On August 19, 2019, the Business Roundtable, led by JPMorgan Chase’s Jamie Dimon and composed of more than two hundred of America’s top CEOs, heralded the dawn of a new age of corporate capitalism. Henceforth, the CEOs proclaimed, the purpose of publicly traded corporations would be to serve the interests of workers, communities, and the environment, not only their shareholders. The declaration capped a two-decades-long trend of corporations claiming to have changed into caring and conscientious actors, ready to lead the way in solving society’s problems. I call it the “new” corporation movement.
To find out more about it, I visited the movement’s global hub, the World Economic Forum’s annual meeting in Davos, founded and run by economist Klaus Schwab, who originated the idea of ‘stakeholder capitalism’. “Companies recognize that they have a special responsibility in the world, social and environmental responsibility,” Schwab told me in an interview. “Today it is, and has to be, part of corporate action and decision-making.” Everyone I met in Davos agreed. Richard Edelman, for example, told me how today’s corporations embrace social and environmental values as core values, “in the supply chain, in the hiring practices, throughout the corporation,” no longer just as peripheral “philanthropic exercises.” Michael Porter added “it’s quite remarkable how big a shift that’s been—the corporation has really reshaped and redefined itself.”
Davos is not, of course, the only place such notions hold sway. Corporate commitments to social and environmental values are now the global norm. Companies routinely promise carbon neutrality, zero waste to landfills, renewable energy, racial justice, climate change mitigation, equality, sustainability, and helping people in need, among other things. They see themselves as major contributors to solving world problems, and as flag ships for an entirely new kind of capitalism—conscious capitalism, creative capitalism, connected capitalism, inclusive capitalism, green capitalism, and, of course, Schwab’s stakeholder capitalism, as it’s variously described.
It all looks like real change and progress. But there’s a hitch, and it’s a big one. Corporations have not actually changed—at least not in terms of their legal mandates and institutional natures. Despite some tweaks to corporate law, that make it slightly more accommodating of social and environmental values, it continues to demand companies prioritize their own best interests by maximizing shareholder value and pursuing profit, growth, and competitive advantage. In an earlier work (The Corporation book and film), I diagnosed the corporation as an institutional psychopath because of its fundamentally self-interested institutional character. That character hasn’t changed, though it’s better hidden now by a veneer of charm.
None of this denies that corporations can do good, and that they do. But they cannot, and do not, do good at the expense of doing well. ‘Doing well by doing good’ is the guiding principle. Doing good for its own sake is out of bounds. Which limits profoundly how much and what kind of good corporations can do, while licensing them to do bad if that, rather than doing good, is the best way to do well.
There’s the further problem that despite not having really changed, corporations leverage an image of change to secure policies favorable to them, but not necessarily to society. Casting themselves as ‘good actors’, they push governments to free them from regulations designed to protect public interests and citizens’ well-being, claiming they can be trusted to regulate themselves. They take over public services—like schools, water systems, and social services provision—claiming they can run them better and more efficiently than governments. And they push for tax cuts with promises of jobs and other societal benefits.
It’s a key premise of the new corporation movement that because corporations have become good actors, they can, and should, take over government roles. “There’s a real lack of faith in government, and companies are standing up and filling that void,” Michael Porter told me in Davos. Klaus Schwab added that what we really need is “strong collaboration between government and business, a permanent platform for public-private cooperation.” And Richard Edelman—after exclaiming that corporations had evolved into “good actors” and “agents of change,” and that they are now ready to “fill a void left by government”—said: “I’m not much of a believer in political citizenship. I actually believe much more in the power of the marketplace.”
Now, that’s a chilling belief when you consider that political citizenship is, in effect, democracy. But Edelman was just articulating the widely held view among new corporation advocates that “good” corporations deserve greater domain, and democratic governments less. Which helps explain how corporations justify fighting government attempts to protect the same social and environmental values they claim to care so deeply about.
Shortly after President Trump was elected, for example, Jamie Dimon and his Business Roundtable asked the Trump administration to make cuts to a list of “top regulations of concern,” ones, they claimed, were “unduly burdensome” to big business. Among those were ozone and coal-fired plant emission standards, clean water rules, worker overtime and fair pay requirements, and net neutrality rules. In other words, those same new corporation leaders who, like Dimon, often criticized President Trump’s stances on social issues were working to leverage his deregulation agenda to their advantage—all the while claiming to be champions of the very social and environmental values their efforts would deprive of legal protection.
That same dynamic also operates in relation to corporate taxation. Leading new corporations—including Dimon’s JPMorgan Chase, and also companies like Apple, Walmart, and General Electric—say they care about social and environmental values while, at the same time, lobbying against and strategically avoiding taxes that governments rely upon to operationalize those values. It was telling in this regard in Davos when Klaus Schwab—the undisputed godfather of the new corporation movement—turned to Donald Trump, while introducing his address, and said: “On behalf of the business leaders here in this room, let me particularly congratulate you for the historic tax reform package passed last month, greatly reducing the tax burden of U.S. companies.”
Joseph Stiglitz later told me he was surprised by Schwab’s fawning over Trump. But, really, he shouldn’t have been. Schwab was merely reflecting a key belief of the new corporation movement he helped spawn—namely, that corporations, now good actors, could and should be freed from the burdens imposed upon them by democratic governments. In the end, despite all their progressive talk and walk, new corporations and their leaders—like Reaganites in the 1980s, and Trumpites more recently—believe that state regulation, taxation, and social provision should be diminished, and corporate power and control expanded.
Which is why I believe, as the subtitle of my new book suggests, that “good” corporations are bad for democracy.