What’s wrong with corporate activism now – and how it can be fixed

13 févr. 2024


What’s wrong with corporate activism now – and how it can be fixed
Carl Karlsson



The surge in public expectation that companies will lead with their values has left executives in a self-imposed bind. As business leaders across the board proclaimed the death of the shareholder-centric model and promised a pivot to purpose, once clear-cut concerns regarding environmental stewardship and diversity soon expanded into a broader array of contentious social justice issues. Rather than achieving the intended PR boost, companies now confront a complex dilemma: How best to navigate the simultaneous pursuit of profit and purpose as the voices of corporate activists grow louder.

In her new book, Higher Ground: How Business can do the Right Thing in a Turbulent World, NYU Stern ethics professor Alison Taylor skillfully charts a path out of the everything-all-at-once dilemma. Drawing on two decades of advising multinational companies on risk, sustainability, human rights and culture, and over 200 interviews with executives, activists, and academics, Taylor creates a coherent internal and outward-facing strategy for companies to act responsibly in the face of contradictory expectations and mounting societal suspicion.

Welcome to the Jungle asked Taylor about some of the most pressing questions addressed in her book. How can CEOs cut through the noise and prioritize the right social and environmental initiatives amidst the cacophony of competing demands? When should they engage with contentious social and political issues, and how can they do so effectively? How do companies navigate reputational risk in the age of social media? And is transparency really a corporate panacea?

Why is your book called Higher Ground?

I ended up with Higher Ground as the title because the central argument of the book is that we’re trapped in a thicket of confusion on what it means to be a good business. I aim to elevate the debate and, hopefully, bring some clarity and coherence to the arguments. The second reason is that Higher Ground is the title of a Stevie Wonder song that was released on his album _Innervisions _– the year I was born. It’s become a theme song for the book!

We’ve previously discussed how the predicament of companies today – having to deliver on lofty social and political promises while also turning a profit – is largely of their own making. Can you give us an overview?

The story of the rise of stakeholder capitalism can be told in different ways. My version, which I outline in the first chapter of the book, focuses on three overarching megatrends propelling this shift. But a shorthand version would be that in 2018 and 2019, a bunch of very powerful and mainly American investors and CEOs proclaimed that [American economist] Milton Friedman’s shareholder-centric model is dead and we’ve now entered into a new era of stakeholder capitalism. In January 2018, Larry Fink, chief executive of BlackRock [an American multinational investment corporation], was the first to directly challenge Friedman, followed roughly 18 months later by the Business Roundtable [a nonprofit lobby group composed of CEOs] that proclaimed a broader purpose for corporations beyond mere profit maximization.

My view, and it has been backed up by research by Lucian Bebchuk and Roberto Tallarita [of Harvard Law School], is that these grand promises of stakeholder governance were made for PR reasons. Considering the political context at the time, it made a lot of sense for senior leaders like Jamie Dimon [chairman and chief executive of JP Morgan Chase] and Jeff Bezos [founder of Amazon] to view this as a potentially lucrative marketing opportunity. [Then president Donald] Trump had recently been elected and pulled out of the Paris Climate Agreement. From a business perspective, it appeared strategic to come out in support of the climate, especially in the face of huge public pressure by young people – or, from a business point of view, young consumers. When Trump started to make noise about immigration, that was another black-and-white issue that corporate leaders could cash in on. So I think the CEOs got drawn into these social and political issues and, having big egos, some started viewing themselves as politicians, the new statesmen who will save the world.

The issue is that once you’ve claimed to care about all stakeholders and not just shareholders, you’ve opened up the Overton window; you’ve opened up this novel space for negotiation that didn’t used to exist. Fast-forward to today and these topics that seemed black-and-white under Trump – disregard for the climate, racist police killings and building walls – have sprung the door open for a whole host of other contentious issues. CEOs are now talking about Gaza and China; they’re talking about gender identity and abortion. And all of that is a lot less convenient.

How does this relate to younger people coming into the workplace?

Young people don’t remember a time before businesses took stances on political and social issues, which means it has become a new reality. What I hear in the classroom, and something I understand, is that students feel there’s no political avenue that empowers them. They have no agency or feeling of impact; they feel that there’s little point in standing in line to vote in a gerrymandered system in which their ballot won’t count. So corporate activism assumes a role of surrogate agency. After all, corporate leadership is more likely to respond than politicians. But as I’ve pointed out in previous interviews, elevating corporations to political and social leaders is problematic simply because corporations aren’t, in fact, democracies or governments, which means there’s no mechanism to provide proper representation. I think it’s finally dawning on people that this wasn’t a very good idea in the first place. But it’s a bit late. There is much more about this in my book, and in a new article I just published in Harvard Business Review.

While you’re skeptical about the new, elevated status of companies and the sincerity of the promises they make, your book isn’t a call to return to the past but suggests a more realistic and honest approach, where companies focus on the direct impact they can have on humans. Is that a fair summary?

Yes, I’m essentially saying that companies should mind the problems they can actually solve by focusing on their base and impact on people. A good example is Walmart and McDonald’s which, while making a lot of noise about their ESG [environmental, social and governance] commitments, are paying their workers so poorly that they have to claim social security benefits – which means that taxpayers are subsidizing these companies. A better commitment would be to treat their employees with dignity and respect, and provide them the financial wherewithal to choose how they spend their money and free time. But let’s take a more controversial example: abortion. According to human rights and human impact ideas, you shouldn’t impose your values on people who don’t share them. So this would suggest that if you’re a company, you need to provide reproductive healthcare – because the right to health is a human right – but you shouldn’t force anti-abortion employees to use that healthcare.

