A board member of the trucking company Werner Enterprises has resigned, citing his frustration over the company’s “unquestioned dedication to ESG considerations as a primary strategy, and the refusal to adequately consider differing perspectives.”
Vikram Mansharamani tendered his resignation on Feb. 27, though the company stated in a regulatory filing Friday that Mansharamani, a director since 2021, “did not have the support” of its nominating committee and would not be recommended for reelection at the company’s annual meeting this spring.
Still, it’s unusual to see a director cite ESG as a reason for discontent, as nearly all companies have bolstered their environmental, social and governance practices in recent years.
Much of the pushback has come from conservative shareholders in the form of lawsuits against “woke” companies such as Target, which last May faced a backlash against its LGBTQ “Pride” sales and marketing campaign that caused its sales and its stock price to fall.
That a director now publicly expresses discontent was perhaps inevitable, given the divisiveness of ESG.
“I’m not surprised. I think you very well will see more of that. I doubt this will be the only one,” said Charles Elson, a retired University of Delaware finance professor and founder of the Weinberg Center for Corporate Governance.
ESG may be a bone of contention in boardrooms in light of its politicization, and board members should be discussing the issue, especially if change is needed, said Cindy Schipani, a professor of business law at the University of Michigan.
“But with issues such as climate change striking political discord, and the pushback we’ve been seeing by some large companies, I’m not surprised to learn of strong disagreements in the boardroom.”
Speaking last summer at the Aspen Ideas Festival, Larry Fink, CEO of the investment giant BlackRock and one of ESG’s biggest champions, said he continues to embrace the concepts behind ESG. However, he said, “I don’t use the word ESG any more, because it’s been entirely weaponized—the far left and … the far right.”
While numerous ESG battles have flared up across the country, they’ve typically involved separate parties with sharply diverging ideologies squaring off, not infighting within one organization.
“I have seen none of that (resignations over ESG) anywhere else with regard to directors. Nor have I seen it with any institutional shareholders—just the rock-throwers like us and our few allies,” said Paul Chesser, director of the corporate integrity project at the National and Legal Policy Center.
“I suspect if there was anything of that nature going on it would be done so quietly in most cases with the director stepping away or moving on, to be replaced with others aligned with the other existing board members,” Chesser added.
Mansharamani told the company that he had “ongoing material disagreements with the board” that “lead me to conclude I am no longer able to effectively serve as a director.”
In addition to his concerns over the Omaha, Nebraska-based company’s dedication to ESG he cited concerns over “repeated related party transactions.”
Though he did not elaborate, Werner in a recent Securities and Exchange Commission filing noted that North End Teleservices—whose CEO is Carmen Tapio, a Werner director who chairs the company’s ESG committee—provides temporary staffing services to the trucking company. Tapio’s company is the largest Black-owned business in Nebraska.
The deal is valued at $381,000, Werner said. “The company believes the terms of the agreement are no less favorable to the company than that could be obtained from unrelated third parties, on an arm’s length basis. Ms. Tapio did not participate in the approval of the transaction.”
In Friday’s SEC filing, Werner said that, while it “disagrees with Dr. Mansharamani’s statements, it carefully considers its policies and related practices and takes his report of ongoing material disagreements with the Board of Directors seriously. The Company is proud of its commitment to stewardship, community engagement, and effective corporate governance.”
Mansharamani did not respond to a request for comment from Law.com. He is founder, president and CEO of Kelan Advisors, a Boston-area company that provides strategic advice to corporate boards and C-suites.
Mansharamani—who on LinkedIn describes his profession as “independent thinker—holds a doctorate from MIT’s Sloan School of Management. He teaches finance and business ethics classes to students at Yale and Harvard and is the author of books including ”Think For Yourself: Restoring Common Sense in an Age of Experts and Artificial Intelligence” and “Boombustology: Spotting Financial Bubbles Before They Burst.”
On LinkedIn, Mansharamani last week reposted an article from geopolitical analyst Worth Wray that said: “I am increasingly convinced that ESG & DEI are destroyers of economic value and subversive scourges on free societies. At the same time, I suspect Corporate America’s recent flirtation with the dark side has backfired and inspired a whole new generation of unapologetic American capitalists.”
Yet Mansharamani in his own post isn’t entirely dismissive of ESG. He contrasted the profit-focused “shareholder capitalism” of Nobel Prize-winning economist Milton Friedman with the “stakeholder” capitalism approach popularized by World Economic Forum founder Klaus Schwab. The latter factors in everyone impacted by the decisions of a business.
“If a company is responding to a customer’s desires for lower carbon emissions in its supply chain, isn’t that designing an offering that is attractive to customers? Isn’t it just ‘good business’ to find the best talent and meet customer needs?”
“Ultimately, I’ve come to conclude that the social responsibility of a business is to increase its long-term profits and that by articulating the components of a good long-term strategy, there is no false choice between shareholders and stakeholders.”
Unfortunately, however, “the focus of boards is too often on the short-term. It’s time to take a step back, dismiss the false trade-offs and restore a focus on maximizing long-term profits with purpose.”
Werner’s 2022 corporate social responsibility update lists numerous ESG initiatives such an order for 10 electric trucks, operating a newer and more efficient diesel fleet and the use of solar panels to power a new company facility in New England.
In its recent SEC filing, Werner seemed more concerned about the consequences of not living up to ESG proponent’s expectations than stakeholders who oppose it.
It noted that ratings of its ESG initiatives can lead to “negative sentiment toward us by investors or other stakeholders, which could have a negative impact on our revenues, stock price and access to costs of capital” and impose additional costs on the company.
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