth slowed for the first time since it became a public company. Since Feb. 2, Meta’s market value is down $341 billion. From its peak on Sept. 7, 2021, it is down almost $540 billion.

Crystal Patterson, who worked in Facebook’s Washington office from June 2014 until September 2021 and was most recently a public policy manager at the company, said Ms. Sandberg was an icon for women at the company and throughout tech.

Ms. Patterson highlighted the executive’s efforts to champion diversity at the company and her zeal for helping small businesses use Facebook’s tools.

“Her record is mixed, but overall, her legacy is a positive one,” Ms. Patterson said.

Debbie Frost, a former Facebook communications executive who now works with Ms. Sandberg’s foundation, said the executive’s departure would allow her to focus on promoting equality and other women’s issues in a way that she hasn’t been able to do while at the tech giant.

While Ms. Sandberg constantly raised important issues for women at work throughout her career, it was always something that she did on the side because of the intensity and constraints of her full-time job, Ms. Frost said.

Another adviser said Facebook’s desire for its executives to stay away from hot-button issues was in conflict with Ms. Sandberg’s focus on abortion rights in the wake of the Supreme Court’s expected overturning of Roe v. Wade. After the leaked draft ruling last month, she posted that it would destroy “one of our most fundamental rights,” a public position that made some at the company anxious, the adviser said.

In the interview this week, Ms. Sandberg said she was looking forward to spending more time working with her foundation and on women’s issues after she leaves. Beyond that, she said she isn’t sure about what her life after Facebook will look like.

“This will be a chance to take a breath and figure it out. This job and that kind of thought process really can’t coexist,” she said.

A recruiter who has worked with Ms. Sandberg in the past told the Journal that within hours of her announcement two inquiries gauging her interest in a board chair seat and a CEO role had come in.

FT : Sandberg’s legacy: ‘Facebook would not be Facebook without Sheryl’

Sandberg’s legacy: ‘Facebook would not be Facebook without Sheryl’
Exit marks a crossroads for the Silicon Valley executive and social media company she played an integral role in building

Sheryl Sandberg intended to spend just five years at Facebook when she joined in 2008 as Mark Zuckerberg’s right-hand woman. Instead, she stayed 14 years, becoming one of the most recognisable, and polarising figures, in Silicon Valley. 

When she steps down as chief operating officer of Facebook, now known as Meta, this autumn, she will leave behind a mixed legacy. On the one hand, she has built an image as a seasoned executive and female role model who helped grow a $538bn company by supercharging its digital advertising machine. 

But Sandberg has also become a lightning rod for criticism, accused of attempting to brush controversies over moderation and privacy under the rug, as Facebook lurched from scandal to scandal after the 2016 US election.

“Facebook would not be Facebook without Sheryl,” said David Jones, chief executive of The Brandtech Group and former chief executive of advertising group Havas. “She built the foundation that allowed Facebook to grow into what it became — good and bad.” 

For Sandberg and Zuckerberg, the moment marks a crossroads, as the power duo, who have drifted apart in recent years, now seek to remake their images separately after years of scrutiny.

Zuckerberg has been focused on his vision for the metaverse, at a time when Facebook’s share price is flailing, growth is slowing and competition is rising. Sandberg, a committed Democrat, has said she intends to focus on her family and philanthropic endeavours, amid speculation that she may enter politics. She will remain on Meta’s board. 

Sandberg also leaves under a cloud following a report by The Wall Street Journal alleging she had pressured the Daily Mail to drop negative coverage of her former boyfriend and Activision Blizzard chief executive Bobby Kotick. Meta said the matter is now closed.

Separately on Thursday, the Journal reported an investigation into her use of company resources to plan her forthcoming wedding to marketing executive Tom Bernthal. A Meta spokesperson said of the report: “None of this had any impact on her personal decision to leave.”

Sandberg has been credited with transforming a scrappy start-up manned by twenty-something “tech bros” into an enviable digital ad empire during the first half of her tenure. She proclaimed that she was “put on this planet to scale organisations” — and she did. According to Facebook’s initial public offering filings, in 2009 the company’s sales stood at $777mn. By 2021, Meta generated $117bn in revenue. 

