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CEOs are exploiting employee activists Disney knows how to manipulate its workers

Is Disney exploiting its workers? (APHOTOGRAFIA/Getty Images)

Is Disney exploiting its workers? (APHOTOGRAFIA/Getty Images)


February 21, 2024   7 mins

Ron DeSantis and Vivek Ramaswamy may have failed to charm Republican voters, but their wildly successful war on “woke capitalism” has taken on a life of its own. And the two most controversial three-letter acronyms in American life — DEI (diversity, equity, and inclusion) and ESG (environmental, social, and governance) — are on the run.

Signs of revolt are everywhere. Last month, The New York Times led with a story headlined “Inside the Anti-DEI Crusade”, which reported that “more than 20 states considered or approved new laws taking aim at DEI” in 2023. BlackRock, a pioneer of ESG investing, just announced mass layoffs in its ESG division. It was recently discovered that assets under management in ESG had declined by $5 trillion over two years.

This string of victories might suggest that the swift “de-wokeification” of business is not far off. After all, the C-Suite represents the only locus of power in American life to have a documented Right-leaning bias. One study last year found that registered Republicans outnumbered Democrats among top-earning executives in S&P 500 companies by a margin of 69% to 31%. It seems logical enough, then, to attribute the relentless equity, gender and climate activism of American businesses over recent years to pressure from a shareholder base, media and society in the throes of a sociocultural maelstrom. It would seem equally logical to predict that as this maelstrom subsides, managers will return to their traditional role of maximising shareholder returns, while leaving the political realm to elected politicians.

But wishful thinking will only lead to disappointment. Such optimism depends on the tenuous assumption that business leaders, when left to their own devices, will lead their businesses the way they vote. In today’s America, that would require them to be willing to see their own elite position severely curtailed or taken away entirely. And to give up one’s status for one’s values is a bigger sacrifice than most people are willing to make.

To be sure, C-Suite positions accord their holders wealth and status within a company or an industry. But that most tantalising of emoluments — social status — is doled out by other institutions, most notably media, academia and government, all of which have a decidedly different political orientation from the C-suite. It is, therefore, no surprise that, even while Republican executives outnumber Democrats by more than 2-1, the CEOs whose wisdom is most regularly exalted in the mass media —  say, Warren Buffett of Berkshire Hathaway, Bob Iger of Disney, or Larry Page (formerly) of Google — are Democrats. Meanwhile, Right-leaning CEOs and founders too powerful for the media to ignore — say, Elon Musk or Peter Thiel — are cast as out-of-touch, if not a bit sinister.

If this isn’t enough to remind a CEO which side his bread is buttered, he can consider the recipients of those most golden of post-retirement parachutes, Distinguished Professorships at Harvard or the Wharton School of Business. (As an ex-employee of the former, I can vouch that the ideology of its practice-based faculty mirrors Buffett’s far more closely than Musk’s.) Or he can observe which titans of finance are awarded honorary doctorates or deliver homilies at the World Economic Forum (WEF) in Davos, the Aspen Institute, and the Munich Security Conference.

Beyond the quest for status, there are more quotidian considerations that encourage business leaders to stay the course with DEI and ESG. Every year, as America’s regulatory state grows, so does American businesses’ dependency on the good will of regulators and government partners. And once one penetrates below the rank of presidential appointees — even if November brings a second Trump Administration — the political makeup of regulators is overwhelmingly Democratic. Many CEOs will conclude that running afoul of regulators to satisfy their personal values simply isn’t worth it.

For the first time in years, shareholders and investors are fighting back against the American C-suite. It’s too late, however, for their revolt to have a deep and durable impact on company behaviour. That is because the shareholder is no longer king in American business, and he hasn’t been for a long time. The “stakeholder” is.

“Shareholders and investors are fighting back against the American C-suite.”

In American business law, the cornerstone of fiduciary duty is the business judgment rule (BJR), which stipulates that managers are exempted from legal liability for violating their duty to the shareholder, provided that they act “in good faith”, in the company’s interest. Classically, “the company’s interest” has been defined narrowly as maximising shareholder returns. Over the past decade, however, the definition of a company’s “interest” has been quietly expanded — in sources ranging from the Harvard Law School Forum on Law and Governance to that consummate arbiter of business conventional wisdom, Investopedia — from shareholder benefit to “stakeholder” benefit.

