The Securities and Exchange Commission (SEC) sided with conservative investors this week in their request to investigate what they say is PayPal’s systemic political and religious discrimination against customers.
Over the objections of PayPal’s management, the agency allowed a proposal by the National Center for Public Policy Research (NCPPR) to go to a shareholder vote at the company’s next annual meeting. This decision follows a similar decision on March 29, in which the SEC green-lighted a proposal regarding alleged political and religious discrimination at JPMorgan Chase, the United States’ largest bank.
In an April 10 letter to PayPal’s attorneys, the SEC stated that NCPPR’s proposal “requests that the board conduct an evaluation and issue a report within the next year evaluating how it oversees risks related to discrimination against individuals based on their race, color, religion (including religious views), sex, national origin, or political views, and whether such discrimination may impact individuals’ exercise of their constitutionally protected civil rights.”
Responding to PayPal’s request to block the proposal from going to a shareholder vote, the SEC stated: “We are unable to concur in your view that the Company may exclude the Proposal under Rule 14a-8(i)(7). In our view, the Proposal transcends ordinary business matters.”
PayPal had argued that its shareholders shouldn’t consider NCPPR’s request because the issue of viewpoint discrimination is part of the company’s “ordinary business operations” and that “the proposal seeks to ‘micro-manage’ the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment.”
The NCPPR proposal stated, “Companies that provide banking or financial services are essential pillars of the marketplace. On account of their unique and pivotal role in America’s economy, many federal and state laws already prohibit them from discriminating when providing financial services to the public. And the UN Declaration of Human Rights, consistent with many other laws and the U.S. Constitution, recognizes that ‘everyone has the right to freedom of thought, conscience and religion.’”
Conservatives Claim Viewpoint Discrimination
“We know from news stories that PayPal has been discriminating on the basis of viewpoints, shutting down accounts that differ from their ‘woke’ political principles,” Scott Shepard, a director at NCPPR and co-author of the proposal, told The Epoch Times. “We’re giving them a chance with this to consider ways to rectify those problems.”
PayPal has scored well in terms of its support for progressive causes. Standard & Poor’s ranked it a 49 out of 100 in the social justice category of its environmental, social, and governance (ESG) score, more than double the industry average of 22, although below the industry best of 90. Its overall ESG rating has increased steadily to 58 today from 18 in 2018.
PayPal scored a perfect 100 percent on the Corporate Equality Index (CEI), published by the Human Rights Campaign (HRC). The HRC publishes various corporate indices that it says are “benchmarks of LGBTQ-inclusive policies, practices, and benefits of our nation’s employers.” Noting left-wing philanthropist George Soros’s funding of the HRC, some analysts have suggested that campaigns such as Bud Light’s endorsement of trans activist Dylan Mulvaney were part of a standard corporate practice of pursuing high scores from ESG rating agencies and progressive organizations such as the HRC.
Anheuser-Busch, the brewer of Bud Light beer, scored 100 on HRC’s Corporate Equality Index.
The NCPPR proposal suggested that PayPal also take note of the Viewpoint Diversity Index, which is produced by the Alliance Defending Freedom and measures “corporate respect for religious and ideological diversity.” According to this metric, PayPal scores 5 out of 100 in terms of respecting customers’ and vendors’ freedom of expression and belief and has an overall viewpoint diversity score of 7 out of 100.
JPMorgan, whose shareholders will be voting May 16 on a proposal to investigate political and religious discrimination, also scored a perfect 100 on the HRC’s Corporate Equality Index.
Regarding companies’ CEI scores, Shepard said that “they can only get the scores they received if they’ve been taking hard-left positions in the culture wars.” JPMorgan Chase scored 15 out of 100 on the Viewpoint Diversity Index.
Asset Managers, Proxy Agents Control Corporate Votes
Neither the PayPal nor the JPMorgan proposal is likely to get majority support from shareholders because proxy agents such as ISS and Glass Lewis will recommend against them, he said, and asset managers such as BlackRock, Vanguard, and State Street habitually vote against them. According to a Harvard study, institutional asset managers–such as mutual funds, index funds, and pension funds–own about 70 percent of all corporate shares, compared with 30 percent that are owned by individual shareholders.
ISS and Glass Lewis are the two largest proxy voting agents and together represent an estimated 97 percent share of the industry. Proxy agents advise asset managers and other shareholders how they should vote at corporate shareholder meetings and often vote on shareholders’ behalf.
According to Glass Lewis’s ESG Initiatives, it advocates that corporations disclose and manage their climate change practices:
“In instances where we find either of these disclosures to be absent or significantly lacking, we may recommend voting against responsible directors.”
Glass Lewis also recommends that shareholders support racial equity audits.
Despite its long odds of success, NCPPR continues to put conservative voting proposals in front of corporate shareholders, requesting an examination of policies that may be discriminatory.
“It does put these corporations on the spot by explaining to them in an official, public way, that they’re failing in their fiduciary duties by throwing away customers because of their executives’ personal preferences and in ways that create, among other things, litigation liability for them,” Shepard said.
NCPPR has put similar shareholder proposals in front of MasterCard, Capital One, and Charles Schwab. All of those will go to a shareholder vote without intervention from the SEC because management of those companies, although not supporting the proposals, didn’t challenge them.
PayPal didn’t respond by press time to a request by The Epoch Times for comment.
Kevin Stocklin is a business reporter, film producer and former Wall Street banker. He wrote and produced "We All Fall Down: The American Mortgage Crisis," a 2008 documentary on the collapse of the mortgage finance system. His most recent documentary is "The Shadow State," an investigation of the ESG industry.