Institute for Innovation and Public Purpose; (2020) Stakeholder capitalism during and after COVID-19. (Briefing Papers: IIPP COVID-19 Brief 01). UCL Institute for Innovation and Public Purpose: London, UK.

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Abstract

The COVID crisis has exposed multiple failings within today’s economic system, including the precarity of work, high levels of private debt, and weakened civic infrastructure. The dominant corporate governance model - shareholder value maximisation – combined with financialization has led to a neglect of broader stakeholders and societal challenges. ‘Just-in-time’ business culture has eradicated slack in supply chains, where disruption is now impeding the production of critical health equipment. Meanwhile, the profit-focused model of health innovation has failed to prepare society with a coronavirus vaccine, despite the occurrence of SARS nearly 20 years ago. To overcome these market failures and urgently mitigate the health emergency, we call for governments to deploy their ‘war-time’ capacity to steer production and investment towards food and medical equipment, as well as a vaccine that will be accessible, affordable, and distributed to those most in need. With many private corporations now in urgent need of public financial support, the COVID crisis also provides an opportunity to change the fundamental way that UCL Institute for Innovation and Public Purpose public and private sectors interact to shape a better kind of capitalism. Corporate bailouts should embed strategic conditions in order to align corporate behaviour with the needs of society. In the short term, such conditionalities should focus on preserving employment and maintaining the productive capacity of the economy, whilst avoiding the extraction of government funds by dividends and executive compensation. In the longer term, governments should use conditionalities to promote dignified working conditions, including decent pay, adequate safety, and worker representation, as well as advance longer-term societal missions, not least the need to transition to a net zero-carbon economy. Such mission-oriented public policy should encourage more

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