- The World Economic Forum’s climate head warns business leaders they will be judged by how they act during the pandemic.
- Companies risk a backlash from consumers and investors if they don’t act responsibly.
- Business leaders who take care of their workers and their communities may emerge from the health crisis in a stronger position.
The World Economic Forum has a message for business leaders around the globe: The world will judge how you react to the deadly coronavirus pandemic.
COVID-19 has killed more than 126,000 people and already infected another 2 million, bringing countries to a standstill and putting tens of millions of people out of work. In their response, companies need to place helping their workers and their communities above the bottom line or face a backlash, according to Teresa Hartmann, the Climate Lead of the World Economic Forum.
“The economic crisis following on from the pandemic will be a make or break moment for many companies,” Hartmann said in written comments to Karma. “Most importantly, people will remember how these companies are responding amidst the crisis.”
Earlier this month, the forum unveiled a series of “stakeholder principles” that called for companies to work toward keeping employees safe and supply chains open, maintaining fair prices and supporting government action with resources, as well as preserving their long-term viability. The principles built on the forum’s updated manifesto — released in December — that calls for the movers and shakers who gather in Davos every January to accept a broad mandate that includes being responsible to surrounding communities and the “society at large” as well as shareholders.
“Employees, governments and clients alike are welcoming moves to cut executive salaries as in the case of Marriott or efforts to donate and transport emergency supplies like we’ve seen from Unilever and Maersk,” Hartmann said. “The public is tremendously supportive of social enterprise in times when human tragedy and the economic downturn are casting a light on the stark inequalities in our society.”
George Zarkadakis, digital lead at risk-management company Willis Towers Watson, told Karma that he also “most certainly” sees the crisis as a risk for business leaders.
“Consumers will severely punish companies that did not exhibit empathy, for instance in how they treat their workers, or how they tried to make a difference in helping communities and nations to overcome the pandemic,” said Zarkadakis, whose upcoming book, Cyber Republic, focuses on artificial intelligence’s impact on the global economy.
Ruth Papazian, who recently ended her bid for the Republican nomination to challenge U.S. Rep. Alexandria Ocasio-Cortez for her Congressional seat in New York, was one of the few people who hit social media to criticize the forum’s stakeholder principles.
“Job One for the executives of a publicly-owned corporation is to pursue policies and engage in activities that ensure the corporation is profitable, and can remain a going concern long-term,” Papazian told Karma in emailed comments. The principles “perversely puts shareholder value last,” she wrote.
Papazian wants companies to focus on responsibilities to shareholders because many of those investors are pension funds and retirees. “Retirement nest eggs have been ravaged by the steps taken to mitigate the spread of coronavirus,” she wrote.
Hartmann said that the crisis will also test governments, who are under enormous pressure to pass stimulus packages. Greenhouse gas emissions and pollution levels have dropped because of the near-complete halt in industrial production, she wrote.
“The important thing is to ensure we do not create an unintended rebound effect in an effort to alleviate the economic crisis,” Hartmann wrote. “This is the moment for policymakers around the globe to step up and design long-term responses with human health, environmental concerns and economic recovery in mind.”
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