#102 - Social Responsibility or Profit?

Pawel Pietruszewski
Nov 7
3 min read

I recently finished reading the book Woke Inc. by Vivek Ramaswamy, who became the youngest U.S. presidential candidate in the 2024 Republican primaries. He is also an accomplished entrepreneur, and in his book, he shares a rather controversial view of corporate America.

The Premise of Woke Capitalism

According to Ramaswamy, the recent emphasis on corporate social responsibility is often a convenient cover for unethical, profit-driven motives. In his view, companies pretend to care about societal issues as a way to gain more power and profit.

Here's how it works: pretend like you care about something else than profit and power, precisely to gain more of each.

His core argument is this: the limited liability company was created to generate profits for shareholders while shielding them from responsibility for the company's actions. Originally, this construct was used to legitimize the questionable activities of entities like the East India Company or the Royal African Company, which were granted exclusive rights by the British Crown to trade, extract, and "civilize", often violently supported by the British Navy.

The 1855 Limited Liability Act extended this model to the broader public, democratizing a structure that allows for "only for profit, eyes closed" ventures without requiring full accountability.

Chang's Critique of the Corporate Structure

Ha-Joon Chang, in Edible Economics, critiques this limited liability structure with two key points:

First, the average holding period for shares in the UK has dropped from five years in the 1960s to less than one year in recent decades. Short-term shareholders lack incentive to care about a company’s long-term health or values such as corporate social responsibility.

Second, other stakeholders - employees, suppliers, local communities - have no voting rights. Company decisions are made solely by shareholders, whose interest is typically short-term profit.

And these mechanics matter. They force CEOs into an impossible balancing act.

Ramaswamy portrays them as devils in disguise: leaders who feign good citizenship to boost profits.

He uses provocative examples to make his points. One that stood out was an alleged entertainment of ultra-wealthy capitalists: "dwarf-tossing" on yachts. This disturbing image is meant to show what happens when people accumulate too much unchecked power.

I believe the reality is more nuanced. CEOs are people with varied motivations. Some genuinely care about broader stakeholder impact. But at the end of the day, if they fail to deliver market-level profits, they risk being fired by anonymous shareholders focused solely on returns. This impersonal mechanism may have worked in the 18th and 19th centuries but feels increasingly out of place in an era more attuned to ethical concerns. Ha-Joon Chang echoes this sentiment.

Competing Views on Corporate Accountability

Ramaswamy, however, sees things differently. He argues that the profit-maximizing nature of limited liability corporations is their strength. In his view, democratic institutions - through legislation and enforcement - should be the ones to ensure companies align with societal interests. CEOs who push personal ideologies under the banner of "woke capitalism," he says, act above the democratic order. As citizens, they can vote and advocate like anyone else, but they should not use corporate power to shape ideology.

This is a fascinating perspective. Interestingly, both Ramaswamy and Ha-Joon Chang agree that the impersonal nature of corporate structures is at the heart of the problem.

Ramaswamy, as an aspiring politician, favors external political control. Chang advocates for expanding control within the company to include employees, suppliers, and local communities.

Toward a Balanced Understanding

This is a crucial debate with real-world implications for how we understand and engage with corporations today. Perhaps it's fair to say that while some CEOs may act ethically, society should remain cautious. After all, a CEO's job is to generate profits, not to govern democracy.