Some years ago, a corporate executive offered an apology in response to criticisms that his company prioritized shareholder value creation over social contributions. He said meekly: “Business should be in tune with society.” Companies have tried also to avoid criticism by appeasing woke ideas present in the culture. Bud Light, for example, ran a campaign on social media with a transgender influencer to promote its beer. This backfired and led to a sustained loss of revenue. Apple and others have signalled their net-zero credentials by claiming, falsely, that their operations use electricity only from renewable energy sources.
Today, companies seem less concerned about criticism and have even abandoned some appeasement efforts. Major corporations, such as Walmart, Ford, and Meta, have announced their abandonment of DEI (Diversity, Equity, and Inclusion) programs and return to merit-based hiring and compensation. Major banks, including Morgan Stanley and Citigroup, have announced their withdrawal from the Net-Zero Banking Alliance and are funding fossil fuel producers again. Even Larry Fink of Black Rock, formerly an evangelist for renewable energy, now advocates fossil fuels – because the data centers that AI generation requires depend on vast amounts of reliable, affordable energy that the renewables cannot provide.
This turn was inevitable because business cannot be sustained by appeasing irrational ideas. Yet, many business leaders continue to appease the usual critics of business: intellectuals and social and environmental activists that are often backed by government regulations and subsidies (employment equity laws, carbon taxes, renewable energy subsidies, etc.).
Why do business leaders appease?
The immediate reason for most CEOs to appease the government-backed critics of business is avoiding the arbitrary force of the government. For instance, as per the anti-trust laws, the government can impose penalties on, or even break up, companies that it deems are charging “too much,” or “too little,” for its products, or that sell the “wrong” products (such as carbon-emitting cars), or have “too much” market share.
Just ask Sundar Pichai, CEO of Google, that has been accused of “the intent to monopolize” the search engine market, with a threat of breaking up the company.
Corporate executives appease critics also because they believe it will leave them alone to pursue their fiduciary duty: value creation for shareholders. But many don’t recognize the futility of appeasing the destructive idea that the government can initiate physical force and thus violate companies’ right to liberty and property. As long as the government wields such a force – as it does in a mixed economy, any appeasement of irrational ideas it supports provides only a temporary reprieve at best.
Just ask Mark Zuckerberg of Meta who in a recent Joe Rogan podcast discussed the intimidation and threats his employees had received from the Biden administration to make them censor information and opinions on Facebook on the government’s behalf – and how the company appeased and acquiesced.
The third and the most fundamental reason for appeasing the critics of business is that company executives lack the moral argument for defense. As Ayn Rand argues in The Sanction of The Victims, most business leaders have accepted the moral code of altruism.
Altruism condemns business as exploitation of workers and customers for the benefit of its owners. It demands that businesspeople accept guilt for pursuing their self-interest and place others’ interests – such as the DEI job candidates, or the natural environment free of human carbon emissions – above their own and that of their shareholders.
Clearly, appeasing the critics who demand altruism of business does not work. The more business leaders appease, the more they are asked to sacrifice. The more companies sacrifice their value creation efforts and profits, the less they are able to produce the goods and services that our survival and well-being depend on. Companies that don’t create value profitably cannot sustain themselves: they will go out of business.
Value creation in business requires, not appeasement of others who demand your sacrifice, but independent thinking to discover what your customers value and how to create that for them, profitably, so that your shareholders will receive a return on their investment. Appeasing the critics of business does not promote value creation but value destruction, because the critics’ goal is not human flourishing but its opposite, through forced equity and elimination of human impact on their environment.
Value creation in business also requires a proper moral defense, not from altruism that cannot provide it, but from rational egoism. That entails, first, recognizing the moral value of business: its pursuit of self-interest – profits through creating and trading products and services – increases human flourishing and prosperity. Second, the moral defense requires defending business firmly and publicly, on such moral grounds. (A rare example is an oil and gas CEO Adam Anderson who wrote an open letter to North Face, defending his company and industry). Finally, if and when the government threatens to initiate physical force, companies must stand up and sue it for violating their individual rights (as some, including Google and Meta, have successfully done).
All this takes courage, time, and effort (and money) – but they are worth it because moral defense of business has a lasting impact and allows it to focus on its proper role: creating material values and wealth that enhance human flourishing.
