The emotional debate about "Woke Capitalism" prevents a fruitful discussion. Yet it is hardly more than a new term for an old but still very timely concept.
A specter is haunting America – the specter of “woke capitalism.” All the powers of the world have entered into a holy alliance to exorcise this specter: technology companies, venture capital firms, and important financers for the upcoming round of presidential elections. This specter seems worse than the resurrection of communism. Yet the term simply refers to a kind of “vigilant capitalism” that takes into account the changing interests of younger generations, who sometimes expect companies to do more than generate profits. For example, they demand companies take into consideration the interests of every demographic affected by their business dealings – as well as integrating minorities and responding to the challenges of climate change.
It’s a sign of our times that issues like these can hardly be addressed in a rational manner anymore. Rather than sparking a fruitful discussion, they lead in short order to a divisive debate between hostile opponents – in this case, the pioneers of “woke capitalism” vs. those who consider it excessive and economically harmful.
And that’s where we really need to look. The CEO of Unilever was right when he warned that misunderstood “wokeness” can devolve into “woke washing.” Some companies adorn themselves with sustainability strategies and responsible investments that, upon closer inspection, aren’t worth a can of beans, but are intended to produce a whole barrage of promises. Just a few days ago the US financial regulator, the Securities and Exchange Commission, issued a set of measures intended to prevent greenwashing and sailing under false ESG flags. You can’t just claim to be sustainable and socially responsible when it’s not really true. And that’s a good thing. Topic closed.
Not by a long shot. Woke capitalism is currently reigniting the agitated and sometimes radicalized debate about political correctness and cancel culture. This month, “Strive,” a US asset management company, was founded with the express purpose of fighting woke capitalism. One of the company’s financers is Peter Thiel, known as a brilliant, libertarian, technology investor who would love to build his own private state where only his rules apply. Another vocal critic is a man you’ve probably heard of. “ESG is a scam. It has been weaponized by phony social justice warriors,” Elon Musk tweeted a few days ago. Previously he had already gone after Netflix, tweeting in April, “The woke mind virus is making Netflix unwatchable.”
It almost makes you wish for a revival of the ice bucket challenge. A bucket of cold water might help us keep a cool head. A brief look at history might help, too. Stripped of all the emotional reactions, woke capitalism is hardly more than a new term for an old but still very timely concept – stakeholder capitalism. For a long time, it was thought companies exist only to maximize profits for its shareholders. Since the 2000s, economist Edward Freeman has been challenging this belief with his Stakeholder Theory. It simply states that companies have obligations to various different stakeholders. Shareholders are still high on the list, but customers, suppliers, employees, the public and society as a whole also play a role. Freeman believes that value can also be generated from these relationships. For example, when problematic corporate behavior leads to product boycotts and subsequent economic losses, the company has neglected or simply ignored some of its stakeholder relationships.
So what’s so bad about woke capitalism? First of all, the term itself. While stakeholder capitalism comes across as an economic concept, woke capitalism conjures up images of a militant arm of the Jehova’s Witnesses storming every company’s headquarters. “Woke capitalism” is militant, and that's exactly what it's supposed to be. Some warriors against wokeness simply want to cling to the old, the familiar, the already existing. That has little to do with value-oriented preservation. It is simply about economic advantages and the right to do things the way you want to do them.
Silicon Valley has long been home to an extremely successful boys’ club that is tired of apologizing for the lack of diversity or outright racism in their own companies. If that means their companies get kicked out of the S&P 500’s ESG index, as Tesla was in May, they flip out. They place all the blame on the “fraudulent” index. It has even gone so far that some flagship capitalists – like the CEO of JP Morgan, Jamie Dimon, and the CEO of BlackRock, Larry Fink – have apologized for their “wokeness” in order to assure the public of their unadulterated capitalist bona fides.
Sometimes you just have to wonder whether people are capable of learning from history. What do you suppose Sheryl Sandberg might have to say?
Cover: Simone Pellegrini/Unsplash