What CEOs Are Really Saying When They Lash Out on ‘Woke’ America

This week, when BlackRock CEO Larry Fink defended his company’s efforts to hold companies accountable for their environmental and social impact, he winked at his critics who accused him of imposing a Liberal program for businesses.

“This is not a social or ideological program,” he wrote in his closely guarded annual letter to clients. “It’s not ‘woke’. It’s capitalism.”

Translation: Don’t be irritated by this benevolent approach, Wall Street – it’s just what’s good for business.

Certainly Fink, whose firm manages more than $10 trillion in assets, is not wrong: studies show that companies with strict environmental, social and governance standards tend to perform better financially over the long term. term.

ESG, or socially responsible investing, is a new lens through which companies can be assessed by evaluating them on non-financial metrics, such as their impact on the environment (the “E” in ESG). The social aspect concerns the relationships of companies with employees, suppliers and customers – not just shareholders. And governance encompasses how a company behaves on issues such as executive compensation, shareholder rights, leadership and even its own internal controls.

The message around ESG comes down to this: is doing the right thing valuable in itself, or only if it contributes to the bottom line?

“It’s a bit of both,” says Jon Hale, head of Americas sustainability research at Morningstar. “Sustainable investing… tries to improve companies by saying, ‘Hey, address your ESG issues that investors weren’t really pushing you to do. But also, let’s think about your impact more wide over the world.’ “

Redefining “awake”

Larry Fink is not alone. Elon Musk, despite running a wildly successful electric car company, has also denounced ‘waking up’ as a ‘false virtue’.

Part of the problem is how the term, which originated in black American English, was appropriated by white conservatives. Where staying “woke” once meant being mindful of societal injustices, conservatives now often use the term as a stick to denigrate progressive ideas about race, gender and the environment.

In this cultural and political context, it has become somewhat radical to suggest that companies should do the right thing simply because it is the right thing to do.

But just two years ago, Corporate America executives did just that. The Business Roundtable, America’s leading business advocacy group, broke with decades of tradition in 2019, declaring for the first time that companies must serve all stakeholders — not just shareholders — ethically, morally and fairly. .

In other words, companies should do the right thing because it’s right, not just because it’s good for business. And those who don’t like it can take a long walk.

That was Apple CEO Tim Cook’s message in 2014 when asked by a leading climate change denier group about Apple’s sustainability measures. In an exchange that turned heated, witnesses said, a representative from the conservative National Center for Public Policy Research think tank pressed Cook at a meeting to pledge to focus narrowly on profitability, even at the expense of goals. sustainability from Apple. In response, Cook, perhaps Silicon Valley’s softest CEO, got flustered and dismissed the question.

“When we’re working to make our devices accessible to the blind, I don’t consider the bloody return on investment,” Cook said. Later he added, “If you want me to do things just for ROI reasons, you should get out of this stock.”

Telling climate change skeptics to divest was a pretty bold move in 2014. Eight years later, Cook is unlikely to lose sleep taking the moral high ground: Apple has since grown into a $3 trillion company and Cook himself received nearly $100 million. in total compensation last year.

Just as investors’ obsessive focus on short-term gains helped shape the era of shareholder primacy, they will also play a key role in the transition to the era of stakeholder capitalism, according to Morningstar’s Hale.

“Today virtually every public company is concerned about their ESG performance in a way that it absolutely was not five years ago,” he told CNN Business. The standard is no longer just what companies can do legally, he said.

“If you create negative impacts on the world,” Hale added, “it negatively affects your brand.”

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