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E-MailKatherine Brennan is Deputy General Counsel and Connor Kuratek is Chief Corporate Counsel at Marsh & McLennan Companies; and Betty Moy Huber is counsel at Davis Polk & Wardwell LLP. This post is based on a Davis Polk memorandum by Ms. Brennan, Mr. Kuratek, Ms. Huber, and Paula H. Simpkins. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here) and Toward Fair and Sustainable Capitalism by Leo E. Strine, Jr (discussed on the Forum here).
The novel coronavirus (COVID-19) pandemic has posed unprecedented health risks and has led to global economic disruptions. The World Economic Forum (WEF), an international organization that fosters public-private cooperation on global, regional and industry agendas, released this month the “Stakeholder Principles in the COVID Era” (Stakeholder Principles) as part of its COVID Action Platform and called businesses to action stating that, during this time of crisis, “[t]he business community’s contribution: [is] to be leaders of responsiveness and stewards of resilience.” In January 2020, the WEF made headlines by issuing its Davos Manifesto 2020, challenging companies to incorporate stakeholders into their corporate purpose, as well as issuing, through its International Business Council (IBC) a draft corporate sustainability disclosure framework, “Towards Common Metrics and Consistent Reporting of Sustainable Value Creation.” The Stakeholder Principles are newsworthy insofar as they demonstrate the WEF’s continued commitment to encouraging businesses to embrace their corporate social responsibilities by coming together to minimize the pandemic’s impact on public health and limit its potential for further disruption to lives and economies worldwide.
“[W]e are experiencing how profoundly the COVID-19 emergency is affecting the world,” reads the statement, while also acknowledging the challenges and pressures facing employees, suppliers and customers. By working together, “[W]e can ensure that our society and economy get through this crisis and we can mitigate its negative impact on all of our stakeholders.”
The Stakeholder Principles essentially call for businesses to make a commitment:
- To employees, to keep them safe;
- To suppliers and customers, to secure their shared business continuity;
- To consumers, to maintain fair prices and commercial terms for essential supplies;
- To governments and society, to offer full support; and
- To shareholders, to maintain the long-term viability of the company.
The statement also emphasizes, consistent with the WEF’s January 2020 sustainability disclosure framework, the importance of working together in continuing sustainability efforts in order to achieve long-term mutual goals such as the Paris climate agreement (an international effort by various participants to keep the global rise in climate change below two degrees Celsius) and the United Nations Sustainable Development Agenda (a U.N. initiative to end poverty, protect the planet and improve the general welfare of everyone over a 15-year period).
Its name and the fact (likely not to go unnoticed by issuers) that the shareholder-related principle is listed last reflect that the Stakeholder Principles are meant to embody “stakeholder capitalism.” This perspective departs from the traditional view regarding a corporation’s purpose, at least in the United States, where shareholder interests come first and meeting stakeholders’ needs are viewed through the lens of maximizing shareholder profits.
The joint statement delineating the Stakeholder Principles is issued by Klaus Schwab, Founder and Chief Executive Chairman of the WEF, and the Co-Chairs of the WEF Impact Committee (Feike Sijbesma, Honorable Chairman, Royal DSM, Special Envoy on Coronavirus, Dutch Government and Jim Snabe, Chairman, Siemens and Maersk) and Brian Moynihan, Chair of the WEF’s IBC.
