Perspectives – Bloomberg, McKinsey, Leading ESG Investors, Mark Cuban – on Corporate Purpose and the Virus Crisis

Excellence in Corporate Citizenship on Display in the Coronavirus Crisis – Post #8   

“Corporate Purpose – Virus Crisis”   #WeRise2FightCOVID-19

April 1, 2020

By Hank Boerner, Chair & Chief Strategist, and the G&A Institute team members

On Corporate Purpose – Words and Actions – Thoughts From Influentials As The Virus Crisis Deepens Worldwide — the Focus on Purpose Can Help Corporate Generals Lead From the Front

In summer 2019, The Business Roundtable (BRT), the association of the CEOs of 200 firms, revamped the organization’s mission statement to read…

…“as leaders of America’s largest corporations, BRT CEOs believe we have a responsibility to help build a strong and sustainable economic future in the United States.”

This followed the publication of the January 2019 CEO-to-CEO letter of Larry Fink, who heads BlackRock, the world’s largest asset manager (and therefore a major fiduciary investing in the BRT companies). He regularly writes to the CEOs of companies that BlackRock invests in to let them know where of the major investors stands.

He wrote at the start of 2019…

…Purpose is not the sole pursuit of profits but the animating force for achieving them. And, profits are in no way inconsistent with purpose; in fact, profits and purpose are inextricably linked.

And again in his January 2020 letter to CEOs, Chair & CEO Larry Fink said:

…“As I have written in past letters [to CEOs in 2019, 2018] a company cannot achieve long-term profits without embracing purpose and considering the needs of considering the needs of a broad range of stakeholders. Ultimately, purpose is the engine of long-term profitability.”

Fast forward to March 2020 and now into April. What is the walk-of-the-talk of the CEOs (181 of them) who were signatories as the coronavirus crisis grips the U.S. and the world — and the actions of the signatories’ firms as stakeholders look for aid, comfort, security, payroll, taxes paid, and more?

And what other companies not necessarily in the Roundtable? What actions are taken leveraging corporate power to help society?

The stakeholders are watching. And a good number of the Business Roundtable companies are responding to address societal needs.

And what are the perspectives shared about all of this? We bring you some of these today. Here are some of the views and advice of experts and  influentials.

McKinsey Speaks – On How to Demonstrate Corporate Purpose

Says the influential management consulting firm, McKinsey & Company: Companies will define what they do in the crucible of COVID-19 response – or be defined by it.

So what could company managements be doing when the primary purpose of their efforts is to help the enterprise survive? McKinsey acknowledges this — and provides some advice. This is from their bulletin today.

Questions are being asked, of course, related to survival. How long will the crisis last? What are peers doing? How do we pay our people?

“WIN” – what is important now? (The G&A team has asked and helped to answer that question many times in our three decades of crisis management support for client companies over the years.)

First up, advises the McKinsey team members — understand your stakeholder needs and then with the understanding gained, prioritize your response. There will be tradeoffs among stakeholders – prepare for that.

Then, bring the greatest strengths of the organization to bear – consider, how can you make a difference?

McKinsey advises “collaborate with suppliers and customers and they may identify strengths you didn’t know you had”.

Examples offered:  Car makers can make ventilators (GM, Ford etc). Perfume companies can rapidly turn to manufacture hand sanitizer (LVMH and Estee Lauder are doing that today as we’ve reported in these briefs).

As you move forward, test the assumption and decisions you are taking against your stated purpose – communicate – explain (how and why).

Banks have a commitment to lend money in their community. If the bank pulls away – why? The action could help to define that institution in and after the crisis.

Give people something to do! (We also shared this advice a number of times early in the crisis.)

Involve employees in solutions. Give them a sense of purpose. Your team is looking for signals of leadership. And how to help.

And McKinsey says, the positive is that you may in the process be identifying the next generation of your company’s leadership!

Try new ways. Try using “cross-cutting” teams to develop new solutions, new ways to do things.

When in 2005 Hurricane Katrina hit, Wal-Mart Stores asked employees to deliver supplies to areas that were hard to reach. And we remember that the company’s store managers on their own ordered extra supplies and kept the stores open – even as their own homes were being destroyed.

That led to the CEO embarking on a strategic sustainability journey that revolutionized the whole company and in the process formed the Sustainability Consortium!

And like the best of the military leaders, you should yourself lead from the front. Communicate – often, early. Don’t sugarcoat the news. Adapt to changing conditions (and then communicate again). Your enterprise looks to its leaders for guidance.

