A Letter From Justin Danhof

Senior Advisor

Justin Danhof

Senior Advisor,
Corporate Governance

When I was young, my favorite classes were all history. I devoured Greek and Roman, the Renaissance, the Enlightenment, the Industrial Revolution, the Great World Wars, and everything in between. But growing up in New Hampshire, the one era we were taught more than any other was our nation’s founding and the Thirteen Colonies. Our teachers taught us about the founding seemingly every year to the point my classmates and I just assumed it was state law.

By middle school, we could recite passages from Longfellow’s “Paul Revere’s Ride,” repeat the line “don’t shoot until you see the whites of their eyes,” and reenact the Boston Massacre as well as the Boston Tea Party. Our field trips were to historical sites such as Plymouth Rock where it all began (it’s a little underwhelming), Bunker Hill, and Boston’s Freedom Trail. The sites help weave the story, but what always stood out to me is the Founding Fathers themselves. Many of them were men of means that didn’t have to take such extraordinary risks to break free from the motherland and its monarchy. But they did. And their sacrifices allow us to live on this shining city upon a hill and continue the American experiment more than 250 years later.

The Founding Fathers were far from a monolithic group. If you read some of the back and forth between the federalists and the anti-federalists, you could be forgiven for thinking they were downright hostile towards one another. Despite their differences, they shared a common vision – freedom from an oppressive regime.

What our Founders created was one of the best governance systems in all of human history. Famously, at the federal level, they set up a series of checks and balances amongst three coequal branches of government: Legislative, Executive, and Judicial. That system has held strong for more than 230 years.

In the investment stewardship landscape, there are not three coequal branches; there is still only one King – the shareholder. As such, Strive’s corporate governance activities are trained on driving long-term shareholder value. Strive exercises three main co-equal “branches” to achieve maximum results for our clients: proxy voting, public engagement, and private engagement. As explained in the Stewardship Philosophy section, these activities function as three essential legs of a stool. And I am incredibly proud of what our dedicated corporate governance team achieved this past season by thoughtfully wielding those tools.

America’s Founders weren’t only brilliant for setting up a tri-part federal government – they gifted us with a federalist system as well. Under the Tenth Amendment of the U.S. Constitution, all powers not specifically given to the federal government remain with the states and the people. As U.S. Supreme Court Justice Louis Brandeis later explained, this structure allows states to operate as “the laboratories of democracy.”⁶

In many ways, the different types of funds that have emerged in recent years serve as experiments in the laboratory of the capital markets. There are funds for nearly every kind of investor that wishes to express their values in the market. Some funds invest only in companies with high ESG scores, some exclude fossil fuels, or abortion providers, or invest only in companies that align with Biblical views. There’s even a fund dedicated to vice stocks, like gambling, alcohol, and drugs, and many more.

This competition for values through fund selection is healthy. If the people that run these funds are transparent in what they choose to invest in, investors can be clear-eyed in how they are spending their money to advance social causes aligned with their beliefs.

At Strive, we only drive towards value, not values. We don’t try to handpick the most virtuous companies or exclude the most sinful ones. We invest broadly, and ask all companies to deliver for shareholders. Our stewardship activities are doggedly focused on driving long-term shareholder value. Our votes and engagements are all made accordingly. We are not for everybody and that’s okay.

In recent years, an unfortunate movement has emerged in the corporate governance space that we are forced to address – corporate politicization. Many shareholder proponents and asset managers are asking companies to engage in overtly political matters that aren’t germane to core business functions. This is an end run around the system our founders established. Rather than going through the front door of Congress, the courts, or their respective state house, investors are going through the back door and demanding that companies take the lead on social and political issues. I don’t think that Thomas Jefferson and James Madison envisioned a future where mega-corporations, banks, retailers, and entertainment giants would be the moral arbiters of American society.

Strive does not push companies to the political left or the right. Rather, our votes and engagements are aggressively apolitical in our pursuit of value. By asking business leaders to stay true to their corporate mission, we try to orient companies back to their one true sovereign – the shareholder.

I hope you enjoy our report as we detail how Strive’s governance department is changing corporate America for the better, one company at a time.