“Stakeholder capitalism” may not be a phrase you are intimately familiar with, or it may be a phrase that makes your eyes glaze over. But it’s definitely something you’ve witnessed.
Let me give you an example:
This May, when the actor John Cena was promoting the latest movie in the “Fast and Furious” franchise, he called Taiwan a country. This, needless to say, displeased China — and Cena offered a groveling apology. “I love and respect China and Chinese people. I’m very very sorry for my mistake,” he said in Mandarin on Chinese social media.
Last summer, while Uber was putting out soaring statements about becoming an anti-racist company — it promised, among other pledges, to implement anti-racism education for riders and drivers in California — the company was pushing for Prop 22, which allowed the company to continue to classify its drivers as independent contractors rather than employees.
So “stakeholder capitalism” is the kind of gauzy expression that suggests a freer, fairer, more diverse, environmentally and LGBTQ-friendly world. But in reality it is something far different. It looks, in the case of Cena, like an American movie star doing the bidding of the Chinese Communist Party. In the case of Uber, assurances about “antiracism” allowed the company to distract the public from a political issue with real economic stakes.
This corporate hustle is the subject of a new, bestselling book called Woke Inc: Inside Corporate America’s Social Justice Scam by biotech entrepreneur Vivek Ramaswamy. Ramaswamy makes the compelling case that “stakeholder capitalism” sounds like a good thing, but is in fact deeply damaging our democracy. He explains why in the essay below. — BW
There is nothing more important to progressives today than to apologize: Antiracists apologizing for being racist. Electric-vehicle drivers apologizing for having polluted the planet. And devotees of “stakeholder capitalism” saying sorry for, well, capitalism.
Joe Biden has called conventional, or shareholder, capitalism a “farce,” saying corporations “have a responsibility to their workers, their community, to their country.” Elizabeth Warren’s “accountable capitalism” calls for higher wages, and greater employee involvement in selecting boards of directors and making political contributions. Al Gore has said that, as the value of socially conscious capitalism gains traction, “investors who fail to take it into account may be at risk of violating their fiduciary duty to their clients” — and, presumably, vulnerable to a lawsuit.
Nor is stakeholder capitalism limited to politicians or progressive activists: America’s most powerful CEOs have embraced it. In late 2019, the Business Roundtable, a lobbying group representing the country’s biggest corporations, announced it was revising its statement of purpose with an eye toward “stakeholders.” Jamie Dimon, the chairman and CEO of JPMorgan and the chairman of the Business Roundtable, wrote in a follow-up article in Time: “Capitalism has been the most successful economic system in history. But we can improve upon it to help solve society’s problems and lift up more people.”
Here's what “stakeholder capitalists” miss: Once corporations become vehicles to further an agenda other than shareholder value, they become vehicles to advance any agenda, including those of foreign adversaries.
Case in point: In recent years, the Chinese Communist Party has become a key stakeholder of many American multinationals — from Nike to Visa to BlackRock. It’s now flexing its muscle in ways that — no surprise — strengthens China’s interests at the expense of American ones.
The case of Airbnb is illuminating.
In May 2019, the Silicon Valley darling hired Sean Joyce, a former FBI deputy director, to be its first chief trust officer. Joyce’s job was to protect users’ safety — limiting data breaches, fraud and the many risks, online and off, that come with hundreds of millions of users spread across 5.6 million rental properties in 100,000 cities worldwide.
By October of that year, Joyce had left Airbnb. According to The Wall Street Journal, Joyce quit because he was concerned that Airbnb was secretly sharing data on millions of guests and hosts — who, presumably, are among Airbnb’s most important “stakeholders” — with Chinese officials. This data included phone numbers, email addresses and the content of messages between users and the company. After authorities in Beijing asked Airbnb for even more “real-time data” — which, Joyce feared, would enhance the regime’s surveillance of minority ethnic groups — Joyce took his concerns to Airbnb’s CEO, Brian Chesky, among other senior executives. Nathan Blecharczyk, the company’s chief strategy officer, reportedly told Joyce: “We’re not here to promote American values.”
Soon after, Joyce resigned, citing “a difference in values.”
Three months later, Airbnb announced, with great fanfare, that it had embraced a new philosophy of doing business. “Serving all stakeholders is the best way to build a highly valuable business and it’s the right thing to do for society,” a January 2020 blog post from the company declared. Instead of the conventional shareholders’ meeting, Airbnb would now hold Stakeholder Day, and it would even change its pay structure, linking bonuses to key social targets and creating a “stakeholder committee” on the board of directors. The blog post added: “The stakeholders who make up the Airbnb community are Guests, Hosts, Communities, Shareholders, and Employees.” It did not mention the Chinese Communist Party.
The stakeholder rebrand isn’t just a sideshow; it’s an essential tool for powerful companies. Airbnb has amassed a huge millennial user base in no small part by portraying itself as a forward-looking, stakeholder-oriented company -- one that embraces diversity, equity and inclusion, and proudly aligns itself with #BlackLivesMatter while quietly allowing Chinese users to discriminate against ethnic minorities. (According to Wired, many Airbnb listings in China contain language meant to ward off Uighurs, Tibetans and other minority groups. One such listing read: “We do not have the permission of the police station” to host Uighurs, so “please do not book.”)
