As the coronavirus crisis and the ensuing economic fallout grows, many companies shifted their policies—in some cases, giving low-wage hourly and gig workers temporary access to paid sick leave for the first time. But when the crisis is over, will the companies that survive make more lasting changes?
Andrew Kassoy, cofounder of B Lab, an organization that certifies companies that focus on social good as B Corporations (B Corps for short), argues that the pandemic might accelerate shifts that were already underway. “I think there is already a new consensus that has formed over the last couple of years that we were moving from shareholder capitalism to stakeholder capitalism,” he says, pointing to examples such as a 2019 letter signed by CEOs in the Business Roundtable that signaled a new commitment, at least in words, to more social responsibility.
“I think that message has already been heard loud and clear in the culture,” he says. “And I think this crisis creates an opportunity because it makes it clear that we haven’t built a resilient economic system. This is an opportunity for us to focus on both how business and government play a role in building a more resilient economic system for the next crisis, and there’ll be more of these.”
The current crisis makes it obvious, if it wasn’t already, how many people have been living financially fragile lives. “There’s this oft-quoted statistic that 40% of Americans aren’t prepared for a $500 emergency, and now, we’re all having that emergency together,” Kassoy says. “While shareholder primacy didn’t cause the COVID-19 crisis, it certainly laid bare the fact that we have a system where workers and communities aren’t prepared for a downturn like this. You can see it in how fast the unemployment numbers went up. You can see the desperation of lots of workers to find alternative sources of income and the need for a massive bailout. And so in a different system, where companies were actually paying our workers well enough that people had reserves, we might be in a different situation than we are today and needing a multi-trillion-dollar bailout. And this will only be the first of several, I’m sure.”
Kassoy argues that B Corps, which have to meet strict standards for social and environmental performance, are actually better prepared to weather crises; during the last financial crisis, B Corps were 63% more likely than other businesses of a similar size to make it through the downturn. “We think that’s because those companies were more resilient,” he says. “They had stronger relationships with their workers, or their customers, or through their supply chains, that allowed them to make it through. I hope that we’ll see something similar this time around.”
It’s possible that more companies will choose to make changes to benefit workers. While many businesses are obviously struggling now, when the economy improves, some may decide to pay living wages and offer better benefits rather than adding to oversized CEO pay or making other investments.
Investors should also push for broader improvements, Kassoy says. “It’s pretty tough to expect individual heroic CEOs to change the whole business system. So we need the investment community to play a role as well. They, more than individual companies, have an interest in the stability of the whole system.” Government also has an obvious role—both in terms of setting conditions on companies if they’re given bailouts during the crisis, and by passing laws to permanently improve policies such as sick leave and access to healthcare. “It’s really about changing the rules of the game so that all companies have to be like B Corps.”
“If we get to the other side of this and we end up with the same system that we started with,” Kassoy says, “then we won’t have learned much.”