Barron\'s - April 6 2020

14 BARRON’S April 6, 2020

buybacksfor the protection of work-

ers,” says John Streur, CEO of Calvert

Research & Management, a unit of

Eaton Vance. Streur says companies

with strong governance, including an

emphasis on stakeholders and a focus

on getting the community through the

pandemic, “should be better positioned

for long-term success.”

For shareholders, the rationale

goes, commitment to employees and

other groups ensures the health of

publicly traded companies over the

long haul, by giving them loyal work-

ers, customers, and suppliers.

“Whether you’re a start-up, a small

or medium-size business, or a large

enterprise, you’re seeing every com-

pany learn completely new ways they

can support people and communities

in response to this pandemic,” Cisco

Systems CEO Chuck Robbins told

Barron’s. “The reality is, the concept of

stakeholder capitalism has been core

to many companies, including Cisco,

for a long time now, and you are see-

ing us act on those values.”

Recently, a group including New

York City Comptroller Scott Stringer—

who oversees the city’s pension

funds—and other investors urged

companies to make paid leave avail-

able to all employees, prioritize health

and safety, and retain employees,

which, they argued, would allow com-

panies to resume operations quickly.

Companies making layoffs should be

mindful not to practice discrimina-

tion, they added.

Lots of cutbacks still lie ahead for

employees, including cuts to employer

contributions to already damaged re-

tirement accounts. Obviously, smaller

businesses have a tougher time than

larger ones in taking care of workers

when business dries up. Plenty of

workers have been furloughed in lever-

aged industries such as retail, lodging,

and restaurants. But in many cases,

they remain eligible for full health ben-

efits, as they do at J.C. Penney.

“Stakeholder capitalism might be

accelerated [by the crisis],” says Abby

Joseph Cohen, advisory director and

senior investment strategist at Gold-

man Sachs Group. “But the results

will depend on leadership from both

companies and government officials. I

currently have more confidence in the

former than the latter.”

A look at what big publicly traded

companies are doing during the crisis

shows that many are thinking about

the broader society, with measures

that can’t exactly be characterized as

shareholder friendly. A list can be

found on JUST Capital’s website.

Goldman Sachs gave employees

extra leave and launched a $300 mil-

lion package of grants and low-inter-

Crisis Prods

CEOs to Look

Beyond

Shareholders

Some companies are making big

commitments to employees and

other stakeholders during the year

of Covid-19. Will it last?

“You’re seeing

every com-

pany learn

completely

new ways

they can

support

people and

communi-

ties.”

Chuck Robbins,

Cisco

A

s tens of millions of people

are losing jobs in the U.S.

amid the coronavirus cri-

sis, companies are step-

ping up to commit to their

biggest constituencies

beyond their own share-

holders. The move is likely to acceler-

ate the trend toward what’s known as

stakeholder capitalism—in which em-

ployees, suppliers, customers, and

communities are given equal consider-

ation to shareholders.

With the average tenure of big-com-

pany CEOs lasting just about five

years, most of them haven’t led

through a recession, much less a pan-

demic. This week, Bank of America

CEO Brian Moynihan and other World

Economic Forum officials urged com-

panies to pay attention to a variety of

key groups during the coronavirus

crisis, with employees topping the list.

In an interview with Barron’s ,Moy-

nihan said shareholders “want us to do

what’s in the best interests of the long-

term health of this company. Our team-

mates are essential to that.” He stressed

that safety for workers meant economic

security too. Last month, BofA, Citi-

bank, and other banks said they

wouldn’t make layoffs. Though

Moynihnan says the two are unrelated,

many—including BofA—also said they

would suspend share buybacks.

That’s quite a turn from the past,

when companies traditionally placed

shareholders’ interests at the top of the

list. “Companies are committing to stop

By LESLIE P. NORTON

Bank of America CEO Brian Moynihan onBarron’s Roundtableon Fox Business Network in January

est loans to communities and small

businesses.

Home Depot gave hourly workers

extra paid time off, with more for as-

sociates age 65 and over; paid time off

for workers diagnosed with coronavi-

rus until released by a doctor to re-

turn to work; and paid time off for

anybody needing to quarantine.

Walmart offered customers no-con-

tact payment, pickup, and delivery

and, with the Walmart Foundation,

committed $25 million to support or-

ganizations fighting the coronavirus,

including $10 million for food banks.

Johnson & Johnson will donate

$300 million, much of it over 10

years, to support front-line health-

care workers in the fight against

Covid-19, and to recruiting and train-

ing more workers.

Companies that ranked well in Bar-

ron’s Most Sustainable Companies list

had similar responses. No. 5–ranked

Best Buy offered contactless curbside

service and temporary pay hikes.

“These initiatives should help Best

Buy maintain and attract customers

and employees and create long-term

value for shareholders and stakehold-

ers,” wrote analysts at Calvert, which

assembles the list for Barron’s. Mean-

while, No. 7–ranked Cisco will allocate

$8 million in cash and $210 million in

products to the global coronavirus

response.

Will the trend survive the coronavi-

rus crisis? Bob Eccles, an expert on

sustainable strategies and a visiting

professor at Oxford University, is

skeptical: “It only becomes real when

the company’s board has published a

statement of purpose about their com-

pany: What commitments are they

making to their stakeholders, over

what time frames, and how do they

address trade-off decisions? Other-

wise, who’s accountable?”

For now, the move toward stake-

holder capitalism seems relentless. “I

consider Covid-19 an accelerant to

many of the paradigm shifts already

under way, such as deglobalization

and the rise of populism,” Joyce

Chang, chair of global research at J.P.

Morgan, wrote in an email to Barron’s.

The response from Moynihan and

other CEOs to these societal changes?

“For capitalism to survive, it must be

reformed,” says Chang.

That has also been the driving force

behind the sustainable investing

movement, which could be the big

winner if stakeholder capitalism be-

comes the new normal.B John Lamparski/Getty Images