The Dictatorship of Woke Capital: How Political Correctness Captured Big Business

By Stephen R. Soukup

For the better part of a century, the Left has been waging a slow, methodical battle for control of the institutions of Western civilization. During most of that time, “business”— and American Big Business, in particular — remained the last redoubt for those who believe in free people, free markets, and the criticality of private property. Over the past two decades, however, that has changed, and the Left has taken its long march to the last remaining non-Leftist institution. Over the course of the past two years or so, a small handful of politicians on the Right — Senators Tom Cotton, Marco Rubio, and Josh Hawley, to name three — have begun to sense that something is wrong with American business and have sought to identify the problem and offer solutions to rectify it. While the attention of high-profile politicians to the issue is welcome, to date the solutions they have proposed are inadequate, for a variety of reasons, including a failure to grasp the scope of the problem, failure to understand the mechanisms of corporate governance, and an overreliance on state-imposed, top-down solutions. This book provides a comprehensive overview of the problem and the players involved, both on the aggressive, hardcharging Left and in the nascent conservative resistance. It explains what the Left is doing and how and why the Right must be prepared and willing to fight back to save this critical aspect of American culture from becoming another, more economically powerful version of the “woke” college campus.

• Language: English
• Publisher: Encounter Books
• Release date: Apr 25, 2023
• ISBN: 9781641773027

Stephen R. Soukup

Steve Soukup is the vice president and publisher of The Political Forum, an independent research provider that delivers research and consulting services to the institutional investment community, with an emphasis on events that are likely to have an impact on the financial markets in the United States and abroad. He is also the director of The Political Forum Institute, a non-profit educational organization dedicated to creating and preserving community, primarily among those who create wealth for the nation through capital markets.

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Cover: The dictatorship of woke capital, How Political Correctness Captured Big Business by Stephen R. Soukup

Praise for The Dictatorship of Woke Capital

This book is a real eye-opener about the campaign to politicize corporate America. It’s widely recognized that progressives have been winning the culture wars in our universities and government bureaucracies. Now they are aiming to force corporations to take their side in the battle to re-create capitalism in their own image. They have already made a great deal of progress on this front. Steve Soukup brilliantly reveals how they are doing so, and provides a loud wake-up call for those of us who’ve been largely unaware of what is happening and should be alarmed.

—Edward Yardeni, President and Chief Investment Strategist, Yardeni Research, Inc.

If you’d like to know why the members of the ruling class think they should control and direct every aspect of your life, then the first half of Steve Soukup’s chilling book is the place to start. If you’d like to know how they intend to increase their power over you, the second half of the book spells this out in gruesome detail. Read it. Weep. And then get to work changing your world accordingly.

—Ken Blackwell, columnist and former Treasurer of Ohio

Soukup offers surprising insights into the philosophical roots of woke business.

—American Greatness

Anyone who wants to understand how the woke are taking over our engines of growth would be well served to read Soukup’s manifesto.

—Law & Liberty

… the book is an excellent distillation of a complicated menace.

—The Wall Street Journal

THE

DICTATORSHIP

OF

WOKE CAPITAL

HOW POLITICAL

CORRECTNESS

CAPTURED

BIG BUSINESS

Stephen R. Soukup

Logo: Encounter Books

New York • London

© 2021, 2023 by Stephen R. Soukup

Preface © 2023 by Stephen R. Soukup

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Encounter Books, 900 Broadway, Suite 601, New York, New York, 10003.

First American edition published in 2021 by Encounter Books, an activity of Encounter for Culture and Education, Inc., a nonprofit, tax exempt corporation.

Encounter Books website address: www.encounterbooks.com

Manufactured in the United States and printed on acid-free paper. The paper used in this publication meets the minimum requirements of ANSI/NISO Z39.48–1992

(R 1997) (Permanence of Paper).

First paperback edition published in 2023.

Paperback edition ISBN: 978-1-64177-301-0.

THE LIBRARY OF CONGRESS HAS CATALOGUED THE HARDCOVER EDITION AS FOLLOWS:

Names: Soukup, Stephen R., 1970– author.

