Why did the CEOs wake?
Stephen M. Bainbridge
William D. Warren Distinguished Professor of Law
UCLA School of Law
bainbrid@law.ucla.edu
In April 2021, Yale Management School Dean Jeffrey Sonnenfeld convened 90 CEOs of prominent US corporations to create a common front against newly enacted voting legislation in Georgia and proposed similar legislation in Texas and elsewhere. Dean Sonnenfeld characterized the gathering as the start of a new “spiritual awakening,” akin to the historic Great Awakenings, although critics might suggest this awakening embraces progressive politics rather than the Gospel as holy writ.
As Dean Sonnenfeld pointed out, this is not the first time CEOs of large corporations have intervened in political controversies in recent years. There was the North Carolina “bathroom bill” brawl in 2016, opposition to various Trump actions on immigration and climate change, the Parkland shooting in 2018, and so on. Although some of the participating CEOs protest that their actions were nonpartisan, critics have pointed out that in every case the CEOs came down on the progressive side of the dispute.
To be sure, business and politics have been intertwined in the USA since the Founding. Two hundred years ago the mere act of forming a corporation required the legislature to pass a statute creating that corporation’s charter, which generated much corruption. In the subsequent decades, businesses routinely lobbied government for special favors. Today, annual business lobbying expenditures approaches $3 billion.
So what makes CEO activism different? Traditional business engagement with government was typically directed at the company’s bottom line. It sought a contract to provide the government with goods or services, to obtain tax breaks, or to derail costly regulation.
In contrast, woke CEO activism typically is unrelated to the company’s bottom line. Indeed, it often negatively impacts the bottom line. As The Economist recently reported, when Walmart banned sales of certain types of ammunition in response to a mass shooting, “footfall in Walmart stores in Republican districts fell more sharply as a result than it rose in Democratic ones.”
So why are CEOs plunging into social activism? Some claim that CEOs are responding to perceived consumer and labor demand. In particular, millennials apparently prefer to work for and purchase from companies that are perceived as socially and environmentally responsible. Accordingly, there is an increasingly widely held view in the business community that to attract Millennial and Generation Z workers and customers, companies must project an image as social justice activists. Nike’s embrace of Colin Kaepernick is but the most obvious example of this phenomenon.
Alternatively, some argue that the CEOs may be trying to head off regulation by progressive politicians. As Wall Street Journal columnist David Benoit observed, “Democratic presidential candidate Elizabeth Warren has argued that the primacy of shareholder returns has worsened economic inequality, enriching wealthy investors at the expense of workers.” With the mainstream of the Democratic Party seemingly moving in Warren’s direction on business and finance issues, CEOs may hope that a voluntary embrace of corporate social responsibility platitudes would help them fend off more intrusive regulation.
Both of those factors likely explain at least part of what’s going on, but there is another explanation that suggests a much more profound—and potentially permanent—change taking place. As a Slate essay observed, “Fortune 500 companies today are socially liberal, especially on areas surrounding diversity, gay rights, and immigration; they are unabashedly in favor of free trade and globalization, express concern about climate change, and embrace renewable energy.” In doing so, they are simply reflecting the changing values of their CEOs.
CEOs increasingly reflect the values of the Blue state coastal bubbles in which they are embedded, especially on environmental and social issues. No Fortune 100 CEOs contributed to Donald Trump’s 2016 presidential campaign, for example, but eleven gave to Hillary Clinton. More generally, “liberal groups accounted for eight of the top ten ideological causes of the ultra-rich, and seven of the ten congressional candidates most dependent on money from such people were Democrats.” Even one of the progressive movement’s favorite whipping boys—David Koch—publicly self-identifies as “a social liberal.”
All of which suggests that the elites who control America’s largest corporations are likely to remain some the primary culprits in the assault on America’s national and cultural identity.
