Can Something Good Come of the Anti-Woke Attacks on Business?
Might 'Virtues Signalling' Give Way to Good Governance
The Financial Times today includes a column by Raghuram Rajan, professor at the University of Chicago’s Booth School. The title, “Was DEI really just performative political theatre? and the subtitle “Or do corporate social responsibility policies actually prove useful in a company’s quest to maximise profits?” are interesting questions.
The article asks other interesting questions, “Given their flip flops, what social responsibility can we reasonably expect of corporations?” And ” How much credibility should we place on their promises?”
Readers of my past articles will know that I have never been a fan of ESG, DEI and similar initiatives. Separating them out rather than embedding them as simply part of good governance was always likely to cause problems. And I have long been concerned about Green Washing, Values Washing, Virtues Signalling etc. Perhaps my concern was a result of my early career in marketing and brand development.
Jumping on the bandwagon was an opportunistic move by many firms who saw big profit potential in the value of the Pink Pound, for example. And may companies were willing to embrace causes that had little or nothing to do with the core business purpose and objectives.
As Rajan says, “there are social actions that do not directly benefit the corporation’s purpose but society at large. Tempting as it is for the corporation to step voluntarily into the breach, these are probably better left to governments.”
He goes on to say, “companies can defensibly take on some social responsibilities.” But adds, “these need not shift with the political wind.”
Rajan concludes by saying many businesses will “simply relabel the social policies that are necessary for their primary purpose and continue as before. That is as it should be.” In other words, they will incorporate what is material to the purpose of the business in their governance and management decisions.
His advice is wise advice, and aligns with what I have argued for, but will they? Can they? Do boards and executive teams know what all the material factors for their success are, and are likely to be in the future? The evidence suggests few know what value the firm creates, and for who, today. That suggests they do not know what is material to their performance now. And if that is the case, they are very unlikely to know what is material to their medium and longer-term performance.
Values Washing is something I have written about before. Almost two years ago I asked, “Is Values Washing a Bigger Problem Than Green Washing” for example. For a long time I have also been arguing the focus should be on the lived values of the organisation i.e. what it does, its actions - virtues. Why? Because “When It Comes To Values Actions Speak Louder Than Words.” And in May 2014 I wrote “From Values to Value: The Only Sustainable Business Model and the Foundation of Lasting Reputations”
Though many will be appalled by the impact of the anti-woke agenda. And whilst many businesses that are dropping it probably did not have any genuine belief in it, perhaps there is some good news - potentially at least, if we can put the spotlight back governance and demand improvement in all aspects. That would be a great outcome, because we must recognise the interdependence of all the factors that constitute good governance, not focus on single issues.
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Thanks for the excellent post and critique of the FT article Paul. My points of observation:
Its critique of DEI and ESG as often “performative”, underscores the need for businesses to align social responsibility with their core purpose - delivering value to society and contributing to the common good. This requires ensuring that their actions are both authentic and embedded within their long-term strategy, rather than driven by short-term trends.
Businesses must ultimately embrace the notion that embedding strategic social-impact objectives within their governance models will foster long-term credibility and resilience, rather than being primarily framed and oriented to demonstrate loyalty to the State or being tuned to reacting to shifting political winds. While broader social issues may fall within the domain of the State, the Market still plays a vital role in collaborating with stakeholders to create positive change.
Ultimately, focusing on lived values, and demonstrating them through measurable actions, strengthens both organisational performance and societal trust. This requires moving beyond single-issue governance toward polycentric governance models that are capable of addressing complexity of contemporary society and the interconnected factors essential for sustainable success.
“ a company’s quest to maximise profits”
This is the Friedman Doctrine.
It is what is being challenged by Sustainability, ESG, and DEI.
They are not intended to turbocharge profit maximization, but to put the brakes on it.
Where they fail is in letting financialization continue as a corruption of the code of Finance, while trying to ameliorate the harshest consequences of that corruption.
What we really need to do is reboot the system to reset the code, and purge the corruption.
So the real question is, how do we reboot the system?