COVID-19: Reflections on Rebuilding a More Inclusive and Resilient Economy
By: Paula Luff, Former PNY Board Member and Co-Chair of PNY's Committee on Members.
I have been self-isolating for nearly six weeks in New York City. I am grateful to be with my family and for the opportunity to stay connected, and to reconnect, with extended family, friends and colleagues. I have also had plenty of time to reflect on the past 20+ years of my career operating at the nexus of business and society and to think a but about where we go from here.
The pandemic's duration and full economic impact are still unknown. We know for certain that it will end and the economy will recover. Will corporate sustainability efforts and ESG investing fall victim to the downturn? I hope not. Will the new focus on corporate purpose prove to be a luxury of a booming economy or a durable roadmap to a more inclusive form of capitalism? It is clear that business as usual has fallen short.
The current crisis will be looked back on as a defining moment--akin to pearly Harbor, the Kennedy assassination and 9/11. We will all be asked where we were and what we did. We each need to make every effort to land on the right side of history.
I am an optimist at heart. I believe that many of us will heed Churchill's advice to never let a good crisis go to waste. One thing is clear to me. Post-outbreak, government, philanthropy, civil society, the private sector and investors must come together to build a more inclusive, sustainable society and economy. There is much work in story for all of us. Here are just a couple of things I am reflecting on right now:
- Access to Capital: Small business employ roughly half of the U.S. workforce. Larger enterprises, government, and investors can help make small businesses more resilient. Access to capital and technical assistance will be key. So will fresh thinking regarding providing and financing employee benefits.
- Benefits Linked to Employment: Temporary workers, contractors, gig workers and hourly employees often work without benefits. The COVID-19 crisis has exposed the shortcomings of tying benefits to employment. Any solution will require a multi-sectoral approach that includes government and the private sector. Government involvement may be an anathema to many, but the private sector cannot, and should not, develop or finance solutions on its own.
- How We Value Work and Workers: Especially "unskilled" or "low-skilled" work. In addition to health care workers and first responders of all training levels, we owe a debt of gratitude to cleaners, cashiers and stock people, delivery people and truck drivers. It should be abundantly clear by now that they deserve a living wage and the kind of "safety net" that many of us receive as part of our compensation. Again, this is going to require creative thinking and resources from both government and the private sector.
- How We Account for Human Capital: Services account for roughly two-thirds of U.S. GDP. However, our accounting and tax treatment of capital expenditures still reflect an economy that was once drive by manufacturing and machines. Investments in people are categorized as administrative costs rather than capital investments. This needs to change.
- Re-examining Stock Buy-Backs: Stock buy backs suged to record highs in late 2018 on the heels of tax reform. The COVID crisis is prompting heightened scrutiny of the practice and calls for companies to reevaluate how they deploy capital. Executive compensation and internal pay equity will continue to be under the microscope as well since equity grants comprise a large share of executive pay. Buy backs boost both the share price and executive compensation widening the pay gap with respect to the rest of the workforce.
- How and Where We Work: Many companies still resist work-from-home and flexible arrangements. Hopefully the unprecedented number of people required to work from home right now will convince skeptics that employees can be productive outside the office. Moreover, if this pandemic has taught us anything at all, it is the importance of staying home when sick. Companies need to create a culture where it is not acceptable, or expected, to come to work while sick. Institute paid sick leave. If employees can and wish to work while ill, then insist they do so from home.
- ESG Investment Strategies: Many investors already integrate material ESG factors into their investment process. While ESG data has a number of shortcomings, the "S" has proven especially weak. The pandemic underscores the materiality of a number of social factors such as workforce health and safety and paid leave practices. Investors can use both capital and engagement to push for change.
I know that we will make it through this crisis, but the world will be very different on the other side. Let's not waste the opportunity to rebuild in a way that benefits most and leaves us prepared and resilient for the next crisis. We know it's coming, but now when. Stay well and safe.