The savior CEO and the empty promise of ‘stakeholder capitalism’

Companies may claim to serve employees, communities and the planet – but two books show profit still comes first

American CEOs are a self-assured bunch but it takes a certain level of hubris to conclude that your skills making money and climbing the corporate ladder also equip you to solve social and environmental challenges.

While promising to save the world is increasingly part of the chief executive’s job description, two timely new books make clear that this grandiose notion remains little more than a self-serving fantasy.

No matter how earnestly they proclaim their support for “stakeholder capitalism” – the popular promise that companies now take care of employees, communities, the planet and other “stakeholders”, not just themselves – profits still come first.

Few chief executives have embraced the CEO-as-world-saver conceit as enthusiastically as Jamie Dimon, the head of the $2.6tn investment bank JP Morgan Chase. There’s Dimon lamenting in Time magazine that “policymakers, governments and business leaders have done a poor job of helping those who have been left behind.” There’s Dimon concluding a shareholder letter with a rousing call to “acknowledge our problems and work together” to “lift up those who need help and society as a whole”. And there’s Dimon taking a knee at a Chase bank branch, ostensibly in solidarity with the global Black Lives Matter uprising.

New York Times reporter Emily Flitter captures the insurmountable contradictions of stakeholder capitalism in her important and infuriating new book, The White Wall: How Big Finance Bankrupts Black America. In 2014, Flitter recounts, JP Morgan started making philanthropic contributions and “for-profit capital allocations” to the city of Detroit, Michigan, to “address some of Detroit’s biggest economic hurdles”, as Dimon would later phrase it. Accompanying each investment was, Flitter writes, “a media blitz that made it seem like JP Morgan bankers had galloped into a completely deserted hellscape and brought it back to life”.

Over the next five years, the bank directed some $155m to Detroit. That’s not an insignificant amount of money – unless you compare it to JP Morgan’s own earnings or its CEO’s compensation. As Flitter points out, that $155m represented “0.03% of its profits over the same period”. A Guardian review of JP Morgan’s annual proxy statements calculates that between 2015 and 2019, roughly the same window as JP Morgan’s work in Detroit, the bank’s board (which Dimon chairs) awarded Dimon more than $135m in compensation.

Part of the justification the company gave for Dimon’s 2019 pay was his support for “a diversity and inclusion strategy that attracts, motivates and retains top talent”. In a memo to JP Morgan employees a few weeks after the murder of George Floyd, Dimon wrote: “Let us be clear – we are watching, listening and want every single one of you to know we are committed to fighting against racism and discrimination wherever and however it exists.” Yet as Flitter reveals with devastating clarity, from sidelining Black employees to offering Black customers inferior lending terms and investment products to promoting predatory practices in predominantly Black communities, such commitments are often little more than empty rhetoric.

Empty rhetoric does nothing to address the racism that remains deeply entrenched in finance, but that doesn’t mean rhetoric is pointless – at least for executives. “The anodyne talk of diversity can be used as a shield against discussions of specific and unflattering problems,” Flitter writes, which “also helps keep the topics of racism and representation on the margins of corporate life”. The ultimate outcome of performative anti-racism is the preservation of the status quo – which is, of course, the point.

High-profile pledges are also fantastic PR. Flitter notes, for instance, that “from start to finish” a JP Morgan investigation into its predecessor banks’ historical ties to slavery “was handled by one of the bank’s public relations specialists”. Of the $30bn that formed JP Morgan’s landmark “racial equity commitment”, announced to great fanfare in October 2020, Flitter finds that some $28bn “was made up of activities that were part of the bank’s normal business and were now being counted as specifically good for closing the racial wealth gap”. (Earlier this year, JP Morgan agreed to a third-party audit of the $30bn pledge.)

In the fall of 2019, rhetoric also helped land Dimon and two other CEOs on the cover of Fortune magazine. At the time, Dimon was leading the Business Roundtable, a lobbying group for CEOs of American companies. During Dimon’s tenure, the organization earned glowing headlines and effusive praise from business and media elites by issuing a statement that claimed to “redefine … the purpose of the corporation to promote ‘an economy that serves all Americans’”, including by “foster[ing] diversity and inclusion, dignity and respect”. (The statement came less than a year after JP Morgan paid some $24m to settle a racial discrimination lawsuit filed by employees.)