What is a stakeholder? Pioneered by WEF Chairman Klaus Schwab decades ago, the term refers to any “party that has an interest in a company and can either affect or be affected by the business”. The term is wide enough to encompass not only shareholders, but employees, customers, government regulators, communities, entire nations, even the whole world. Under the stakeholder system, there is no hierarchy, no order in which the different stakeholders must be served. It is — critically — so slippery a concept that virtually any business decision can be justified on the grounds that it benefits one stakeholder or another. In this way, it accords unprecedented power to managers, who, by virtue of their positions, can claim an understanding of stakeholders’ needs shared by no one else.

Stakeholderism enables managers to do two things that were far more difficult under the conventional shareholder model: first, to pursue ends other than profitability without running afoul of the BJR; and second, to avoid personal responsibility for unpopular business decisions by claiming that other “stakeholders” have demanded them. If they are to win the corporate battle against DEI and ESG, therefore, shareholders need to be ready to recognise and resist three common “stakeholder” dodges: employee activism, consumer activism and government regulations.

Let’s start with employee activism, which refers to pressure exerted on managers by company employees to adopt or reject a certain policy or position. Employee activism is a real concern for managers at many companies, particularly those in industries that attract politically engaged young people. But it is also easily exploited by managers for their own ends. This is due to a fundamental asymmetry in information: managers know what their employees are saying, but the public — and even shareholders — largely do not. Therefore, when a manager justifies a policy decision on the grounds that key employees threatened to leave the company if they decided differently, who is to say that they didn’t?

Take Disney, an expert in the use of employees as a corporate shield. In 2022, in response to a new set of education regulations related to sexuality in the company’s home state of Florida (monikered as the “Don’t Say Gay” bill), the company capitalised on employee activism to oppose the law. Following a series of walkouts by some employees, Disney’s various outlets issued statements condemning the law, such as this tweet by Disney+: “We strongly denounce all legislation that infringes on the basic human rights of people in the LGBTQIA+ community — especially legislation that targets and harms young people and their families.” Disney subsequently committed to ceasing all political donations within the state of Florida, donated to the Human Rights Campaign, and included a gay kiss scene in the upcoming movie Lightyear.

The narrative, as widely reported, was that Disney employees had acted en masse to persuade their bosses to take a stand against bigotry following an insufficiently indignant reaction from CEO Bob Chapek. But there was another side to the story which only received coverage in conservative media outlets. It turned out that a group of conservative-leaning employees at Disney had also written an open letter to management, urging Disney to remain “politically neutral” and arguing that the company “shouldn’t be a vehicle for one demographic’s political activism”. Disney, they added, had created an oppressive political culture within the company: “Employees who want [Disney] to make Left-wing political statements are encouraged, while those of us who want the company to remain neutral can say so only in a whisper out of fear of professional retaliation.”

Here were two groups of Disney employees taking contradictory positions. But when Disney management sought to express “solidarity” with its employees, it did so by capitulating totally to the first group while ignoring the second. And yet, if a shareholder irate over Disney’s antagonism of its home state, its governor and legislature were to take management to court for violating their fiduciary duties, he would have faced a severe uphill climb. After all, Disney’s employed “creatives” mean the difference between industry leadership and falling behind. And when it comes to what those employees really want, or whether one group of dissenting employees poses a greater threat to the company than another, who is in a better position to decide than the managers? This was none other than a victory for managers over shareholders, using employee activism as a shield.

Indeed, as if to demonstrate just how fully he has internalised this principal, Iger, responding to a separate imbroglio over the restrictive 2019 abortion law in Georgia, speculated portentously: “I think many people who work for us will not want to work there, and we will have to heed their wishes in that regard.” Quartz, reporting on Iger’s comments at the time, asked: “Was this another victory of sorts for employee activism before employees even acted?” This was the wrong question. It was, rather, another victory for managers over shareholders, using employee activism as a shield.

The principle can also apply to customer activism. While customer feedback can be more public than employee sentiment, much of it is also proprietary — collected through meetings and correspondence with clients or customer surveys. The prerogative of packaging this information and determining how it should influence company behaviour falls to managers. The same goes for government regulations. When the task of interpreting the regulatory climate is left solely to managers, they can very easily end up passing off their own political aims as regulatory risks, or even lobbying behind the scenes for the very regulations that they present to their boards as regrettable faits accomplis.

The long-and-short of it is that shareholders are in a far weaker position compared with a decade ago. Their only avenues to influence company policy now are through questions brought to corporate boards, and through the hiring and firing of managers and board members. If they are to fight back, they must learn to use those avenues to maximum effect. Firstly, by demanding thorough proof from managers every time a decision is attributed to the needs of a “stakeholder”, to make sure it’s not another dodge. And then, by hiring and firing managers and board members based on who will prioritise benefit to shareholders, rather than their public image or personal political aims.

