Turning the Corporate Left's Own Tools against It
National Review, June 10, 2021 (July 1, 2021 Issue)
To say that tackling woke capitalism will not be easy is an understatement. Its ascent is the product of, among many other factors, the political challenge posed to free markets by a misunderstood financial crisis, the relentless leftward drift of our institutions, and, as always, the jockeying for power — and its prizes — among our elites. And then there is the manner in which anxiety over climate change — a key contributor to the current effort to redefine the nature and purpose of a corporation — is being used to overturn many of the economic and political assumptions on which our society is organized, thus intensifying what is already a perfect storm. Oh yes, there is also the small matter of the Democrat several months into his term in the White House, and the kind of president that he is proving to be.
The sole silver lining in this very dark cloud is that woke capitalism has made so many inroads that a pushback has been spreading beyond the op-ed pages for a while now and even, in the last months of the Trump administration, included a commendable — if, as it sadly now appears, temporary — toughening of the rules governing “socially responsible” investing (SRI). More recently, the writers of an editorial in the Wall Street Journal noted that Consumers’ Research, a conservative nonprofit, was running advertising highlighting the contradiction between certain companies’ woke proclamations and their sometimes grubby ways. China was mentioned.
Exposing the mismatch between executives’ fine words and their less than shining deeds is traditionally a habit of the Left more than of the Right. But if the growing politicization of some of our most important enterprises is to be stopped, the Right would do well to adopt some tactics honed by the Left. After all, it is late in the day to think that starting a long march through the institutions, however worthwhile in due course, will find success anytime soon.
By contrast, campaigns such as that run by Consumers’ Research can force a swift surrender if they demonstrate to managements that going woke may lead to reputational and (to the degree that companies are forced to alter how they do business) unforeseen financial costs. That’s good enough reason to pursue them. But concentrating criticism, directly or indirectly, on a particular corporate political position narrows the contest down to a fight over a single issue, as opposed to one fought on a broader and, for companies, more treacherous front. As for other tactics more usually associated with the activist Left, from shareholder resolutions to (if the opportunity presents itself) lawfare to boycotts, there is everything to be said for giving them a try, not least because of the publicity they can attract and the results they can generate. But again, such tactics will typically be tied to a single issue and therefore will allow a firm’s bosses to focus the debate on the merits of the topic at hand — Georgia’s new voting law, say — rather than on a far trickier question: Why should a company participate in a brawl such as this in the first place?
One of the more potent techniques in leftist rhetoric is to call an opponent or a policy “fascist,” even if this overused insult has, as George Orwell recognized nearly 80 years ago, been transformed into near meaninglessness. Be that as it may, Orwell also took pains to observe that fascism was a distinct “political and economic system,” and so it was (and is). This system could (and can) assume various forms, but common to most of them, if in theory more than practice, is the notion of a society run for and, to an extent, by its constituent groups. The individual, of course, counts for little. Industries make up some of those groups, but their role brings duties as well as rights. Larger corporations, especially, are not solely responsible to their shareholders and, ultimately, are expected to act in the best interests of the state — interests defined, naturally, by those in charge.
This may sound all too familiar to anyone who has seen how woke capital has been helped on its way by the support that stakeholder capitalism — the notion that a company should be beholden to all its “stakeholders” (a conveniently imprecise term) rather than, primarily, to its shareholders — is winning in C-suites, from regulatory bodies, across segments of government, and within innumerable pressure groups. And both woke capital and stakeholder capitalism have been reinforced by the growth of a significantly more aggressive type of SRI, frequently driven by climate-change concerns (genuine or otherwise) and, more and more, with the muscle of giant investment firms behind it.
A good number of these firms are, like the corporations mentioned earlier, also vulnerable to accusations of hypocrisy. They are, it is alleged, engaging in the promotion of investment products that are far less “socially responsible” than claimed but that — Wall Street being Wall Street — still come with the higher fees associated with SRI. This is a critique with a leftish feel that woke capital’s adversaries should not hesitate to exploit, particularly if they tie it in to what may be another false promise: that investors can do well by doing good.
This is a key selling point for ESG, a modern take on SRI under which a company’s suitability for investment will be affected by how it measures up against often imprecisely defined environmental (E), social (S), and governance (G) yardsticks. But, beyond the vagueness of how ESG is defined (not to speak of the lack of clarity over the relative weighting of its three components), ESG is even less of a science than some of its advocates maintain: Is it really possible to pick out with any accuracy how much “doing good” contributes to the outperformance by a company’s stock? Big Tech tends to have a relatively light environmental footprint, but is that why its shares have done well?
To be fair, in the current political and investment climate, some businesses characterized by their high scores according to certain ESG criteria have seen their shares rocket, but that may well be a matter of investors’ putting their money where they believe that other investors will put theirs, the basis of a bubble rather than something more, well, sustainable. In those cases where an ESG advantage can genuinely help a company’s longer-term prospects, this ought to be quickly reflected in its share price, limiting the potential for future outperformance. Intuitively, too, it is hard to see why funds with fewer investment opportunities (thanks to ESG-driven constraints) should do better than those with more.
Corporations have long been involved in politics but mainly in ways designed to bolster their bottom lines (for example, by lobbying for lower taxes), a legitimate extension of their business development and, by definition, aimed at achieving reasonably limited policy goals. Now, however, the combination of stakeholder ideology and more assertive SRI has permitted or compelled company leaderships to range far wider in their political activities. To put it crudely, they are diverting some of the resources of their companies’ shareholders away from their proper purpose — boosting return — in order to work toward the (often woke) agenda shaped by corporate managements, a cabal of powerful investment managers (themselves playing political games with other people’s money), stakeholders, unelected activists, unelected private- and public-sector regulators, and elements within the state. Even without the unnerving echoes of the fascist past, the spectacle of this unseemly and dangerous coalition using methods to achieve objectives more properly decided at the ballot box ought to alarm those on the left with some attachment to democracy, but little, if anything, has been heard. Ends and means, I suppose.
The Right should use the opening created by that silence. Battles, albeit necessary, over a company’s stance on a specific controversy will almost inevitably be seen as another partisan punch-up. In a polarized political environment, such battles will, except in unusually egregious instances, change few minds, particularly given how entrenched progressive ideas have become within so many companies and so much of their institutional investor base. On the other hand, a more general attack on stakeholder capitalism as undermining not only shareholder rights (and thus private property) but also democracy itself could, if carried out correctly (don’t forget to wield the seven-letter f-word), be far more effective in winning over the center ground, corporately, politically, and in the markets. If that is indeed the case, then woke capital’s advance could start to go into reverse.
Borrowing the tactics of, or tactics acceptable to, the Left may be a useful approach to confronting an abuse of corporate and financial might, but there must be a limit as to how far even increasingly anti-big-business conservatives should take this as a precedent. While they may be (understandably) frustrated by another manifestation of woke capitalism, Silicon Valley’s policing of speech on the right, joining the Democrats in inviting government to step in and help would be a self-inflicted wound that might never heal.
This article appeared in the July 1, 2021 issue of National Review as ‘Market Strategy’