The Rise of Woke Corporations: Examining Their Impact on Society

Why Do Corporations “Go Woke” and Who Does it Really Benefit?

By Carlon Howard, Chief Impact Officer, Equity Institute, and Allen Mendenhall, Associate Dean, Sorrell College of Business, Troy University

We Cannot Ignore Corporations, “Woke” or Otherwise

By Carlon Howard – Chief Impact Officer, Equity Institute

On February 13, 2014, Meta (formerly Facebook) shared a post describing its updated list of gender identities, making it clear its professed commitment to respecting gender diversity. The update allowed users more options than “male” and “female.” Instead, it featured 58 different terms, such as non-binary, cisgender, genderfluid, and agender. While people celebrated the release as a much-needed acknowledgement of the complexity of gender identity, there were others that reacted negatively to what they viewed as political correctness taken too far.

In recent years, the term “woke corporations” has been used to refer to companies which make explicit choices when it comes to their words and actions regarding identity politics. According to researchers Akane Kanai and Rosalind Gill, “woke” in this context is “…the corporate extraction of value from the struggles for recognition led by historically oppressed populations.” These businesses could be seen as a positive force for good and taking a stand against discrimination. However, there is fear that these companies are becoming too involved in social and political debates, at least from a corporate perspective. This begs the question: Are “woke corporations” good or bad for America? 

“Woke” Corporate Agendas Through the Years

It is commonly assumed that corporations have only recently become involved in politics and social issues, as they seek to influence policies and laws that affect their interests. However, evidence suggests that corporations have long been intertwined with politics and power since at least the early 20th century. Corporate leaders have made fortunes by using the tools of political patronage, such as gaining the right to exploit public lands and access to bailouts. They have also used various other methods to gain leverage over policymakers and lawmakers, such as hiring lobbyists and donating to campaigns, and crafting public opinion through advertising and other marketing strategies. 

Indeed, corporate involvement in politics and social issues seems to be part of the fabric of our American society. This includes non-“woke corporations” that have also historically have been involved in social issues. For example, Dr. John Harvey Kellogg, founder of Kellogg’s cereal, used his business platform to advocate against the dangers of sex—a social issue he felt strongly about. The politically active corporations of today are part of a long legacy of corporate influence, as businesses have long been deeply embedded into our political and social systems and have held the power to promote positive social change or maintain the status quo.

The Actual Impact

While the intentions of these initiatives are good, the results can have a negative impact. Companies may use their participation in social initiatives as a way of distracting from other issues that could limit their profits, such as low wages and poor working conditions. Furthermore, corporate engagement may allow organizations to present themselves as ‘morally responsible’ while taking advantage of vulnerable populations or manipulating public opinion for their own benefit.

With the proliferation of social media, corporate involvement in social issues has become increasingly common. Companies are eager to appear socially conscious and willing to take a stand on certain issues. However, this can lead to unintended consequences, due to companies having greater incentive to benefit financially than they do to genuinely make a positive impact on society. 

While individuals can certainly still wield influence within our democratic process, large companies remain a powerful force that continues to shape how Americans think about important issues every day. Their presence can no longer simply be ignored—acknowledging and managing it must become a part of our discourse if we expect to see real change happen going forward. The culture of corporate influence on society will always remain a subject of public debate and scrutiny, but we can be more aware of this issue.

“Going Woke” Only Benefits Those On The Top

By Allen Mendenhall – Associate Dean, Sorrell College of Business, Troy University

Corporations in the U.S. have historically contributed to both major political parties and supported a range of issues that cut across partisan lines. But something has changed. Although companies like Chick-fil-A, Fox News, and Hobby Lobby embrace cultural conservatism, they are the minority. Why are U.S. companies “going woke,” adopting Environmental, Social, and Governance (ESG) measures that reflect principally “leftist” politics and social causes?

It’s not because these companies are genuinely conscientious and socially responsible (there are, of course, exceptions). Rather, it’s because companies respond to top-down pressures from government, regulators, and activist investors. The story of how we got here is long and complicated, but it involves a concerted effort by central banks, asset management firms, finance ministries, financial institutions, and sovereign wealth funds to mainstream ESG. ESG is an acronym for the non-financial considerations that asset managers, banks, and investors factor when they allocate capital and assess risk. The rise of institutional investors and asset management firms created opportunities for activists to unite powerful players in government and financial services to turn ESG from an ideal into a reality.

Things Change, But Not Always For The Better

For most of the 20th century, shareholders either did not vote their shares or simply stayed out of everyday corporate governance, voting only on big-picture issues such as the hiring of executives or mergers and acquisitions. If a shareholder did not like the direction the company was taking, she would simply divest by selling her shares. 

Today, however, massive, wealthy institutional investors—not retail or household investors—engage corporate boards on the specificities of quotidian operations and management. They own large shares of companies and in many cases are majority shareholders. Unlike individuals who invest their own money, they invest other people’s money for fees. Rather than divesting when the company takes an action they do not approve of, they intervene. Many, if not most, of these “institutional investors” are also “activist investors,” pushing corporations into politics. The beneficiaries of the funds managed by these investors are. often unaware of the politics that their investments support. When an asset management firm invests beneficiaries’ money in underperforming funds to support causes rather than maximize returns, they breach their fiduciary duties to the beneficiaries while avoiding legal retribution or punishment. That’s wrong and unethical. 