Her success, in part, came down to her meticulous attention to detail and her prowess as a consummate networker, associates say. Marketers describe her spending more time with advertising executives than her rivals did, such as her former employer Google, and hosting glitzy dinners at her Menlo Park house to woo clients. She would listen to, and then act on, their demands, they said.

“She played an important role in getting Mark Zuckerberg to take the advertising community very seriously,” said Jones.

Sandberg also surrounded herself with close allies, mainly women, from her previous roles at Harvard, the Treasury and Google — dubbed “Friends of Sheryl Sandberg”, or FOSS. Many saw the FOSS phenomenon as Sandberg championing women in alignment with her corporate feminism manifesto, Lean In; others bemoaned the creation of such cliques.

“When you had her behind your back, it was incredibly empowering, but if you don’t have the Sheryl blessing, it can be very limiting,” one former senior staffer said.

Sandberg’s ability to work the room brought in business, and was crucial to her establishment of Facebook’s public policy and communications team. She personally took up the role of lobbyist-in-chief, meeting with regulators and lawmakers while Zuckerberg focused on product innovation. 

As Silicon Valley boomed, members of Congress actively pursued meetings with Sandberg before the 2016 election in a bid to embrace the tech sector, according to former colleagues. But it did not last. 

Her public profile as Zuckerberg’s second-in-command left her in the line of fire — in front of lawmakers, clients and the public — as the company was hit by a series of scandals following the 2016 election.

“Sheryl was always the soft power with the phone calls and charm offensive when Facebook faced a crisis,” one advertising agency executive said. 

The ads business model she pioneered has also come under scrutiny. Critics and civil society groups have argued that toxic and provocative posts were rewarded in a bid to grab users’ attention, while its harvesting of user data for targeting also contributed to privacy lapses. 

Sandberg also developed a reputation for failing to identify issues then becoming defensive when they erupted into scandals, seeking to control press narratives and ward off regulators.

“It’s not about what she did — it’s about the response. Many of these things were unintended consequences. But you then have to turn around and act,” said another advertising executive. 

This so-called delay, deny, deflect approach was applied to her handling of the Cambridge Analytica scandal as well as the revelations of Russian disinformation campaigns around the 2016 election, according to multiple reports.

At times, it escalated into finger-pointing. The New York Times in 2018 revealed that under Sandberg’s watch, Facebook hired Definers Public Affairs, a Republican-leaning consultancy, to spread misinformation about competitors and critics.

More recently, she caused a backlash for minimising the notion that Facebook played a role in the events leading to the January 6 storming of the US Capitol, arguing that it was “largely” organised on other platforms.

Some expressed sympathy for her position; Zuckerberg, after all, is the ultimate decision maker. “She felt cornered around those things, which continued to increase the ‘deflect’ approach,” a former senior employee said. “She could never get out of the crouching position because there’s just crisis after crisis after crisis coming up for the company.”

Recommended
LexMeta Platforms
Meta: Sheryl Sandberg exits the metaverse Premium

Her departure does not come out of the blue, according to insiders. In recent years, Sandberg had stepped back from the limelight, and her influence has waned, as tensions with Zuckerberg simmered. 

“Year over year, the gulf between Sheryl and Mark and what they kind of thought should be done from a content moderation standpoint certainly grew,” the former employee said, adding that Zuckerberg’s free expression stance was clashing with Sandberg’s desire for tighter moderation. 

In his missive about Sandberg’s departure, Zuckerberg said that Javier Olivan, the company’s chief growth officer, will take on a “more traditional COO role” in which he will be “focused internally and operationally”. 

Despite Sandberg being a “superstar who defined the COO role in her own unique way”, Zuckerberg wrote that “Meta has reached the point where it makes sense for our product and business groups to be more closely integrated, rather than having all the business and operations functions organised separately from our products”.

The shake-up consolidates Zuckerberg’s own power as he takes on many of the people who used to report directly to her.

Zuckerberg described the move as the “end of an era”. But with it, he also signalled his intention to start a new one — in which Sandberg’s previous role, with all of its power and breadth, will no longer exist. 