Title: The dictatorship of woke capital / by Stephen R. Soukup.

Description: First American edition. | New York : Encounter Books, 2021.

Includes bibliographical references and index.

Identifiers: LCCN 2020035578 (print) | LCCN 2020035579 (ebook) ISBN 9781641771429 (hardcover) | ISBN 9781641771436 (ebook)

Subjects: LCSH: Economics—Political aspects—United States—21st century.

United States—Economic policy—2009-

Classification: LCC HC106.84 .S658 2021 (print) | LCC HC106.84 (ebook) DDC 322/.30973—dc23

LC record available at https://lccn.loc.gov/2020035578

LC ebook record available at https://lccn.loc.gov/2020035579

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CONTENTS

Preface to the Paperback Edition

Introduction What Is Woke Capital?

CHAPTER 1 To Whom Does Wall Street Belong?

PART I: WELL, HOW DID WE GET HERE?

CHAPTER 2 Wilson, Waldo, and the Fed

CHAPTER 3 The Long March Through the Institutions

CHAPTER 4 Where Two Streams Meet

CHAPTER 5 Friedman, Sorel, and the Heroic Myth

PART II: AFTER THE LONG MARCH

CHAPTER 6 From SRI to ESG

CHAPTER 7 Setting the Field

CHAPTER 8 The Players, Part One: On the Left

CHAPTER 9 The Players, Part Two: On the Right

CHAPTER 10 The World’s Biggest Corporation: Rotten to the Core?

CHAPTER 11 Is the House of Mouse Contaminated by Rotten Apples?

CHAPTER 12 Amazon, Hate, and the Poverty Palace

In Conclusion

Notes

Index

PREFACE TO THE PAPERBACK EDITION

Two years ago, when The Dictatorship of Woke Capital was first published, the practices identified and explained therein were still largely unknown or poorly understood, even within business and capital markets. Outside these arenas, the concept of woke capital was so foreign that worrying about it seemed a little deranged. Leftist corporations? Massive investment companies leveraging their clients’ wealth to effect political change? Asset management firms colluding with one another to push a leftist policy agenda that cannot be challenged by politicians or undone by voters? What crazy conspiratorial nonsense is this?

The catch, of course, is that the book was neither crazy nor especially conspiratorial. The dictatorship is real, and it is further consolidating its power.

As luck would have it, two events that coincided nearly perfectly with the release of this book would confirm its premises and alert the general public to the realities of politically weaponized business and investment capital.

Roughly a month after the book’s publication, the duly elected legislature of Georgia passed an election integrity bill and the duly elected governor, Brian Kemp, signed it into law. By any objective appraisal, the law was moderate and reasonable, yet it drew the ire of some prominent business leaders, particularly those running large corporations headquartered in the state. Opponents of the law insisted that election integrity was actually a dog whistle to white supremacists and racists.

Of all the business executives to comment publicly on the law, only one called for calm, reason, and bipartisanship. Ed Bastian, the CEO of Delta Airlines, released a statement observing,

The legislation signed this week improved considerably during the legislative process, and expands weekend voting, codifies Sunday voting and protects a voter’s ability to cast an absentee ballot without providing a reason. For the first time, drop boxes have also been authorized for all counties statewide and poll workers will be allowed to work across county lines.¹

Even this exceptionally measured praise of the law’s benefits was judged harshly by the media and other business leaders, and it exposed Delta to the outrage of the woke mob.

Bastian returned only days later, hat in hand, to express his remorse and detail his reeducation on the matter. I need to make it crystal clear that the final bill is unacceptable and does not match Delta’s values, he groused.

After having time to now fully understand all that is in the bill, coupled with discussions with leaders and employees in the Black community, it’s evident that the bill includes provisions that will make it harder for many underrepresented voters, particularly Black voters, to exercise their constitutional right to elect their representatives. That is wrong.²

Given the role of mega asset managers in enforcing the dictatorship of woke capital, it is worth noting that Delta’s largest shareholders at the time included: #1, Vanguard Group (10.22 percent); #2, BlackRock (5.59 percent); and #5, State Street Corporation.³ These three asset management firms, known as the Big Three of passive management, control somewhere around $20 trillion in assets collectively, including 19.2 percent of Delta Airlines. (BlackRock and State Street are profiled in Chapter 8 of this book.)

