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Rotman Insights Hub | University of Toronto - Rotman School of Management

Navigating a shifting corporate landscape

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Cornell Wright

Many people still believe that shareholder interests are at odds with stakeholder interests, but that is a false dichotomy.

Most enlightened businesses view the interests of shareholders and other stakeholders to be largely aligned from a longer-term perspective. That means focusing on how your talent is being managed, as well as your relationships with the communities in which you operate. Failing to address these issues is simply not sustainable.

Some companies still resist this mindset, and in many ways these tensions are inherent in our structures. Even though boards are meant to take account of the interests of all stakeholders, they are elected each year by shareholders. And quarterly reporting is still widely practised as it is viewed as the easiest metric to measure performance. Compensation systems also reward short-term thinking in many cases, and activist shareholders sometimes demand near-term returns so there are lots of competing factors that can drive short-term views.

This pandemic period serves as a case study for balancing the needs of all stakeholder groups.

If you think back to last March when the world went into various stages of lockdown, companies had to think very quickly and prioritize employee safety. They weren’t saying ‘But wait, if we send our employees home, that will impact productivity for this quarter’. Instead they were saying, ‘If we treat our employees properly at this difficult time, that will come back to us in a positive way over the coming months’. This has been a period where companies have had to balance so many different priorities and focus on relationships with employees, suppliers, communities and more. Financial institutions have stepped up to provide accommodations for their customers, for example, like delaying mortgage payments. They recognize that a short-term gain that is a long-term negative for the business doesn’t make sense.

Working with some of the country’s largest corporations, I’ve noticed some shifts in my clients’ priorities.

It has happened in stages. Last March, people were very focused on figuring out how to put in place systems that would allow them to operate. There were concerns around liquidity and fortifying balance sheets, those kinds of things. As time passed, the focus shifted. I think the big story for large companies is just how adaptable and resilient they have proven to be. Companies are well past crisis management at this point, and they’ve adapted their business models in many respects. They’ve figured out how to operate in this new world, which in many respects is very different from a year ago.

The economy is picking up. In Q3 of last year there was unprecedented uncertainty and a massive global slowdown and shutdown. But as we came through the summer and into the fall, we saw rising markets and confidence because people were seeing light at the end of the tunnel. Today, in Q1 of 2021, the M&A market is quite buoyant. The number one factor that drives M&A is confidence, and there is a level of confidence around where we are today but more importantly, around where the world will be in six, nine and 12 months. We’re seeing a lot of transactional activity across sectors, particularly in technology and healthcare.

Crisis management is an interdisciplinary practice.

Any big crisis has many different dimensions to it, so you need multidimensional thinking to address it. You need to look at the financial aspects, employee aspects, suppliers and customers, to name a few. By its very nature, crisis management means that you’re focusing on the here and now. That’s why really good crisis management focuses in part on the here and now, but also in part on what’s next. You have to be careful not to be myopic and just solve the problem right in front of you. You need to think ahead to where things are going — and consider where you want to get.

So, when will the economy be healthy again?

I’d say two things. First, markets today are very healthy, and that is a function of many factors including the fiscal stimulus strategy from the Bank of Canada, which is creating extraordinary market conditions. Second, at the same time we have a very challenged economy in terms of high unemployment and lack of opportunity. The pandemic has shone a bright light on inequality and the fact that some people are doing really well while others are struggling. Coming out of this, there will be an even greater need to make sure we’re supporting people and helping them get back on their feet.

I hope most leaders would agree by now that a high degree of structural inequality is not good for anyone. One of the great strengths of Canada is our strong social safety net, but we also need to work on genuine equality of opportunity. I believe that will be a big focus in the next six to 12 months as we figure out how to restore what has been lost—and how to continue to build on initiatives that have been underway for some time.

mag coverThis article first appeared in the Spring 2021 issue of Rotman Management magazine. Published in January, May and September, each issue features thought-provoking insights and problem-solving tools from leading global researchers and management practitioners. Subscribe today

Cornell Wright (Rotman JD/MBA ’00) is the chair of Torys’ corporate department and former co-head of the firm’s mergers and acquisitions practice. In December 2020, he was appointed as an executive-in-residence at the Rotman School of Management.