'Fire And Fury – Inside The Trump White House' by Michael Wolff will engender a new confrontation between fatalism and activism. Fatalists will argue with a usual dose of cynicism that there is nothing new when it comes to Mr. Trump’s erratic behavior; that the allegations of substance-less approach to (geo)politics must be significantly discounted; that the wild White House dynamics were an open secret in DC; that they did not prevent a comprehensive tax bill from being passed; and, most critically, that dysfunctionality is the standard product of most presidential administrations anyway. Let us move on! Activists will instead draw attention to the abnormal modus operandi of the office of the Chief Executive Officer of the U.S. of A. to anyone endowed with some common sense. They will call for all sorts of actions.
Who will prevail? Activists start with a natural advantage. Aptly defined by Wikipedia as ‘the efforts to promote, impede, or direct social, political, economic, and/or environmental reform or stasis with the desire to make improvements in society’, activism is constantly gaining ground in its fight against fatalism. It is driven by the world’s innate ambition to climb up a Maslow pyramid of values.
In the financial markets, for example, shareholders activism has been noticeably on the rise. Globally, the number of proxy contests initiated by activist shareholders increased by 25% in 2017 vs. 2016, with M&A (split or sale of the targeted company) as the principal campaign objective. This took place with an unprecedented level of support from institutional investors: Activists are quickly moving away from a pariah status and successfully positioning themselves as upholders of the deepest capitalistic values – even in Europe. Last year, the Old Continent saw investments by activists of circa $20bn (driven by US activists, primarily Elliott and Third Point) and accounted for a quarter of the campaigns launched worldwide, the highest contribution level ever. The UK attracted the largest number of campaigns, followed by Italy and Germany. The industrials sector was the #1 target sector globally. Given the transformation it is undergoing, its leading position in this ranking may last.
Activism is not only intensifying in the world of finance. Consumers, and more generally end-users, have become more active too. They now require a highly ethical behavior from their suppliers. Last year, Philip Kotler, the renowned marketing professor, declared in an excellent article: ‘Finally, brand activism!’. Patagonia, Ben & Jerry and The Body Shop are cited as precursors of this now broadening movement which may lead to some soul-searching amongst many firms, including in Diversified Industrials. Interestingly, Archie Carroll provided a framework for the evolution of corporate social responsibilities in 1991 already when unveiling a pyramid of value: economic responsibilities represent the foundation on which to build legal, then ethical and finally philanthropic responsibilities. The question posed to corporates today is not only ‘What do you stand for’ but also ‘What do you actively do about it?’ The challenge for all firms goes far beyond the definition of a strategic vision.
Last but not least, ‘Time’s Up’, the high-profile organization launched a few days ago by women working in film, television and theater against sexual misconduct, represents another example of growing activism and declining fatalism.
Tolerance for ineffective or plainly unfair and inappropriate behaviors and policies is at ground zero, which is where it should be. Moreover, the scope of acceptable behaviors and policies is tightening every day. There is nowhere to hide – Time is up indeed. Given these trends, Mr. Wolff’s book’s potential consequences for US politics may be underestimated by many, especially by those with a fatalistic bias. Bold initiatives from activists against the White House and its supporters cannot be excluded, beyond the conventional media, and enabled by social media. And a besieged White House Management team may respond to growing pressure with unpredictable acts. Whether economists and the financial markets fully grasp the implications of this scenario is questionable.