Managers will always feel the urge toward “mission creep” from the purely commercial to the political. When they succumb to it, the democratic process surrenders to what the sociologist C. Wright Mills once termed a “power elite” — an amalgamation of public and private sector that offers us a single orthodoxy rather than a marketplace of ideas or products. Shareholder capitalism is democracy’s vital firewall between the public and private sector, and it is under threat. It is nothing less than the patriotic duty of all American investors and board members to reinforce it for the protection of our republic.


John Masko is a journalist based in Boston, specialising in business and international politics.


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Aidan A
Aidan A
4 months ago

Unfortunately, I don’t see DEI going anywhere in American corporations, schools, etc. Too many citizens are steeped in this ideology. Broadly speaking women, minorities and liberal leaning men. That’s a lot of people. Can’t speak for Western Europe, but it doesn’t look much better from what I can see. Hope I am wrong.

Kieran P
Kieran P
4 months ago
Reply to  Aidan A

The virus of DEI has embedded itself with quite astonishing in Western Europe if Ireland is used as an example.

Charles Stanhope
Charles Stanhope
4 months ago
Reply to  Kieran P

Trust the ‘Plastic Paddies’ to lead the way!

Andrew Fisher
Andrew Fisher
4 months ago
Reply to  Aidan A

Not actually most ethnic minorities and certainly not Muslims! There is a purely transactional political coalition which is very fragile.

Chipoko
Chipoko
4 months ago
Reply to  Aidan A

Sadly, I fear you are too right in your perception.

Ian_S
Ian_S
4 months ago

This is a great example of the way in practice that the woke movement has brought our society to its knees — not by some kind of violent confrontational assault (though there’s been some elements of that too, e.g. BLM riots) — but most importantly by seeping into and saturating all the tiny crevices of organisational spaces; what Foucault called the capillaries of power.

Walter Marvell
Walter Marvell
4 months ago
Reply to  Ian_S

Law is the battering ram. Always State driven law.

Andrew Fisher
Andrew Fisher
4 months ago
Reply to  Walter Marvell

No, that is completely the wrong way around.

Progressive advance is not only – or even due to legal change as the Florida – Disney dispute shows. It is an ongoing cultural revolution in the West; the comparison can be made with how Christianity took over the Roman Empire. Law followed.

In the UK we have various free speech and other measures passed by the Conservative government. Ok, they are not very conservative but they aren’t “progressive” either. But if 80% of the civil service and educators for example, are hostile to this position, it will be of limited effectiveness. They are the people on the ground. Unless you envisage a much tougher ongoing counter revolution – which is not really in sight in most countries the Progressive Left will unfortunately increase their dominance further.

The US is able to mount a more effective resistance though not at the federal level – because of its federal system.

Russ W
Russ W
4 months ago
Reply to  Andrew Fisher

Agree

Andrew Horsman
Andrew Horsman
4 months ago

Do not be afraid. Here are some thoughts for the consideration of anyone facing this at work:

1. The people pushing DEI / ESG within corporations are not bad people. The vast majority believe they are “doing the right thing”, even if there is without doubt a lot of opportunistic box-ticking grifting, ass-covering and virtue-signalling. It’s important to bear that in mind when engaging with them. It’s also important explicitly to recognise legitimate grievances: for example, racism experienced by ethnic minority people in Western countries remains a problem, even if it was not as bad as it once was.

2. It’s possibility to practice “corporate-judo” and turn the momentum built up by these movements against it. For example, agree that it is important to be inclusive, socially responsible and representative; and, therefore, that marginalised people such as the vaccine-injured or smallholding farmers put out of business by net-zero also need to be heard / considered / represented. Jolt consciences by drawing comparisons between today’s marginalised groups with, for example, gay people in the 1980s. People want to be on the right side of history, especially when they can see it turning.

3. Building on that, rather than whinging about the evils of authoritarian faux-progressive wokery on comments boards or submitting snarky comments in anonymous employee surveys, proper classical liberals need to start articulating our case more clearly and more loudly in the workplace. Again, play them at their own game. In response to demands to “do something on DEI”, organise study groups on Orwell, Frankl, Arendt, Burke. Or, to be more up to date, Jonathan Haidt or Kathleen Stock. Keep it positive.