So Airbnb gets credit for being “progressive” while turning a blind eye toward real repression.
No doubt, more traditional, “shareholder” corporations do all kinds of terrible things to curry favor with unsavory, foreign regimes. Consider pretty much every international energy company that has tapped into Russia’s massive oil and gas reserves. But those companies aren’t trading on their reputation for being forward-looking or right-minded or stakeholder-ish. Airbnb is.
Nor is this just about Airbnb or any other American corporation. It’s also about the countries those companies do business in.
The net effect of companies like Airbnb bemoaning every microaggression committed against every black, brown or trans person in the United States while staying silent when it comes to genuine human-rights atrocities in China — cramming more than one million Uighurs into concentration camps; forcibly sterilizing them; and criminalizing the practice of Islam — is to create the impression that China is our equal when it comes to civil liberties.
Sure enough, when E.U. officials, in late 2020, pressed Xi Jinping about human-rights abuses in Xinjiang, the home to most of China’s Uighurs, Xi shot back that the very existence of Black Lives Matter is proof that the United States is no better than China. When State Department spokesperson Morgan Ortagus criticized Beijing for its crackdown on Hong Kong demonstrators, in late May 2020, Chinese Foreign Ministry spokesperson Hua Chunying tweeted: “I can’t breathe,” a not so subtle allusion to Black Lives Matter. In March, China’s top diplomat, Yang Jiechi, lambasted the United States for “slaughtering” black Americans, adding that China hopes America will do better on human rights.
Disney, too, has bent over backward to avoid doing anything that might ruffle Chinese officials.
In 2019 Disney’s CEO that it would be “very difficult” for Disney to film movies in any state in the United States that restricts abortion access. But the company’s respect for women’s rights did not prohibit it from filming “Mulan” in Xinjiang, where Chinese authorities have embarked on a program of systemic rape — part of an effort to dissolve ancient family and communal bonds, and transform Uighurs into what Beijing regards as full-fledged, non-Muslim Chinese. Not only that: In the credits of “Mulan,” Disney gave “special thanks” to those same authorities.
Then there was the Ancient One, a character in Disney’s 2016 hit “Dr. Strange.” The Ancient One was supposed to be a Tibetan monk, but this upset Beijing, which, no doubt, worried audiences might think Disney was saying something good about another Tibetan monk: the Dalai Lama. So Disney made the monk white. Progressives, in the United States, howled that Disney had replaced an Asian character with a white one. So Disney did what it had to do to assuage the progressives: It made the monk a woman. This did the trick. White-woman-washing the Ancient One was good for China and Disney. Not so much for Tibet.
Consider Apple. The $2 trillion giant now hides the Taiwanese flag emoji from users in Hong Kong and Macau. It has removed songs from iTunes that refer to Tiananmen Square. All the while, it relentlessly scolds America for its “systemic racism.”
Then there’s the NBA, considered the wokest professional sports league in America. When Houston Rockets General Manager Daryl Morey tweeted, in October 2019, from his personal account, “Fight for freedom, stand with Hong Kong,” and the Chinese consulate in Houston denounced Morey, the Rockets’ owner followed suit, nearly firing him. Rockets star James Harden publicly apologized to China. LeBron James suggested Morey had abused his First Amendment rights: “I believe he wasn't educated on the situation at hand, and he spoke, and so many people could have been harmed not only financially, physically, emotionally, spiritually. So just be careful what we tweet and say and we do, even though, yes, we do have freedom of speech, but there can be a lot of negative that comes with that, too.”
To make sure Chinese authorities knew that it, too, was very upset with the Rockets, Nike pulled its Rockets gear from stores in China. In June, during a call with Wall Street analysts, CEO John Donahoe told investors, “Nike is a brand that is of China and for China.” Donahoe did not mention that some Chinese Uighurs serve as forced labor in factories employed by Nike. This from the same company that, in 2019, canceled its Betsy Ross Flag sneaker ahead of the July Fourth holiday after Colin Kaepernick declared that the flag was linked to nation’s history of slavery.
China may be the most prominent example of stakeholder capitalism gone awry, but it is hardly alone.
Any number of American corporations now lavishing untold sums of capital on diversity, inclusion and equity initiatives in the United States are eager to do business in countries with reprehensible human-rights records: Citigroup, in the Democratic Republic of the Congo, where extrajudicial killings and violence against women are rampant; Hilton, in Abu Dhabi and Sri Lanka, where it’s illegal to be gay; the pharmaceutical giant Merck, in Russia, where democratic activist Alexei Navalny is in prison; and BlackRock, the world’s No. 1 investment-management firm, in Latin America, southeast Asia and sub-Saharan Africa, where companies that BlackRock has invested in have razed forests and exacerbated greenhouse-gas emissions. And so many more.
So persists an inescapable contradiction of stakeholder capitalism: All of these corporations have successfully rebranded themselves as good citizens, global stewards and combatants in the war against systemic racism, which has obviously proven good for business, but very bad for America, blurring the moral distinction between democracies and closed societies, between the free West and fear-based societies like China.
And because this business strategy is dressed in the garments of justice, it only compounds our innumerable confusions about what makes us us.