Within a few days, the political fever raised by election integrity spread throughout the country. On Saturday, April 11, more than one hundred CEOs nationwide participated in a Zoom call—organized by Kenneth Chenault, the former CEO of American Express, and Kenneth Grazier, the CEO of Merck—the purposes of which were to encourage them to get involved in the pushback against the Georgia law and to organize resistance to similar proposed laws in other states, notably Texas.⁴

The commissioner of Major League Baseball was so upset about the prospect of Georgia requiring photo ID to vote that he pulled the annual All-Star Game out of Atlanta, a city that is 52 percent black, has black business ownership of 30 percent, and is rated the #5 city in the country (out of 124) for black-owned businesses—and moved it to Denver, which is about 8 percent black, has 3.5 percent black business ownership, is ranked 106th for black-owned businesses, and is located in a state that also requires photo ID to vote. And he did it all in the name of racial justice. Or something.

In short, American Big Business used the passage of a law in Georgia as an opportunity to announce that it was no longer neutral in the culture wars. It had picked a side and would play politics aggressively to demonstrate its support for that side.

Roughly a month later, a small, almost entirely unknown hedge fund in San Francisco, called Engine No. 1, made national headlines and revealed the other chief tactic of the woke capitalist—shareholder activism—as it engineered a hostile partial takeover of the ExxonMobil board of directors. This takeover was unique in capital markets, in that it was designed not to make the company more profitable or valuable, but to make it more environmentally friendly and more concerned about sustainability.

At its annual general meeting on May 26, 2021, ExxonMobil tallied the votes placed by its shareholders for several positions on its board. Engine No. 1 had proposed four candidates to stand against existing board members who were, as is usually the case, supported by Exxon’s management. When all the votes were counted, the little engine that could had won three of the four seats it sought, shaking up the energy world and the capital markets.

Of course, Engine No. 1 didn’t really do that all by itself. It had powerful allies. The Big Three passive asset management firms—Vanguard, BlackRock, and State Street—all voted with Engine No. 1, as did the two largest public pension systems in the country, the California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS). Indeed, many observers believed at the time that Engine No. 1 was merely a front operation for the good folks at CalSTRS, which had been trying to change management and directors at Exxon for years. That was not actually the case, but the two firms often communicated about goals and tactics, even before Engine No. 1 officially existed as a firm.

Between them, these two episodes demonstrated that the phenomena discussed in this book are anything but the inventions of a conspiracy-addled mind. They showed that American Big Business does indeed have a political bent, that it feels increasingly comfortable expressing and acting on it, and that Western capital markets are dominated by asset managers who are interested in shaping public policy, albeit outside of and without the complications inherent in the public policy arena.

Moreover, these two incidents demonstrated these phenomena in a very open and high-profile way, thereby ensuring that millions of people who were previously altogether unaware of such things were, ironically enough, awakened to the new reality. The dictatorship of woke capital is a real and compelling threat of which everyone, everywhere was suddenly cognizant. Within a few weeks, a set of issues that had seemed so remote and so removed from most people’s everyday lives became a matter of urgent concern—on both sides. To borrow from Robert Penn Warren, it was out of that room now. It was prowling the veldt.⁵ Over the next several months, the woke capital–woke business–ESG conglomeration would come to dominate much of the discussion in business, politics, and regulatory affairs.

The Biden administration entered office determined to take a whole of government approach to climate change, and that meant, among other things, writing new regulations and rewriting old ones to address ESG-related matters. On his first day in office, President Joe Biden suspended a Labor Department rule implemented near the end of the Trump administration that required managers of retirement plans covered under ERISA (the Employee Retirement Income Security Act of 1974) to focus exclusively on pecuniary factors in investing and to use environmental and social factors sparsely and only in the case of a deadlock between otherwise evenly matched investment options. A few months later, Biden’s Labor Department issued its own rule, which not only permitted plan managers to consider ESG factors but also suggested that they would be regarded as derelict in their fiduciary obligations if they did not factor ESG into their investment schemes.