Things that stand out for us that McKinsey explains:

  • Executives are uniquely poised now to bring corporate power, guided by social purpose to aid millions of dislodged and vulnerable lives. Done well, your actions can bridge the divide between shareholders and stakeholders. And leave a lasting, positive legacy.
  • Credibility is both essential and fragile element of executive leadership. Authentic actions demonstrate the company’s genuine commitment to social purpose.

Thanks to McKinsey’s Bill Schaninger, senior partner in Philadelphia, and Bruce Simpson, senior partner in Toronto, and their colleagues Han Zhang and Chris Zhu, for the valuable insights and guidance offered to corporate leaders.

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Mark Cuban on COVID-19 – Words & Action

We are often entertained by the antics of Mark Cuban on the courts (he’s owner of the Dallas Mavericks NBA team) and appearances on the hit TV show, “Shark Tank”. He was serious this week in addressing the virus crisis.

On Twitter he advised the federal policymakers: “Dear government, here is why you require companies that receive bailouts to retain 100% of their employees. The cost of the bailout loan – eventual payments will cost taxpayers less than the cost of government assistance programs for fired employees. Case closed.”

And…

“If you run a business, BEFORE YOUR FIRE ANYONE (or any more), you have an obligation to yourself/employees to find every gov loan option available today and those soon to come. Find the time. When the gov loans start you want to be already an expert and in line.”

Mark Cuban then walked-the-talk, setting up a way to pay his team’s venue employees (American Airlines Arena) even though games are cancelled and no one is coming. Then sent $100,000+ to the area’s not-for-profits aiding the Big D residents.

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Investor Coalition Speaks Its Mind on Corporate Purpose

Nearly 200 long-term institutional investors (with AUM of US$4.7 trillion) called on company managements to protect their workers – difficult to do, the investors acknowledge. Board directors are accountable for long-term Human Capital Management strategies (they remind board members on both domestic U.S. and global companies).

The steps companies could take, says the investor group:

  • Provide paid leave – including emergency leave) for full-time, part-time and subcontracted workers.
  • Prioritize health and safety – meaning, worker and public health safety, and to protect social license to operate. That may include closing facilities as precautionary step.
  • Maintain employment levels – your workers are well-trained (we hope!) and will enable the company to ramp up quickly once the crisis is resolved.
  • And be on the watch for any moves that may be discriminatory.
  • Maintain customer – and supplier — relationships to ensure that you can help stabilize them if necessary (such as financial challenges to suppliers) and to protect your own and other communities and businesses.
  • Practice financial prudence – demonstrate, the advisors strongly urge, the highest levels of ethical financial management and responsibility. And, limit executive and senior management compensation during the crisis (not repeating the practices of companies in the 2008 financial practices with money provided by the taxpayer).

Corporate leadership is critically-needed, the coalition stresses, to help society get through the crisis.

Among the investors in the coalition issuing the advice to public company managements: the Interfaith Center on Corporate Responsibility (ICCR) coalition (with 300 institutional members); the New York City public employees pension fund, led by Comptroller Scott Stringer; AFL-CIO fund; the state treasurers of Connecticut, Maryland, Rhode Island, Oregon, Vermont; American Federation of Teachers (AFT); the British Columbia Government and Services Employees Union; Aviva Investors; APG; Boston Common Asset Management; Coalition on Corporate Responsibility in Indiana & Michigan; Cornerstone Capital Group; Communications Workers of America (CWA); Robeco Asset Management; numerous foundations and religious orders and denominations.

Information: https://www.iccr.org/program-areas/human-rights/investor-action-coronavirus

All of this is spelled out in the “Investor Statement on Coronavirus Response” being circulated among fiduciaries.

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Believe the Investor’s Urging Will Pay Off?

Bloomberg LP provides us with some of the early answers.  Bloomberg Intelligence’s (BI) Shaheen Contractor (ESG Team BI Industry Analyst) in a brief for terminal users noted that an analysis of ESG Exchange Traded Funds (ETFs) during the selloff for the week ending February 28 provided a buffer for their investors and outperformed their benchmarks. The data: only 8% of ESG ETFs had outflows while 22% of all U.S. ETFs saw outflows.

This, she writes, suggests ESG is seen by investors as a long-term investment and not a trading strategy.

And the flow to ESG ETF’s suggests that these instruments are “sticky” and less cyclical. Where where the flows to ESG ETFs? BlackRock, JPMorgan, BNP Paribas, Societe Generale, DWS, State Street, and Vanguard all saw inflows during the drawdown.

