July 24, 2020

The immediate response from companies to the COVID-19 crisis proved that they could respond to interests much broader than just those of their shareholders. For the first time, across multiple industries, management stepped up to address the needs of employees, customers and communities. We saw it as the ‘green shoots’ growth of stakeholder capitalism. And it was excitingly new. But lately some companies have started to pull back. The green shoots are at risk of withering, unless something is done.

At the beginning of the COVID- 19 crisis, the corporate response was swift. Companies quickly shifted focus to ensure the safety of their employees, to mitigate economic risk to their customers and to protect their communities.

A good example of this is Canada’s grocery retailers. The big three – Loblaws, Metro and Sobey’s – all came forward with bold initiatives like freezing food prices, re-tooling their stores to protect employees and offering “hero bonus” wage increases for frontline workers. These were admirable efforts that we applauded.

For some, such efforts fueled a belief that the we could be on the cusp of fundamental change in how companies operated. It was an exciting and long-anticipated development that COVID-19 had accelerated. Then, as with the societal response to the coronavirus itself, fatigue set in.

We saw it in mid-May in the United States, when Kroger suddenly stopped its hero bonus. The decision resulted in enough pushback that the company quickly announced a one-time (as in once-and-for-all) $400 ‘thank you’ bonus. The marketing department at Kroger had clearly worked overtime on that one.

In June, it was Canada’s turn. The same three grocery retailers that had made such admirable efforts in the early spring simultaneously made the decision to end their $2 per hour hero bonuses.

Was the early optimism misplaced? Certainly this kind of action makes it clear that we can’t expect to just sit back and hope these ‘green shoots’ of stakeholder capitalism will take root. Hope is not, and never has been, a strategy at NEI. We’ll be engaging with our grocery retailers to dig deeper into their pandemic responses and subsequent actions, asking why the multi-stakeholder support initiatives they created at the start of the outbreak can’t become part of how they operate going forward.

And that is the tact we’ll take with all companies we engage with – especially in light of the inconsistent response to COVID-19 we’re witnessing now. Take Walmart, for example. We know from our proxy work that Walmart’s initial COVID-19 response was troublingly insufficient. Especially as it related to the protection of employees. Yet in July the company was among the leaders in the US in requiring all customers to wear face coverings, directly enhancing the safety of the company’s frontline workers. Similarly, Kroger, which earlier had egg on its face, announced it was making face coverings mandatory for all its customers.

Given the highly volatile and well documented reactions of a small minority of shoppers to the mask requirements, these were not light decisions. But they were the right ones. And we believe there’s more where that came from across all companies.

Ultimately, we probably shouldn’t be surprised by the unevenness of the corporate response to COVID-19. For most companies it’s new territory. And you can’t always tell from a distance if these decisions are indicative of companies finally seeing the light on stakeholder capitalism, or something more reactionary.

The only way to find out for sure, and the only way to fully nurture the green shoots, is to actively engage with management.