The 'virtue economy' is dead: Shareholders are back on top

Moving on from stakeholder capitalism has turned into a bad bet

- ALLISON SCHRAGER

The virtue economy has completely burst in the US. Many companies are cutting their diversity, equity and inclusion (DEI) programmes, environmental, social and government (ESG) funding in the US has fallen, and companies are being quieter about politics.

The disappearance of the virtue-industrial complex comes with a human and financial cost. 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 returns to their shareholders.

This notion sounded cruel and heartless in 2019, when 181 CEOs of the Business Round Table in the US 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?