Big business has pledged to not always put shareholders first. The coronavirus will test that promise.

As a brutal recession takes hold and the crisis spurs new business practices, will companies really look out for their workers’ interests?

Big business has pledged to not always put shareholders first. The coronavirus will test that promise.
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The nation is, understandably, bracing for a recession. It’s not too soon, however, to start considering what kind of economy will emerge in its wake.


With the health impact of the coronavirus crisis still very much unfolding, it’s anybody’s guess just how bad things are actually going to get. Goldman Sachs expects U.S. gross domestic product to tumble by 6% in the first quarter and then nosedive 24% in the second—by far the steepest drop ever. Oxford Economics is projecting a less earth-shattering, but nevertheless historically awful, contraction of 12% in the second quarter.

Also unclear is what the eventual rebound will look like—whether it will be quick and robust (V-shaped) or painfully slow to materialize (U-shaped).

Yet whatever the downturn’s severity and duration, this much you can be certain about: The biggest companies will come out the other side having ascertained how to make do—and, in many cases, do more—with less.

In turn, these new processes and practices will threaten the livelihoods of millions of workers who not only stand to suffer terribly during the current crisis but who have found it increasingly hard to make ends meet over the years—even when times were supposedly good. Indeed, while the U.S. has enjoyed an unemployment rate of 4% or below since March 2018, job quality has long been deteriorating, marked by a proliferation of positions that offer low hourly wages and limited hours of work per week.

Now, thanks to the pandemic, U.S. companies will surely ramp up plans to replace bodies with machines, as Chinese factories are doing with the rapid deployment of robots and other businesses around the world are doing by automating call centers. “Automation happens in bursts, concentrated especially in bad times such as in the wake of economic shocks, when humans become relatively more expensive as firms’ revenues rapidly decline,” the Brookings Institution warned this week.

Corporate travel may be curtailed for the long haul as executives wonder about the wisdom of schlepping all over the place when Zoom or even email will do the trick. For those adopting these new arrangements, they promise to save both time and money—but none of it will be welcome news for the 450,000 people employed in the U.S. airline industry.

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A boom in remote employees

Meanwhile, corporations are bound to become more comfortable with having remote employees, especially as managers learn to keep their teams engaged from a distance. As a result, it’s not difficult to imagine that the portion of Americans working full time from home will swell substantially from the less than 4% who did so before the crisis. The fallout in the corporate real estate market could be huge—for brokers and bankers, of course, but also for many of the nation’s 2.4 million janitors and building cleaners, 1.2 million security guards, and other low-wage workers serving office towers and corporate campuses.

Whether businesses will transform themselves in exactly these ways or in others, the point is that they will have no choice but to cut costs and slash their payrolls in the tough days ahead (if they haven’t already)—and, if the past 30 years are any guide, they’ll then do their best to make sure that many of those jobs won’t come back.

When this first occurred, it caught experts off guard.

The 1990-91 recession, which has been blamed on a myriad of factors, lasted only eight months. But the ensuing economic expansion was unlike any other since the end of World War II.

During the previous eight recoveries, an average of 10 months passed before the number of jobs that had disappeared were recouped. This time, it would require 23 months.

“Even though business profits are up, output is growing, and the economy is recovering,” analyst Michael Mandel observed in 1993, “help-wanted ads are still scarce, and private job growth is plodding along at a measly 75,000 per month—with many of these temporary or part-time positions.” Corporations, he added, apparently had “developed a deep, and perhaps abiding, reluctance to hire.”


Americans were suddenly confronting a new phenomenon: the “jobless recovery.” And it would only get more intense. It took 38 months for employment to recover from the 2001 recession, which was triggered by the dot-com crash, and 51 months to regain the jobs that had been lost following the Great Recession.

Why have these upturns in employment been so sluggish?

Some have criticized government officials for putting forth inadequate monetary and fiscal responses. Others have noted that unions, which once afforded widespread job protections, have been on a steady downward slide (and today represent only about 6% of the private-sector workforce). Still others have cited the unstoppable march of technology and globalization.

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The birth of shareholder primacy

But there is another reason as well: a wholesale revising of corporate priorities.

In the postwar era, the nation’s leading executives cared tremendously about generating profits—but not at the expense of their workers, at least not nearly to the degree exhibited over the past three or four decades. In fact, in the words of corporate lawyer and scholar Adolf Berle, business had come “to assume in appreciable part the role of conscience-carrier of 20th century American society.”

What changed everything, beginning in the early 1980s and accelerating through the 2010s, has been an inordinate focus by major companies on financial returns. Under this new set of norms, shareholder value has trumped all other values.


Buybacks, in which companies try to goose their stock price, have flourished while pay for the vast majority of workers has stagnated and benefits such as medical coverage have eroded.

Which is what makes the moment we find ourselves in, though obviously dire, filled with the potential for something better.

In recent years, a groundswell has been mounting among consumers, employees, socially minded investors, politicians, and activist groups for companies to watch out more for the interests of their workers and the communities in which they do business.

Last August, 181 CEOs of the Business Roundtable pivoted and pledged to do just that. Expressing “a fundamental commitment to all of our stakeholders,” they vowed “to deliver value to all of them, for the future success of our companies, our communities, and our country.” Before issuing this statement, the Roundtable had since 1997 been in favor of putting shareholders ahead of everyone else.

The coronavirus crisis will test how real this awakening is.

So far, there have been hopeful glimmers. While smaller businesses typically don’t have much financial flexibility, Walmart, PepsiCo, AT&T, JPMorgan Chase, and other giants are providing bonuses and enhanced paid leave for frontline workers.


“For once, ‘shareholder value’ is a secondary concern,” Bloomberg’s Joe Nocera marveled last week. Executives “seem to understand that the most important thing they can do to help the country get through the crisis is to keep putting money into the pockets of their employees—even if they don’t have much to do.”

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What happens next?

Yet how extensively such actions spread throughout corporate America, and how long they’ll continue, remains to be seen.

So, too, does what happens next—and this will ultimately be what’s most crucial. Once this nightmare is over and the economy starts to rise again, will companies rush to maximize the efficiencies they’ve discovered during the recession or will they be more cognizant of cushioning the blow for affected employees, perhaps by retraining them for new jobs rather than just letting them go?

Will they keep in place their improved sick-leave policies or allow them to lapse? Will they ensure that workers get a larger slice of the profits they’ve helped to produce—or revert to their old ways?

In Washington, the crisis is forcing politicians to wrestle with essential questions—beyond any short-term succor and stimulus—about who has access to healthcare and the size and scope of the public safety net. It would be tragic if, spurred by this calamity, they can’t figure out how to make the most vulnerable among us a lot less vulnerable going forward.

The same is true for business. It’s time to step up—and not just for today, but also for tomorrow.

About the author

Rick Wartzman is head of the KH Moon Center for a Functioning Society at the Drucker Institute and the author of four books, including his latest, The End of Loyalty: The Rise and Fall of Good Jobs in America. You can follow him @RWartzman.