FT : Draghi reforms make waves on Italy’s beaches

Draghi reforms make waves on Italy’s beaches
Under pressure from Brussels, Rome is set to auction lucrative seaside concessions

As Italy slips into early summer, business is booming at Gabriele Di Sienna’s family-owned restaurant, which serves Spanish food — and provides umbrellas, sunbeds and changing cabins — to visitors to Ostia beach outside Rome.

But after two tough years of Covid-19, Di Sienna, 45, sees little to cheer. Like other owners of the ubiquitous balneari or bathing establishments that line Italy’s coasts, he has big new worries about his business’s long-term future, as Italy plans a shake-up of its traditional beach management.

To resolve a seemingly frivolous but intense and long-running quarrel between Rome and Brussels over beaches, prime minister Mario Draghi’s government has agreed to terminate all Italy’s beach concessions next year and hold auctions for new ones.

The tenders aim to redress EU complaints about a lack of transparency in the allotment of lucrative beach rights, ensure fair competition to manage prime beaches and give Italy’s cash-strapped government more of the revenues generated from the private use of the public coastline.

Yet Di Sienna and his two cousins — the third generation to run a business founded by their grandfather in 1964 — fear they will lose the enterprise that has sustained them all their lives.

“It’s something like losing a child or losing a son,” Di Sienna said. “This concession was for life, and now everything has changed. Big firms will come and put their hands on everything. A family like ours doesn’t have a lot of money. Multinationals have a lot of money to buy everything.”

Italy’s estimated 30,000 private bathing concessions — which range from humble beach shacks to luxurious resorts — occupy nearly 60 per cent of the coastline each summer with their umbrellas and loungers. Many of the businesses are decades old, some passed from generation to generation within families, and others traded between unrelated parties like any financial asset.

Marina Lalli, president of the Association of Tourism Entrepreneurs, says the businesses are integral to the Italian beach scene economy.

“The tradition in Italy among tourists is that people like to have the beach already set up for them,” said Lalli, who has a 70-room seafront hotel with 500 sunbeds, and 189 large umbrellas, in southern Italy. “There are people who like to go with their own umbrella, but it’s a minority.”

“This is our tradition, our economy, our tourists,” she added. “We don’t see why we should change this way of life.”

Yet Italy’s beach concessions have attracted controversy. Legambiente, a national environmental movement, argues the businesses prevent free public access to a precious natural environment and have in effect privatised public beaches — and worsened coastal erosion — while giving public coffers little in return.

Establishments that can generate millions in annual revenues — charging as much as €100 a day for a lounger in a prime location in peak summer — may pay just a few thousand euros a year in fees to government.

According to the EU, the enterprises also violate Italy’s obligation to ensure that concessions to manage scarce natural resources are granted for a “limited duration, and through an open public selection procedure, based on non-discriminatory, transparent and objective criteria”.

With considerable political clout both in their communities and parliament, bathing establishment owners have long resisted Brussels’ calls for greater private competition for Italy’s prime beaches.

In July 2020, with tourism in the pandemic doldrums, the previous Italian government even voted to extend all beach concessions for another 13 years until 2033. That prompted the European Commission to launch formal infringement proceedings against Rome, while Italy’s own Council of State ruled such a long extension was also illegal.

Draghi now hopes to settle the beach concession issue as part of a wider reform effort to reboot Italy’s economy and boost growth. But it has not been easy, given the support for the balneari among many Italian lawmakers. The auctions have been tacked on to a broader competition law that Italy must adopt this year to fulfil conditions of its €200mn EU-funded Covid recovery plan.

Despite the unease along the coasts, Italian officials said they did not expect the wholesale eviction of all incumbent concessionaires, as the auctions will take account of families that depend on beach businesses as their sole income source, as well as large recent investments.

But officials said the tender would also establish a principle that concessions were not automatic, indefinite entitlements and must be earned. To shore up political support from members of his own national unity government, Draghi’s administration has agreed to compensate owners who lose their concessions — though the precise formula for valuing the businesses has yet to be worked out.

Even with these safeguards, many owners remain gloomy, warning of an end to the distinctive character of Italy’s seaside and the prospect of large, global hotel chains — with their generic character — moving in to displace local owners.

“It will be the globalisation of the beaches,” said Lalli. “They will take away the specificity of Italian tourism, and Italian hospitality.”

