Woke Capital Revisited 

By | June 28, 2023

In Woke Capital Revisited, a symposium piece connected with the 2022 Berle Conference, I argue that an expanded definition of corporate purpose and the social expectation of how public companies should act have created an environment where corporations now play an increasingly prominent role in diversifying leadership. However, the scope of how widely inclusive corporate leadership is implemented depends on the company. I focus primarily on leadership diversity, equity, and inclusion (“DEI”) efforts in the public company context, although I also share some thoughts on why DEI efforts have largely been patchwork in nature in the private company context. This piece is a follow-up to a 2019 article that I wrote, titled Woke Capital, which discussed the evolving role of corporations in modern times and explored the role of corporations in social movements using the Muslim Ban, the gun control movement, and the LGBTQIA+ rights movement as case studies. Woke Capital Revisited takes a slightly different direction in that it examines corporate inclusivity in leadership in the boardroom and throughout the corporation itself in the context of public companies, with some references to private companies. It also explores how stakeholder capitalism played out in the context of voting rights, Black Lives Matter, and transgender youth. 

My article begins by explaining the value of diversity in corporations. Surveys have shown that people trust businesses more than NGOs, the government, or the media, and they are seen as outperforming them in many ways. 85% of Americans agreed that companies should disclose more about their social impact, with 82% believing that companies are responsible for cultivating a diverse and inclusive workplace. Diversity also positively impacts innovation. A study by McKinsey found that executive teams with the most gender diversity outperformed those with the least by 25%. In the context of ethnic diversity, executive teams with the most ethnic diversity outperformed those with the least by 36% in profitability. For private companies, there is a long way to go in terms of diversity in leadership, even though studies have shown that companies with gender diversity and ethnic diversity outperform those that are not diverse. 

Of course, there are critics of corporations being more involved in social issues, such as certain politicians who have derisively characterized such involvement using the label “woke.” In the meantime, corporations are trying to figure out how to navigate increased expectations from investors and other stakeholders. Some companies do the bare minimum to meet such expectations, while others try to make lasting organizational changes. 

Next, I give an overview of how corporate purpose has evolved and explain the role of publicness in diversity efforts. Professor Donald Langevoort argues that the corporation’s publicness means that with its right to exercise large-scale economic power comes a quid pro quo—there must be transparency, voice, and accountability—a sort of “social license” discussed in Professor Hillary Sale’s scholarship. Corporations have reputational and legal consequences if they do not meet such expectations. However, there are challenges with publicness in that the concept is fluid. Therefore, corporations are left with the difficult task of assessing public perceptions and controlling the narrative about their action, or lack thereof, on social issues. For example, public companies commonly make public pledges to increase the representation of underrepresented minorities and women on their boards and in their workforce. Those who are more proactive (and also hope to avoid government intervention or regulation of their behavior) may choose to implement company policies drafted by in-house lawyers, which provide internal rules and regulations that provide a roadmap for implementing DEI initiatives. The larger stakeholder community, which includes employees and social movements, can spotlight diversity issues and affect companies’ understanding of the social norms affiliated with their publicness and what corporate inclusivity should look like in the leadership context. 

I then examine corporate inclusivity in leadership in both public and private companies, emphasizing what we can learn from successes and failures. To help further my analysis, I use Black Lives Matter, voting rights, and transgender youth as case studies. Corporations sometimes speak out on social issues that intersect with and impact corporate inclusivity to avoid public scrutiny and government intervention in the DEI realm. There is also an expectation that people expect businesses to do more on societal issues. Other times, corporations speak out on certain matters, such as voting rights, because of their importance to DEI initiatives generally. In many areas, however, they fall short. 

I also offer some thoughts on whether the fiduciary duties of officers and directors can be grounded in a company’s duties to society. Ultimately, a compelling argument can be made for DEI initiatives to be undertaken by business leaders under the duty of loyalty. Stated differently, the business judgment rule gives corporations broad discretion concerning DEI matters. 

Finally, I explore how senior executives and the board can be held accountable and amplify diversity-related goals using legal and business mechanisms. These mechanisms include revisiting and communicating existing legal policies concerning DEI, creating an infrastructure for DEI efforts to succeed, implementing a “whole-of-company” approach, considering cultural changes (e.g., determining who on the board of directors is responsible for DEI initiatives), creating avenues within the corporation for reflection and discussion, publicizing detailed and standardized disclosures about DEI in leadership, and examining diversity within the ranks of third party suppliers. Each of these possible avenues of change is explored in greater detail in the article. 

My suggestions on corporate inclusivity in leadership would take time and commitment to implement. While the levers of corporate purpose and publicness have their roles to play, they are limited in advancing corporate inclusivity. Instead, a broader and more holistic approach must be taken to achieve diversity in leadership that reflects our society. 


Jennifer S. Fan is the D. Wayne and Anne Gittinger Professor of Law and the Associate Dean for Research and Faculty Development at the University of Washington School of Law. 

This post is adapted from her “Woke Capital Revisited” paper, available on SSRN. 

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