President Biden nominated Gary Gensler, an alumnus of the Obama administration (and Goldman Sachs), to run the Securities and Exchange Commission, and tapped Allison Herren Lee to serve as the commission’s interim director until Gensler could be confirmed. Lee began—and Gensler continued—an aggressive ESG agenda, including the creation of a task force dedicated to investigating ESG fraud, and announcing plans to issue a rule compelling all publicly traded companies to disclose environmental data related to climate change, just as they had long been compelled to disclose pertinent financial data. In so doing, the SEC challenged its own seven-decade-old definition of investment materiality, implicitly arguing that nonpecuniary matters like energy sustainability could be considered every bit as material as anything on a company’s annual 10-K financial report.

The mega asset managers too were emboldened. The global COVID pandemic had been a boon for the ESG giants, and not just because BlackRock and its CEO, Larry Fink, had been tapped by the Trump administration to lead the financial sector recovery. With the pandemic as a backdrop, the ESG industry pushed the narrative that only sustainable, environmentally friendly investment could save the world from manmade destruction. In the United States alone, investments in ESG-designated funds jumped by 33 percent in 2021, from $304 billion to $400 billion.⁶

ESG came of age in 2019 and 2020, but it kept its momentum in 2021, spurred on by greater public awareness.

On the flip side of that coin, while the forces supporting woke capital and promoting ESG were getting comfortable in their role as the new Masters of the Financial Universe, those who opposed the political weaponization of business were inundated with support and new allies. If the events of spring 2021 energized the woke capitalists, the English language lacks a word that adequately describes what those events did for their opposition.

Chapter 9 of this book, The Players, Part Two: On the Right, is its shortest chapter—almost comically so. That’s obviously a reflection of the paucity of individuals and organizations who were engaged in this battle for the soul of business when the book was written. The longest chapter is The Players, Part One: On the Left, which covers everyone from the Big Three to the Federal Reserve to the widow of Apple’s founder. The forces of woke capital were focused, organized, and engaged. And they faced precious little opposition: the Free Enterprise Project, the American Legislative Affairs Council (ALEC), and … that’s about it.

This disparity would not, however, survive those crucial few months in 2021. Richard Morrison at the Competitive Enterprise Institute emerged as a vigilant and meticulous analyst of the ESG regulatory apparatus. William Buckley’s venerable conservative journal, National Review, dedicated an entire issue to woke capital and turned its Capital Matters newsletter—edited by Andrew Stuttaford, the erudite four-decade veteran of the global financial markets—into a clearinghouse of ESG-related commentary and analysis. Rupert Darwall at RealClear Foundation turned his decades-long research on energy markets and climate change into serious and substantive investigations of the claims made by ESG proponents and the effects of their real-world applications. Consumers’ Research, the nation’s oldest consumer advocacy organization, became a force in pushing back against the top-down imposition of politicized investments. The Heritage Foundation took on a greater role in exposing and addressing woke capital, adding Andy Puzder, the former CEO of CKE Restaurants and a onetime nominee for secretary of labor, to its list of ESG-focused fellows. And the list goes on.

Of all the new faces in the woke capital arena, two have exerted an especially outsized influence. One is Derek Kreifels, the cofounder and CEO of the State Financial Officers Foundation (SFOF), a nonprofit organization dedicated to encouraging fiscal probity and principled stewardship of constituent tax dollars among state treasurers and auditors. Upon his awakening to the realities of ESG and its political nature, Kreifels understood that this top-down, activist, one-size-fits-all investment scheme would threaten his group’s core fiscal mission and would prove problematic for many of its members. Kreifels quickly formulated a counterstrategy that would focus on state financial officers’ fiduciary responsibilities to their constituents and would expose the risks posed to state governments by the explosion of ESG products and methodologies.

Within months, state treasurers were speaking out and taking action against the ESG practitioners whose obsessions were hurting their constituents. Representing states with impeccable credit records and various economic interests, these treasurers included John Murante of Nebraska (agriculture), Riley Moore of West Virginia (energy production), and Marlo Oaks of Utah.