Back at Ostia, Di Sienna is anxiously awaiting details of the bidding process, which he said would probably determine whether he got to retain the business built by his family over decades.

FT : ESG exposed in a world of changing priorities

ESG exposed in a world of changing priorities
Investors ask hard questions of the market trend, but responsible investing will survive

Until recently Anne Simpson was considered an evangelical advocate for the cause of environmental, social and governance investing (ESG). This spring, however, the former head of sustainability at the Calpers pension fund, who now runs responsible investing at Franklin Templeton, made a surprising declaration. “I think it’s time for RIP ESG,” she told a conference in New York.

Specifically, she thinks that the war in Ukraine has forced ESG advocates to reconsider some of their approaches, because energy security and poverty reduction have suddenly become as important as the green transition. Box ticking around carbon emissions alone, in other words, does not work.

But does also she think that it is time to jettison any effort to be environmentally “sustainable” altogether, I asked? Absolutely not. “We have to rethink what ESG means,” she argues. “We need a broader, human centred approach.” 

The issue at stake is finding the right trade-offs — ways to balance all the different goals around “responsibility” — in the least bad way possible, so as to help as many people as possible thrive on our troubled planet, and prevent catastrophic climate change.

Investors everywhere should take note. Whether or not they love ESG — and are baffled by the current debates swirling around the topic — the idea of responsible investing is far broader and older than the acronym itself. The “values” embedded in your portfolio matter, in both a financial and social sense — and will continue to do so even if analysts are arguing about the finer details of ESG.

The end of an era for ESG?
In the past couple of years, the concept of sustainability and stakeholder-focused business has become wildly — and surprisingly — popular.

That is partly because of the rise of climate activists such as Greta Thunberg, who has managed instil fear into many middle-aged chief executive officers and chief investment officers with her strident campaigns.

However it is also because events such as Covid-19 or the Black Lives Matter campaign have made it hard for corporate boards to ignore social welfare at a time when social media tools and increased digital transparency has made it easier than ever for activist groups to monitor what companies are doing and launch campaigns against them if they breach social norms.

Or to put to another way, the concept of ESG has moved from being a narrow area of activism — driven by people who want to change the world — to a sphere of risk management for corporate boards — where it is shaped by the knowledge that companies which ignore ESG issues can face reputational damage and the loss of customers, investors and employees.

The idea of just focusing on shareholder interests, as the 20th century economist Milton Friedman urged company boards to do, looks increasingly risky — even for those shareholders.

Meanwhile, the amount of money earmarked for ESG funds has exploded — not least because investment groups such as BlackRock argued last year that companies which do not adhere to ESG principles are likely to underperform relative to peers. Thus, while there are numerous different ways of measuring the size of this field, analysts estimate that around a third of all investments are managed with some ESG lens.

However, financial history shows that trends move in pendulum swings: whenever a good innovation catches fire, it typically evolves so fast that it is taken to extremes that cause problems — and an inevitable reaction. And we are now seeing history repeat itself: after a heady boom, a backlash has set in, as some of the problems around the current ESG fashion emerge.

Questions over greenwashing
One trigger for reflection has come from whistleblowers such as Desiree Fixler, a former chief sustainability officer at Deutsche Bank’s asset management arm, who alleged last year that her employer was engaged in widespread greenwashing, claims the company denies.

Another has come from Tariq Fancy, a former sustainability expert at BlackRock, who lashed out against the asset management behemoth, arguing that ESG is actually undermining efforts to curb climate change because it takes the pressure off governments to act — and does not really rechannel capital into green causes as it claims.

Separately, Stuart Kirk, head of sustainable investments at HSBC’s wealth division (who is currently suspended), has argued that the climate risks to investors have been overstated by ESG advocates and central bankers such as Mark Carney, former governor of the Bank of England.

Meanwhile, as Simpson notes, the war in Ukraine has made the issue of energy security so important that some former ESG proponents are starting to recognise that they need to use the hated fossil fuel producers to cope with populations’ needs.

And Russia’s invasion has also highlighted another point: the problems of reconciling “E” with “S” and “G” in a unified way. Some Russian companies, such as En+, which were previously welcomed by ESG activists because they were trying to embrace green technologies, are now being shunned because most ethical investors will no longer buy anything linked to the Russian establishment. The lens of ESG, in other words, has changed. And similar tensions exist around other entities that have nothing to do with the war.

