Sceptical public pulling the plug on corporate virtue-signalling

There was a time when creating jobs, and creating wealth, and keeping consumers happy was all businesses needed to do to maintain a degree of public approval. But in the last decade or so, around the western world, grandstanding on political issues became the norm.

Hence the term ESG, which has been a buzzword among so-called progressive businesses. It stands for environmental, social and governance measures that businesses have taken to make themselves look good (or so they thought) to the anti-capitalist class of whom they feel they should live in fear.

But the lustre is now wearing off.

According to new polling for the Centre for Independent Studies, the public are increasingly unimpressed by this sort of toadying to so-called progressive agendas.

More than 60 per cent of consumers said a company’s political activism rarely or never aligned with their views.

And more than twice as many consumers said they were less likely to buy from a firm whose activism they disagreed with than those who said they were much more likely to buy from them because of agreeing with their values.

Proving the public are far from stupid, the CIS survey also uncovered the cynicism the activist approach stimulates.

Almost a quarter of respondents thought the policy was pursued in the hope of increasing profits, not out of conviction.

Almost as many, 22 per cent, said the policy was followed to ward off a public backlash. A fifth said it was to ingratiate the firm with the public and with politicians.

The findings suggest that those who run such companies have little real understanding of the true views of the public — something that became apparent in the run up to last October’s referendum on whether to add racial identity to the Australian constitution.

Thirteen of the top 20 businesses listed on the Australian Securities Exchange, including the big banks, supermarkets and energy companies, publicly backed the Voice to parliament. So, too, did the national carrier, the senior law firms, even the sporting bodies.

This allowed the YES campaign to signal their virtue and outspend the NO side by two and half times. Yet the measure was heavily defeated by 61 per cent to 39 per cent and the referendum lost in all six states.

Indeed, in the CIS survey, more than 60 per cent of employees of activist companies and 41 per cent of their shareholders said that corporate support for political causes never aligns with their own views.

Staff, too, become appalled, as with those working for Woolworths who rebelled last January against the company’s refusal to sell merchandise connected with Australia Day despite selling items connected to the Chinese New Year. One employee warned: “Go woke, go broke.”

Provided their shareholders concur, there is nothing wrong with businesses donating to charities and seeking to alleviate disadvantage in that way. But it is quite another matter for them to meddle in legislation and to seek to change society by applying political pressure.

As Senator Jacinta Nampijinpa Price observed after the Voice’s landslide defeat: “Large corporations should focus on providing for their customers, not telling them what to think.”

The meddling goes far beyond Australia. Last year, for example, one of Britain’s most prominent banking executives, Alison Rose, lost her job running NatWest Bank. She broke the fundamental rule of disclosing private and confidential details about the account of a client –- in this case someone she regarded as an ideological opponent, Nigel Farage, the former Brexit campaigner and now a Reform Party MP at Westminster.

Rose clung on for as long as she could, but her behaviour was so indefensible that she was thrown out in a late-night boardroom coup. The board, however, should have seen it coming. When she took up her post, Rose made a big deal of expressing her commitment to diversity and to tackling climate change.

Those with shares in NatWest might have preferred her to make a strong statement about how she intended to increase the value of their business and their dividends. But this was clearly of less importance in a corporate world where who can signal the most virtue had become paramount.

Indeed, Milton Friedman made this point more than half a century ago: “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits,” the only significant qualification being that it engage “in open and free competition without deception or fraud.” Or to put it more bluntly, one goes into business to make money.

Shareholding in the western world used to be a minority sport, confined to a few well-to do people. Now it is one of mass participation, especially because so many people have a stake in super funds whose value is linked to the stock market.

But perhaps the tide is turning. Last week Microsoft laid off its entire Diversity, Equity and Inclusion team, formed in what was described an act of “performative wokeism” after the death of George Floyd in 2020. Zoom, Google and Meta have also cut costs in this respect.

Slowly, executives appear to be learning that pursuing a political agenda drives down shareholder value, and possibly even drives them out of their jobs. One thing that never changes is the old adage of looking after number one.

Tom Switzer is executive director of the Centre for Independent Studies. CIS will host events on corporate social activism in Sydney on Tuesday and Hobart on Wednesday.