Alternative to woke capitalism

In the world of business, there was a growing awareness that a business should look beyond profit, long deemed their ultimate responsibility to the owners and stockholders of the business. The new mantra says that business leaders should also accept that they have a responsibility towards other stakeholders of the company, which include customers, suppliers, employees and the entire community as a whole.

This means, for example, that business has the responsibility of caring for the environment and leading the fight against climate change. It also means that businesses are obligated to practice ethical practices and to avoid unethical practices such as money laundering, tax evasion, bribery and false advertising. This also includes obligations to the employees to ensure that they are earning enough to live a life of dignity, even at the cost of profitability.

All these social obligations were supposed to be done voluntarily by the business community but this has now become controversial.

The first controversy is whether it is possible for the business leaders to look beyond the profit motive as their primary objective and to accept that these other obligations have equal weight. Is it really possible for bosses to take a stand on divisive issues such as the environment, clean governance or economic policies benefitting primarily the poor?

Many business leaders around the world have started tackling this issue. The terms they use may vary like enlightened capitalism or capitalism with a conscience.  However, all discussions are based on the belief that business leaders can arrive at these judgments without any government interference or regulation. Andrew Edgecliffe-Johnson has termed this as “woke capitalism.” (“Woke” is the popular term used these days to mean being actively aware and attentive to current issues, especially relating to racial and social concerns.)

I find it hard to believe that businessmen would be willing to voluntarily sacrifice their profits or risk controversies even at the cost of their conscience. Perhaps Adam Smith, foremost defender of the profit motive, was right in saying that the best economy is purely a capitalist economy where businessmen are allowed absolute freedom to maximize their profits and only the government has the power to regulate these businesses.

I note, for example, many business leaders who will acknowledge what Pope Francis said, that every worker deserves a living wage. But these same individuals will oppose any mandate for an increase in the minimum wage, no matter how small. Perhaps the urge to minimize cost and increase profitability is an ingrained motivation in every successful businessman.

Recently, there was a second controversy regarding woke capitalism. Many prominent individuals, including business leaders, are now going back to the philosophy of Milton Friedman, who questioned the belief that business has other obligations aside from profit.

The principle of stakeholder capitalism, which is based on ESG (economic, social, governance) principles, has been ridiculed as “greenwashing.” The implication here is that business has no role in climate change or environmental issues.

Elon Musk, one of the richest men and the most prominent capitalist in the world, has called ESG a scam. Perhaps he is justifying in saying this as many businesses engaged in stakeholder capitalism more because of its public relations value rather than a desire to really fulfill their obligations to society.

I personally will add that I believe that one of the primary motivations for business to get involved in seemingly non-profitable actions is to prevent more regulations from the government. Many times business leaders will publicly announce that they are willing to engage in such concerns while at the same time will ask for special compensation from the government, like tax incentives and other privileges.

Tariq Fancy, former chief investment officer for sustainable investing, calls sustainable investing as a “dangerous placebo.” Desiree Fixler, former head of ESG for the Deutsche Bank, says that the acronym ESG has become meaningless.

Many governments in advanced countries in Europe and North America seem to have accepted these criticisms. These countries are now pushing for more regulation to ensure that businesses adhere to basic ethical and sustainable principles. Among these proposals are: global taxation, closing loopholes that allow money laundering and measures that will abolish monopolistic practices.

In the Philippines, the concept of stakeholder capitalism is only beginning to be discussed among business leaders. Whether this will take off or not in the country remains to be seen.  However, the big conglomerates in this country should be aware that the rise of populism and anti-elitism led to the rise of populist leaders. Even popular and promising leaders like VP Leni Robredo have been unable to stem anti-elitism and the disillusionment against oligarchs.

It will be difficult for the elite in this country to change old habits and practices. But if they do not do so, then populism will continue to dominate our politics as the poor and even the middle class will continue to be disillusioned with the practice of maximizing profits even at the expense of a dignified life for the ordinary Filipino. I do not believe that woke capitalism will ever take root in this country. We must find a balance between government regulation of the market economy and preserving the right of business to be competitive. I believe that this balance lies in social democracy.

*      *      *

Our June Zoom specials:

Adult Series session with public historian and columnist Ambeth R. Ocampo on “Writing the Past, the Present, the Future” on June 18, 10:00-10:30 a.m.

Young Writers’ Hangout on June 25 with Alma Anonas Carpio, 2-3 p.m. In answer to inquiries, Write Things’ six-day summer workshop “Writefest” will have a second run on June 27, 29, July 1, 4, 6 & 8, 3-4:30 pm.

Contact [email protected].  0945.2273216

Email: [email protected]