Walt Disney Company last week sued Ron DeSantis and the State of Florida for violating its First Amendment rights because Florida retaliated against Disney for speaking out against Florida’s new “don’t say gay” law. While there’s been a lot of press on this fight, attention is just being given to the strength of Disney’s First Amendment claims in the lawsuit. The reality is states can’t discriminate, as Florida is doing here, against companies that take political positions they don’t like. The US Supreme Court in the famous Citizens United case said corporations have the same free speech rights as individuals.
Disney believes it’s important to speak out on these workplace/societal issues, a part of the “Social” component of the Environmental, Social and Governance (ESG) factors that most companies now act and report on. Florida’s retaliation against Disney is part of a campaign against “woke corporations” promoting and utilizing ESG factors in how they invest and run their businesses. Trump calls ESG “radical-left garbage” and DeSantis says it’s “an attempt to impose ruling class ideology on society through publicly traded companies and asset management.” Advocates say good ESG practices are important to the long-term financial success of companies in an evolving world with challenges like attracting diverse workers and the need for companies to slash greenhouse gas emissions in the face of climate change.
States ARE free to enact either pro or anti-ESG laws but only so long as they don’t violate the US Constitution. We previously wrote a piece explaining how many of these anti ESG laws violate the Commerce Clause of the Constitution, which gives the US Congress the exclusive right to regulate interstate commerce. But these laws also violate the free speech rights of pro ESG companies who are penalized by anti ESG states.
Blackrock has also been exercising its free speech rights. It’s the largest asset manager in the world and its CEO Larry Fink is well known for espousing ESG principles in his widely read annual letters. As a result, Blackrock has been the main target of anti ESG laws in Texas and Florida where it has been cut off from managing state pension money. Citigroup, JP Morgan and Goldman Sachs were banned from doing municipal bond offerings in Texas because Texas found they discriminate against the firearm and oil/gas industries.
We won’t see a decision in the Disney case for a while, but a 2022 federal court decision about a Texas law that blacklists companies that “boycott” Israel makes the point. An engineering company was cut off from a contract with the City of Houston because its CEO was critical of Israel’s treatment of the Palestinians. He refused to do business with Israeli companies. The Texas federal court judge found the law to be an unconstitutional violation of the company’s free speech rights and reinstated the contract. He based his decision on controlling US Supreme Court precedent that instructs that the government cannot force someone to give up free speech for a government benefit.
The anti ESG political movement was already sputtering. With the Disney case, red states are now on notice they can’t retaliate against powerful US corporations that exercise their free speech rights.
In related news:
This past week, over 30% of shareholders of Goldman Sachs, Wells Fargo and Bank of America voted for more aggressive climate transition plans than corporate management recommended. https://www.ft.com/content/8318f146-a41c-49f8-94df-811799b0c60f?shareType=nongift
And The NY Times published a story on Monday along the same lines as our article. https://www.nytimes.com/2023/04/30/opinion/disney-desantis-florida-lawsuit.html