Business leaders have long operated with the mindset that the purpose of a private enterprise is to maximize value for shareholders. A business seeking investors to grow exchanges a slice of ownership to investors for their capital, with the investors’ expectation that the monetary value of their slice will grow and therefore also their wealth. The CEO leads the business’s mission to create and deliver value at maximum shareholder value, and the board of directors ensures decisions are made to fulfil the promise of growth and wealth creation for investors.
And so goes ‘shareholder primacy’.
Before COVID-19 and its economic impacts, a competing theory, the stakeholder theory, had already gained ground. Stakeholder theory argues that the interests of the natural environment and all people—employees, customers, partners and suppliers, and local and distant communities—cannot be ignored in the quest to grow profit and shareholder value. Danone is just one example of this theory in action: this year Danone has announced its move to assume a ‘Entreprise à Mission’ legal framework, affirming its business model will continue its commitment towards sustainable value creation.1
Stakeholder theory does not say that making profit is bad. Danone certainly would not subscribe to such a view! However, what stakeholder theory advances is the understanding that business shouldn’t do harm to the planet and people to maximize shareholder value. The natural planetary boundaries are a requisite for life2 and therefore for ourselves, as people. If business harms the planet then there is also harm to people, which ultimately has harmful effects on business continuity. There is a healthy harmony that must exist between the health of the planet, prosperity of society, and economic growth.
A growing list of global and local businesses continue to make sustainability commitments to meet the Paris Agreement3 or other targets. The scrutiny of everyday people and regulators highlights the tension between concern about authenticity and degree of ambition (just ask those in oil and gas such as BP’s Bernand Looney4) with optimism that these are finally the critical major steps on the journey to shared prosperity. In the era of COVID-19, there is frequent analysis on the evolving responses of businesses to the crisis,5 naming and either praising or shaming those businesses seen as following or not following their commitment to stakeholders.
Yet, as the world becomes more familiar with life under shifting COVID-19 restrictions we should wisely look to understand what Generation Co—as community members, employees, consumers, and investors—expects from business and how businesses will respond.
One expectation is where and how work will be done. Millions have worked from their makeshift home offices, while millions more designated as essential workers report to their physical workspace. Will working from home more often or exclusively become a norm for many office workers? What will be the minimum protection standards for essential work? What will Generation Co demand?
The answer may be simple: choice. For some greater creative ability and productivity results from working remotely, while others will prefer, benefit from or require close physical proximity to teammates. The tech industry is notable in its acceleration to “forever” work from home as announced by Twitter and Square’s Jack Dorsey, though Facebook’s revised policy comes with conditions.6
For essential workers, the answer is a non-negotiable health safety for essential workers. It will be expected especially at big businesses—at no additional premium to the customer price—that workers receive their protection. Don’t expect a high likelihood that Amazon Prime customers would react well if Amazon hiked prices to cover costs for health investments.
We will see growth in expectations about trust between a manager and employee. Some organizations before the pandemic already experimented with permitting frequent remote work and have invested in building the infrastructure, developing the perspective and skill sets that result in a successful working dynamic with team members and managers in various locations. Others are forced into a new frontier and learning on the go. We may even think back to Marissa Mayer’s controversial decision in 2013 to end remote work to promote a culture of collaboration at Yahoo as an example of a company moving the other way on remote work policy.7 As successes and failures tally up, who among management and staff will find relief that constant face-time is not required to achieve results, and who will decide it is time to closely monitor staff through software wherever they are working, as some employees are already experiencing?8 Generation Co will certainly not respond well to the latter with a loss of privacy, trust, and the constant reminder that worth is equated to productivity and trust means a manager having control.
Trust isn’t just an evolving expectation between employee and manager. It is also a matter of trust between a business and their key partners, suppliers, and financiers. Do bills get paid in time, in full, or at all when consumer demand and revenue dries up? What tense or vulnerable negotiations have occurred between businesses attempting to survive in the short-term while navigating the uncertainty of long-term relationship consequences?
Delaying payment on rent can open cash flow for payroll but leaves mortgages and lease agreements in a bind. The retail rental space is an example of a sector under the spotlight and pressure as businesses big and small seek alternative arrangements and landlords find themselves with non-payments and some seeking transparency into financial information before making decisions on honoring payment delay requests.9 Actions today will redefine business relationships either drawing them closer in mutual trust or teaching some to be more self-reliant and guarded from experiences being burned or left financially distressed.
