20 Jan 2021 So Long Shareholders, Wokeism Has Arrived
Step aside shareholders, there’s a new sheriff in town: Wokeism.
Left-wing CEOs and corporate board members are quickly changing their approach on how to conduct business, and sadly, they are abandoning the people who must, in any logical corporate system, be their top priority: shareholders. The Corporate Wokeism model, also known as stakeholder primacy, has infiltrated America’s business sector and is sending it down a dangerous, partisan path.
Contrary to shareholder primacy — the belief that a corporation’s main focus is toward the interest of its owners, which means maximizing the long-term value of the company — woke business elitists are now pushing for the stakeholder primacy model, which prioritizes making decisions for “all possibly interested parties.” These parties include employees, customers and even the communities in which the businesses reside. This creates overarching promises that only lead to dire consequences.
There are two main repercussions that arise from the stakeholder model: 1) An increase in corporate adoption of left-wing ESG (Environmental, Social, and Governance) policies and the infiltration of wokeism into the corporate sector; and 2) Vague and malleable standards for CEO/board member decision-making, allowing them to enact any policy they may see fit and offering them the opportunity to cherry pick the “stakeholder interests” to which their pre-determined policy positions respond.
Occupy Wall Street, a social movement in NYC in 2011 to protest economic inequality and the lack of emphasis on the “little guy,” sparked a rise in this corporate wokeism. The bigwigs on Wall Street were terrified by the protests and the avalanche of left-wing corporate legislation that it might spur, and began to add performatively “social justice” considerations to their decision making. This process has continued, which has resulted in wokeism taking over the corporate sector.
Today, corporations are pushing agendas of social justice initiatives, “community building” and diversity quotas, ultimately leaving the interests of actual corporation owners out in the cold. This agenda is often a very expensive and efficiency-depleted sideshow.
One misconception about shareholder and stakeholder primacy is how the two models affect employees and consumers. Lackluster knowledge of a capitalist system enhances a simplistic belief of “one or the other.” That is, you either maximize profit for the shareholders and leave the others out, or you help defend the “little guy” and remove the emphasis from a small group of owners. But this is wrong. The shareholder primacy model creates incentives for sensible corporate managers to work for the benefit of owners, employees and consumers at the same time.
Think about it. If a corporation makes decisions that blatantly undermine employees, consumers, and the communities around it, its corporate revenue and reputation will suffer, thus decreasing profits for the firm’s owners. By keeping the company’s long-term interests at the top of the priority list, corporate leaders will automatically make decisions that benefit people outside of the owners themselves, because satisfying such groups will lead to boosting the value of the organization.
However, the stakeholder model, by undermining this clear and legally enforceable process, leaves all stakeholders at greater risk, while also freeing up self-impressed CEOs to flatter their egos by blundering unconstrained through public-policy issues which have nothing to do with the companies’ long-term interests.
Stakeholder primacy is a direct route to uncontrollable power for CEOs and board members, which goes a long way to explaining why so many of them support its adoption. CEOs hate being at the mercy of their shareholders, and the stakeholder model provides them with absurd amounts of discretion that they can then disguise under the category of “all possibly interested parties.” However, under the shareholder model, they don’t have this unceasing discretion. They must always answer to the question: Did my business decision help maximize profit?
A perfect example of a self-righteous CEO is Brian Moynihan of Bank of America. Moynihan has embraced stakeholder primacy and the role of a corporation as fighting for the interests of all. I wonder why? Most likely because Moynihan views himself as the politically woke dictator of the corporation, sending billions of shareholder dollars to causes he finds beneficial in satisfying his political and policy desires. One such organization he loves funding is Planned Parenthood. He continuously puts his own personal interests ahead of those of shareholders, while ignoring his fiduciary duties. The shareholder primacy model — which, if anything, should be strengthened, not abandoned — would hold him accountable for these decisions, and make him answer as to how they help his owners, not just his personal agenda.
Lastly, the stakeholder model is faulty due to its emphasis on favored employee opinion, leading to an opportunity for CEOs to enact their personal policy preferences — even instituting witch hunts against those who hold different public-policy positions — while ascribing those preferences to employees. If CEOs recognize that certain workers have policy preferences that align with their own, they will use them as caricatures for enacting such policies, claiming they did so in the interest of all employees. Yet workers who don’t share the policy preferences of those in decision-making roles will remain silent, in fear of angering the hierarchy. Thus the voices of these employees, who often are conservative, get silenced by the left-wing members of the organization.
The woke takeover and trend toward stakeholder primacy in the business sector will only lead to long-term consequences. We must remain true to traditional capitalism and keep shareholder interests as the top priority, which in turn, will lead to sustained growth and a better workforce for all.