4. Establish common ground to build alliances. Almost everyone can agree that looking after the environment and not being racist is a good; and the vast majority agree on basic human rights. Most people understand that well-intended interventions can have unintended adverse consequences. Gently point this out, but avoid threatening the ego of someone who has invested a lot of personal meaning in their (probably net harmful) pet DEI / ESG project. Try and make friends with the most woke person you can find at work, using hobbies and interests (food, football, family, whatever) to build rapport. Work with them to try and reorient the “DEI agenda” towards something that is genuinely inclusive of all customers / employees.

5. Remember that the DEI / ESG ideologies are wafer thin, fragile, ephemeral things. Think of them as fads. Like fondue sets, the Cabbage Patch Kids, tamagotchis, fears about dangerous dogs, Mr Blobby, prog rock, the R-rate of viral transmission, Pokémon Go, the hole in the Ozone Layer, Bob the Builder, and the Millennium Bug, they will, in time, fade away into cultural and political background. This too, shall pass and the tide will turn.

6. Most important of all DO NOT BE AFRAID. In the UK, at least, employment and equalities law protects a legitimately held philosophical view (just as it protects religious faith). Engage with a positive mindset, a smile on your face (even if it conceals gritted teeth), and always with the best interests of your company at heart. Avoid the unfortunate irony of turning your challenges into a political or moral crusade – make it squarely about helping your company to achieve its already-stated objectives. You may be surprised how many people feel able to speak up once one person finds the courage to do so.

William Cameron
William Cameron
4 months ago
Reply to  Andrew Horsman

Oh I think they are bad people. They are making bad things happen. Thats the definition of bad. So I disagree with your opening premise.

Andrew Horsman
Andrew Horsman
4 months ago

Personally I’m far more concerned about good, albeit misguided, people trying to do good and inadvertently causing harm, than I am about bad people deliberately trying to cause havoc. Very few people are sociopaths, and most people just follow the crowd which – admittedly – a tiny minority of powerful sociopaths are able to manipulate through psychological and emotional blackmail and fear (and even the sociopaths might well have persuaded themselves that their mad plans are some common good). The road to hell is paved with good intentions, and the line between good and evil runs through every human heart.

Davy Humerme
Davy Humerme
4 months ago
Reply to  Andrew Horsman

Excellent and sensible advice based on real insight Andrew. That said you may find that setting up a reading group on Material Girls even balanced with one of bel hooks books will probably cause an orchestrated trigger tantrum.

Walter Marvell
Walter Marvell
4 months ago
Reply to  Andrew Horsman

A really interesting post. I warm to all calls for positive calm pushback to the anti discriminatory mania and lazy progressive ideology. Only two quibbles. At the heart of the DEI ideological push in the UK is State mandated action on equality. The EQA laws of 2010 and 2015 & their victim/oppressor nostrum are the key drivers…and those laws are having myriad catastrophic impacts, mainly in the communal/socio-cultural sphere. Look too at Birmingham…hard at night as they now cannot afford lights. A deranged misreading of gender pay equality (comparing not like with like jobs but say male binmen and female receptionists) has bankrupted a major city with a billion pound bill. DEI is also unashamedly anti meritocratic. Not good when the public sector is buckling under the pressures of uncontrolled unplanned mass migration.

Andrew Fisher
Andrew Fisher
4 months ago
Reply to  Andrew Horsman

I think this is well argued and worth trying. However, the progressive agenda is now almost fully detached from reality in many respects: men can declare themselves women, with obvious consequences for women’s rights. And racism is just fine, as long as it is directed at white (or Jewish) people – or indeed snide comments about non white people who don’t tow the “progressive” identitarian agenda.

Many woke activists are in fact NOT acting in good faith but are thoroughly obnoxious bullying people.

I believe that this phenomenon is best seen is an ongoing cultural revolution in the West. The equally irrational and fanatical 4th century Christians acted in a very similar way as they suborned and took over the Roman Empire!

Russ W
Russ W
4 months ago
Reply to  Andrew Horsman

Andrew, thanks. It is quite rare that anyone has any advice on what to do. Cheers to you!

“ The people pushing DEI / ESG within corporations are not bad people. The vast majority believe they are “doing the right thing”, even if there is without doubt a lot of opportunistic box-ticking grifting, ass-covering and virtue-signalling”

And that how evil grows. “The road to hell is paved with good intentions” and hell on earth is what their purported ignorance courts. Purported as that quiet internal voice whispering the truth, that something isn’t right is, I believe is always there.

