A day after the August NBA strike in response to yet another police shooting—this time, Jacob Blake, in Kenosha, Wisconsin—Uber’s head of diversity and inclusion, Bo Young Lee, tweeted out the company’s new billboard campaign. “If you tolerate racism, delete Uber,” the sign read. Lee added, “Now is the time for all people and organizations to stand up for what is right.”
Corporate America had already been examining its complicity in furthering systemic racism and inequality in the wake of a summer rife with police killings of Black people. Uber, for its part, was one of many companies standing up for what’s right—so long as it didn’t have to change too radically. Several weeks earlier, Uber had committed to anti-racism education for riders and drivers, established that it had no tolerance for discrimination, and pledged $1 million toward criminal justice reform. Even so, the company had committed more than $30 million to overturn AB5, the California law that requires its contract drivers be treated as full-time employees. In other words, Uber was arguing against the single biggest thing it could do to foster equity: give its drivers, which some estimates have put at two-thirds non-white, the stability of healthcare and benefits. (When asked for comment, Uber pointed to previous statements on how it’s fighting AB5 because its workers want flexibility.)
Uber’s moves embody what’s known as “woke capitalism,” where businesses respond to societal issues such as systemic racism with representational gestures, from sobering statements to strategic donations. For some people, this is enough. Or so executives hope.
But for others, society’s multiple, overlapping crises have created an opportunity to make companies more accountable—and, ideally, more innovative. “There’s basically no one arguing for shareholder primacy anymore,” says Julius Krein, founder of the public-policy journal American Affairs. “[Corporate leaders] don’t want to leave the current model because they don’t know what comes next, and they’re afraid.” A movement argues that they don’t have to be.
For a glimpse of the future, business leaders need only look to the companies that have best handled the tumult of 2020. They were the ones that were “woke” long before this year. Patagonia’s decision to pay employees while stores were shuttered during lockdowns was not the first time it put workers first: The company has offered on-site childcare for more than three decades. The call Ben & Jerry’s made to dismantle white supremacy following the police killing of George Floyd was not a bandwagon move: The ice cream brand had supported a congressional bill that would study the effects of slavery and discrimination and recommend reparations. Both companies have built reputations as the rare institutions that care about their employees, the communities in which they operate, and the environment.
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Patagonia and Ben & Jerry’s are also certified B Corporations. This means that they meet certain standards for corporate transparency, worker benefits, and energy efficiency (as set by the nonprofit B Lab), and that they consider a broader array of stakeholders than just financial shareholders.
Although B Lab has attracted more than 3,500 companies since 2007, its cofounder and CEO Andrew Kassoy has long known that this way of doing business needed to be more prerequisite than perk. “If we want to have an economic system that creates value for all stakeholders, that creates jobs that have dignity and opportunity, and that lift up people who have been marginalized or made vulnerable by the system that we’ve got, then [all] companies need to be like B Corporations,” says Kassoy.
That’s why B Lab has also spent the past decade advocating for a legal option for incorporation. Benefit corporation status requires an annual public benefit report and protects that broader purpose from shareholders, who, under traditional corporate law, could hold a company liable for decisions that don’t prioritize profits. (B Lab also audits certified B Corporations.) Since Maryland became the first state to recognize the benefit corporation, in 2010, more than 35 other states, Washington, D.C., and Puerto Rico now legally allow companies to serve the wider public.
But this effort has its limits. A company has to choose to incorporate as a benefit corporation. “Voluntary initiatives in the private sector—that’s been the nature of socially responsible business and investing for 30 years,” says Marjorie Kelly, executive vice president of the Democracy Collaborative, a nonprofit research institute focused on building a fairer economy. “We are now at a pivot point where it needs to move into policy.”
Kassoy sent up a signal flare of the movement’s next phase when he and several colleagues published a white paper in September that takes the stakeholder capitalism fight to the federal level. The timing was strategic: It came just after the 50th anniversary of an influential 1970 New York Times article written by the economist Milton Friedman, bluntly titled “The Social Responsibility of Business Is to Increase Its Profits.” That manifesto set in motion a decades-long effort to overthrow what had been a placid era of corporate America supporting unions and welcoming legislation that regulated consumer, workplace, and environmental safety. B Lab seeks to retack, making companies and investors responsible for the social impact of their actions. “It’s a good moment to say, ‘The next 50 years should look totally different,’ ” Kassoy says.
He already has a surprising number of allies from across the political spectrum. Senator Elizabeth Warren (a Democrat from Massachusetts) introduced the Accountable Capitalism Act in 2018, which would require a federal charter for companies with more than $1 billion in revenue that obligates directors to consider all stakeholders in their decision-making. In a 2019 report, Senator Marco Rubio (a Republican from Florida) argued for prioritizing long-term corporate investments over short-term profit maximization.
The pandemic has only sharpened bipartisan calls for a new model of doing business. In an outline of policy proposals focused on COVID-19 recovery, the liberal think tank Roosevelt Institute calls for a Warren-esque federal charter to “create a legal obligation for the corporation to account for the public effects of its actions” and legislation mandating that companies let workers elect “a significant portion” of their board. Meanwhile, both Representative Alexandria Ocasio-Cortez (a Democrat from New York) and Senator Ron Johnson (a Republican from Wisconsin) have introduced proposals to tie COVID-19 relief funds to promoting employee ownership.
These initiatives wouldn’t just benefit workers, but corporations, too. Shareholder primacy has inspired mass layoffs, tax avoidance, and share buyback programs, all of which enrich top executives and shareholders with no discernible benefit to the business itself. “[Share buybacks] deprive the company of money that it could use to pay people who are better, to give better jobs to people who have more experience, and who’ll produce products of the future,” says William Lazonick, an economist who studies innovation and competition. Apple, for example, announced in June a $100 million program to promote racial justice inside the company, but it spent $67 billion on share buybacks in the last fiscal year. There’s “renewed interest from the right,” Krein adds, “for a new model to correct declining U.S. competitiveness.”
“If there are things that society needs—dealing with climate change, a pandemic, or racial inequality—then companies can’t innovate and solve those problems,” Lazonick says, unless their “normal business practices” are realigned. Friedman’s 1970 article was partly a response to a proposal for General Motors to add board members who would advocate for safer, more fuel-efficient cars. Friedman called this plan socialism, but Lazonick argues that it would have spurred GM to compete against imports which met this consumer demand. Says Lazonick, “They lost out.”
When we consider the world after this pandemic, the protests, and the election, we can’t just hope that businesses will do better. “The way you change corporate behavior,” says Bharat Ramamurti, managing director of the corporate power program at the Roosevelt Institute, “is to change the law, and then enforce that law strictly.”