These dreams come in the form of two acronyms and an abstract noun. The acronym is ESG, which stands for Environmental, Social and Governance, and DEI stands for Diversity, Equity and Inclusion. The abstract noun is “purpose” – a company must pursue purpose before profit. Publications such as Harvard Business Review are fascinated by these themes. Young scholars pay attention to them. The Business Roundtable, which represents America’s largest corporations, asserts a duty to pursue the interests of all stakeholders, not just shareholders.
Business schools will probably continue to sing this hymn: if you get tenure by talking about corporate responsibility to society, you have a vested interest in continuing to talk about it for the next 50 years. But it will become increasingly irrelevant for companies that are overwhelmed, first, to survive, and second, to wring more productivity out of constrained resources, including labor.
US politics will further drive a return to fundamentals. Republicans led by Florida Gov. Ron DeSantis (the likely front-runner for the 2024 Republican presidential nomination) decided to point to “sane companies” such as Disney as examples. Goals: If companies support “progressive” causes instead of focusing on their core business mission, they will pay a political price.
The U.S. Supreme Court is set to rule on two cases, one involving the University of North Carolina and the other involving Harvard, concerning the legality of using diversity as a grounds for race in admissions. Court watchers are almost unanimous that the court will rule against the idea. This would have far-reaching implications for companies, as it would remove legal protections for pursuing race-based policies, prompting a flood of lawsuits. Short-sighted companies will simply abandon diversity-themed hiring policies; visionaries will employ sophisticated methods to spot talent among underrepresented minorities, regardless of race.
Another area of my jurisdiction is British politics. There we’ll see a variation on the same theme: focus on government “boring” after the extravagant dreams of the past year or so. Boris Johnson’s vision of Brexit through national advancement has been dashed, partly because of his own disorganization and partly because Brexit supporters never decided whether they wanted more or less Global Market. Liz Truss’s more ambitious dreams of reviving growth were dashed in even more spectacular fashion, markets were in free fall and the Conservative Party was hammered. Rishi Sunak’s job is to provide capable government.
This task would be a thankless one for two reasons. The first is that a decade or more of austerity has brought Britain’s public services to the brink of collapse. Sunak’s government will face a litany of crises – heart attack victims waiting for hours for ambulances, hospital corridors packed with patients, children poisoned by black mold in parliament buildings, schools unable to provide school dinners and most importantly , the number of strikers is increasing – but the prime minister will not have the money to deal with them. The Truss disaster means that the market is no longer willing to trust the government. At the same time, entrenched inflation means governments cannot bow to payment demands without causing wage-price spirals.
The government also faces a massive refugee crisis without any politically acceptable solution. Some 33,029 people were caught arriving in the UK by small boat between January and September 2022, almost double the number in the same nine months in 2021, taking a heavy toll on an overwhelmed public sector. If the UK continues with the status quo, where refugees can delay appeals for months, the court system and refugee centers will collapse under the weight of claims and institutions.
For Nigel Farage and other right-wing activists, this is manna from heaven. If the government tries to speed up the court system and export refugees to Rwanda, it risks alienating the liberal middle class. To add to the sense of institutional crisis, the new king, who is still on his feet, will face allegations of racism from the Duke and Duchess of Sussex (aka Harry and Meghan) and how the then-Prince of Wales funded him His philanthropic efforts, of which one of his favorite projects – the historic Dumfries House in Scotland – is the beneficiary.
Corresponding to the shrinking vision of the Conservative Party is the expansion of the vision of the Labor Party. Keir Starmer played a clever waiting game. Focusing on tackling his party’s problems, he is now advocating bold (perhaps too bold) policies, including the abolition of the House of Lords and the removal of private schools’ tax-exempt status. We can expect more announcements from him this year about devolution from Britain’s bloated central government and revitalization of provincial economic clusters. One side’s exhaustion is always another’s opportunity.
The West needs Friendshoring, not Reshoring: Redesigning global supply chains for a dangerous and unpredictable world should not mean giving up the power of comparative advantage.
Disney’s Florida battle shows why corporate progressivism can’t win: The wrathful face of The Walt Disney Company warns in Florida that capitalism won’t restore its legitimacy by alienating half the country.
America must work harder to find its high-capacity, low-wage home-grown talent: America can no longer rely on imports to solve its talent problem: to thrive in the knowledge economy, it must do more to identify and develop its low-wage, high-wage talent ability students.
Companies that really want to do something good should separate “ESG” from “DEI”: businessmen should think carefully about the new acronym that increasingly dominates their lives.
Larry Fink is wrong: business doesn’t need a “social purpose”: the UK’s Better Business Act and other laws like it will prevent companies from doing their essential job – competing to produce the best services and products at the lowest prices.
The fall and fall of the Conservative empire: Two books on the downfall of Boris Johnson and the brief reign of Liz Truss show how badly the British political system is broken.
Trump Republicans and Brexiteers are heading for a national divide: a populist revolution that could end up reshaping Britain more significantly than America.
Rishi Sunak is a Conservative old and new: Britain’s prime minister is a fascinating mix of the fresh and the timeless in the ruling Conservative world.
We are witnessing the hollowing out of the Conservative Party: for all its electoral success since 2010, the British Conservative Party has been rotting from within. It must be willing to undertake broader structural reforms.
Elizabeth II’s revolutionary monarchy: She defied European royal cycling and low-price marketing and transformed Windsor into a staunchly bourgeois but mesmerizing dynasty.
Kissinger knows why the global leadership deficit is growing: one of the world’s most experienced statesmen believes that the wellspring of civilization of great leaders may be drying up.
This column does not necessarily reflect the views of the editorial board or Bloomberg LP and its owners.
Adrian Wooldridge is the Bloomberg Opinion’s Global Business Columnist. A former contributor to The Economist, he is most recently the author of Talent Aristocrats: How Meritocracy Shaped the Modern World.
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