Good news for investors looking for “proof of concept” of ESG/sustainable investing from Shaheen Contractor – thanks to her and Bloomberg for sharing this good news.

Her email is: scontractor2@bloomberg.net

The brief: “ESG ETFs See Relative Outperformance, Inflows During Drawdown”

For information, it is on the Bloomberg: https://blinks.bloomberg.com/news/stories/Q6RT29T0G1L2

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Lead from the front.  The general who led the effort to win WW II for the U.S.A. and the democracies, General Dwight D. Eisenhower (President, 1953-1961) observed:   “Leadership is the art of getting someone else to do something you want done because he wants to do it.  You don’t lead by hitting people over the head–that’s assault, not leadership.”

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G&A Institute Team Note:
We continue to bring you news of private (corporate and business), public and social sector developments as organizations in the three societal sectors adjust to the emergency.

The new items will be posted at the top of the blog post and the items today will move down the queue.

We created the tag Corporate Purpose – Virus Crisis” for this continuing series – and the hashtag “WeRise2FightCOVID-19” for our Twitter posts.  Do join the conversation and contribute your views and news.

Send us news about your organization – info@ga-institute.com so we can share.   Stay safe – be well — keep in touch!

Climate Change Resolutions / and Investors’ Voting — “Hurricane” Coming in 2017 Shareholder Voting?

“Stormy Weather Ahead Warning”:  Climate Change Resolutions / and Investors’ Voting — “Hurricane” Coming in 2017 Shareholder Proxy Voting Season?

Guest Commentary – by Seth DuppstadtProxy Insight Limited

The United Nations‘ consensus reached in the “Paris Agreement” (COP 21), the goal to limit global temperature rise to within 2 degrees Celsius could turn shareholder support for climate change resolutions from a squall into a powerful hurricane at U.S. energy and utility companies this proxy season. says our team at Proxy Insight.

Example cited:  The BlackRock Investment Stewardship Team’s new guidance on climate risk engagement made the possibility of a Category 5 storm conceivable — if companies aren’t responsive.

During the 2016 corporate proxy season, a particularly successful subset of shareholder-sponsored climate change resolutions — known as 2 Degree Scenario (“2DS”) proposals —  averaged 37.73 percent shareholder support:

ISSUER MEETING DATE % FOR
Devon Energy Corporation 8-Jun-16 36.06
Southern Company (The) 25-May-16 34.46
Exxon Mobil Corporation 25-May-16 38.14
Chevron Corporation 25-May-16 40.76
FirstEnergy Corporation 17-May-16 31.9
Anadarko Petroleum Corporation 10-May-16 42
Occidental Petroleum Corporation 29-Apr-16 48.99
Noble Energy Inc. 26-Apr-16 25.1
AES Corporation (The) 21-Apr-16 42.21

 

This was a notably high level of support for a first-round shareholder proposal — especially for climate change related. *

Example:  The proposal at Occidental Petroleum almost gained a majority with 48.99% of votes cast in support (not including abstentions).

Proxy Insight data show Institutional Shareholder Services (ISS) recommended For votes for all nine 2DS resolutions, while proxy advisor Glass Lewis opposed one.

The shareholder resolutions ask companies to stress test their portfolios and report on financial risks that could occur in a low-carbon economy.

Up to 17 2DS resolutions are expected to move to vote at U.S. companies in 2017 proxy voting, according to Ceres.  (Ten will be filed at companies not having these resolutions before).  The next scheduled company voting on 2DS will be at AES Corp on April 20th. A preliminary proxy indicates Duke Energy shareholders will be voting on May 4.

*excluding non-US “Strategic Resilience for 2035” proposals (2015/16)

 TOP-10 INVESTORS (AUM) MOST FREQUENTLY SUPPORTING “2DS” CLIMATE CHANGE RESOLUTIONS

Investor For Against Abstain DNV Split
Deutsche Asset & Wealth Management 100.00% 0.00% 0.00% 0.00% 0.00%
Legal & General Investment Management 100.00% 0.00% 0.00% 0.00% 0.00%
Legg Mason Partners Fund Advisor, LLC. 100.00% 0.00% 0.00% 0.00% 0.00%
AXA Investment Managers 100.00% 0.00% 0.00% 0.00% 0.00%
APG (Stichting PF ABP) 100.00% 0.00% 0.00% 0.00% 0.00%
Schroders 100.00% 0.00% 0.00% 0.00% 0.00%
M&G Investment Management 100.00% 0.00% 0.00% 0.00% 0.00%
Aviva Investors 100.00% 0.00% 0.00% 0.00% 0.00%
Canada Pension Plan Investment Board (CPPIB) 100.00% 0.00% 0.00% 0.00% 0.00%
California Public Employees’ Retirement System (CalPERS) 100.00% 0.00% 0.00% 0.00% 0.00%

