Activist Capitalism and Democracy

Public corporations are brandishing their political identities. They are increasingly taking stands and messaging on highly charged social issues: gun control, gender and race, immigration, abortion, reproductive rights, and free speech. Corporate scholars have paid scant attention to this transformation, mostly retrieving old questions about the compatibility of corporate social responsibility and economic efficiency. This Article remedies this gap, offering the first comprehensive analysis of “activist capitalism” and arguing that its real cost is democratic rather than economic.Economically, we show that under the asset price effects arising from the “moral portfolio” choices of today’s largest investors, there is no profitable deviation at the equilibrium for corporations as “producers of moral goods.” Refraining from activism makes a corporation less appealing to investors and hence less competitive. The price to pay for efficient activism, however, is “corporate conformity.” Because of the divisive and exclusionary nature of today’s moral goods—one cannot stand on both sides of a conflicting social issue—corporations conform to the majoritarian investor demand, even though it might represent just a minority of individuals under current equity reconcentration patterns and the rules of corporate voting. Democratically, the threat is that activist capitalism might erode political equality in the adjudication of divisive moral matters. In Citizens United, Justice Stevens warned that corporations’ disproportionate means may lead to the marginalization of the voices of ordinary citizens. A similar argument applies to the distortionary effects of activist capitalism. We conclude by attempting to identify potential solutions to mitigate these effects