Back in January - which yes, does now seem like another lifetime - the World Economic Forum (WEF) chose for its annual shindig in Davos the theme of Stakeholder Capitalism. WEF Executive Chairman Klaus Schwab explained the concept in the Davos Manifesto 2020:
The purpose of a company is to engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all its stakeholders – employees, customers, suppliers, local communities and society at large.
Is Stakeholder Capitalism a thing or just a soundbite to appease corporate conscience?
Three months on from that gathering and the COVID-19 global pandemic has provided an unwelcome opportunity to put some of the tenets of the theory to the test. For its part, the WEF has set up the COVID Action Platform - to rally the business community for collective action - and endorsed 6 Stakeholder Principles for addressing COVID-19, one of which is:
To offer full support to governments and society.
That’s a goal that organizations around the world are faced with right now and how they meet - or don’t meet - that challenge may yet have a long term impact on their prospects. Mark Carney, the former Governor of the Bank of England, wrote in The Economist magazine recently that companies need to be ready to be judged by “what they did during the war”, declaring that COVID-19 was indeed a “test of Stakeholder Capitalism”:
Fundamentally the traditional drivers of value have been shaken, new ones will gain prominence, and there's a possibility that the gulf between what markets value and what people value will close.
Analysts at Morgan Stanley are of similar mind, with Jessica Alsford, Head of Sustainability Research, warning:
Corporate behavior in a time of crisis—both in how companies treat employees and customers, and their impact on society in a time of need—can have lasting implications, both positive and negative. These factors can be linked to long-term performance and returns.
Morgan Stanley sees COVID-19 as accelerating attitudes to corporate behavior that were already taking shape:
Even before the [COVID-19] outbreak, more investors were looking at companies through the lens of environmental, social and governance (ESG) practices. But now, corporate decisions on human capital, customers and society during the COVID-19 pandemic could carry greater weight. As companies face greater scrutiny during the crisis, ESG factors will now be a key layer of diligence in evaluating an investment.
Leaders in the tech sector have to varying degrees risen to the challenge. At a personal level, billionaire CEOs have dipped into their pockets - Twitter’s Jack Dorsey is donating $1 billion to the battle against the virus, Amazon’s Jeff Bezos has chipped in with $100 million, while Microsoft founder Bill Gates, who’s been warning of the pandemic peril for years, is ready to put vast sums of money where his mouth has been.
Corporately, there’s been work underway as well. Among many others, Apple and Google are teaming up to track the spread of infections, Facebook has pitched its own Big Data effort in partnership with Carnegie Mellon University, while HP Inc and the HP Foundation have committed to donate an estimated $8 million in products and grants to support blended learning and local communities impacted by COVID-19 worldwide.
One of the most outspoken advocates of Stakeholder Capitalism over the years has been Salesforce CEO Marc Benioff. Last year the launch of his latest book - Trailblazer: The Power of Business as the Greatest Platform for Change - provided a mainstream media platform from which to preach his message, but in practice the philanthropic and socially responsible mindset has been hardwired in the Salesforce corporate DNA since its inception.
The current crisis has see the company rise to the challenge across multiple fronts, including teaming up with Chinese e-commerce giant Alibaba to fly a 747 full of Personal Protective Equipment (PPE) into COVID-19 stricken New York, as well as partnering with the likes of Walmart, State Farm and Uber Freight to distribute PPE in other US states. In addition, the firm is providing free access to its platform for those organizations on the pandemic frontline as well as offering $10,000 grants to small businesses.
Gavin Patterson, the firm’s recently-appointed President and CEO of International, took up his new role just as the COVID-19 crisis was getting underway in Western economies. It is, as he puts it, “an extraordinary time and a very interesting time to be starting a new job”. It is also, he suggests, an important opportunity for business:
Business has taken a lot of criticism over the last few years. Trust and the relationship between business and its communities has been challenged. But I think this is a very timely opportunity to be able to demonstrate that business is key to having a successful economy and ensuring that everybody across the world is able to have full and healthy lives. So I think it's really, really important during this period that business steps up and is part of the solution. That's very much part of the way we've been thinking about it at Salesforce.