Elon Musk’s Tesla group, say, is often lauded for its high “E” credentials because it created three-quarters of new electric cars in the US last year. 

However, the minerals used to make these cars sometimes come from dirty mines, with poor labour conditions, and the company has been criticised for racial discrimination and bad working conditions in its factories. Tesla rejects the claims.

It scores so badly on “S” that the S&P 500 ratings group recently removed Tesla from its ESG bucket, causing its stock price to fall 6 per cent — and Musk to complain that ESG has now become “weaponised by phoney social justice warriors”, and is thus “a scam”.

Rethinking the rules
So does this mean that the impetus behind ESG is dead, or dying? Probably not. Instead, a better way to frame what is going on is that this year’s backlash is a sign that the market is maturing and evolving, in the face of more scrutiny. And this mood of challenge might actually make the idea of “sustainability” more — not less — sustainable and durable as a concept since it could dispel some of the froth.

“I think that what I did [by blowing the whistle on greenwashing] has burst a bubble in a way that will make more credible in the long run,” says Fixler. After all, she points out, in the early years of the 21st century there was another financial innovation craze around credit derivatives, but that boom was not subject to much oversight or challenge until too late; this time round she thinks (or hopes) the challenge is coming so early that it will help counter the excess.

There are several reasons why this might be correct. One is the fact that regulators are already stepping up their own scrutiny. The Securities and Exchanges Commission recently settled with Bank of New York Mellon over allegations that its marketing literature had overstated ESG claims. Other regulators are following suit, and warning that they plan to scrutinise not just the sellside banks — but rating agencies too.

“The whole investment chain has to get involved, and ratings have to be regulated too,” Sacha Sadan, ESG director at the UK’s Financial Conduct Agency, said at an industry event in London last week. “People do get surprised when they see certain stocks [such as oil and gas] in a portfolio that’s an ESG best-in-class . . . and that’s why as a consumer regulator looking after people we have to make sure that is correct.”

As more oversight enters this sphere, a sense of greater precision and clarity is starting to emerge too. That is partly because of a growing recognition that investors need to separate out the “E” from “S” and “G” when they are creating their portfolios and investment strategies; lumping these together in a single rating can cause confusion. But the other factor which is forcing more clarity is a set of reforms that are now emerging in the accounting world.

At the Glasgow COP26 climate change summit, Carney and other financial leaders pledged to create a new consolidated set of accounting standards to measure sustainability, known as the International Sustainability Standards Board (ISSB), an initiative now being led by Emmanuel Faber, former head of Danone, the French foods group.

These rules are likely to emerge in the next couple of years, for both reporting and audit purposes: if companies start presenting their accounts to investors with these metrics, this will inject more clarity too, particularly around the “E” element (which is dramatically easier to measure anyway than S and G.)

The third factor which is likely to give the movement legs, however, is digital transparency. Back in the middle of the 20th century, when Friedman created his vision of shareholder capitalism, it was hard for most investors or ordinary citizens (and even regulators) to know exactly what companies were doing; the only benchmark was the quarterly accounts.

Now, however, outsiders have a vast array of tools with which they can track companies, ranging from social media platforms such as Glassdoor, to satellite services that can monitor emissions — not to mention a host of digital tools that can peer into supply chains.

Equally important, digital technologies have given critics the means to mobilise themselves and publicise their claims in an embarrassing way. The #metoo movements around sexual harassment shows the power of tech in relation to the “S” factor in ESG.

Similar campaigns are emerging around issues such as pollution and carbon emissions. And the power of digital tech has been visibly on display during the Ukraine war too. Most notably, shortly after Russia invaded, Yale University started publishing an index that outlined what companies were doing with their operations in Russia, and giving them grades according to whether they had withdrawn — or not.

The impact was swiftly felt: companies which were earning bad grades started to pull out of Russia, to avoid customer and employee revolts (and the risk of being attacked by the Anonymous hacking groups, which started targeting companies such as Switzerland’s Nestlé that were slow to withdraw.)

