Wielding a whip of cords, Jesus drove the money-changers out of the temple. Wielding an expansive regulatory agenda, Vivek Ramaswamy hopes to drive the priests out of the market. In Woke Inc.: Inside Corporate America’s Social Justice Scam, Ramaswamy claims that social values belong to democracy; but businesses must embrace the “pursuit of financial self-interest above all.” After all, “money and morality weren’t meant to mix.” Or so we’re told.
Ramaswamy addresses a topic he knows well. As a successful biotech founder who stepped down following an internal disagreement sparked by his conservative political views, Ramaswamy possesses a unique perspective on the struggle for the soul of corporate America. Yet “Woke Inc.” ultimately disappoints.
The problem is simple: Ramaswamy does not permit his ample experience to inform his theory. Instead, he draws from a naïve Aristotelianism propounded by academics such as his former professor Michael Sandel. As a result, Ramaswamy presents a vision for business that overlooks how corporations, and corporate law, actually work.
The book’s topic is timely and worthy of attention. Many businesses have gone all in on controversial Diversity, Equity and Inclusion programs that range from ineffective to counter-productive. And its CEO’s have made loud commitments to a new way of doing business that does not seem borne out by actual evidence. One result has been unprecedented conservative anger at the business community, even as businesses have failed to win real support from progressives. But while Ramaswamy provides infuriating anecdotes of business gone wrong, his political proposals are dangerous and founded on faulty theory.
Ramaswamy’s former Harvard professor Sandel might be the source for much of the problem. Sandel based his 2012 book, What Money Can’t Buy, on a false dichotomy: between greedy, corrosive markets and the sacred, noble fields where “we” pursue the common good. Citing Sandel, Ramaswamy delineates between business, strictly about making money, and social values, which “we” decide using democracy. They get both business and morality wrong.
Ramaswamy asserts that corporate managers’ fiduciary responsibility to shareholders is not about rewarding shareholders, but rather about “reining in corporate power” by keeping businesses from influencing social values. He presents this theory as a novel explanation of shareholder primacy that Milton Friedman and other free market economists overlooked. And he draws from it the conclusion that limited liability should be exclusively confined to business activity in pursuit of narrow, financial self-interest.
Were Ramaswamy correct about the purpose of fiduciary responsibility, the long history of American corporate law would provide ample evidence. For example, there would be relevant cases where judges “pierced the corporate veil”, holding shareholders liable for improper corporate interference in moral issues. Ramaswamy cites no such sources.
He also misrepresents the current state of corporate law. At one point he claims, “by limiting the focus of corporate boards to shareholders’ financial interests alone, corporate law is actually confining the sphere of influence of corporations.” Yet since the 1980’s several dozen states have passed constituency statutes that permit businesses to prioritize interests other than those of their shareholders. These states still offer limited liability incorporation. Delaware’s shareholder primacy may be the superior model for US corporate law, and its plethora of Fortune 500 companies may support such an assertion, but it’s not the only one.
In his business practice, Ramaswamy clearly recognized that markets and morality can mix. Describing his tenure as CEO of Roivant Sciences, he led the development of new therapies for diseases that afflict disadvantaged communities. As he describes it, “I thought that the best way for our company to do our part to improve all lives, including black lives, was by … developing medicine for patients who needed them.”
This is an admirable example of business as a force for good. And it’s a potent rejoinder to the fallacy that in order to do good, businesses must engage in corporate social responsibility efforts outside their core products and services. But Ramaswamy’s Roivant case study is not consistent with his own theory, which cleanly separates money from morality.
Based on that false dichotomy, Ramaswamy proposes an ambitious legal and regulatory program to drive “social values back to American democracy where it belongs.” He insists America was founded on the idea that “we make our most important value judgments through our democratic process.” This is plainly false. America was founded on the idea that the most basic rights are inalienable and should not be left to the whims of majoritarian democracy, such as freedom of speech and association.
Instead of Americans selecting their own associations and moral values, Ramaswamy would have democracy, which is to say government, set them for us. He goes so far as recommending mandatory national service for all citizens. His other proposals include effectively expanding EEOC’s enforcement authority to ban “woke” doctrine as a workplace religion, a change that would likely rule out other approaches to workforce culture as well. And he advocates for recognizing internet platforms as state actors due to the combination of liability protections and pressure from policymakers. The latter would have harmful implications, far beyond Big Tech.
Such measures might have short-term populist appeal. And Ramaswamy is far from the only right-of-center figure recommending them. Yet they would exert unintended consequences on all Americans, not just the progressives Ramaswamy targets. Consider that most large corporate entities receive some government privileges and face regulatory threats. Are they all state actors? Does that include Hobby Lobby? Liberty University? Catholic hospital networks?
Ramaswamy indicates he may write another book. He would do well to draw more on his experience in business, and less on theories passed down from the ivory tower.
Still, the problems Ramaswamy describes are real and likely to get worse, thanks to a regulatory agenda he largely overlooks. This October, the Security and Exchange Commission will release draft regulation mandating climate risk and human capital disclosures. Over the long run, a cohort on the progressive left aims to impose uniform “stakeholder capitalism” on all businesses. Ramaswamy, in response, suggests banning the spread of “woke” culture within business. Between the extremes of mandating and banning woke capitalism, there must be some common ground where Americans can meet to chart a better way.