Where ‘Woke’ CEOs Are Falling Short

Do CEOs have the power to run the world, or are they unable? Is the world going to allow it?

That has become a central question of our times, as leaders of big business step up to address some of society’s most pressing problems. Consider:

• A majority of Fortune 500 CEOs, according to Fortune’s polling, have now committed to, or are planning to commit to, the U.N. goal of reaching net zero emissions by 2050 or sooner. The complex task of combating climate change was once viewed as an issue for governments. It has now been embraced by the C-Suite.

• Most large companies have set clear targets for diversity within their own organizations, and many are engaged in efforts to promote social justice beyond their corporate boundaries. Many of the most successful companies have made training a core part of their culture. This is not only to improve existing employees’ skills but also to promote social mobility and decrease inequality.

• Perhaps most dramatically, CEOs this year moved into a lead role in geopolitics. Corporations have become the frontline troops in the effort to roll back Vladimir Putin’s invasion of Ukraine, with hundreds voluntarily cutting or ending their businesses in Russia.

Fortune Media’s CEO, I have a unique perspective on the rapid redefining of business and society. This change has been happening for a decade. I have spoken to hundreds of CEOs and asked their opinions about it. These conversations convinced me that there is something real and lasting.

The conversations made me realize that the limits of stakeholder capitalism were not insurmountable. This is because these leaders have lost sight of a small number of social issues, where business and human needs intersect. And I believe at least four of those issues—taxes, voting rights, China relations and CEO pay—have the potential to erode rising trust in business, unless they are more effectively addressed.

The movement toward stakeholder capitalism—with companies tending to concerns of employees, customers, the communities they live in and the planet they inhabit, as well as concerns of shareholder—has been building for more than a decade, fed by the shaken faith in the efficacy of markets that grew out of the Great Recession. Bill Gates gave a speech at the World Economic Forum in Davos in 2008, the year he stepped down as CEO of Microsoft, calling for a new form of “creative capitalism.”

“The world is getting better,” he said, “but it’s not getting better fast enough, and it’s not getting better for everyone.” Capitalism needs to be refined to “serve the wider interest.”

Harvard Business School professor Michael Porter began making a similar argument, talking about “shared-value capitalism.” Whole Foods CEO John MacKey called it “conscious capitalism.” Salesforce CEO Marc Benioff (who co-owns TIME with his wife, Lynne) dubbed it “compassionate capitalism.” Others used the term “inclusive capitalism.” Everywhere, there was a growing sense among the titans of business that capitalism needed a modifier.

Soon, semantics was translated into actions. When Indiana passed a religious liberties law in 2014 perceived by many as restricting the rights of LGBTQ people, Benioff threatened to cut his company’s business in the state. In 2016, the state of North Carolina passed a law restricting transgender access to public bathrooms and even the state’s largest employer, Bank of America, took a strong stand against the move. In 2017, President Trump’s ambivalent comments after a “Unite the Right” rally in Charlottesville led a host of CEOs, led by Merck’s Ken Frazier, to resign from the President’s advisory councils. After the Parkland shootings in 2018, Delta CEO Ed Bastian ended the discount program for NRA member members. His company is located in Georgia where the majority of Georgia state legislators are members.

The recent flailings of Disney CEO Bob Chapek in responding to Florida’s law restricting classroom discussions of sexual orientation and gender identity show how much the corporate climate has changed. Chapek initially shied away from public comment on the law, in an effort to avoid stepping into a political hornet’s nest, but was forced to step in after his employees rebelled.

Critics attack these moves as the workings of “woke” CEOs, kowtowing to political pressure. Fundamental business pressures, however, are actually at work. An entire new generation is demanding from their employers that they uphold their values. And in an economy where talent has become the top driver of business value, these employee demands can’t be ignored. Business leaders have been forced to be more transparent through social media, which makes it difficult for them not to get in trouble.

Failure by the government also contributes to this change. Twenty years ago, challenges like fixing the climate, addressing inequality or advancing social justice were clearly seen as the government’s domain. But over time, it has become clear that our ever more polarized political institutions aren’t up to those challenges. Business leaders who are pragmatic and able to see the bigger picture feel that they have to step in for their own survival. In the long term, they can’t have a successful business if society is in revolt or the planet is on fire.

But what happens when a company’s efforts to address social problems run headlong into its financial interests?

The best business leaders naturally gravitate to the power of “And”: How can I address the needs of my employees andHow can I increase the owners’ value? What can I do to help the climate? And Make money for shareholders How can I achieve my social goals And This could help boost your business. And fortunately, there is no shortage of such win-win solutions in today’s business world. Companies are seeking creative solutions that will allow them to both serve the community and increase their profits. CEOs do this by imagining new ways. Public trust has increased in business leaders as a result. Tracking by the Edelman Trust Barometer found that business leaders–and particularly, “my employer”–are now more trusted by the public in most countries than government leaders, non-governmental organization leaders, and media leaders.

But those same leaders have crashed on the shoals of issues where the ‘and’ becomes an ‘or,’ and tradeoffs loom. They continue to ignore four major landmines directly in front of them.


