One of the last Gilbert and Sullivan comedic operas staged in London, Utopia Limited, satirized various aspects of Victorian life. Its chief target was the increasing domination of the joint-stock limited-liability company as a form of economic and social organization. This modern form of the company, which helped to unleash capitalism’s prodigious wealth-creation potential, was thought to be so successful that it might be imitated everywhere. Indeed, some even envisioned it replacing antiquated forms of political and social organization, such as government and the family. Consider a brief excerpt:
Zara: But perhaps the most beneficent change of all . . . has applied the Limited Liability principle to individuals, and every man, woman, and child is now a Company Limited with liability restricted to the amount of his declared Capital! There is not a christened baby in Utopia who has not already issued his little Prospectus!
Fitz: Marvelous is the power of a Civilization which can transmute, by a word, a Limited Income into an Income Limited.
In the end, the modern company did not replace other forms of organization. The social critics who had feared the world foreseen in the Gilbert and Sullivan libretto — from George Bernard Shaw to Anthony Sampson (in The Company Man) — were proven wrong. Modern companies generally stayed within their remit, organizing human activity strictly for economic life.
Yet with the advent of woke capitalism, societies now have the opposite concern: Companies and corporate CEOs are beginning to assume political roles and forms of organization for their economic enterprises. In this woke utopia, a company is no longer simply — or even principally — an entity obligated to pursue the economic interests of its shareholders, employees, and customers. Instead, it is a “platform” for political action. This company — its shareholders, employees, and customers — serves as a vessel for the CEO, a sort of super-citizen political actor, who acts without the normal oversight of corporate governance and on behalf of the company’s ubiquitous “stakeholders” and the entire globe. A contrasting satirical opera would have every baby issuing his or her own political-party manifesto rather than an investment prospectus.
Each American company and CEO would as well. Indeed, they’ve been doing so increasingly over the past year. Such statements aren’t exactly manifestos, correctly understood. That would imply a coherent philosophy along with its wide-ranging application to policy issues. No, instead, woke CEOs issue sentiments — trendy in the extreme and most often very far afield from their companies’ expertise. Take, for example, the CEOs who recently banded together to sign a letter criticizing Georgia’s new voting legislation. I know a number of the signatories and believe that they are good people and well-meaning leaders. But I also know that they have no relevant expertise in this or almost any other area of public policy in the news.
To be sure, this is a free country wherein everybody has a right to express an opinion. And, yes, the opinions of leaders in society do weigh more heavily than those of, say, the guy at the end of the local bar. But when corporate CEOs issue opinions framed explicitly as advocacy, we ought to ask: For whom are they speaking? Do they have a right to speak for their shareholders, employees, or even customers on any issue not directly in line with the company’s expertise? Do they have a right to add “political actor and advocate” to a company’s mission statement? They are, after all, supposed to be using somebody else’s money to do something economic, not political — a corporate-leadership role that heretofore required an uncommon focus and commitment to the company and its shareholders.
Were they charged with this political-advocacy role when they were selected? Did they demonstrate the requisite expertise and track record of accomplishment in today’s pressing policy issues as they presumably did in their areas of business expertise before they were chosen as CEOs? Do their structure, staffing, bylaws, and processes support coming to those political opinions with the same care and deliberation that marks any other activity of their enterprise? Have they asked their shareholders? Do they have the consent of the governed?
In almost all cases, the answer to each of these questions is “No.” The complex series of corporate decisions, processes, governance, oversight, and accountability that accompany most major corporate decisions are short-circuited when CEOs or companies hastily take institutional positions on gun rights, abortion, voting laws, policing, climate change, and so on. The language they use betrays them: It is either euphemistic, activist lingo intended to obscure complexities — e.g., “reproductive health care” — or sentiments so vague and banal that they don’t need to be stated. Is anybody for sick children?
It seems to me that these CEOs — who preside over companies with a diverse array of shareholders and employees — are simply hijacking the authority of their office. I would level that judgment of a CEO who takes a so-called right-wing or a left-wing advocacy position. Shareholders and employees, let alone customers, know what they are getting into with Ben & Jerry’s ice cream or Black Rifle coffee (I love both). But for the most part, activist CEOs and fund managers are taking shareholders along for the ride and usually without consent. The charge is not about the political stance; it is about the duty of the CEO and the board of directors — one I felt keenly when I was a public-company CEO and director.
Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management, tells us that today’s CEOs need to respond to the demands of their Millennial and Generation Z employees for political activism. I tell CEOs to push back on Millennials who want everything to be imbued with politics. In looking around at a world in which political institutions and processes are the least trusted in our society, who can possibly make the argument that we need more politics in the workplace, or in the church, or at the town picnic? Today’s scorched-earth politics can ruin much of what it touches, often without achieving any of its purported goals. Every nonpolitical institution that has been perceived to have been “politicized” has rapidly shed trust and confidence. Americans’ confidence in big businesses is at an all-time low in polls — and some 50 points below small businesses.
