Over a decade ago I represented my employer, a manufacturing company, at an awards ceremony. The company was being honored for its long-standing support of the arts.
Corporate support of the arts did not strike me as being at all controversial. After all, like science and engineering, the arts inspire and challenge what is possible and encourage lifelong learning and creativity.
In accepting the award, I began by saying, “Successful businesses improve the human condition.”
So far, so good.
But then I added that I was accepting the award “on behalf of our shareowners, Board of Directors, and more than 200,000 employees around the world.” At that, I felt I was starting to lose the crowd. The business leaders attending the gala weren’t interested in answering to those folks.
Over time, as I spoke of fiduciary responsibilities and challenged feel-good assumptions of the managerial class in many other venues, I became known as the “conservative corporate responsibility guy.” Unfortunately, my theme—that instead of talking about “giving back,” businesses would do better to focus instead on “creating more”—fell increasingly out of fashion, even within business and financial circles.
Slipping away was the notion that turning an idea into a business, satisfying growing numbers of customers, and providing meaningful jobs was tremendously valuable to society. Instead, it was perceived as being not good enough.
Over the years, the concept of corporate citizenship evolved into corporate social responsibility, then sustainability. It now lives under a nebulous umbrella of environmental, social, and governance—ESG for short. Increasingly, corporate social responsibility has become corporate socialism requirements.
And there are growing numbers of people who want to impose their political and cultural preferences on the world and use your money to pay for it.
Notable purveyors of this flawed philosophy include some chief executives of the world’s largest publicly-traded companies and best known brands. It includes leaders of the world’s largest hedge funds who have weaponized retirement and investment portfolios. It includes global elitists who proclaim a “Great Reset” is needed and, urged by stale groupthink in their boardrooms, believe they can dictate what we are supposed to want, need, and think.
This is unpacked in brilliant detail in Stephen Soukup’s new book, “The Dictatorship of Woke Capital: How Political Correctness Captured Big Business.”
As Soukup sees it, CEOs in prior generations led with the bearing of generals and quarterbacks. Their modern counterparts never stand up straight because they are constantly kneeling before an endless array of stakeholders. In this, they weaken themselves and you—the corporate shareholders and employees—pay the price.
For example, according to Bloomberg, firms like Blackrock will spend $1 billion next year on data tracking ESG factors, continuing a 20 percent increase in each of the past few years. Imagine that type of compliance commitment multiplied across the Fortune 500. That’s untold billions that could instead go toward research and development, making each company more innovative, America more competitive, and your retirement more secure.
The same article acknowledges the “sharp increases in spending come even though ESG data isn't perfect. ESG ratings are often based on ‘incomplete or outdated’ data as there are no formal rules.” This lack of disciplined capital allocation has real impact.
Shareowners are being robbed. You literally own the company. It is your property, in the form of capital, which has made the production of useful products and services possible and now available in the marketplace for customers. And that capital is now being diverted to causes and purposes you never intended to support.
Employees, too, are being hoodwinked. Every day you allocate your property—time, talent, intellect—only to watch it be abused. Your agreement to give of yourself could reap greater rewards in the form of higher salary and benefits.
It also contributes to the curious phenomenon that, as the market achieves all-time highs, prosperity is not being more widely enjoyed. Unfortunately, the trend of stakeholder capitalism will continue to produce adverse effects by reducing wages, incomes, and employment.
Earlier this month, environmental nonprofit leaders asked America's CEOs to adopt a “climate advocacy agenda,” essentially reestablishing Obama-era policies that strangled the economy. This is not a one-off. There is a growing effort to shrink the economy to “save the planet.”
The boards and advisory committees of these nonprofits are saturated with big business representatives. In effect, they wrote this letter to themselves. In doing so, they depressed the value of their own role at their companies and in society.
That’s not good for business. That’s not good for people. The clarity, offered by Soukup, might be his most important offering: Business leaders have a choice, and they’re choosing wrongly.
The true path to elevating the human condition was affirmed with the recent release of the Heritage Foundation’s 27th Annual Index of Economic Freedom. It showed, once again, the undeniable linkage between economic freedom, individual liberty, and prosperity in nations around the world.
This prosperity is not just an end in itself. As Heritage President Kay C. James has written, “Prosperous peoples have the resources to take better care of their poor and their environments, create better health care and education systems, ensure an abundance of food and clean water, and solve many of the other societal problems that nations face, and that makes life better for all people.”
There is a right side in all of this. All clear thinkers and property owners—shareowners, employees, and investors—need to speak up. Don’t be silenced by loud voices from the statist, progressive Left. Their stakeholder claims carry no legal, ethical, or moral authority.
Experience teaches that even the best efforts of central planners and bureaucrats are unlikely to lead to sustainable growth and benefits. Centralization of power and decision making anywhere destroys the moral autonomy of human beings.
Successful businesses have a responsibility to improve the human condition. That responsibility is to advance free people and free markets.
This piece originally appeared in RealClear Markets