Slaying the ESG and DEI Dragons

The American right is a fractious world these days. It is divided by intense disagreements about economic policy, foreign affairs, constitutional proprieties, and social policy—not to mention what President Donald Trump and his movement portend for American conservatism’s future. But if there is anything that quickly unites the center-right of American politics, it is hostility to ESG and its DEI handmaiden.

Different concerns often motivate the antagonism towards ESG and DEI from the right. Social conservatives, for example, point out that DEI and the “S” (social) part of ESG never reflect conservative views on social questions. Instead, they invariably embody progressive positions on issues of sex and race. Some classical liberals will also be opposed to companies effectively working to promote social progressivism via ESG and DEI. However, they and libertarians will be equally concerned about the myriad ways ESG and DEI undermine and compromise shareholder primacy and the pursuit of profit in publicly traded corporations.

There is no shortage of scholars showing the fundamental incoherence of ESG and DEI and the overall stakeholder capitalism theoretical framework propagated by many business-school professors, which binds it all together. For example, law professor Steven M. Bainbridge and the economist Paul Mueller have written extensively on these matters. Curiously, however, there has been far less extended commentary about ESG and DEI from business leaders themselves.

One reason is that many CEOs of major US public corporations have been among the most prominent backers of ESG and DEI programs. BlackRock’s Larry Fink is—or was—the personification of a CEO who has aggressively pushed these programs and, until recently, loudly insisted that everyone else should get on board.

It is, therefore, not surprising that Fink features significantly in a new book about the stakeholder capitalism-ESG-DEI phenomena. In A Tyranny for The Good of Its Victims: The Ugly Truth about Stakeholder Capitalism (2025), the entrepreneur and lawyer Andrew F. Puzder takes a fresh look at the rise of these programs within corporate America and explores why CEOs have embraced them.

For Puzder, ESG and DEI have many formal definitions, but once we pull back the veil, we discover that they are “a ruse” that seeks to “turn elitist social justice and environmentalist goals into moral imperatives” to be imposed by stealth on the rest of us via the world of business. Puzder also reveals how he and others have worked to combat this trend, not primarily through legislation but rather by using marketplace tools and pressures to expose what has gone on and to persuade parts of corporate America to begin distancing themselves from ideas fundamentally at odds with good business practice and the core principles that have made American capitalism so successful.

Collapsing Corporate America from Within

Progressives in America and the hard left in general are distinguished for many things, but one thing stands out in particular: they never ever give up. If one avenue turns out not to work (say, revolution or legislation), progressives quickly seek other pathways, such as using the judicial system, activist judges, and prosecutors to get their way or by taking over institutions from within to advance their goals.

According to Puzder, ESG and DEI fall squarely into the latter category. Certainly, progressive activists stand to gain considerably from the need these programs generate for chief diversity officers, people to manage ESG investment portfolios, and woke management consultants to advise on how to hardwire these things into business practice and structures. Puzder, however, observes that something else is at the root of it all: ideological conviction.

ESG and DEI amount, he argues, to the continuation of various social justice programs through means other than politics, lawfare, or the more radical means (violent protests, etc.) that the hard left is never quite willing to take off the table. The genius of progressives and aligned law and business school professors has been to persuade boards of directors and CEOs of two things. First, ESG and DEI policies are reconcilable with the bottom line; second, the same policies will go a long way to alleviating the perennial criticism that business enterprises are essentially parasitical organizations that inflict considerable harm on society.

Puzder stresses, however, that ESG and DEI also empowered some CEOs to start behaving in precisely the “masters-of-the-universe” fashion that progressives have long accused them of personifying. Puzder points to Larry Fink as a prime illustration of this trend. He traces how Fink and others steadily moved in the direction of insisting that stakeholder capitalism, ESG, and DEI were the future for business and the world more generally. By examining Fink’s annual CEO letters as well as his speeches and other statements, Puzder shows how Fink espoused ideas about topics like diversity and climate change that would have made many a DEI officer or radical environmentalist proud, as well as Fink’s embrace of apocalyptic language to verbally bludgeon others into embracing the cause. Notwithstanding Fink’s protestations that he was not pushing woke ideology, Puzder demonstrates just how woke the ideas expressed by BlackRock’s CEO were and their undeniable connection to his efforts to advance ESG, DEI, and stakeholder capitalism.

This helped to create the climate, Puzder maintains, for the Business Roundtable’s (BRT) decision to issue its 2019 “Statement on the Purpose of a Corporation.” The statement diluted the BRT’s longstanding commitment to shareholder primacy by endorsing stakeholder logic. There were few more ominous signs of how much ESG and DEI ideas and concepts had permeated corporate America than the fact that 181 CEOs of major American corporations signed on to something that relativized shareholder primacy and the pursuit of profit as the core telos of the publicly traded corporation.

Guerilla War against ESG

It took a while for conservatives, classical liberals, and free-market and limited government-minded people to become aware of the extent to which DEI logic and ESG priorities had worked their way into boardrooms and C-suites around the United States. In retrospect, the BRT 2019 statement was the catalyst for the emergence of what Puzder calls “the Resistance” to those inside and outside the corporate world who have sought to turn American business into yet another reliable citadel of woke orthodoxies.