Information is available at:  https://www.linkedin.com/pulse/climate-change-voting-calm-before-storm-seth-duppstadt

Proxy Insight is the leading provider of global shareholder voting analytics.

Visit www.proxyinsight.com for more information, where you can also sign up for a trial or contact Seth Duppstadt, SVP Proxy Insight Limited at: seth.duppstadt@proxyinsight.com  Telephone:  646-513-4141

Corporate Human Rights Performance — Benchmarking and Ranking of Global Companies

by Hank Boerner – G&A Institute

Interesting news out of Switzerland today — the first wide scale project to rank up to 500 global companies on their human rights performance was launched, and corporate human rights performance in key sectors will be researched and ranked over the coming months.  The first sectors in focus are Agriculture, Apparel, Extractives, and Information and Communications Technology.

This is the new Corporate Human Rights Benchmark (“CHRB”).

The organizers of the long-term project include Aviva Investors; Business and Human Rights Resource Center; EIRIS; the Institute for Human Rights and Business; and VBDO (a sustainable investment forum for SR investors in the Netherlands).  The Corporate Roundtable (ICAR) has endorsed the project.

In announcing the project, the organizers said that investors, companies and consumers are increasingly aware of the impacts of business on human rights.  The project will share the first publicly-available (open source) information on corporate policies, processes and performance on human rights…including what managements are doing to address negative impacts, and what they can do to scale resources.

Among recent positive developments the organizers citied:

  • A year after the Rana Plaza factory fire in Bangladesh, the Bangladesh Accord has spurred on greater transparency, with increased public reporting on factory inspections.
  • Beverage industry giants Coca Cola Company and PepsiCo have committed to Zero Tolerance policies on “land grabs.”
  • The European Union is committed to restricting exports of spyware surveillance technologies because of human rights concerns.
  • The recently-adopted Conflict Mineral legislation in the United States has resulted in a 65% drop in armed groups profiting from illegal mining trade.

Backgrounds of the partnering organizations in the project:

  • Aviva Investors – global asset management business, and part of Aviva plc, one of the UK’s largest insurance services providers.
  • Business and Human Rights Resource Centre – international NGO that tracks human rights impact of 5,600 companies in 180+ countries, with information available in 7 languages.
  • Calvert Investments – influential US investment management firm and long-time recognized leader in advancing sustainable & responsible investment strategies.
  • EIRIS – global leader in ESG research and SRI strategies (UK based with members in the EU).
  • Institute for Human Rights and Business – global “think and do” tank, providing “impartial space for dialogue to deepen understanding of human rights challenges and the [appropriate] role of business.”
  • VBDO – The Dutch association of institutional investors promoting  sustainable development; members consider both financial and ESG criteria for their investments.

Over the next 3 years the 6 organizations — organized as the “CHRB Steering Group” — will conduct a worldwide “consultation” on the methodology and results with diverse stakeholders, and collect and release information on 500 companies’ human rights performance.  The information will be open source, and available to company managements, investors, the public sector, local communities, and NGOs.

Steve Waygood of Aviva Investors commented:  “Our benchmark will introduce a positive competitive environment and companies try to race to the top of the annual ranking.  [The effort] will also shine a light on those [companies] where performance needs to improve.

“It took more than 60 years from the signing of the Universal Declaration of Human Rights before the UN Guiding Principles on Business and Human Rights were developed.

“We believe that within 6 years of their approval, we can help to make these Guiding Principles routine corporate practice through the development and use of the Benchmark.”

Information is available through EIRIS:  contact is Stephen Hine, head of Responsible Investment Development – Stephen.hine@eiris.org

Note that the team at Governance & Accountability Institute identifies, tracks and monitors third party recognitions of companies for a variety of [their] achievements. These include scores, rankings, ratings, and “best of” lists.  This is definitely a growth business, and the third party actions can have influence on a company’s reputation and capital markets valuation.  Investors and other third parti4s will be watching the new human rights benchmarking as the project moves forward.