It’s Time to Wake Up to ‘Woke Capitalism’
Should Corporations Be Encouraged to Influence the Political Process?
It's well known that corporations donate to politicians of their choice. This has been going on for many years. What's not so clear is whether the concept of "woke capitalism" is ratcheting up the support in a more tangible way that creates a further divide in society. Are such actions consistent with corporate social responsibility?
Corporate Social Responsibility
I have previously blogged about whether corporations are socially responsible and serve the public interest. I wrote that blog in reference to Milton Friedman’s seminal article on the social responsibilities of corporations. He attacked the controversy about whether corporations should strive to meet social responsibility goals in his now famous expression: “In a free society,…there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception fraud.”
Friedman proclaimed that a corporation is a morally neutral legal construct with maximizing returns for shareholders as its single purpose. Directors and executives of a corporation are employed to achieve this sole objective. The only moral responsibility of directors and executives is to meet shareholder expectations, which is to maximize their return on investment. He considers this ethical because the directors have a moral duty to ensure the survival of the corporation.
From an ethical perspective, I disagree with Friedman. Utilitarianism holds that decision-makers should provide the greatest good for the greatest number of people so that companies are ethically obliged to participate in socially responsible activities that maximize the total welfare of all stakeholders. This has become known as “stakeholder capitalism.” In fairness to Friedman, his statement was published in a New York Times article in 1970. A lot has changed in the last 52 years.
Corporations wield a great deal of influence over the lives of others whether in terms of salaries, wages, and benefits, making charitable contributions, developing communities, economic expansion and, of course, climate change. They need to be circumspect about what they do and how they do it.
The idea of "conscious capitalism" is worth considering as a mantra for corporate behavior. Conscious Capitalism refers to a socially responsible economic and political philosophy. The premise behind conscious capitalism is that businesses should operate ethically while they pursue profits. This means they should consider serving all stakeholders involved including their employees, humanity, and the environment—not just their management teams and shareholders. The idea of conscious capital was created by Whole Foods co-founder John Mackey and marketing professor Raj Sisodia.
While conscious capitalism still pursues a profit, it emphasizes doing so in ways that sincerely consider the interests of all principal stakeholders. The philosophy recognizes that some stakeholders, namely the environment, cannot speak for themselves but are still necessary considerations when making business decisions.
What is Woke Capitalism?
The new kid on the block is Woke Capitalism. In 2015 Ross Douthat coined the term "woke capitalism" when writing a piece for the New York Times. He defined it as “how companies signal their support for progressive causes in order to maintain their influence in society.” The question to ask is whether a corporation’s political leanings in the form of the political views of its top executives and board of director members should have a role in the decisions corporations make with their resources and economic influence on society.
There is an interesting book by Vivek Ramaswamy called “The Dangers of Woke Capitalism.” In it, Ramaswamy says that:
“Woke capitalism reflects the invasion of capitalism into the sphere of life properly reserved for the democratic process. He worries that corporate actions ranging from persuasion (e.g., tweeting support for a social movement) to coercion (e.g., firing an employee for expressing a politically incorrect thought) are eroding the ability of Americans to govern themselves democratically, instead concentrating power in the hands of a few rich executives and the advocates (and dictators) who have their ear. To Ramaswamy, this reflects an abuse of corporate power and a betrayal of the purpose for which corporations were established in the first place: to seek profit by providing goods and services.”
According to an article on the website of transformingsociety.co.uk, woke capitalism is where “major corporations, CEOs and the uber-rich publicly and financially support political causes normally associated with the progressive left. The #MeToo movement, Black Lives Matter, same-sex marriage, climate activism and animal rights are just some of the divisive political causes big business has backed in recent years.
Supporters argue that corporations have responsibilities to their ‘stakeholders’. They contend that businesses should have a social purpose and should care for all the constituents who have a connection to them. By this limited view, woke capitalism, if done authentically, can be desirable because the power and reach that corporations have today can be used to make the world a better place. However, just because corporations have a right to do it that doesn’t mean it’s the right thing to do.
The problem with woke capitalism, as I see it, is that corporations become a political tool. I believe it is a bridge too far for corporations to get directly involved in the political process. It’s one thing to support worthy causes using corporate funds, so long as it represents shareholder interests – the owners of the corporation --, but quite another to seek to influence elections, and that’s what’s going on in the U.S. today. Let me be clear, it’s just as wrong for the right to do as it is the left.
Taken to its extreme, woke capitalism might focus next on gun control issues, which certainly need to be addressed but by Congress, not corporations. As a country, the U.S. has been unable to make significant changes in gun control laws for dozens of years. Perhaps the awful events of mass murder the last two weeks at a supermarket in Buffalo, New York and an elementary school in Uvalde, Texas, might not have happened with much stronger gun controls. But that’s a subject for another day.
Are Corporate Executives Acting in the Interests of Employees?
Do we really want corporations to be “woke” and use their resources and influence to move society in one direction or the other? I think not. Let them increase the wages of the average worker and benefits as well. That’s what’s most needed in the sense that employees lag terribly in average pay when compared to CEOs.
It was announced on May 15, 2022, that in an analysis of more than 400 companies by the Wall Street Journal, corporations recorded annual shareholder returns of nearly 30 percent. The median pay package for CEOs of the same companies was $14.7 million as compared to $13.4 million in 2020. In 2020, top CEOs earned more than 351 times more than the typical CEO.
It is true that the majority of these amounts are in stock options, which CEOs can exercise and buy stock of their companies. This is typically done when the stock is selling in the market at a price greater than the price the CEOs would have to pay to exercise their options. The monetary gain to CEOs is the difference between the current market price at the exercise date and the price they must pay to exercise their options.
Once again, I want to remind readers that I am not taking a stance one way or another. The attack on abortion rights by conservatives, much like the attack on voting rights, is at least partly sponsored by some of the largest and most well-known companies in the U.S.
Both progressives and conservatives should be held to the same standard. It would be just as wrong if corporations exercised their “wokeness” and financially support anti-abortion causes. Let’s leave these to the states to decide and the U.S. Supreme Court.
Blog posted by Dr. Steven Mintz, The Ethics Sage, on May 31, 2022. You can sign up for Steve’s newsletter and learn more about his activities on his website (https://www.stevenmintzethics.com/) and by following him on Facebook at: https://www.facebook.com/StevenMintzEthics and on Twitter at: https://twitter.com/ethicssage.