Corporate Social Activism and the New Business of Change

Author(s)

Tom Lin
Professor of Law at Temple University, Beasley School of Law.

Posted

Time to read

3 Minutes

The days when activists focused on fights over social issues while businesses concentrated on the pursuit of commercial profit are gone. Through pronouncements, boycotts, sponsorships, lobbying, investments, and divestment, businesses and their executives are at the forefront of some of the most important and contentious issues of our time, from the Russian invasion of Ukraine to voting rights to gender equity.  As a result, the traditional understandings of capitalism and activism in American life have changed, a topic that I explore in a recent article and new book, The Capitalist and the Activist

Throughout US history, corporations have played a critical role in social activism. For instance, during the 1960s, many corporations openly supported the civil rights movement even in the face of serious and dangerous resistance. Many businesses played a crucial role in lobbying presidents John Kennedy and Lyndon Johnson in the epic political battles that ultimately led to the passage and enforcement of the landmark Civil Rights Act of 1964 and Civil Rights Act of 1968.

While corporate social activism is not new, the current times, tools, and context have made contemporary corporate social activism meaningfully different. The roots of this new corporate social activism can be traced to three large, interconnected developments in business, law, and society: (1) the evolution of corporate purpose from shareholder primacy to expansive stakeholder governance; (2) the convergence of the public and private sectors; and (3) the expansion of corporate political rights.

More specifically, evolving expectations of corporations to focus beyond near-term shareholder wealth has driven businesses to think more about other stakeholders besides their shareholders alone.  The rise of privatization of traditional public functions like prisons and policing along with unprecedented public interventions in private businesses like with government bailouts and mask mandates have made business engagement on social issue seem a natural extension of the convergence of the public and private spheres.  Likewise, U.S. Supreme Court decisions like Citizens United and Hobby Lobby expanding the political rights of corporations have understandably been extended to corporate resources being used to address societal challenges.  These two rulings had a collective effect of permitting businesses to spend corporate resources on political campaign and social issue advocacy with little to no fear of legal liability; and not surprisingly, many businesses have done so. 

Furthermore, these developments at the roots of contemporary corporate social activism have been powered and amplified by social media and new financial technology.  For example, leveraging apps like Twitter and GoFundMe, activists and citizens can readily organize, communicate, and fundraise to bring their concerns to the powerful in business and government like never before.  Tens of millions of people can be reached, millions of dollars raised, and thousands gathered to raise awareness or protest an issue in a matter of hours and days that simply was not possible in past eras.

Contemporary corporate social activism at its best can benefit both activists and capitalists. By working thoughtfully with businesses, activists can gain wider reach, deeper impact, and improved operations for their causes.  At the same time, by working with activists, businesses can enhance their value, create new and better markets, and attract more investors and talent to their companies.

Of course, recognizing the significant good that capitalists can do should not blind us to the serious harms that they can create or perpetuate like on issues relating to antitrust, competition, and income inequality.  Similarly, recognizing the transformative power of activists does not deny the obstacles that they can present for policymaking like when activists campaign against compromised legislative achievements that make incremental progress possible because of desires for purer and grander solutions.  Ultimately, capitalist and activist enterprises are human enterprises that reflect the contradictions, complexities, and richness of the human beings behind them.  They are neither all good nor all bad. 

To be sure, there are risks and drawbacks to this partnership between capitalists and activists if engaged in without careful thought. Corporate social activism could further politicize an already fragmented marketplace, marginalize important social issues, corrode core democratic values, and whitewash corporate misdeeds.  For instance, in response to corporate social activism by asset managers like BlackRock the financial industry, the states of Florida and Texas, have barred their state pension funds from investing in certain ESG funds. Similarly, a number of companies have faced heightened regulatory scrutiny and cutbacks of state subsidies and contracts because of their positions on certain social issues. 

These risks could prompt some businesses to understandably avoid corporate social activism altogether.  A better response, however, would be to acknowledge those risks and manage them thoughtfully, honestly, and critically, so that society may realize some of the benefits of corporate social activism while mitigating its perils.  Moreover, corporate social activism is not likely to disappear from law, business, and society so thoughtful engagement is preferable to no engagement at all. 

In the end, contemporary corporate social activism is a story of how we can meet and master old, yet urgent, social challenges with new perspectives and tools in both corporate and democratic governance. It is one of the most consequential stories of business and society in recent history and will remain so for the foreseeable future.

Tom Lin is a Professor of Law at Temple University.

A version of this blog post was first featured on the Columbia Law School Blue Sky Blog.

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