Corporate America bowed to Trump before he was even in the White House

Before Donald Trump's inauguration, some large American corporations had already begun to adjust their positions to align with the new administration's policy direction, a shift that is playing out globally. The new president's views on diversity, workplace inclusion, and climate change policies would have recently sparked strong opposition from the American business community. However, many American companies are now showing a significant change in attitude, a shift that has even reached Australia.

Meta CEO Mark Zuckerberg is perhaps a prime example of this sudden shift. He disbanded Facebook's fact-checking team, citing bias, a move that ironically exposed his possible need for better fact-checking mechanisms. More recently, he also complained that workplaces needed more "masculinity." Trump's landslide victory in the US election has emboldened politicians in other countries, including Australia, who are also beginning to retreat on "progressive" policies, with boards of directors in developed countries taking preemptive action.

However, there are limits to how much political and corporate leaders can shift their positions. Politicians need to win elections, so cutting back on the rights of women and minorities in the workplace may backfire in future votes. Similarly, corporate leaders need to maximize profits if they want to keep their jobs. They adopt climate change strategies not only because the scientific evidence is conclusive, but also because they represent a significant business opportunity. Worse, ignoring climate change can lead to enormous long-term costs, particularly in industries like insurance.

Nevertheless, there are obvious contradictions in the new approach. Currently, almost any criticism can simply be dismissed as "woke." Trump's second presidential term has already encouraged boards to retreat on "progressive" policies. For example, in previous years, Macquarie Bank would publish its progress in reducing exposure to carbon-intensive industries each December, but last month's annual update failed to appear, with global financial institutions sensing the shift and choosing to quietly retreat.

Fearing that environmental targets could expose them to legal action for neglecting their duty to investor returns, some of the world's largest money managers have quietly abandoned commitments made after the Glasgow COP21 meeting. About two weeks ago, global finance and investment giant BlackRock withdrew from the Net Zero Asset Managers initiative, a group of more than 300 large investment groups managing nearly $97 trillion in assets. This caused panic in the industry. Three days later, the group abruptly announced a suspension of itself and its activities, solemnly pledging to keep the identities of its remaining members secret, rather than work to reduce emissions. The reason was the impending Trump administration. "Recent developments in the US, along with differing regulatory and client expectations across investors' respective jurisdictions, have led NZAM to initiate a review of the initiative to ensure that NZAM remains fit for purpose in the new global context," the group stated.

A number of Australian institutions, including IFM Investors, Macquarie, and Magellan, are also members of the initiative. Previously, financial institutions had viewed climate change as an investment issue, not wanting to be caught lending to or investing in stranded assets, so reducing exposure was a prudent move. Seizing on this new trend, Opposition Leader Peter Dutton recently attacked "woke bankers" and threatened to implement a new regime forcing banks to lend to reputable fossil fuel or forestry extraction companies. Some of the world’s largest money managers have already distanced themselves from past net-zero commitments.

The evolution of environmental, social, and governance (ESG) has been a long and slow process, occurring under governments of all political persuasions. Since the start of the century, investors have been demanding that public companies be held accountable, accept scrutiny, and adhere to stricter environmental controls and labor laws. Similarly, as laws aimed at eliminating discrimination based on gender, race, and sexual orientation have become more rigorous, calls for diversity, equity, and inclusion within companies have grown louder. This has led executives of public companies to make statements that have been seen as interfering in politics. For example, Qantas and Commonwealth Bank executives expressed opinions on the Voice to Parliament referendum and the same-sex marriage plebiscite, angering some Coalition politicians, including Dutton, who have made it clear that company executives should focus on providing better customer service.

Having spent significant time and effort improving workplace culture and tying bonuses to the implementation of these programs, the bosses of our largest companies have been actively promoting their progress as a way to attract top talent. Harassment within companies, whether sexual or otherwise, can come at a high cost, including legal fees, fines, and reputational damage. To cut back on diversity programs would first require relaxing laws, which could backfire politically in the future.

The message that Donald Trump is sending to the American business community is unmistakable. Aside from targeting any company that has factories overseas, the future focus will be on hiring the best people, not trying to elevate employees based on factors like diversity, equity, and inclusion. The US will return to a merit-based system where gender or race will no longer play a role. However, this philosophy appears to contradict the ideals presented in "Project 2025," which has the explicit goal of hiring only Trump loyalists into government departments and much of the public service, a policy that takes "political correctness" to a new level. Similar contradictions exist in climate policy.

During his last stint in the White House, the president withdrew the US from its commitments under the Paris climate accord, and since then, he has supported fossil fuels with the slogan "drill, baby, drill." But his seemingly fanciful plan to buy Greenland is closely related to climate change. From a security and strategic point of view, as the polar ice cap melts, the waters between Greenland and the UK have become a less hostile route for shipping, making it easier for Russian and Chinese ships to access North America. In addition, there is the economic appeal. The island is rich in natural resources. Greenland not only has substantial oil reserves but also possesses large quantities of critical minerals, particularly rare earths, which are crucial not only for weapons production but also for the technology needed to produce renewable energy and electric vehicles. As the ice covering 80% of the island melts, the terrain once considered too harsh is becoming more accessible for mining these minerals, making them even more valuable.

Donald Trump and consistency rarely appear in the same sentence, but his push to remove diversity clauses and environmental regulations in the workplace has struck a strong chord with those who feel left behind or unfairly overlooked. The American business community seems to be temporarily supporting Trump. But cutting back on workplace legal protections and environmental laws may be a more difficult task.