Corporate America Is Turning Down the Woke Talk

Chart of the Week #27

Back in July, I wrote to you about “Woke Capitalism” being in retreat. In that piece, I shared a telling statistic from quarterly earnings calls: from a peak of 165 companies mentioning DEI and ESG in Q4 2020, the number crashed to just 32 by Q4 2023. That’s an 81% collapse in corporate virtue signaling.

Since then, I've been hunting for fresher and more comprehensive data on this trend. Well, I found it - and it's even more revealing. This time the numbers come from the Russell 3000 Index, which captures nearly every publicly traded company in America, not just the giants. We're talking about 98% of the investable U.S. stock market - from tech behemoths to small-cap manufacturers.

And guess what? Turns out, the woke retreat isn't just a big-company phenomenon like my last piece showed - it's happening across the board. Take a look at today's chart, which shows the same pattern playing out across the entire U.S. stock market.

The "woke" chatter that exploded post-2020 has decisively retreated to pre-pandemic levels. After peaking in early 2022, mentions of ESG and DEI have fallen off a cliff.

And it’s not just talk—if you’ve seen the headlines, a lot of companies, including some big names, are actually walking the walk. Ford, Harley-Davidson, and Lowe's are among the growing list of major corporate players quietly backing away from their post-2020 DEI initiatives. We're seeing everything from companies dropping out of LGBTQ workplace rankings to eliminating diversity targets for suppliers and staff.

And here's what's interesting: this isn't just happening at traditionally conservative-leaning companies - it's an across-the-board thing.

Granted, the usual PR surveys still show support for DEI programs (shocking, I know), but a more telling Bentley University/Gallup survey recently revealed that most people actually prefer companies to stick to business and stay out of current events.

Welcome to what Bloomberg calls the "Great Quieting" - where companies are finally returning to their core mission of creating value rather than virtue signaling.

What's behind the Great Quieting? Simple: the end of cheap money.

As I explained in my July piece, between March 2022 and June 2023, the Fed hiked interest rates ten times, from near-zero to a range of 5.00% to 5.25%.

The era of easy money came to an abrupt end - and with it, corporate America's luxury of prioritizing ESG/DEI over profits. Just look at the chart above - the steepest drops in ESG and DEI mentions align perfectly with the Fed's rate hiking cycle.

When money got expensive and returns got scarce, investors finally woke up to the folly of corporate America's obsession with social activism and politics at the expense of actual business performance.

But here’s the million-dollar question: Will boardrooms turn up the volume on “woke” chatter once the Fed goes back to its cheap money ways? I guess we won’t have to wait long to find out.