What CEOs really say when they lash out at ‘awake’ America

ESG, or socially responsible investing, is a new lens through which companies can be assessed by assessing them against non-financial measures, such as their impact on the environment (the “E” in ESG). The social aspect concerns the relationships of companies with employees, suppliers and customers – not just shareholders. And governance includes how a company behaves on things like executive pay, shareholder rights, leadership, and even its own internal controls.

The message around ESG comes down to this: is doing the right thing valuable in itself, or only if it helps the bottom line?

“It’s a bit of both,” said Jon Hale, America’s chief of sustainability research at Morningstar. “Sustainable investing… is trying to improve companies by saying, ‘Hey, fix your ESG-related issues that investors didn’t really push before. But let’s also think about your broader impact on the world.’ “

Redefining ‘awake’

Larry Fink is not alone. Elon Musk, despite running a wildly successful electric car company, has also dismissed “waking up” as a “false virtue.”

Part of the problem is how the term, which originated in Black American English, has been appropriated by white conservatives. Where “staying awake” once meant being alert to societal injustices, conservatives now often use the term as a cudgel to discredit progressive ideas about race, gender, and the environment.

Against that cultural and political backdrop, it has become somewhat radical to suggest that companies should do the right thing simply because it is the right thing to do.

In other words, companies should do what’s right because it’s right, not just because it’s good for business. And who doesn’t like it, can take a long walk.

That was the message from Apple CEO Tim Cook, in 2014, when he was questioned by a prominent group that denies climate change about Apple’s sustainability measures. In a heated argument, according to witnesses, a representative of the conservative think tank National Center for Public Policy Research at a meeting urged Cook to commit to a narrow focus on profitability, even at the expense of Apple’s sustainability goals. In response, Cook, arguably the most mild-mannered CEO in Silicon Valley, got annoyed and shot the question.

“As we work to make our devices accessible to the blind, I don’t think about the damn ROI,” Cook said. He later added, “If you want me to do things solely for ROI reasons, get off this stock.”

In 2014, telling climate skeptics to divest was a pretty bold move. Eight years later, Cook is unlikely to get sleepy because of his high morale: Apple has since become a $3 trillion company, and Cook himself received nearly $100 million in total compensation last year.

Just as investors’ obsessive focus on short-term gains has helped shape the era of shareholder primacy, they will also play a key role in the transition to the era of stakeholder capitalism, Morningstar’s Hale said.

“Virtually every publicly traded company today is concerned about their ESG performance in a way they definitely weren’t five years ago,” he told CNN Business. The norm is no longer just what companies can legally get away with, he said.

“If you have a negative impact on the world,” Hale added, “it negatively impacts your brand.”