A recent survey from public relations group Edelman of public attitudes in the West underscores how digital communication dovetails with this social zeitgeist shift: its poll suggests that “59 per cent of respondents say geopolitics is now a top priority for business, while 47 per cent have bought or boycotted brands based on the parent company’s response to the invasion of Ukraine”. Moreover “nearly everyone surveyed (95 per cent) expects business to act in response to an unprovoked invasion, from applying political and economic pressure to publicly speaking out against the aggressor”. 

Of course, a cynic might say that this simply illustrates Musk’s point — namely that ESG has become prone to social media fashions, if not “woke” mob rule, in a way that makes the concept dangerously slippery and hard to define, or apply. It is a fair point: the behaviour of the Russian government was never considered an ESG issue before February 2022, never mind its long-running human rights abuses.

Shifting ties between business and society
However, there is another way to frame what is going on: what the war on Ukraine — and Yale university websites — show is that the relationship of business to society is shifting. When Friedman developed his famous theory of shareholder-first business, he not only lived without digital scrutiny, but also existed in an era (after the second world war) when there was a widespread belief that the tricky problems in society, such as pollution, could be handed over to governments to resolve. The state was seen as being effective. Thus, as the historian Douglas Brinkley points out, when environmental activists such as Rachel Carson embarked on the “Silent Spring” movement in the 1960s, they collaborated with politicians (from both right and left) and labour unions — but not corporate leaders or investors.

Today, however, there is not just a new era of digital transparency, but a collapse of popular faith in the power of governments to fix problems. As a result, companies are being forced into the frame of policy issues, whether their leaders like it or not. And while the issues that corporate leaders are being asked to address seem like an ever-shifting kaleidoscope of problems — ranging from Russia to gender rights to carbon emission to biodiversity — the key point is this: returning to a world where the public thinks companies should “just” chase shareholder returns is unlikely any time soon.

Lessons for retail investors
So what does this mean for ordinary investors who want to embrace sustainability? One key point is to recognise that pursuing ESG strategies is never simple but always requires trade-offs between different “E”, “S” and “G” goals; so much so that, in the future, those three letters are increasingly likely to be separated. 

In practical terms, that means that investors who want to “do good” (or at least avoid harm) in the world might need to define their priorities and look for options that let them chase specific goals, such as carbon emissions.

It also means that the companies providing financial services will need to provide more bespoke and customised offerings. Investors and financial service providers alike will need to learn what the new accounting frameworks mean and why they matter. The acronym “ISSB”, for instance, might sound confusing but it could affect asset values in the future, not least because the closely-related “task force for Climate Related Financial Disclosures” framework that is being used as bedrock for ISSB is soon likely to become mandatory for big companies in jurisdictions such as Switzerland, New Zealand and the UK.

Last, but not least, investors need to recognise that while the “ESG” acronym might evolve significantly in the next year — or even be headed for the grave, as Simpson suggests — the concept of responsible investing and business is not likely to disappear any time soon. Companies are under the spotlight more than ever before and investors have increasingly effective tools to force them to change in response to shifting social mores.

Call this, if you like, the rise of stakeholder capitalism — or (as I prefer) a world where lateral vision is needed, rather than narrow tunnel vision. Either way, investors and corporate executives ignore it at their peril.

FT : Biden forced into Saudi thaw amid rising oil prices

Biden forced into Saudi thaw amid rising oil prices
Meeting with Crown Prince would cement U-turn for a US president who labelled kingdom a ‘pariah’

When Joe Biden took over the White House from Donald Trump last year, there was no country whose relationship with the US changed more suddenly and more drastically than Saudi Arabia.

As a candidate, Biden had vowed to treat the kingdom as a “pariah” amid mounting evidence Saudi officials were behind the 2018 murder of dissident Jamal Khashoggi; within a month in office, Biden had declassified US intelligence pointing to Crown Prince Mohammed bin Salman, the country’s de facto leader, as having been behind the killing.

But amid skyrocketing oil prices and record inflation at home, the US president — who had once characterised the “battle between democracies and autocracies” as the central guiding principle of his foreign policy — has been forced into a sharp U-turn.

Biden is now expected to meet Crown Prince Mohammed in person during a visit to Riyadh later this month, a climbdown facilitated by a furious, senior-level diplomatic offensive by the president’s top Middle East adviser and energy adviser.

