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Article

20 Apr 2020

Author:
Luca Giacalone, Board Agenda

Commentary: Will Covid-19 accelerate the shift towards stakeholder governance?

[T]his crisis and its aftermath may make louder the calls for the adoption of a more stakeholder-oriented decision-making process at companies...

[C]ompanies across all sectors have been reconsidering their distributions to shareholders to preserve cash within the business and support its stakeholders...

In the US, companies receiving federal funds from the $2.3trn stimulus package will have to suspend share buybacks. Similarly, the French government asked companies relying on government support to scrap dividends or halt share buybacks. In the banking sector, the European Central Bank and the Bank of England have also acted swiftly, requesting banks to halt distribution to shareholders and focus their resources on supporting the economy...

Legal & General Investment Management [...] stated that it is mindful that the suspension or reduction of payments to shareholders may be necessary to guarantee the long-term sustainability of the company. Notably, LGIM asked companies to “focus not only on shareholders”...

BMO Global Asset Management [...] also expects companies to reconsider their share buybacks programmes..., while UK asset manager Schroders [...] asked companies that they “prioritise their key stakeholders, in particular employees but also customers and suppliers”... 

Some examples where executives have been agreeing to pay reductions include The Walt Disney Company, Rolls-Royce and French firm Kering. While investors are not explicitly requiring these pay reductions, the alignment between executives and employees has become a key focus for them in recent years.

Companies have also taken important actions to support their employees and communities that they serve in. For example, US retailer The Home Depot expanded its paid leave benefits for both full-time and part-time employees while French food maker Danone established a €250m facility to help its 15,000 small business partners and has taken steps to guarantee the income of all employees until the end of June...

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