The Capitalist and the Activist

Tom C.W. Lin is the Feinberg Chair Professor of Law at Temple University Beasley School of Law. This post is based on his recent book. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here); Companies Should Maximize Shareholder Welfare Not Market Value by Oliver Hart and Luigi Zingales (discussed on the Forum here); Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by a Trustee by Max M. Schanzenbach and Robert H. Sitkoff (discussed on the Forum here); and Exit vs. Voice by Eleonora Broccardo, Oliver Hart, and Luigi Zingales (discussed on the Forum here).

Today, corporations and their executives are at the frontlines of some of the most important and contentious issues of our time, such as the Russian invasion of Ukraine, voting rights, gun violence, racial justice, climate change, and gender equity. Through their policies, pronouncements, investments, and divestments, businesses and business leaders are directly engaging with the significant challenges confronting modern society. This is the new reality of business, activism, and politics in contemporary America.

My new book, The Capitalist and the Activist, explores this complicated new reality of contemporary corporate social activism—its driving forces, promises and perils, and implications for our laws, public policies, and businesses. It does so mindful of the structural shortcomings and systemic limitations of capitalism and activism, yet hopeful of progress.

The roots of contemporary corporate social activism can be traced to three large, interconnected developments in business, law, and society. Specifically, the evolution of corporate purpose from one of zealous shareholder primacy to one of more expansive stakeholder governance, the convergence of the public and private sectors, and the expansion of corporate political rights have all helped foster a fusion of capitalism and activism that is at the heart of contemporary corporate social activism.

Furthermore, these roots are simultaneously powered and amplified by new technology. Activists and citizens can readily organize, communicate, and fundraise to bring their concerns to the powerful in business and government like never before. Tens of millions of people can be reached, millions of dollars raised, and thousands gathered to raise awareness or protest an issue in a matter of minutes, hours, or days.

This new dynamic between capitalism and activism has resulted in both a new change in business and a new business of change that blurs conventional divisions between public and private, profit and nonprofit, capitalism and activism. This new business of change has already and will continue to alter discussions and decisions between and among business leaders, investors, consumers, policymakers, and other stakeholders.

Today, one can effectuate change and progress on important social issues like voting rights, racial justice, income inequality, gun violence, immigration reform, gender equity, and climate change by changing laws and public policies and by changing the institutional practices and priorities at major corporations. Increasingly, social activists and concerned citizens are choosing to pursue change and progress via the converging paths of government and business. The old way of conceptualizing either public or private avenues for change has been rendered a false choice. On issue after issue, the preferred choice is one that engages both public policymakers and institutions as well as private businesses and executives.

This preferred both/and, public-private path often uses business channels to make progress on social issues by fusing capitalism and activism to engage with the public political process and private investment decisions. For instance, activists will often leverage the marketing and communication resources of businesses to amplify their voices to the public and to policymakers who might be more accessible and receptive to voices that come with the imprimaturs of business by encouraging prominent business executives to speak out on one issue or another.

Moreover, contemporary political dysfunction and obstructionist partisanship have made these new corporate channels of social change and progress much more appealing than the traditional public channels of government. Despite strong popular support, efforts toward reform and progress on one issue or another too often find their death and purgatory in the crucible of a congressional committee, a threatened filibuster, or an endless administrative rulemaking process.

Given the all-too-common political dysfunction and gridlock in government these days, change and progress on challenging social issues via corporate social activism is not only more appealing but also more effective. Corporations and their executives can move faster than the government to accommodate changes in citizen concerns, customer sentiments, investor preferences, and social norms in ways that a dysfunctional political process does not and cannot.

The rise of contemporary corporate social activism presents an incredible opportunity that can mutually benefit both activists and capitalists. By working thoughtfully with businesses, activists can gain wider reach, deeper impact, and improved operations for their causes. At the same time, by working with activists, businesses can enhance their value, create new and better markets, and attract more investors and talent to their companies.

To be sure, while capitalists and activists can and should learn and benefit from working with one another, there are real risks and drawbacks in this partnership if engaged in thoughtlessly. Corporate social activism could further politicize an already fragmented marketplace, marginalize important social issues, corrode core democratic values, and whitewash corporate misdeeds.

These risks and drawbacks can understandably cause one to refrain from engaging in corporate social activism altogether. But such a blanket withdrawal would both deny the reality that corporate social activism is already happening and foreclose the potential good that can come from it. Instead of refusing to engage in corporate social activism altogether, one should acknowledge its risks and manage them thoughtfully, honestly, and critically, so that society may realize its promise while mitigating its perils.

Contemporary corporate social activism can impact not only institutional norms of business and activism, but also individual norms. Society often perpetuates a dichotomy between working for the public interest or working for private gain. This notion presupposes that one can either work for the public interest by entering into government service or the nonprofit world or choose to work for private gain by going into the business world.

While this dichotomy may contain a kernel of truth, it is largely false in light of many changing expectations, policies, and practices in law, business, and society. With the rise of corporate social activism, public interest work should mean more than working for the government or a nonprofit organization, and private sector work should mean more than personal gain and profit. The new language and rules of social change are becoming more synonymous with the language and rules of business, and appropriately so.

The timely and timeless challenges that confront us as a society are too important, too large, and too complex to be left only to the good, hardworking activists and people in government and the nonprofit sector. These challenges require the creativity, ingenuity, resources, and efforts of the private sector as well as the public sector, those working for nonprofit causes, and those working for very profitable causes.

In the end, contemporary corporate social activism is, in one sense, a story of how we can meet and master old yet urgent social challenges with new perspectives and new approaches to corporate governance and democratic governance. It is one of the most consequential stories of business and society in recent history and will remain so for the foreseeable future. The conflicts, collaborations, and complexities between and among capitalists and activists will present some of the most fruitful opportunities, dangerous obstacles, and complex questions for executives, activists, policymakers, investors, and citizens for years to come.

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One Comment

  1. Carlos Oliveira
    Posted Wednesday, June 15, 2022 at 9:23 am | Permalink

    Excelent, Professor Lin; either we entrepreneurs took the lead, or else the free enterprise will be under threat.

    Best, Carlos

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