The New York Times tried very hard to paint Kreifels and SFOF (a three-person organization) as the masterminds of a nationwide conspiracy to politicize and weaponize the ESG issue, ⁷ never quite grasping the irony that it is impossible to politicize or weaponize something that was conceived as a fundamentally political weapon. Still, the effort expended by the Times to investigate and expose an organization that is open and public about its positions and its programs is evidence of Kreifels’s influence (and of the Times’s tone-deaf silliness).

The second person to have an outsized influence on the process of awakening and enlivening the opposition to woke capital is Vivek Ramaswamy, the under-forty biotech multicentimillionaire, serial entrepreneur, and the author of Woke, Inc., which was published in August 2021. If The Dictatorship of Woke Capital is about the wokeness of business, Woke, Inc. is about the business of wokeness. His book quickly turned the charismatic Ramaswamy into the public face of the anti-woke movement and the pushback against woke capital.

An impressive speaker and in-demand veteran financial TV guest commentator, Ramaswamy raised awareness of the issues associated with the weaponization of capital and the politicization of business. He also went to work, almost immediately after the release if his book, devising his own plan to thwart the woke capitalists. In May 2022, Ramaswamy announced that he and his best friend from high school, Anson Frericks, had cofounded a new asset management company, called Strive Asset Management, specifically designed to counter the Big Three and their woke capitalism. For months prior to their public announcement, Ramaswamy and Frericks worked quietly and furtively to build a small team of executives and to enlist the support of angel investors. Among the more interesting of the latter group were the investor and conservative political activist Peter Thiel and the famous left-leaning hedge fund manager Bill Ackman.

Among the more interesting of the former group—and the hire that best demonstrates Strive’s commitment to countering shareholder political activism—was Justin Danhof, the now-former director of the Free Enterprise Project at the National Center for Public Policy Research. Danhof ’s story is detailed in Chapter 9 of this book. He may not be the OG warrior against politically weaponized investments—or he may be. It depends on whom you ask. Either way, Danhof more than anyone else led the movement to fight back against political shareholder activism since its infancy. He is now the director of corporate governance at Strive, where his mere presence speaks to the firm’s seriousness.

I should also acknowledge, at this point, one other player in the woke capital/ESG game who has made an invaluable contribution to our understanding of the rules of that game. His name is Tariq Fancy, and he was present at the creation—the creation of the ESG marketing scam. On March 16, 2021, less than a month after the original publication of this book, Fancy took to the pages of USA Today to expose what he saw as a grave disservice being done to the environmental movement and, indeed, to the planet. His opinion piece began:

The financial services industry is duping the American public with its pro-environment, sustainable investing practices. This multitrillion dollar arena of socially conscious investing is being presented as something it’s not. In essence, Wall Street is greenwashing the economic system and, in the process, creating a deadly distraction. I should know. I was at the heart of it.⁸

Tariq Fancy, you see, had been the chief investment officer for sustainable investing at BlackRock, the Mordor of woke capital. He was with Larry Fink when the BlackRock CEO devised his plan to take over the sustainable investment world and use it to make his firm even bigger and more powerful. He was there when ESG and sustainable investments were peddled to the firm’s clients and to the financial media as the means by which to save the world, to do well by doing good. He didn’t just see it all happen; he made it all happen. And in the end, he couldn’t help but conclude that sustainable investing boils down to little more than marketing hype, PR spin and disingenuous promises from the investment community.

The interesting thing about Fancy is that he, unlike most of the other critics of ESG/sustainable investing cited above (and including this author), believes deeply in the necessity of cutting carbon emissions, transitioning promptly to alternative fuels, and stopping the menace that is manmade climate change. What that means is that he entered the world of woke capital with the highest hopes and the best intentions. He was truly optimistic that shareholder activism and sustainable investment practices could save the world. Only reluctantly did he concede that investors were being duped. His rebuke of BlackRock, Larry Fink, and the whole woke-industrial complex is far more potent and searing than any other. His is the disappointment,