In business school, aspiring executives are taught to put shareholder return first. The usefulness of the product or service plays a role only in how it increases sales and lowers returns and warranty claims. Under the harsh light of textbook case studies, employees are merely manageable costs. Much of a firm’s human capital is accounted on the income statement under “cost of goods sold” and “selling and general administrative expenses.” The successful deployment of human capital leads to retained earnings, share buybacks and dividends. Those factors drive shareholder return.
Many companies have had no options other than to lay off employees, reduce hours or shut down completely. Some are using the pandemic as an excuse to shed operations that were performing poorly before anyone had even heard of the coronavirus. But some firms are taking extraordinary steps to keep their employees on or at least able to access costly employee benefits.
Part of this is legitimate self-interest, of course. Good employees are tough to find, even more so when the unemployment rate is at the record low it was before the crisis. Companies betting on a rapid rebound are smart to hold on to their people so they can enjoy the fruits of an economic recovery, as long as they can afford to do so. Some firms are holding the line for their public image. For every dollar in payroll paid out, it seems like they spend two dollars on ads touting their sacrifices. There are a few companies that sought to take unfair advantage of government crisis programs under the guise of shareholder interest.
But there are many other companies, big and small, who are placing their owners’ returns second, third or even last on the priority list. These companies are shifting production to critically needed medical supplies, hand sanitizer or maybe they are just paying wages to keep their employees and their families fed. Those decisions didn’t come from some business school. Those lessons were taught much earlier than that. Business schools will be studying the effects of that altruism for years to come. If those very giving companies thrive after the pandemic, is it because of their core values, or was it because they were simply well-funded to begin with? Will their customers remember their generosity and reward them with more business? We will see. This great big experiment in compassionate capitalism will take some time to fully play out.
Most of us aren’t asked to save lives on a daily basis or put our lives on the line for the country. But in these challenging times there are plenty of opportunities to be a hero. I don’t fault managers who make difficult decisions to keep their companies viable. I also understand when companies take the legal self-interest route. That’s brought wealth and resilience to our country. But today, I want to recognize the quiet, determined business owners who are making extraordinary sacrifices to keep as many employees as they can on the payroll or deploying their productive resources towards our front-line responders. Thank you, so very much.