According to Fortune, Dimon and the Business Roundtable had begun a “reexamination” of the group’s stated commitment to prioritizing stock prices at a “testy dinner” the previous year. One person who attended that dinner with Dimon was Rick Wartzman, the author of the new book, Still Broke: Walmart’s Remarkable Transformation and the Limits of Socially Conscious Capitalism.

Soon after the Business Roundtable released its statement, Dimon was succeeded as head of the group by a fellow stakeholder capitalism enthusiast and a key player in Wartzman’s narrative: Doug McMillon, Walmart’s chairman and CEO. McMillon speaks incessantly about how Walmart is committed to all of its stakeholders, particularly its 2.3 million employees. The company, Wartzman writes, “very much sees itself as part of this new wave of capitalism”.

Doug McMillan against the Walmart logo.
The Walmart CEO, Doug McMillan, often speaks about how his company is committed to its 2.3 million employees. Photograph: Jason Ivester/AP

Still Broke traces Walmart’s history through the lens of the company’s employees. This unexpectedly engaging book portrays a company making progress, but of a very narrow sort: the type of progress that happens on executives’ terms, not workers’; the type of progress that is considered progress only because the starting point was so bad. It’s the type of progress, in other words, that aptly reflects most corporations’ social and environmental responsibility efforts.

Walmart’s approach to worker organizing serves as a case in point. “If there is one thing that runs as deep in Walmart’s DNA as its devotion to keeping costs down and prices low, it would have to be its antipathy toward organized labor,” Wartzman writes. In the 1990s the company “tracked employee attitudes” to generate a “Union Probably Index” that would allow it to better target stores that might be inclined to organize.

Years later, Walmart hired the elite PR firm (and vocal stakeholder capitalism proponent) Edelman to fight labor efforts; one outcome was “Working Families for Walmart”, an astroturf organization paid for by Walmart and “housed in Edelman’s Washington offices”. Wartzman also highlights a 2012 Bloomberg investigation that discovered that Walmart was so afraid of the employee organizing initiative Our Walmart that the company “hired an intelligence-gathering service from Lockheed Martin, contacted the FBI, staffed up its labor hotline, ranked stores by labor activity and kept eyes on employees (and activists) prominent in the group”.

Throughout Still Broke, Wartzman wrestles openly with two tensions. One is the contrast between Walmart’s genuine progress on certain issues – such as its sustainability efforts or its philanthropic undertakings, including its admirably generous response to Hurricane Katrina – and its stubborn unwillingness to raise hourly wages or allow employees to organize. (As the book reveals, Walmart’s anti-labor efforts have continued under McMillon.)

The more foundational tension is whether it’s even possible for companies to solve the societal challenges they claim to be determined to fix. In 2015, Walmart finally announced that it would raise its minimum hourly wage to $9, with a further increase to $10 the following year. Like JP Morgan’s investments in the city of Detroit, Walmart’s pay bump was a PR bonanza for the company: President Obama called to congratulate McMillon, and the company was named to Fortune’s “Change the World” list. Walmart has made that list every year since, and the company continues to be celebrated as a paragon of corporate progress.

Yet as Wartzman’s account makes abundantly clear, the “mantle of social responsibility” that corporate and media elites have bestowed on Walmart does little for the people who depend on it the most: employees. “After all of that – after all the protests and HR focus groups, the headlines and hearings, the self-congratulatory speeches and board meetings – here’s where Walmart landed: as of summer 2022, at least half of its US hourly workers still make less than $29,000 a year, many of them a fair bit less,” Wartzman concludes.

As the civil rights activist JoAnne Bland tells Wartzman after she meets with McMillon, “They know people can’t live off those wages. How much profit do you need?”

“At the heart of the struggle for Black Americans to gain equal footing in this country,” Flitter observes in The White Wall, “is the question of who has control and who has money.” Whatever promises corporations make about fighting racism or protecting employees, these two books make clear that companies may be willing to make changes at the margins, but they still draw the line at sacrificing control or money.


Adam Lowenstein

The GuardianTramp

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