‘Woke Capitalism’ Has Both Sides Riled Up 

The spat between Florida Governor Ron DeSantis and the Disney Corporation has shined the spotlight on environmentally directed investing and diversity programs. These activities have given rise to the term “woke capitalism”—and the movement to prevent these activities from taking hold in business. 

Why It’s Important

In an effort to fight ESG investing and DEI policies in the corporate world, “woke capitalism” has emerged as a buzzword in the modern political discourse. How politicians address it will define the careers of numerous congressional, gubernatorial, and presidential candidates in the upcoming election cycle, particularly as energized young progressive voters delivered the Democratic Party a narrow victory in the 2022 midterm elections.   

Understanding “woke capitalism” will be vital for Republicans if they want to make the case that their anti-ESG and anti-DEI positions are correct. As a recent flubbed interview with conservative author Bethany Mandel shows, conservatives need to be able to define their terms and explain what they are opposing and why—as the term could become a mere buzzword similar to “political correctness” that could make it easy to dismiss. Alternatively, it could make the term far more powerful if employed correctly. 

“‘Woke capitalism’ is effective precisely because it is a buzzword. ESG portfolios underperform in the market, and they will continue to do so as more and more people, curious and concerned about corporate ‘wokeness,’ look behind the curtain at what’s happening among large asset management firms, activist shareholders, and ideological proxy advisory services that push companies into politics,” says Professor Allen Mendenhall, Associate Dean at the Sorrell College of Business at Troy University. 

Defining “Woke Capitalism”  

Professor Mendenhall has led a public effort to challenge “wokeness” in the business world. Sorrell is tackling the issue through its Free Enterprise Scholars program, which will be focused on moral and anti-woke business practices, as The College Fix reports. He tells Leaders Media that the “woke” signifier, once a term used by self-identified progressives, has been appropriated and neutralized by critics of the progressive movement.  

“‘Woke capitalism’ is shorthand for a variety of trends in business, financial services, and capital markets, including the shift from shareholder to stakeholder governance, the leftward activism of large publicly traded companies, the proxy advisory services of ISS and Glass Lewis, ESG investing, debanking, the World Economic Forum, net-zero emissions, the Business Roundtable’s redefinition of the purpose of corporations, and more,” he says.  

The term was coined by New York Times columnist Ross Douthat in 2015 as a way to describe how corporations will signal support for progressive social causes as a way to maintain power and influence in a changing society, The Heritage Foundation notes.  

Mendenhall says the causes of the corporate movement toward “woke capitalism” are numerous and can fill several books—many of which have already been written, such as Steve Soukup’s The Dictatorship Of Woke Capital and Vivek Ramaswamy’s Woke, Inc. A central cause he mentions is that the trend provides political cover for corporations to behave unethically and fiscally irresponsibly—doing so with the full approval of the federal government, central banks, and international organizations like the World Economic Forum. 

Against The Moral Defense of Social Responsibility 

Veronique de Rugy is an economist and a senior research fellow at the Mercatus Center at George Mason University, who studies government spending, cronyism, and barriers to entry for workers. She addressed the issue of “woke capitalism” in an op-ed for Reason last year, noting that corporate attempts to pay lip service to issues such as racism and climate change have not made significant progress in tackling these issues. 

“Trying to force companies through shame and cancel culture is unlikely to achieve fundamental change for society—which we could achieve through persuasion. The reason it becomes counterproductive is that it gives companies an incentive to engage in pure signaling that is not world-changing. Forcing this change through government and social pressures will create the wrong kind of behavior,” she tells Leaders Media. 

As she notes, the disparities that proponents of ESG and DEI are advancing are real problems. There is nothing necessarily wrong with a private company choosing by its own volition to address hiring disparities among racial minorities or women. However, as she notes, diversity training programs and sexual-harassment programs do not have a strong record of successfully changing company cultures or changing minds. 

“In the past few years, companies put all these pledges and announcements on these issues, but if you go back and look at what they’ve changed in their business models, you realize they’ve changed nothing,” says de Rugy. 

Mendenhall agrees, saying, “ESG capital constraints on investment are not moral or good. There is little verifiable data showing that they accomplish the goals they purport to pursue. Their alleged benefits to society are immeasurable. They may not be effective at all except for excluding certain political and religious views from corporate culture. Nor do they steward money according to longstanding principles of fiduciary duties.”

Alternative Perspectives

Critics of the push against “woke capitalism” view the term and the arguments against ESG and DEI as distractions and cynical political ploys. Pattie Sellers and Nina Easton are the co-founders of JOURNEY, a diversity-focused nonprofit that helps diverse women find roles in leadership. In a recent op-ed for Fortune, the women argue that corporate efforts to address diversity have failed to elevate women and that the poor state of the economy will place diversity hires on the chopping block. 

“While corporate marketers bombard us with messages ‘celebrating’ women’s accomplishments during Women’s History Month, there is little to celebrate. The numbers are still distressing: Only 10% of Fortune 500 companies have female CEOs—and less than 1% have a woman of color at the helm. The C-suite, the launchpad for the top role, is only 26% female—and 5% women of color,” they say. 

Many defenders of DEI and ESG have pointed out that Republican efforts to quash these movements are operating in violation of their stated commitments to free speech, academic freedom, and free market principles, openly punishing corporations for freely making decisions based on their own judgments and decisions. 

“The backlash against so-called ‘woke capitalism’ is fundamentally anti-capitalist. Companies that prioritize positive environmental and social impacts in addition to profit are responding rationally to the market and to a business case that’s been proven over decades. It’s hypocritical and short-sighted for political leaders to coerce the market to align with their interests, rather than what’s good for people, our economy, and our planet,” Beneficial State Bank CEO Randell Leach writes in The Hill.