Corporate world spent years creating complex accounting and lobbying strategies to reduce their taxes. The game has grown to be a global phenomenon, where large corporations hide assets overseas in low-tax countries and lobby legislatures for tax legislations that best suit their interests. They also hire top talent to constantly outgun the government tax enforcers. A single statistic shows how effective these efforts are: The U.S. has seen its corporate tax revenue drop from 7% in World War II to just 1% today.

Only recently, have some companies begun to stop and ask the question that true stakeholder capitalism demands–not just “Is this tax maneuver legal?” but “Is this moral? Is it the right thing for society?” The Business Roundtable proudly pronounced a new era of stakeholder capitalism in August of 2019. But it didn’t dismantle its Washington lobbying team that reflexively and effectively combats any attempt to increase corporate taxation.

One of the greatest ways that companies can contribute to society is through taxation. Until they repurpose their armies of tax warriors, “stakeholder capitalism” will remain under a cloud.

You have the right to vote

Businesses have values. It is an essential principle of stakeholder capitalism. These values are what employees look for in their leaders.

However, recent American debates about voting rights has challenged this values-based approach. Many CEOs had signed statements stating that all Americans should be encouraged and given access to the ballot box before the 2020 election. And in Georgia, CEOs including Coca-Cola’s James Quincey and Delta’s Ed Bastian initially came out strongly against a law that would make voting more difficult for some.

But those efforts prompted a backlash from the likes of Senate Minority Leader Mitch McConnell, who said CEOs should “stay out of politics,” and from the editors of The Wall Street Journal, who attacked the “woke” CEOs. In the end, efforts by businesses to prevent such laws were stopped.

It’s not hard to appreciate why. The most heated partisan argument in American politics has been around voter access. Easy access leads to higher turnout among urban minorities and communities. That means Democrats are more likely to win. It is understandable that corporate leaders would be reluctant to give up a Republican Party that they believe has served their best interests and to join a Democratic party that more challenges the idea of capitalism.

How can CEOs defend the principle of greater access to vote without becoming involved in the political dogfight or undermining the support system for them? That is the conundrum that I do not know of any corporate leaders who have found an answer.

Compensation for CEOs

In the last 50 years, the average CEO salary has increased by over 50%. The average CEO at one of the top 350 companies today makes more than 300 times the salary of the average worker–ten times more than a half century ago.

The majority of the rise in stock-based compensation has occurred. Many shareholders are happy to foot the bill since they know that their investment returns will rise.

In a stakeholder-based world, however, it may not suffice to please shareholders. Many see the large gap in pay between CEOs, workers and employees as evidence of an unsustainable level of inequality. Two-thirds (and even more) of Americans believe CEO salaries are excessive. One of the most difficult challenges for business leaders in maintaining trust is rebuilding trust in CEO compensation.


The corporate response to Russia’s invasion of Ukraine is unprecedented in the modern history of business. Similar episodes were the boycott by corporate companies of South Africa during the apartheid regime in South Africa, which occurred in 1970s and 1980s. The response to Russia came in days, but that campaign was not over for decades. Jeffrey Sonnenfeld from Yale University tracked 600 firms around the globe that decided to leave or decrease their participation in Russian markets.

However, Russian businesses were not profitable for many of these companies. Boardrooms all over the globe began to consider a more complicated possibility. What if there had been an invasion by the Chinese of Taiwan, rather than the Russian of Ukraine? What if the company at stake were, for example, ten times larger? Would an autocrat attacking another country’s sovereignty lead to the same corporate reaction? Could a company like Apple–which gets 20% of its revenue from China–or Starbucks–which has more than 5,000 stores in China–ever be expected to walk away from its China business in a geopolitical crisis?

The U.S., Europe and other countries have believed that greater economic engagement will lead to better alignment of political values since bringing China in the World Trade Organization over 20 years ago. But it’s now clear that hasn’t happened. And Russia’s invasion of Ukraine highlights the risk that will face global business if a day of reckoning ever arrives for China. Figuring out how to champion corporate values in a country that doesn’t share those values remains a perplexing and unsolved problem.

Fifty years ago, the economist Milton Friedman famously declared that “there is one and only one social responsibility of business: to use its resources and engage in activities designed to increase its profits, so long as it…engages in open and free competition without deception or fraud.” That doctrine was simple and clear and easy to boil down into metrics. Even today, many business leaders argue their pursuit of social goals is in line with Friedman’s dictum. In the long run, they say, taking care of your workers, producing quality products and services, and looking after the planet will increase a company’s earnings.

Dov Seidman founded LRN, an ethics and compliance firm, and recently established The HOW Institute for Society. He believes that business is currently in a transitional period. The current approach to stakeholder capitalism is, in his view, really just a form of “enlightened shareholder capitalism”–where good behavior has become a means toward achieving shareholder ends over the long term.

True stakeholder capitalism, or what he prefers to call “moral capitalism,” requires something deeper. Businesses must be supported by clear values if they are to compete in social trust and build meaningful relationships with stakeholders.

“You need a new operating system, a Human operating system, that truly places people—and their concerns, needs and aspirations—at the center of how they operate. Companies need to be mindful not just of what they legally can and cannot do, but more importantly, what they should and should not do.”

That’s the next step in business’ metamorphosis.

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