Amazon's Jeff Bezos signed it. So did Doug McMillon, the CEO of Walmart, and Charlie Scharf, the CEO of Wells Fargo. In August 2019, these corporate chieftains and 178 others made a big fuss over affirming the Business Roundtable’s updated statement of purpose, declaring the end of shareholder primacy in favour of stakeholder capitalism that aims to create value for employees, suppliers, communities, and others.

What a difference a crisis makes. As America scrambled to deal with the health and economic fallout of the COVID-19 pandemic, workers in Amazon warehouses across the U.S. staged walkouts to protest unsafe working conditions, and the company’s Whole Foods division had to walk back an initial statement asking employees to donate sick days. Walmart’s ASDA division has canceled orders from apparel manufacturers in places such as Bangladesh even if production was completed or in progress. And Wells Fargo’s deferred-mortgage-repayment program — designed to alleviate monthly payments for suddenly unemployed homeowners — still requires borrowers to repay the whole lump sum after three months.

It’s a tightrope, of course. Companies are trying to stay afloat. The J. Crew and Neiman Marcus bankruptcies are harbingers of many to come. Some companies are just waiting to get back to normal and using bailouts to tide them over. However, myriad signals tell us that returning to the old normal won’t be adequate or even possible. COVID-19 is revealing fractures in our economy that many in the corporate elite might not have paid attention to in the past.

We need to build back better.

"Build back better" is an expression coined by a United Nations task force charged with coming up with improved disaster-recovery plans. For them, building back better meant using recovery after calamities — they were thinking of earthquakes, tsunamis, and hurricanes — to restore equitable social systems, revitalize livelihoods, and protect the environment. Don’t just rebuild houses — install clean water systems; don’t just improve early warning systems — create safer roads and dwellings.

For us in the midst of the COVID-19 crisis, build back better means making good on the commitments to stakeholders that everyone was so eagerly talking about last year. Even very short-term evidence indicates that a more socially-responsible approach might also be a more resilient approach. According to an analysis by Just Capital, companies that have prioritized workers and customers during this crisis are doing better in the market. Scholarly research in finance has shown that investing in corporate social responsibility (CSR) creates greater social capital — norms of trustworthiness and the propensity to reciprocate — which leads to greater resilience, because being trustworthy is more valuable in times of uncertainty and upheaval.

Even before the crisis, one-third of Americans thought technology companies and banks had a negative effect on the country, and more than half had a negative view of large corporations overall. The trust isn’t there. Yet. What would it take to gain it? To build back better, companies need to redesign, reorient, and realign.

Redesigning work

First, companies need to radically redesign work. Here, workers are guiding us to solutions. A living wage, guaranteed sick leave and care leave, and increased safety will address many of the deep inequalities that the pandemic has brought even more clearly into focus. For many years, companies have resisted attempts to provide these benefits.

But we have now seen that it is possible. Aldi, Anheuser-Busch, Danone, and Nestlé, among others, have increased pay to essential workers. Dominion Energy, SimpliPhi, and S&P Global are offering more paid sick leave; and even Uber is now offering two weeks of paid sick leave to its drivers. Now that the previously unthinkable has been accomplished, it seems hard to return to old ways.

Even at a moment when workers might not have much power given soaring unemployment rates, they are conducting walkouts and strikes to improve their precarious situation. They are unlikely to stand down as the economy recovers. The 1918 Spanish flu pandemic holds some lessons: One of the biggest waves of labour protest in U.S. history occurred just after that pandemic peaked. Twenty percent of the total workforce went out on strike — police officers, steelworkers, dressmakers, coal miners, shipyard workers, and even Broadway theatre actors — and they gained better working conditions as a result.

Today, essential workers are being applauded for risking their own personal safety to supply food, transport goods, and care for the sick. Yet they have historically been paid notoriously low wages with few benefits. Do we think we can go back to an old normal when grocery workers, home health assistants, farmworkers, and delivery drivers can barely scratch out a livelihood? Should we want to?

The pandemic has forced many of us who still have jobs into completely new modes of working. Disability advocates have long asked for accommodations such as work-from-home options, requests that employers often denied as too expensive or too complicated to implement. Now that abled people must work from home, organizations are finding that it is indeed possible to hold meetings, teach classes, and brainstorm remotely. Why wouldn’t we continue investing in these types of more flexible accommodations?

Modern capitalism has long rewarded the ideal worker — available at all hours, dedicated to the job, without family encumbrances — but this is likely to change as people, in quarantine, rediscover the simple joys in life: time with family, friends, gardening, baking, crafts, hiking, woodworking, and so on.