As work norms and relationships change, so does the expectation of a meeting. Global business travel usually kept in budget by finance managers may permanently find a question asked: what is the purpose of meeting face-to-face? The answer may be very human—to build a relationship. Meetings will be purposeful moments to connect with customers, colleagues, and partners. Meetings may still have some tactical function, but if more complex work can now be done as a standard from afar, an in-person meeting locally or globally will be one where all parties will be enjoying more time for camaraderie and humanity building. After Zoom fatigue, meaningful in-person interaction is what the afflicted will all need.
Yet, this expectation will be for those businesses that have both the financial management and entrepreneurial spirit to make it through the pandemic, and that for some will require adapting new business models and interacting with customers in new ways and perhaps preferably—contactless. Smaller delivery service providers around the world such as Instacart and Deliveroo are enjoying a boom as consumers further embrace the idea of delivery of items they normally went out to buy. Telemedicine is being looked at as a permanent feature of the future,10 and some speculate that the age of robots taking on more “essential” functions will usher in.11 The latter will stoke the concerns among Generation Co about employment and businesses will walk a fine line as they evaluate cost–benefit analyses between investment in personal protection for humans with investment in automation.
And with business models and customer interaction we can’t neglect to talk about hygiene. Vogue can tell you that fashionable face masks are “in” and where to buy them.12 Yet hygiene is not just at the core of the global hospitality and travel industry, but commercial and office spaces too. The guidelines and recommendations regarding the longevity of the virus may vary, but Generation Co will think thoughtfully about the risks they take in closed quarters, putting an expectation on business to seek additional precautions and spend more money keeping cubicles and desk spaces safe. Professional commercial cleaning services may win in this.13
The expectations of Generation Co will also play a role in board rooms and executive offices as a clash of cultures becomes more apparent over how to lead the future of industries. Those who are adherent to the current norms of business and shareholder primacy will duke it out privately against those who see the stakeholder model as the future and are willing to chart into the unknown. Boards will feel the pressure from investors at annual general meetings and Generation Co will vote with not just their dollars as investors and consumers, but with where they choose to dedicate their careers.
Generation Co is positioned to exert more influence over an ever-flattening power dynamic with business. May a business ignore or underestimate Generation Co at its own peril!
1. ‘Danone to pioneer French “Entreprise à Mission” model’. Paris: Danone 2020. Retrieved from https://www.danone.com/content/dam/danone-corp/danone-com/medias/medias-en/2020/corporatepressreleases/pr-danone-to-pioneer-french-entreprise-a-mission-model.pdf.
2. ‘Planetary boundaries research’. Stockholm: Stockholm Resilience Centre 2020. Retrieved from https://www.stockholmresilience.org/research/planetary-boundaries.html.
3. United Nations Framework Convention on Climate Change. New York: United Nations 2015. Retrieved from https://unfccc.int/sites/default/files/english_paris_agreement.pdf.
4. G. Tett, B. Nauman, and A. Raval: ‘Moral Money special edition: in depth with BP’s Bernard Looney’, Financial Times, May 13, 2020.
5. S. Bixby and C. Mahoney: ‘Chart of the week: COVID-19 best responders outperform their respective industries’, JUST Capital, May 29, 2020.
6. J. Kelly: ‘Here are the companies leading the work-from-home revolution’, Forbes, May 24, 2020.
7. C. Arthur: ‘Yahoo chief bans working from home’, The Guardian, February 13, 2013.
8. B. Allyn: (2020, May 13). ‘Your boss is watching you: work-from-home boom leads to more surveillance’, NPR, May 13, 2020.
9. L. Miranda: ‘What happens to Main Street when even the biggest retailers can’t pay rent?’, NBC News, May 6, 2020.
10. J. Harpaz: ‘5 reasons why telehealth is here to stay (COVID-19 and beyond)’, Forbes, May 4, 2020.
11. J. Moenius: ‘Opinion: one nasty side effect of coronavirus: robots will take our jobs at an even faster rate’, Marketwatch, April 20, 2020.
12. S. Spellings, ‘Cloth masks to shop now’, Vogue, May 20, 2020.
13. D. Stribling: ‘The cleaning industry ramps up to fight COVID-19 at commercial properties, but it might fail’, Bisnow, May 15, 2020.
Top photograph by Samson Duborg-Rankin/Unsplash