If we take woke capitalism to its logical conclusion, then CEOs who view their legitimacy and authority as extending to political activism on behalf of all the constituents in their economic enterprise would need to hold forth on many more issues than whatever has seized the Yale dean at the moment. They’d surely have to enlist policy staff, pollsters, focus groups, and others to keep up. What would make for boundaries if a company or CEO should have an active “voice” on just about everything a stakeholder in humanity could care about? Whom do you call on Walgreens’s foreign-policy staff to ask about their position on the recent Israeli–Palestinian dustup?
I often ask CEOs who are playing this role how they would feel if the shoe were on the other foot. Imagine an elected political official stepping in to make product-design decisions in an economic enterprise, asserting that he had a platform — a voice — on behalf of “stakeholders.” No CEO, board, or shareholder group would tolerate it.
Robert Frost reminded us that good fences make good neighbors. In the same way, good boundaries make good civilizations. We have our political institutions and political actors, bound by law, convention, and practice. A company CEO gets to act in this as a citizen, citizen leader, or even an activist on his own time and privately, but not by usurping the leadership office given to him for other reasons. If the company or the CEO is truly to be a super–political actor, how does a political system account for that? Does the corporation get a super-vote? A bulk vote? By what process is that determined? By its employees? By its customers, revenue size, or enterprise value? The argument collapses into absurdity.
Some have begun to resist it — the recent letter from the CEO of Shopify being a perfect case in point and a necessary commonsense corrective. “Like any other for-profit company, [we] are not a family. Shopify is also not the government,” the statement read. Thank you, Shopify.
This issue is not simply a personal irritation with CEOs playing politics — something akin to Laura Ingraham’s rejoinder of “Shut up and sing” to artists who get political. No, something much deeper is at stake.
Units of organization and how they interact constitute one of the great questions of a functioning society: Who does what around here, and why? Organizational units come into being based on circumstance, need, tradition, convention, law, and religion, among other factors. They endure, however, by maintaining their legitimacy through a consensus in thought and in the law about their source of authority, their expertise, their utility vis-à-vis other institutions, their role in “the system,” their boundaries, their structure, and their mechanisms for governance and oversight. This is true from the family, in its many forms, through to governments and supranational organizations.
Enduring political and economic institutions in our society are legitimized in great measure by a set of transparent processes that give institutions some sense of representing those who belong to them. It is not by accident that political institutions characterized by representative democracy and economic institutions characterized by shareholder rights developed around the same time in Northwest Europe a few hundred years ago. Both phenomena were rooted in the same radical thought — that the legitimacy of the institution itself was based on the consent of the governed. And that the leaders of the organizations ultimately served in the interest of the citizen or the shareholder.
It was a dramatic reversal of the “Who works for whom?” formula that had animated most of human history. It was, moreover, a reversal that propelled the West dramatically ahead of more-sophisticated and more-resourced civilizations at the time that could not adapt this philosophy because of legal and cultural constraints. Many economic historians trace the dramatic separation in prosperity of the past few hundred years between the “West and the Rest” to the ancient legal and cultural restrictions in Islamic and Chinese systems that disallowed a separation of economic institutions from familial, tribal, or political systems. In the West, new systems and forms of organization replaced — not always, but in the main — institutional relationships organized along dynastic and personal lines with ones organized along impersonal lines reinforced by the rule of law. It allowed, in the case of companies, for complete strangers to have sacred economic relationships with one another bound by law and the consent of the governed. This arrangement precipitated an explosion of freedom and wealth.
Consent of the governed in a modern company is not a sentiment. Public or private companies — small or large — are governed by complex bylaws and systems of governance and oversight. Corporate leaders have an obligation, grounded in law and convention, to advance the interests of shareholders, employees, and customers. Serving as spokesmen on trendy political or social issues is not one of those interests, and it runs afoul of their fundamental purpose as corporate leaders.
Recognizing that the proverbial horse has left the barn, some conservatives have proposed a kind of economic Benedict Option featuring nonwoke investment funds, stock indexes, banks, analysts, and the like to support companies and CEOs standing against the overt and intentional politicization of their enterprises. This is compelling — and probably a great investment compared with underperforming “ESG” companies, which use environmental, social, and governance criteria for investing — but it ultimately gives up too much terrain to a destructive trend that is causing capitalist societies to self-emasculate by giving up a key competitive advantage.
Conservatives or other traditionalists who value propriety and boundaries in the economic sphere need to push back against woke capitalists and woke capitalism. An avalanche of shareholder resolutions should confront woke CEOs who have made their political moves without shareholder and employee consent. Lawsuits could address the dereliction of duty that follows from commandeering one’s office and source of authority to perform a different role. Activist investors should prey on companies that are more interested in woke theater than in economic performance and employee livelihoods. Conservative shareholder-services groups and even rating agencies could be stood up to grade boards and hold them accountable for their systems of governance.
Woke CEOs who become political actors without the full spectrum of debate and transparency and without some measure of the consent of their shareholders expropriate the legitimacy of their office. It is poor stewardship and ultimately a threat to the system of organization that allowed representative democracy and shareholder capitalism to create the thriving, modern world we enjoy today.
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