I agree with your guidance, don’t mistake me. I’m just pointing out that decades of western ease and inattention to the wellspring of our success – morals, merit, rationality paired with Judeo Christian values – is what got our culture to now.

Walter Marvell
Walter Marvell
4 months ago

America must fight this War against the disastrous failed European/UK progressive model of governance. It enforces a top down anti capitalist and anti growth regulatory technocratic Order, enforced by vast grad armies of permanent bureaucratic state power elites. Its recent capture by deranged ideologies of the Left – Net Zero, Magic Money and DEI – have choked off hope of growth in Europe. Europe’s Codified Legal System is anti capitalist, compelling crass intervention by these middling ‘technocrats’ into every area of life with its precautionary principle. Europe is risk averse. This contrasts markedly with the more fluid and superior Common Law of the UK (pre EU capture) and America, which rewards risk and encourages innovation. Europe is now trapped in its nightmarish Anti Growth Cage. America must indeed recognise these dangers and resist sickly corruption by Euro-style Ways.

Andrew Fisher
Andrew Fisher
4 months ago
Reply to  Walter Marvell

It’s rather amusing that much of the European Right Wing blames you guys! The “GAE” (Great American Empire)! Did Europeans start the BLM movement or burn down parts of our inner cities?

Progressivism certainly seems much more entrenched and extreme in the US. The Europeans often just follow in pale imitation. However it is true that the US federal system also gives much more opportunities for conservative push back, as in Florida than in European unitary states.

john d rockemella
john d rockemella
4 months ago

Hit the nail on the head! This stakeholder capitalism is not a free market economy! Almost designed to crash capitalism to bring in the great reset im sure! All by design. Too many coincidences now. Well
Engineered and executed plan, which has been drawn up over decades to bring in global governance through financial an medical tyranny. More to come i’m sure..

Andrew Fisher
Andrew Fisher
4 months ago

It’s not a plan – that’s just ridiculous and an almost childish way of looking at the world. Were Thatcher and Reagan part of this “plan” in your opinion? Human society and history are immensely complicated and consequences can be unseen! We have a terrible record of predicting the future.

Russ W
Russ W
4 months ago
Reply to  Andrew Fisher

That was maybe a little rude. But I agree, while some do have a plan, the broader picture is more complex. That being said, things are not looking good.

Alex Lekas
Alex Lekas
4 months ago

This article goes a long way to say that incentives work, whether those incentives are used for beneficial reasons or perverse ones.
But when Disney management sought to express “solidarity” with its employees, it did so by capitulating totally to the first group while ignoring the second. Of course, that’s what management did. Because there was no incentive to side with the second group. All of the preening and posturing was associated with the first.
The political ideology of the C-suite is irrelevant. Human nature is human nature. People invariably choose no pain over pain. The people who oppose sterilizing children are seen as far less troublesome than the activist community that supports it. The media glommed onto the “don’t say gay” talking point even though that was nowhere in the bill. When something is obviously framed as good guys vs. bad guys, it’s not hard to see how CEOs will react.

Julian Farrows
Julian Farrows
4 months ago
Reply to  Alex Lekas

‘People invariably choose no pain over pain‘ aka cowardice.

Thomas Wagner
Thomas Wagner
4 months ago
Reply to  Julian Farrows

And choosing pain over no pain is masochism.

UnHerd Reader
UnHerd Reader
4 months ago

Initially I fully agreed with the author’s approach – on reflection what he describes (shift of power from shareholders to managers) has been happening for decades (defined by Galbraith in 1967 as “Technostructure” where managers and other company leading administrators, scientists, or lawyers retain more power and influence than the shareholders in the decisional and directional process.” (from Wikipedia).
I think the intent of Stakeholder capitalism is to give the opportunity to corporations to increase their power and influence in the political sphere, with DEI and ESG initiatives providing the guise for private organisations to actively interfere and shape the public political, social and cultural landscape.

David Kingsworthy
David Kingsworthy
4 months ago

“the political makeup of regulators is overwhelmingly Democratic”
Whoa careful, you sound conspiratorial there….. everyone knows there is no such thing as a Deep State.

William Brand
William Brand
4 months ago

Woe to him who calls evil good and good evil. The judgment of God is coming soon. God will send plagues and asteroids to punish these woke leaders. He will also destroy the United States as the main source of WOKE. The devil will get 7 years to rule and then Christ returns, and Satan is bound for 1000 years.

Russ W
Russ W
4 months ago

Articles like this are why I subscribe.