Woke Capitalism in a Secular World

Some 18 months ago the Business Roundtable proposed redefining the purpose of a corporation. Rather than simply working in the interest of shareholders, the organization affirmed that companies also should commit to delivering value to customers, investing in employees, dealing fairly and ethically with suppliers, and supporting local communities.

The admirable—if platitudinous—idea quickly has been perverted to mean that businesses ought to obey orders from the progressive elite, regardless of how thin its connection to any company may be. In practice, “woke capital” does little more than pay tribute to progressive causes through marketing and posturing. The problem for companies that play along is that the proponents of many progressive causes are hostile to free enterprise itself. The best that such companies can hope for is short-term appeasement.

The Business Roundtable statement arguably was a repudiation of the Friedman doctrine, as explained by economist Milton Friedman in his 1970 article “The Social Responsibility of Business Is to Increase Its Profits.” He wrote that corporate executives should “conduct the business in accordance with their [shareholders’] desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.”

Friedman didn’t address what to do when “ethical custom” is inimical to free enterprise itself.

As any CEO knows, simply making as much money as fast as possible won’t ensure that a company can flourish over time. A corporation is a complex human organization, animated by a vision of the good it can do for its customers. Success cannot be reduced solely to profitability.

The problem is analogous to one identified by philosopher John Ralston Saul. Voltaire and his Enlightenment colleagues championed reason as the way to free people from arbitrary power and the “superstition” of religion. But reason has been degraded into a narrowly rationalist form of scientific management, Saul observed in “Voltaire’s Bastards” (1992). By reducing all of morality to the latest progressive causes, the woke capitalists have unintentionally become Friedman’s bastards—replacing one narrow rationalism with another.

Another problem with woke capitalism is that it simply doesn’t work. One of my students recently reviewed 30 cases of companies engaging in political activism. Twenty-seven generated a “negative outcome,” or backlash. This shouldn’t be surprising. The U.S. is sharply divided on political and social issues. There isn’t much upside for a company to take a stand on abortion, same-sex marriage or complex racial issues, especially when such themes are irrelevant to its business.

Principles guide good managers when making decisions. Yet these principles do not come from external norms of “ethical custom,” especially not if the custom derives from the progressive beliefs of the moment. Principles, if they are to be effective in guiding any organization, must be grounded in faith or at least some other lasting, existential commitment. They can be reinforced by a healthy corporate culture, but there is no substituting for internally grounded habits such as honesty, trustworthiness, and self-discipline. We used to call that virtue.

This straightforward and principled approach to entrepreneurship and management is the best alternative to woke capitalism. It grounds business in lasting principles while recognizing that the creation of goods and services for society is good in itself. When done fairly and honestly, commerce does not have to be apologized for or justified through “woke-washing.” Instead of using business to further divide the country and sideline people of faith, companies can take a “live and let live” approach.

One point in particular from Friedman’s famous article remains salient: It is not the role of unelected business leaders to involve public companies in controversial political or social issues. They should instead work on the good that they were established to do, in a principled fashion. And they should look closely at the source of these principles to make sure that what they are following is a moral compass, not a wind vane.

Mr. Abela is dean of the Busch School of Business at the Catholic University of America