Explainer: How woke capitalism captured our imagination

The core purpose of a company is to deliver profits to shareholders. In “free-market capitalism”, the invisible hand of the market, which is essentially market players guided by their calculations of their self-interest, is believed to result in the best possible outcomes for all. This doctrine expects not only government to get out of the way of market participants taking unhindered decisions, it also frees business from social or other responsibilities beyond delivering profits to shareholders. But, as was always visible, but became especially undeniable after the global financial crisis of 2008, “free-market” capitalism doesn’t deliver across all sets of circumstances.

Since companies operate in society, every few years, newer ideas of the wider purpose of companies, their roles and responsibilities, beyond delivering profits to shareholders, emerge. Some ideas stick, changing corporate culture. Some end up being passing fads. Some turn out to be good for the larger good, and therefore, for companies and their shareholders ultimately. (One example is striving for sustainability or a gender-diverse workforce.

Back in the 1990s, the popular theme was corporate social responsibility.

Until recently, the notion of “stakeholder” capitalism — a word play on “shareholder” capitalism — was fashionable, where companies are expected to treat all areas equally. This includes consumers, employees and people affected by the company’s sourcing decisions, and the people the impact on the climate, environment and ecosystem of the company’s operations. “Stakeholder” capitalism rejects the idea that companies must put the interests of shareholders ahead of all the other groups.

The profits versus purpose debate entered its latest iterant with a spat between Disney’s chief executive Bob Chapek and Ron DeSantis, the Republican governor of Florida, over a bill proposing to limit the teaching of gender identity in Florida’s public elementary schools. Disney’s CEO attacked Florida’s new Parental Rights in Education Act for allegedly targeting LGBTQ+ communities. DeSantis responded by accusing Disney of giving in to pressures from a “woke mob.”

Lately, more and more companies have been pushed—in most cases by their employees—to wade into political areas and speak out on issues that they traditionally used to stay quiet about. This is called “woke” capitalism. Simply put, it is a system in which companies take, or purport to take, stands on social/ political issues. There are many reasons this happens, but the most common one is when employees lose faith in the politics of the day to weigh in on themes they care for, they put pressure on their CEOs to represent their views publicly. This trend was christened “woke capitalism” by a columnist Ross Douthat in a New York Times article in 2018.

In the US, Fortune 500 CEOs are lending their voices to a variety of causes ranging from LGBT rights to climate change, drawing charges of “wokeism” from politicians, some of who are openly demanding that corporate leaders should stay clear of political debates. CEOs, such as JP Morgan’s Jamie Dimon, have argued in turn that pledges to reduce investments in fossil fuels or treat all employees, regardless of their ethnicity, race or sexual orientation, isn’t “woke”.

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