On Tuesday, the White House was able to show the first fruits of the policy reversal: Opec agreed to accelerate oil production to help replace output lost to international sanctions against Russia, and Riyadh helped extend a truce between Yemen’s Saudi-backed government and Houthi rebels.

“Biden has been a sceptic of the Saudis long before MBS was on the scene,” said Daniel Shapiro, a former ambassador to Israel during the Obama administration, using the crown prince’s nickname.

But Shapiro, a distinguished fellow at the Atlantic Council, said the White House had to make an unsentimental choice in order to add oil supplies to the tightening global oil market and to ensure Riyadh supported hardening American approaches to both Russia and China.

“That’s the core bargain that would make a trip worthwhile,” he said. In exchange, Saudi Arabia wants assurances Washington will provide weapons and co-ordination to protect the kingdom from Iran and its proxies.

The oil output deal followed months of shuttle diplomacy led by Brett McGurk, Biden’s Middle East adviser, and Amos Hochstein, his senior energy adviser. The two men were in Riyadh a week ahead of Thursday’s Opec+ meeting — their fourth visit to the Saudi capital in recent weeks.

But the diplomacy has involved more than oil supplies, according to people familiar with the discussions, with a broader energy security agreement on the table, as well as the reset of the security arrangement.

The Saudis are looking for more defensive equipment, including Patriot anti-missile systems, new security guarantees, and assistance on a civilian nuclear programme, according to Helima Croft, global head of commodity strategy at RBC Capital Markets and a former CIA analyst.

Asked about a visit to Riyadh, expected to take place as part of a larger gathering of the Gulf Cooperation Council and as a stop on a trip when Biden will go to Israel and to Europe, a senior administration insisted there was no trip yet to announce.

But the official added if Biden “determines that it’s in the interests of the United States to engage with a foreign leader and that such an engagement can deliver results, then he’ll do so”.

For the market, Thursday’s deal may be mostly symbolic — signalling Saudi Arabia’s willingness to resume its role as an active swing supplier, the “central bank of oil”. Actual oil additions may be less than announced.

That may partly explain the market’s reaction on Thursday, with international benchmark Brent actually rising 1 per cent, to settle at $117.61 a barrel. Opec+ pledged to increase supply by 648,000 barrels a day in July and August. But most of it was already planned. The net proposed increase is just 216,000 b/d.

The extra supply could be dwarfed by supply losses from Russia, which produces 10 per cent of the world’s 100mn barrels a day of crude. The International Energy Agency has said Russia could lose up to 3mn b/d of production later this year as sanctions stifle its industry.

In addition to strains over the Khashoggi murder, US-Saudi ties have been strained over Biden’s failure to support Riyadh in the Yemeni civil war, which is widely viewed as a proxy conflict between the Saudis and its main regional rival, Iran.

Biden has also shown a preference to engage with King Salman rather than Crown Prince Mohammed, a sharp change from the Trump years, when the Crown Prince was assiduously courted by Jared Kushner, Trump’s son-in-law and adviser.

Some within Biden’s team have urged for a Saudi thaw for months, arguing a new relationship with the 36-year-old crown price needed to be struck with a leader who will probably rule the longtime US ally for decades.

Just how far the US president is willing to go remains to be seen. As a candidate, Biden pledged not to sell the kingdom more weaponry, and he has attempted to keep human rights and democratic values at the top of his international agenda.

“I’ve been clear that human rights will be the centre of our foreign policy,” he said last summer when American troops pulled out of Afghanistan.

But the Ukraine war has forced the White House to rethink much of its original foreign policy agenda, from climate policy to its laser-like focus on the US rivalry with China.

“This was an administration that came into office talking about net zero, the age of oil being over, a new policy paradigm, a pivot to Asia — but in a crisis has now gone back to tried diplomacy,” said Croft. “It’s a return to Realpolitik . . . in a crisis, you always pick up the phone and call Riyadh.”

