The ‘virtue economy is dead’: Long live shareholder capitalism

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.

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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?

By then ESG standards and DEI programmes were already popular, but the statement signified full private sector buy-in. Soon it seemed every corporate decision—from who it hired to how it managed its supply chain—was weighed in relation to its stated values. It featured heavily in marketing, to demonstrate how a company was committed to a better world (and worthy of your business).

Eventually, true to the spirit of capitalism, an industry of DEI consultants, marketers and HR professionals sprang up. It went beyond the corporate world: Virtue became a bigger priority among university administrators, non-profits and the media.

I remember talking to a business school dean in 2022 who noted that more students were aspiring to work in DEI because they saw such jobs as well paid, hard to monitor and stable.

By 2025, that turned out the be a bad bet. It took a few years for America Inc to realize that Milton Friedman was right: It is better for society, the economy and a company’s bottom line for it to just focus on profits. This is not to say that advocates for the virtue economy did not have noble motives; it was a sincere effort to make the world a fairer, safer and cleaner place. The problem is that the ‘stakeholder capitalism’ model pits equally deserving (if that’s the right word) groups against each other.

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For example, should a company move a factory from Detroit to Nashville? If it does, unionized workers in Detroit will suffer, but non-unionized workers in Tennessee will benefit. Whose interests matter more? Or consider environmental concerns: How much should consumers be willing to give up today in exchange for a better environment decades from now? There are winners in the future, losers today—whose preferences matter more?

How much weight to put on each of these goals is a question of values. Everyone has different values, and one’s values are not necessarily better than another’s. This may be why, when companies take a political stand, it tends not to boost employee morale, but to be divisive.

Friedman’s argument wasn’t that values have no place in the economy. Workers have rights. Inequality and discrimination exist. If companies were simply allowed to pursue profit without regulation, some would harm the environment or take risks we all end up paying for.

The case for shareholder primacy doesn’t deny any of that. It simply argues that it is not the CEO’s job to impose his or her values on shareholders, employees, customers or anyone else. It is the role of public officials to represent society’s values through appropriate laws, regulation and taxation. If they have values the majority of the public doesn’t agree with, voters can hold them accountable.

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Many champions of the virtue economy are now dismayed to see CEOs courting US President Donald Trump. Instead of seeing this as a betrayal, maybe it’s better to view it as the final act of the virtue economy. Were these CEOs pretending to care about DEI a few years ago, or pretending not to now? It’s impossible to say. But if they had just stuck to business, none of this would be necessary.

Going forward, some economic and professional readjustments in the US will be necessary. With the demise of the virtue economy, some jobs are being lost, some skills will prove less useful and many young people will need to rethink their careers.

At least the population that was most likely to benefit from the virtue economy—the well-educated and relatively affluent—also tends adjust fairly quickly to economic shocks. That is one small consolation in what, with the benefit of hindsight, has been a costly experiment. ©Bloomberg