A corporate awokening?

‘Woke capitalism’ – much in the news of late - has been defined as the corporate takeover of secular morality.

You might think the phenomenon would be welcomed by neoliberals as another signifier of the eclipse of socialism. But you’d be wrong. Woke capitalism was described as ‘the new villain of the right’ in an Observer article this week.

Yet there are plenty of sceptics on the left, too. ‘Compassion must not be privatised,’ many self-styled progressives grumble.

What has this to do with the law? Much. This week’s interviewee, Paul Watchman, might be described as the very personification of woke capitalism. An avowed internationalist, the former Freshfields partner has devoted much of an eclectic career to persuading bosses to do good. This has involved furthering such ostensibly noble causes as pro bono, ethically responsible investment and the fight against climate change. He is presently chair of Lawyers for Net Zero.

Watchman is especially compelling when he pinpoints the critical ambiguity at the heart of the debate. Are company directors who are guided at least in part by ESG (environmental, social and governance) considerations failing in their duty to shareholders? Chucking out pollution and employing child labour can be extremely good for profits, after all. Should directors be able to override that duty?

The same consideration surely applied to those directors who handed back furlough cash when they did not have to.

Watchman believes in-house lawyers are ‘uniquely positioned’ to make a difference by ‘nudging’ their employers in the right direction. One exemplar he cites is Unilever, whose chief executive Alan Jope credits ESG with being the company’s ‘hottest’ recruitment tool.

No company better demonstrates the tensions that can arise here. Stellar fund manager Terry Smith, a legend among his peers, recently criticised Unilever for prioritising sustainability credentials at the expense of running the business (that is, profits). ‘A company which feels it has to define the purpose of Hellmann’s mayonnaise  has in our view clearly lost the plot,’ Smith declared in a biting aside.

‘Stakeholder capitalism’ (as woke capitalism used to be called in the Blair era) still has much to do to win over the City. Can lawyers help? Should they want to?