The “Big Three” asset management firms are BlackRock, Vanguard, and State Street. They grew dominant by investing state pension money, enormous endowments, and the assets of billionaires and multimillionaires. These asset management firms influence corporate culture in two ways: by their investment strategies and their shareholder proxy voting and proposals. They operationalized ESG while buying and voting shares in publicly traded companies. They function like “mega corporations” that influence the organizational culture of other big corporations, which have begun lobbying for ESG regulations at the federal level.

The Big WHY of Woke Corporations

Why would big corporations back ESG regulation? The first reason is that small businesses cannot afford to comply with complex ESG mandates. Large corporations absorb the costs of ESG regulations while gaining advantages over smaller competitors that cannot afford regulatory compliance. Although bigger companies can bear the rising costs of ESG compliance, they cannot do so without passing on costs to consumers. Rising prices disproportionately impact the poor and the developing world as ordinary goods and services become prohibitively expensive for a growing segment of the population.

A second reason is that the threat of government coercion incentivizes businesses to support positions that are otherwise against their interests. Although ESG would not make them better off, businesses will adopt and pursue it if the consequences of non-compliance would make them even worse off. In other words, government distorts incentives for businesses. Third, ESG has empowered special interest groups—e.g., lawyers and accountants—that earn fees by helping clients navigate new or potential ESG regulations. The proliferation of ESG ratings, moreover, has generated a new field of high-powered consultants with expertise in private ratings agencies, which form their own interest groups.

The Rich Get Richer…

Companies “go woke”, not necessarily because there’s a market for wokeness, but because they are part of a broader system that concentrates power in specialized industries that overlap with government agencies and institutions. The next time you read about a company championing controversial politics, investigate their boards, executive leadership, and shareholders. Chances are, you’ll find that the world’s richest and most powerful people and corporations are getting richer and more powerful under the guise of ESG by squeezing out competition through the threat of government compulsion.

Empty Words, Empty Promises

By Carlon Howard – Chief Impact Officer, Equity Institute

Mr. Mendenhall, thank you for your response. So much of what you said has great merit. Indeed, America’s wealthiest business owners profit from positioning themselves as morally conscious. What I found missing, however, is the impact this has on the people who inhabit our country. 

When we examine the behavior of socially responsible companies, it becomes evident that their focus is more on improving public image than actually benefiting those in need. Companies can make promises about donating money to charities or supporting community initiatives, yet often these are little more than empty words. For instance, many consumers have been taken aback by the sudden rise in companies regarding themselves as socially responsible, only to find out that a small percentage of profits from these companies are donated back into the cause they support.

This trend perpetuates a fascinating paradox: wealthy companies appear altruistic, while quietly failing to engage with those who could benefit most from their actions. This pattern adversely affects vulnerable communities, because the money corporations promise rarely reaches those who need it most. 

In short, while companies may purport to have a socially conscious mission, this does not necessarily translate into an actual benefit for the American people. Instead of leading by example and committing to meaningful change, corporations prioritize their interests over those of everyday citizens. We must recognize this pervasive dynamic and begin to push back against it to create systemic solutions that will improve our country.

Ethical Action in Corporations Will Lead to “Woke” Outcomes

By Allen Mendenhall – Associate Dean, Sorrell College of Business, Troy University

I have enjoyed our exchange, Mr. Howard. It demonstrates, I hope, that people with differing political commitments can find common ground and disagree civilly. I’ll close with three clarifications.

First, I don’t believe the pursuit of profit is bad. Profits are simply the total revenues of a company, minus its expenses. Companies that don’t profit, go out of business. Failed companies can’t benefit society, except to provide important examples and data about their failure to future businesses and entrepreneurs. We learn from others’ mistakes.

Second, we must recognize the extent to which business and government are intertwined in the pursuit of ESG. If you analyze the most powerful asset managers, you’ll discover they amassed their power with government assistance or by investing government money. Finding a “systemic solution” to the problems we’ve discussed is difficult because we’re embedded in entrenched systems. It’s hard to imagine an easy way out without radical changes in the size and scope of government. New government regulations regarding ESG will only reduce competition and benefit the most powerful companies and institutional investors.

Finally, businesses can, and do, provide widespread benefits to society writ large. Commercial culture incentivizes trade and exchange rather than coercion and violence. Companies provide jobs and improve our lives and institutions; they drive technology and innovation. When they act ethically and within the law, corporations that maximize profits for shareholders might just generate the “woke” outcomes that activists, through other means, purport to seek.

If you enjoyed this article, please make sure to like, comment, and share below. You can also read more from our Culture Wars series here. 

Carlon Howard

Chief Impact Officer, Equity Institute | Website

Carlon is the Chief Impact Officer and Co-Founder of Equity Institute. In his role, he oversees organizational strategy, internal operations, and implementation of Equity Institute’s educator pathway program. Carlon is an avid reader and lifelong learner who spends much of his time exploring topics related to social science, history, and leadership.

Allen Mendenhall

Associate Dean, Sorrell College of Business, Troy University; Executive Director, Manuel H. Johnson Center for Political Economy

Allen Mendenhall is Associate Dean and Grady Rosier Professor in the Sorrell College of Business at Troy University, where he directs the Manuel H. Johnson Center for Political Economy. He also serves as Policy Adviser for the Heartland Institute and is the Publisher and Editor-in-Chief of Southern Literary Review.