The philanthropic aspect of the Salesforce operating model has been well-profiled over the more than two decades the firm has been in business, but it particularly comes into its own during periods of crisis. Patterson points to various ways that a company like Salesforce can play its part:
It can be through philanthropy, where the company has been giving generously to causes across not just the US, but around the world. It's been in the way we've been trying to work with healthcare organizations and other businesses to ensure that things like PPE got to the most important places or that healthcare workers get the food they need as their as they're fighting to save people's lives. But I think, ultimately, we will be judged by the way we look after all our stakeholders as business leaders through this period. We believe that business is the best possible platform for change and I think this will be a period when we're judged not just on what we've done in the short term, but ultimately, whether or not we've put in the right long term solutions for the economy.
It’s a message that we’re likely to hear a lot from various sources over the coming months. Over at IBM, new CEO Arvind Krishna this week made a similar point about the ability of tech firms to make a difference away from the purely commercial:
[An] area we’ve been focusing on has been to mobilize IBM and IBM-ers to help with the global battle against COVID-19…the computing power, over 360 Petaflops that we have helped convene for researchers; the Weather Channel’s COVID-19 county-by-county map, which saw more than 40 million visits in the first week of launch; the AI assistants that can answer citizens’ questions about COVID-19, 21 of them live today, and nearly 90 being rolled out; and educational resources available to anyone anywhere. We’re doing great work helping the city of New York and are delivering 300,000 tablets with educational software and free cellular data connections that can help students learn remotely.
When we add this all up, we have done the math. In just a few weeks we have already committed over $200 million in terms of contributions and volunteer time. I’m extremely proud of IBM’s response to COVID-19.
No turning back?
All of which is a hugely impressive response to a time of emergency, but does it constitute an ongoing shift in attitude. Will COVID-19 be the catalyst that pushes more skeptical companies towards embracing Stakeholder Capitalism or will it be a return to ‘business as usual’ as soon as some form of return to normality is in sight?
For Patterson, there’s no going back and that means ongoing change is to be expected:
Clearly, after a period of shock, we’ve entered a period now of relative stability. Colleagues are having to find ways of continuing to work with customers, listen to customers, help customers, while working remotely in most cases. But there will come a time later in the year - we don't know whether it's going to be the next few weeks or the next few months, or indeed, it might take into it might take too early next year - but there will be a time we come out of this and it is important that we are ready to help our customers as they transform their businesses on the back of of this change.
Nobody believes we're going to revert to the way we were. I think there will be opportunities and there will be an imperative to really change your business fundamentally, for the long term and in a more sustainable way. Coming out of this situation, it's so important as business leaders that we're there to help our customers through that change, and that they look to us for advice and sharing experiences in order to make sure that some good eventually comes out of this, not just for business, but I think for society as a whole.
While there are still dark days to come in the current pandemic, there are positives to be found, he concludes:
Clearly as we go through this period, things will change. I'm optimistic. I think we will get through it. I think it will be a slow recovery, but we will get through it. But it's important that we don't just revert back to the way we were and that we use this as an opportunity. I think it's very important to not just look back. We need to look forward and create a new way of living, a new way of governing ourselves, of educating ourselves and, of course, a new way of doing business.
Patterson’s optimism is encouraging at a time when there is so much to be negative about. As with every major crisis, this one has brought out the best in some and thrown unforgiving light on the actions of others. Billionaires holding out their hands for taxpayer funding to bail out their airlines is never going to be as good a look as those chartering 747s to fly face masks into pandemic hot spots. As noted above, COVID-19 is a test of Stakeholder Capitalism in action. Whatever the outcome, there will be plenty of practical examples to discuss at Davos 2021…