Finally, it all comes down to childcare. Many men working from home are now finding out just how intensive childcare is. Work has needed to morph to deal with parents taking shifts with the kids. As the economy reopens, women are disproportionately going to be held back if adequate childcare options and work arrangements are not available. Childcare has always been a rate limiter in women’s advancement. Companies now just have a clearer window through which to see the challenge.

Reorienting priorities

When companies commit to purpose, this must by definition reorient corporate priorities. We have for the past five decades — guided by Milton Friedman’s 1970 dictate — glorified total returns to shareholders where interests of stakeholders were only a derivative of the duty to the shareholder.

It wasn’t always this way. After the Second World War, as Mark Mizruchi wrote in The Fracturing of the American Corporate Elite, there was a broad settlement in which companies acceded to the legitimacy of organized labour and other interests, accepting and even supporting federal legislation to protect the environment, eliminate discrimination in hiring, and so on. In the 1970s, stagflation, the oil crisis, and other economic concerns prepared the way for a different settlement, one which for half a century has privileged the shareholder and led to a massive increase in inequality.

The COVID-19 pandemic creates an opening for a new settlement with different priorities. While companies are thinking about survival, they are also imagining new futures. Even before the pandemic, there was a surfeit of reasons for urgency: millennials who won’t work for companies that don’t emphasize social goals; greater inequality leading to political instability; the risk of disruptions due to climate change; employees crafting viral social media posts to fight bad working conditions; consumers boycotting unethical products.

Saying you want to create value for all stakeholders is one thing. Doing it is another.

One guide for this reorientation is already in place: the UN Sustainable Development Goals (SDGs). These carefully negotiated, consensus-driven themes address poverty, hunger, health, education, gender equality, and decent work. They focus on the sustainability of cities and communities, of the climate, of the oceans, and of the land. Companies have begun to sign on to individual goals, such as reducing carbon emissions or avoiding deforestation. The real power would be in using these 17 goals as a central part of corporate strategy-making and operations.

Former Unilever CEO Paul Polman called for “heroic chief executive officers” to achieve the SDGs. Surely that will be true. But it’s not enough. Companies will need to transform how they operate in ways that we are only beginning to imagine. These transformations will require innovation to create new opportunities for growth and prosperity, but that will require companies to avoid pink-washing, green-washing or purpose-washing.

Reconfiguring corporate governance

Corporate boards will need to prepare for this new normal. The COVID-19 crisis has shifted the conversation: More attention is being paid to companies that offshore their profits to avoid taxes but then seek bailouts, to the need for universal healthcare and childcare, to the impact of reduced activity on air pollution, to unnecessary consumerism, to the possibilities created by a Green New Deal.

Saying you want to create value for all stakeholders is one thing, but doing it is another. So, if companies are going to make good on promises to pursue purpose, then boards of directors will have to create new standard operating procedures.

The most obvious step is to create mechanisms for these stakeholders to have a voice in oversight and decision-making. This requires an honest assessment of who stakeholders really are (the SDGs help here). It’s not just the usual suspects (for instance, customers or employees): Companies need to think about the communities in which they operate, the environment, their impact on supply chains, and the like.

Then stakeholders need a seat at the table. In Germany, labour is represented on the country’s supervisory boards. In the U.S., we are seeing increasing pressure to do the same, with a recent shareholder proposal at Walmart and a variety of legislative efforts in Congress. Other companies are creating stakeholder committees on their board (Airbnb is an example), charging individual board members with representing different stakeholder interests, or creating separate stakeholder advisory groups.

Some of these actions could be mere Band-Aids on deep wounds if they’re not done seriously. Governance processes will need mechanisms for understanding trade-offs created by stakeholder interests and finding innovative ways to address them.

Building back better may also amplify forms of governance that are better attuned to diverse stakeholders. Cooperatives — with their democratic management processes and economic participation by members — may be best suited to a post-COVID-19 world. Or perhaps companies should be required over a period of years to qualify as B Corporations, which are legally obliged to address their impact on all stakeholders. These are more radical approaches than merely creating a board committee, but it is worth pointing out that these models already exist and may be better guides for our new understanding of 21st-century business.

In closing

The COVID-19 crisis shows us that corporate purpose cannot just be a fancy bow that companies tie on top of their operations to dress them up. Taking care of all stakeholders will require real transformation. In this moment of upheaval, we should be envisioning how we can build back better.

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This article originally appeared in the Fall 2020 issue of Rotman Management magazine.