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New York (CNN Business)“Woke” probably isn’t the first adjective that comes to mind when describing Corporate America. But some CEOs are wearing their non-wokeness as a badge of honor.

This week, when BlackRock CEO Larry Fink defended his firm’s efforts to hold companies accountable for their environmental and social impact, he included a nod to his critics who’ve accused him of forcing a liberal agenda on businesses.
“It is not a social or ideological agenda,” he wrote in his closely watched annual letter to clients. “It is not ‘woke.’ It is capitalism.”

Translation: Don’t be angered by this do-gooder approach, Wall Street — this is just what’s good for business.

To be sure, Fink, whose firm has more than $10 trillion in assets under management, isn’t wrong: Studies show that companies with strong environmental, social, and governance norms tend to perform better financially over the long term.

But the messaging around so-called ESG, or socially responsible investing, is important: Is doing the right thing valuable in and of itself, or only if it helps the bottom line?
“It’s a little bit of both,” says Jon Hale, the head of sustainability research for the Americas at Morningstar. “Sustainable investing…is trying to improve companies by saying, ‘Hey, take care of your ESG-related issues that investors used to not really prod you to do. But also, let’s think about your broader impact on the world.'”

Redefining ‘woke’

Larry Fink isn’t alone. Elon Musk, despite running a massively successful electric car company, has also decried “wokeness” as a “false virtue.”
Part of the problem is the way the term, which originates in Black American English, has been appropriated by White conservatives. Where staying “woke” once meant being alert to societal injustices, conservatives often wield the term now as a cudgel to disparage progressive ideas regarding race, gender and the environment.
Against that cultural and political backdrop, it’s become somewhat radical to suggest that companies should do the right thing simply because it’s the right thing to do.
But just two years ago, the leaders of Corporate America did just that. The Business Roundtable, the leading advocacy group for American corporations, broke with decades of tradition in 2019, stating for the first time that businesses must serve all stakeholders — not just shareholders — ethically, morally and fairly.
In other words, companies should do what’s right because it’s right, not only because it’s good for business. And those who don’t like it can take a long walk.
That was Apple CEO Tim Cook’s message, back in 2014, when questioned by a prominent climate-change-denying group about Apple’s sustainability measures. In an exchange that became heated, according to witnesses, a representative for the conservative think tank National Center for Public Policy Research pressed Cook at a meeting to commit to a narrow focus on profitability, even at the expense of Apple’s sustainability goals. In response, Cook, perhaps the most mild-mannered CEO in Silicon Valley, became agitated and shot the question down.
“When we work on making our devices accessible by the blind, I don’t consider the bloody ROI,” Cook said. Later, he added: “If you want me to do things only for ROI reasons, you should get out of this stock.”
Telling climate-change skeptics to divest was a pretty bold move in 2014. Eight years later, you’re unlikely to find Cook losing sleep over taking the moral high ground: Apple has since become a $3 trillion company and Cook himself received nearly $100 million in total compensation last year.
Just as investors’ obsessive focus with short-term gains helped shape the shareholder-primacy era, they will also play a key role in the transition to the stakeholder capitalism era, according to Morningstar’s Hale.

“Virtually every public company today is concerned about their ESG performance in a way that they were absolutely not five years ago,” he told CNN Business. The standard is no longer just what companies can get away with legally, he said.
“If you’re creating negative impacts on the world,” Hale added, “it affects your brand negatively.”
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