by Allison Schrager of Bloomberg News
The virtue economy, the only bubble I have ever called, has now completely burst. Many companies are cutting their DEI programs, flows into ESG funds in the US have fallen, and companies are being more quiet about politics.
The disappearance of the virtue-industrial complex does not come without a cost, on a human as well as financial level. At the same time, there is a clear winner — the concept of shareholder primacy. The idea, popularized by Nobel laureate Milton Friedman in 1970, is that corporate executives and boards have a single goal: to maximize return to their shareholders.
The notion that shareholders are all that should matter sounded cruel and heartless in 2019, when 181 CEOs of the Business Roundtable signed a statement redefining the purpose of a corporation. They committed “to lead their companies for the benefit of all stakeholders — customers, employees, suppliers, communities and shareholders.” How they would do this, and to whom they would be accountable, was unclear. But who could argue with such a noble-sounding goal?
By then environmental, social and government (ESG) standards and diversity, equity and inclusion (DEI) programs were already popular. Still, the statement signified full private-sector buy-in. Soon it seemed every corporate decision — from who it hired to how it managed its supply chain — was weighed in relation to its stated values. It could all be featured heavily in marketing, to demonstrate how a company was committed to a better world (and worthy of your business).
Eventually, true to the spirit of capitalism, an industry of DEI consultants, marketers and HR professionals sprang up. It is hard to put a number on the size of the virtue economy, but it went beyond the corporate world: Virtue became a bigger priority among university administrators, at non-profits, and in the media. I remember talking to a business school dean in 2022 who noted that many more students were aspiring to work in DEI because they saw such jobs as well paid, hard to monitor and stable.