Puzder devotes considerable space to explaining how a loose coalition of scholars, market-orientated business leaders, public intellectuals, and political leaders started to speak publicly about the damage being inflicted by ESG and DEI before moving to compliment intellectual critique with concrete action. In doing so, they primarily deployed pre-existing market tools and private legal mechanisms to alert wider audiences to what was going on, especially by illuminating how ESG and DEI undermined the fiduciary responsibilities of public corporations.

As Puzder states, “Sunlight is the best disinfectant.” Once attention was drawn to the realities of ESG and DEI, even some progressive-inclined Americans whose savings, IRAs, or 401Ks were invested in publicly traded companies turned out to be unhappy about their future economic security being compromised by the promotion of assorted woke causes or sacrificed on the altar of climate change. Growing awareness of the extent to which ESG and DEI negatively impacted the bottom- ine was one part of putting these programs and their supporters on the defense.

Puzder, however, underscores that another powerful pressure brought to bear against ESG and DEI was the willingness of investors—especially state-pension funds—to inform the likes of BlackRock that ESG was inconsistent with the central fiduciary responsibility of publicly traded companies to make money for shareholders within the parameters established by rule of law. Certainly, the size of a state’s pension fund’s investment in ESG-DEI friendly corporations may be a very small portion of the multi-trillion-dollar investment portfolios managed by BlackRock or Vanguard. But when institutional investors directly accuse a major corporation of putting investors last and even start launching legal actions to force a company’s return to basics, it is invariably a public relations disaster for that business.

So it was that by 2023, Larry Fink had begun to dial back the ESG rhetoric. He even claimed that the term had been “weaponized” by the “far left” and “far right.” Puzder illustrates, however, that Fink’s claims that it was all one big misunderstanding exploited by nefarious political extremists simply don’t fit the facts of Fink’s aggressive promotion of ESG and the extent to which he had publicly associated BlackRock with stakeholder capitalism. The Resistance, it seems, had inflicted significant damage upon the ESG-DEI Empire.

What’s Next?

Looking forward, Puzder warns that, while ESG and DEI no longer seem utterly ascendent, it would be a serious mistake to assume that they are defeated. ESG and DEI policies are deeply engrained in corporate America and even more so in the business communities of other nations, particularly the European Union. Moreover, Puzder warns that attempts are underway to disguise what has been going on by diminishing the use of ESG and DEI acronyms but continuing with essentially the same policies under other forms and using different terminology.

I would add three other factors to consider if these programs are to be purged from business. The first is that ESG and DEI have to be formally repudiated by corporate America—and specifically by the BRT—and the institutional manifestations of such ideas inside companies, whether in the form of ESG-enamored CEOs and board members afflicted with delusions of political grandeur, or Human Resources departments who see DEI as their raison d’être—radically diminished.

Second, we must be cognizant that every successive generation of business professors seems to come up with yet another theory that attempts to relativize the profit-centered purpose of business. In the 1980s, it was “socially responsible investing” (SRI). By the 1990s, this had morphed into “corporate social responsibility” (CSR), notoriously championed by outfits like the Enron Corporation that collapsed under the weight of bad business practices, financial scandals, and bankruptcy proceedings in late 2001. In many senses, ESG and DEI represent a continuation of these schemes. Plenty of business school professors have also built entire careers peddling ESG and DEI to redeem business by essentially neutering business. It follows that CEOs and investors need to be more attentive to the propensity of some business schools to play these games.

But preceding everything else is something even more fundamental. With a few notable exceptions like Puzder, many CEOs are often remarkably inarticulate when asked to defend the rightness of commerce. They also seem utterly intimidated by progressive activists intent upon pushing corporate America down particular political paths that companies, large or small, have no reason to go. Appeasement of activists is thus, more often than not, the rule for business rather than the exception.

Alas, this reflects a failure to grasp that many progressives will never be satisfied by anything business leaders do to voluntarily advance progressive goals in society and the economy. They will always demand more because, deep down, a significant proportion of progressives simply do not accept the fundamental legitimacy of business, commerce, and market economies more generally. Indeed, whenever they get their hands on the levers of power, they use regulation to try and obtain what they want from business at the expense of the capacity of private companies to create wealth.

Therein, I would argue, lies the next challenge for those who have done yeoman’s work in causing ESG, DEI, and stakeholder capitalism to stumble. It is to persuade CEOs and boards of directors that part of their job is to explain publicly, confidently, and consistently why the core objective of business is not to promote sundry fashionable causes but rather to deliver profit—not least because that is the prime way that business contributes to the general welfare.

Absent such a vigorous defense of commerce qua commerce by business leaders, I fear that we will repeatedly relive our present (albeit diminished) stakeholder capitalism-ESG-DEI moment. Yes, this type of public intellectual combat can be hard, and many business leaders are not naturally inclined to engage in it. However, unless CEOS and senior executives are prepared to extoll unapologetically in the public square the indispensable importance of business, they will fight endless rearguard actions. The economic and political price for lost growth and diminished freedom will be high for them and society.

Samuel Gregg is the Friedrich Hayek Chair in Economics and Economic History at the American Institute for Economic Research. He is a contributing editor to Civitas Outlook.