How Woke Capitalism Corrupts Business

The phenomenon of woke capitalism isn’t only about corporate America succumbing to progressive ideologies. It reflects deep confusion about the purpose of business and how commerce serves the common good.

One of the more disturbing trends to emerge throughout the business world is “woke capitalism.” Whether it is Nike recalling Betsy Ross flag-emblazoned shoes because it was counselled by activist advisors that the flag represents slavery, or almost 200 CEOs of major firms signing a full-page New York Times advertisement describing laws restricting abortion as “bad for business,” corporate America is rapidly aligning itself with progressive causes.

The reasons for this are manifold. Those active in commerce or who teach in business schools inhabit the same sentimental humanitarian milieu as the rest of us. There’s no reason why they should be less susceptible to this culture than anyone else. No one should be surprised that many business leaders consequently believe that their companies should aggressively promote the progressive agenda, ranging from gender ideology to radical curtailments of religious freedom.

For others, it’s just easier to go along to get along. Why risk your Wall Street job by telling the human resources manager that the firm’s commitment to “diversity” doesn’t appear to include a pluralism of political views? In some instances, corporate wokeness is all about placating militant progressives. But if CEOs think that liberals can be appeased, then they don’t know much about the contemporary left.

There is evidence that some businesses are responding to some consumers’ desires that their purchasing choices align with their political stances, as well as to pressures from institutional investors who have embraced liberal causes. But as companies such as Gillette and Dicks Sporting Goods have discovered, that often produces financial losses as a consequence of backlashes from consumers who hold different views.

At another level, however, woke capitalism feeds on deep confusion about the nature and ends of business. It’s not that private enterprise has no responsibilities vis-à-vis society’s wider common good. What needs to be understood is that (1) businesses are voluntary associations, (2) the scope of their activity is determined and restricted by the goal specific to business as a voluntary association, and (3) businesses serve the widest common good by pursuing their particular common good.

The Proper Ends of Business

Any voluntary organization—whether a business, an NGO, or a charity—has a particular good that it is created to realize. In general, this means it should not pursue goals beyond that end. Things usually go wrong when voluntary associations start pursuing objectives that are more properly the responsibility of other groups: we do not want businesses acting like chess clubs or vice versa.

To avoid these problems, we need to identify the specific good served by business. Germain Grisez offers a particularly concise definition: “The common end of every voluntary association is determined by its participants’ mutual understanding and consent. A profit-making business is a voluntary association of the persons who cooperate in the specific activities for which it was organized, in order to achieve various economic benefits.” These benefits are the good primarily realized through a business association.

To take a fictional example, MAG Enterprises is a private business association that brings together investors, owners, managers, and non-managerial employees. They freely cooperate together to organize monetary capital, technology, skills, labor, and entrepreneurial insight to realize certain economic goals.

The reasons these individuals associate themselves with the business are varied. Some want to learn more about the particular industry in which MAG Enterprises is involved. Others see the same business as a means to derive an income to support their family. But whatever people’s individual reasons for freely involving themselves in the company, everyone must be committed to realizing the specific economic benefits that MAG Enterprises exists to realize. That good, after all, is what binds them together.

This understanding of business isn’t a license for any participant in the company to treat others solely as a means to economic ends. But it does ground and limit the authority of those in the enterprise who, as Grisez notes, “have the responsibility of coordinating all the activities that allow the business to realize its specific end.”

It is on this basis, for instance, that CEOs may terminate employees. If a middle manager is consistently failing to perform up to the required standards, it compromises the company’s ability to realize its goals. While there is room for discussion about how this employee is let go, the CEO’s authority to terminate the middle manager comes from his responsibility to ensure that the company achieves its specific good.

The same good, however, also restricts the CEO from involving the business in the pursuit of agendas that have nothing to do with the firm’s primary goals. There are of course many cultural, charitable, and political activities that people involved in a business can and sometimes should be involved in. But if such endeavors have no immediate bearing on the company’s ability to realize its particular common good, these individuals should do so in a private capacity—not as representatives of the firm.

What about the Wider Common Good?

Some might ask: don’t private companies have responsibilities that go beyond these boundaries? Isn’t it the case that businesses have duties to their customers? In recent decades, many have argued that commercial firms have obligations to anyone or anything affected by their activities. Depending on which business ethics professor you read, such “stakeholders” range from easily identifiable individuals such as clients to catch-all universals like the environment.

Anyone involved in a business should follow all the moral principles that bind everyone else. Among other things, this means they don’t kill, steal from, or lie to customers or anyone else. They must also obey all the just laws that legislators deem necessary for society’s common good. These are the principal ways in which businesses fulfill their duties to all those entities that might qualify as stakeholders.

But there is another, very precise manner in which business contributes to society’s common good. This is by pursuing the specific good that businesses are designed to realize.

A society’s common good consists of all those conditions that assist all members of that society to flourish as they should. Different organizations bear primary responsibility for the establishment and maintenance of these various conditions. The military, for instance, provides for national security. The judiciary’s main duty is to administer justice. The condition specific to each entity reflects its particular competence. Hence, judges don’t fight wars and, save in conditions of martial law, generals don’t administer justice for civilians.

From this standpoint, one primary condition of society’s common good realized by business is the creation and growth of the wealth that provides for people’s material needs and wants. Governments can help businesses accomplish this through, for instance, provision of public works, protecting property rights, or maintaining courts that resolve contractual disputes. But the organization that most often creates wealth in societies that take human freedom and creativity seriously is private business.

To be sure, this end isn’t always at the forefront of the minds of those working in commerce. For some entrepreneurs, it is about the satisfaction derived from creating a new product. Others work in the private sector because they are willing to trade off less employment security in return for higher salaries. A side effect of all these free choices, however, is that they allow businesses to drive the type of economic growth that, over time, raises living standards and provides for society’s material needs. That is how business contributes to a society’s common good.

The Harm of Wokeness

From this perspective, we see that woke capitalism severely distracts commercial enterprises from realizing their distinct good. Business does not exist to engage in Marxist-like consciousness-raising exercises, alter family structures, establish world peace, or even right a nation’s historical wrongs.

Anyone who has been treated unfairly certainly merits justice. Grisez points out, however, that a “company’s responsibility for doing that is limited to the injustices of which it has been guilty, except insofar as presumably just laws might require it to help fulfill the duty of society as a whole to rectify other injustices.” The duty to correct other injustices belongs to other organizations.

Woke capitalism also undermines a business’s pursuit of its particular common good by creating circumstances in which boards of directors and CEOs can appeal to the firm’s commitment to various political objectives to justify deploying company resources in ways that weaken the business’s ability to achieve its specific goal. As Stephen Bainbridge points out, “directors who are allowed to consider everybody’s interests end up being accountable to no one.” In this sense, woke capitalism permits boards and CEOs to exceed their authority and avoid responsibility for their actions.

Woke capitalism, I suspect, is only in its early stages. Progressives understand its effectiveness in herding American entrepreneurs and businesses into the pursuit of liberal concerns. Many business leaders—sometimes for reasons of expediency, or because of their personal embrace of liberal ideology or lack of courage—consider it the way of the future.

They are wrong. Instead of making business woke, we should not let our moral horizons be clouded by sentimental humanitarianism. We must critique woke capitalism clearly and forcibly, remembering that business exists to realize the particular economic ends that constitute its specific common good. The very integrity of business as a distinct form of voluntary association that makes a particular contribution to society’s overall well-being is at stake.

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