· 5 min read
The phrase “go woke, go broke” is often used by critics of corporate social responsibility. It implies that companies face a binary choice: embrace progressive values or pursue profit.
But this dichotomy between “wokeness” and capitalism is both simplistic and increasingly out of step with corporate reality.
Many companies are learning to navigate a middle path. They are embedding social, environmental and ethical considerations into their business strategies – not in spite of profit, but because it contributes to long-term value creation.
Understanding this shift – and the backlash to it – is fundamental to grasping modern corporate responsibility.
Our research examines the growing tension between evolving “woke” agendas within firms and the enduring demands of shareholder value, known as “shareholder revanchism”.
We explore this dynamic using academic Archie Carroll’s Pyramid of Corporate Social Responsibility, where economic responsibility forms the foundation for higher legal, ethical and philanthropic obligations.
Ultimately, we argue for a reassessment of the prevailing emphasis on shareholder profit and short-termism. Directors should adopt a more balanced approach when pursuing profit and discharging their duties.
The illusion of choice
The idea that directors must choose between shareholders and stakeholders – between profit and progressive causes – has deep roots in law and economics.
For decades, shareholder primacy prevailed in global business. This principle was famously reinforced in court decisions such as the 1919 Dodge v Ford case in the United States. Henry Ford was found to have a duty to operate his company in the interests of shareholders. It was later popularised by Milton Friedman, who declared that “the social responsibility of business is to increase its profits”.
A stark example of this tension came with the ousting of Emmanuel Faber, chief executive of food giant Danone in 2021. Faber was accused by some shareholders of failing to “strike the right balance between shareholder value creation and sustainability”. His critics felt he focused too much on people, the planet and social responsibility and not enough on profits.
Yet corporate law has begun to evolve. In the United Kingdom, section 172 of the Companies Act 2006 still requires directors to promote the success of the company “for the benefit of its members”. But the legislation also requires directors to consider employees, suppliers, communities and environmental outcomes.
This model – sometimes termed “enlightened shareholder value” – preserves profit as the goal, while recognising that broader factors shape how it is achieved.
New Zealand’s brief experiment with section 131 of the Companies Act 1993, which allowed directors to consider environmental, social and governance (ESG) factors, is another example. The amendment was introduced under Labour before being revoked by the National-led coalition.
Canada has a similar provision.
The challenge of defining ‘woke capitalism’
The phrase “woke capitalism” was popularised in a 2018 New York Times opinion piece about corporate activism.
It originally described how firms were supporting progressive causes to attract younger, values-driven consumers – not out of altruism, but to strengthen brand appeal.
In 2019, the US Business Roundtable – a group of 200 top chief executives – rejected shareholder primacy in favour of stakeholder governance. It pledged to run companies for the benefit of all stakeholders: customers, employees, suppliers, communities and shareholders.
This followed a 2018 letter by Larry Fink, chairman of BlackRock, calling on firms to pursue a broader purpose and serve all their stakeholders.
Yet corporate activism carries risks.
Nike’s campaign featuring Colin Kaepernick boosted sales but sparked backlash over the American football player’s support for Black Lives Matter. Bud Light’s brief partnership with transgender influencer Dylan Mulvaney triggered boycotts. Gillette’s “toxic masculinity” campaign alienated many long-time customers.
Jaguar’s sales plunged after a rebrand was criticised as pandering. Even ice cream company Ben & Jerry’s has clashed with parent company Unilever over the limits of its political expression.
These examples show that progressive branding is not always rewarded – but nor is silence. Companies now risk criticism for failing to speak out on issues their stakeholders care about. It is clear consumers are increasingly attuned to corporate social responsibility.
Creating value for everyone
A central challenge in reconciling these tensions is the definition of profit itself. Traditional corporate law treats profit as the ultimate end of business activity.
But scholars such as Edward Freeman argue that profit is a precondition for continuity – not an end in itself. As he puts it, profit to a company is like red blood cells to a human: essential for survival, but not the purpose of life.
Under this view, profit becomes cyclical. It is a means of sustaining activity, not a fixed destination. This may seem open ended, but it avoids the fiction that companies ever reach a final “profit goal”.
Firms pursuing social impact are not abandoning capitalism; they are redefining it.
In a polarised climate, “woke capitalism” remains a lightning rod. But the supposed conflict between ethics and economics is a false one. Courts, lawmakers and firms alike are recognising that social responsibility can support, rather than undermine, long-term value.
Directors are no longer torn between duty and decency. They are navigating a broader understanding of corporate success – one in which “wokeness” and capitalism are not opposing forces, but interdependent elements of a sustainable business strategy.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