>>> US After Hours Summary: STNE +21.3%, OKTA +16.5%, LULU +1.7%, RH +1.2% highe

After Hours Summary: STNE +21.3%, OKTA +16.5%, LULU +1.7%, RH +1.2% higher on earnings; JOAN -15.4%, ZUMZ -8.6%, CRWD -2.5% lower on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: STNE +21.3%, OKTA +16.5%, NX +9.5%, PD +3.4%, PHR +2.7%, NAPA +2%, LULU +1.7%, RH +1.2% (also authorizes an additional $2 bln to stock repurchase program), ALK +1.2% (updates its Q2 outlook; raises Q2 revenue guidance)

Companies trading higher in after hours in reaction to news: LOCO +10.8% (names new CFO), CHGG +8.1% (increases securities repurchase program by $1 bln), CLPT +1.8% (receives certification for the Medical Device Single Audit Program), WOR +0.8% (acquires Level5 Tools for $55 mln), COST +0.2% (May adjusted comps grow +11.8%), PINS +0.2% (to acquire THE YES), COIN +0.1% (will extend its hiring pause for the foreseeable future and rescind a number of accepted offers)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: JOAN -15.4%, ZUMZ -8.6%, HCP -8%, ASAN -4.9%, COO -2.8%, CRWD -2.5%, IOT -1.7%

Companies trading lower in after hours in reaction to news: KSS -7.7% (auction delayed indefinitely as several suitors bowed out, according to NY Post), KREF -4.1% (stock offering), MMAT -1.6% (stock offering), NOC -1% (awarded Missile Defense Agency contract with ceiling value of $249 mln), GPN -0.5% (names new CFO), DM -0.5% (stock offering)

FT : Fire Island — Disney’s gay romcom comes loaded with controversy

Fire Island — Disney’s gay romcom comes loaded with controversy
Asian-American-led movie mixing Jane Austen with ketamine and fellatio arrives in tricky times for the studio

In chipper new comedy Fire Island, the New York resort of the same name is called the “gay Disney World”. Last summer when the movie was shot, the line would have merely seemed impish, given that the financing came from Disney itself. Now it can’t help but sound loaded in a gay romance released in tricky times for the company’s relationship with the LGBT+ community.

First came a lack of response from the company in March to Florida’s new “Don’t Say Gay” school legislation, prompting angry staff walkouts at Disney. Then came a change of course into public opposition of the bill that angered Republicans, leading to Disney World being stripped of its ability to “self-govern” in the state. All things considered, Fire Island could be taken as a sincere landmark movie for the studio, Disney merely exploiting a market — or both. Either way, it finds itself still more caught up in the American culture war than it would have been in 2021.

Kudos to the film, then, that it feels as breezy as it does, a wry, intelligent riff on Pride and Prejudice. Jane Austen is a favourite of the resolutely single Noah (Joel Kim Booster, who also wrote the script) for all he disputes her universal truth that every single man “must be in want of a wife”. Here in place of the Bennet sisters, Noah and his affable misfit group of friends arrive on the island for their annual fix of hedonism, despite being poor relations amid doctors and lawyers with zero body fat.

Booster deals deftly not just with sexuality but with class and race (he and co-star Bowen Yang are Asian American), a smart grasp of pop culture adding another flavour to the familiar tale of lovestruck crossed wires. Ketamine and fellatio are new ground both for Austen adaptations and Disney, but the movie’s most radical step might be how subtly conventional it really is. Progress means sugar-coated romcoms for all.

>>> US Early premarket gappers


Early premarket gappers

  • Gapping up:
    • CHWY +17.2%, RPTX +17%, PSTG +12.5%, APRN +11.1%, PATH +11.1%, KIND +9.3%, MDB +9.2%, CRDO +8.5%, ESTC +7.4%, SANA +5.6%, VEEV +4.3%, PVH +4.1%, NTAP +3.4%, RIOT +2.8%, CMTL +2.7%, GSM +2.5%, ASGN +2.3%, BYD +2.1%, DHX +1.4%, VAL +1.4%, ORCL +1%, DAL +0.9%, BA +0.9%, SAIL +0.9%, DSGX +0.9%
  • Gapping down:
    • AI -23.6%, OZON -19%, HPE -6.2%, CNCE -5.4%, DAWN -4.9%, MGY -4.5%, OWL -4%, RDUS -2.3%, IGT -1.7%, FUN -1.6%, ARCB -1.3%, ANIP -1%