Is there a constructive way that companies can speak on political issues?

The company leadership needs to involve employees in ethical and sustainability commitments to set realistic priorities together. So my first recommendation would be a fairly intensive consultative exercise where staffers reflect on what problems the business can solve, and what it cannot. This would empower employees while making them aware of the possibilities and trade-offs.

Then there’s the imperative of putting your money where your mouth is. A company should be able to say that it will steer clear of a certain issue simply because it doesn’t think it’s something it can affect in a meaningful way. The issue is rather saying one thing and doing something else with your campaign finance and lobbying dollars. On the other hand, if it’s an issue related to social identity, culture, employee rights or social identity, leaders can’t say that’s got nothing to do with me: If you employ humans, that’s got something to do with you. So inclusion needs to be a focus. But that also means bringing back the personal lives and agency of employees. In other words, company leaders should be clear that it’s not up to them to represent employees politically as workers should be politically free. Of course, you can’t spout racist stuff on Twitter, but if you want to be, let’s say, a Satanist in your free time, you should be able to do that and still go to work.

It’s a point I’ve made before but I think it’s worth repeating: If you bring your whole self to work, it’s only a matter of time before HR is in your home.

After almost two decades of living with Twitter/X and Facebook, it’s hard to imagine how any level of honesty or rationality could break the spell of vitriol and dehumanized conversations. But you seem hopeful that companies can, to some extent, protect themselves against the weaponization of social media by being more honest.

I think being more restrained and not overpromising is part of the picture, but not panicking is also important. One consequence of the online climate you describe is that the mob will move on to a new issue after five minutes – unless you allow yourself to get dragged into it. Let’s consider some recent missteps, like [those by] Bud Light or Target. Those were unforced blunders and Bud Light in particular made everything worse with its reaction. What I’m seeing is governance by social media partly caused by a neurotic overreaction to being criticized. When responding to criticism, I think CEOs typically have PR and corporate affairs in one ear and lawyers in the other, and the result is this curated, scripted and legalistic response that everybody hates. The congressional testimony of [the then Harvard president] Claudine Gay is a good example, where fear of reputational damage and lawsuits led to this robotic and inhuman speech that, again, made everything worse.

Many political leaders, both in the US and Europe, have found an audience by rejecting prevailing social justice ideals. At the extreme, even blatantly unscrupulous behavior is misperceived by voters as strength or authenticity. Is it possible for companies to take a similar approach?

First of all, there are already companies that are riding on some version of that. Coinbase, Tesla and Twitter are some examples where the messaging is essentially that we’re mission-focused; we’re about maximizing shareholder value, love it or leave it. And I think that’s fine, even though that messaging might make it harder to attract and retain young people. But PR aside, we should remember – as [Bloomberg columnist] Matt Levine has pointed out – that maximizing profit is still the dominant framework. The difference now is that the Freidman approach is topped with a lot of unconvincing rhetoric.

You mentioned in another interview that the chapter on transparency was the trickiest one to write. Why is that?

Transparency has a cultural dimension where the surveillance aspect raises questions about control versus agency, and then it’s the element of disclosure, reputation, PR, and how external stakeholders and investors evaluate your business. So it’s like a hinge point of the book and arguably the most taboo-busting of the chapters. Because everyone, at least on my social media feeds, seems to have agreed that transparency is a silver bullet to all our corporate ills and the perfect route to accountability. But I think it’s more complicated than that.

Yeah, I can’t speak for experts, but as a consumer, I’m not sure how more corporate transparency could meaningfully inform the decisions I make on an everyday basis

Exactly, we completely overestimate the ability of any stakeholder, even an investor, but let alone you and I in the supermarket, trying to figure out what coffee you should buy. We say, disclose, disclose, disclose and stakeholders will trust you more. But it’s not true. We also expect companies not to resort to deception or exaggeration to inflate their ESG ratings in the eyes of investors, which is delusional. To be clear, I’m not saying transparency is bad, simply that business disclosures are very complex and overall they rarely have the desired effect. The US Congress made everything much more transparent in the 1970s and the result has been that no one can work across party lines as politicians are too busy grandstanding for public effect.

In the last five years, what I’ve often got in conversations about the role of companies is a polarized take where one side has accepted the role of corporations as social saviors while the other side doubts the corporate world’s capacity to do any good at all. Do you think the pendulum has begun to slow and that people are becoming more open to a more centered or nuanced view?

If my book works, that’ll be its contribution. But I also think that the trends we’ve covered in the past – how young people view leadership and how they long for impact and agency – are just getting started. At the same time, I believe senior leaders are exhausted and realizing they’ve bitten off more than they can chew. The expectations are too high and too many, and there is an urge to back off from this. But you simply cannot do that by declarations from the top, that’s why I emphasize the need to consult the employees to set more realistic and actionable goals. So I do think we’ll see a correction of corporate overpromising, not least because of all the greenwashing and whitewashing scrutiny.

Your book offers sort of a middle road for corporate conduct. But middle roads aren’t always comfortable places to stand. Are you worried about how your arguments will be received?

Well, if I’ve got it right, everyone will be angry! I say this because I don’t claim to have all the answers, but strongly believe we need to ask better questions. So what I’m hoping is that readers will want to debate me and tell me I’m wrong. In the process of that debate, we’ll come up with better ideas.

*Higher Ground is out now

Photo: Bess Adler for Welcome to the Jungle

Follow Welcome to the Jungle on FacebookLinkedIn, and Instagram, and subscribe to our newsletter to get our latest articles every week!

Les thématiques abordées