On Tuesday, a study from the new Test of Corporate Purpose (TCP) initiative shone a welcome light on how the largest American and European companies responded earlier this year to the COVID-19 pandemic and mass protests against racial injustice. The report underscored the importance of shifting to a stakeholder-led approach and holding companies to account for their commitments. After six years of polling, we know this is precisely what the American people want.
Yet the report also provides a vivid illustration of just how hard it is to definitively evaluate stakeholder capitalism as a movement. Declarative statements like the headline the New York Times used for writing it up – “Stakeholder Capitalism Gets a Report Card. It’s Not Good” – are not only premature, they deflect away from the real task of determining what exactly stakeholder capitalism is and how we can better measure it.
Take as an example one of the key conclusions of the TCP analysis. As it was framed in the Times piece: “‘Since the pandemic’s inception,’ the study concludes, the Business Roundtable statement ‘has failed to deliver fundamental shifts in corporate purpose in a moment of grave crisis when enlightened purpose should be paramount.'”
The story is much more nuanced than that.
On the one year anniversary of the BRT purpose statement this past August, we released new polling in partnership with The Harris Poll and ran an analysis of several key COVID-19 and racial equity data points to test how BRT companies were doing on serving their stakeholders against their Russell 1000 peers. (Stay tuned, as we’ll be releasing additional analysis after our annual Rankings release on October 14.)
Overall, we found that BRT companies actually out-performed their peers, even if they didn’t fully match the expectations of the public. Specifically:
- Hazard Pay – 9% of BRT signatories disclosed offering hazard pay or instating a permanent wage increase in response to the pandemic, compared to 7% of non-signatories in the Russell 1000. BRT signatories were 1.3 times more likely to offer a wage increase in response to the pandemic. It’s interesting to note, however, that BRT signatories offered an average wage increase of $2.13 per hour, while non-signatories offered more, at an average of $2.93 per hour.
- Free PPE for Workers – 40% of BRT signatories disclosed offering free personal protective equipment (PPE) to their workers in response to the pandemic, compared to 22% of non-signatories in the Russell 1000. BRT signatories were 1.8 times more likely to have offered free PPE in response to the pandemic.
- Paid Sick Leave – BRT signatories were about twice as likely than their non-signatory peers in the Russell 1000 to have disclosed providing a new or expanded paid sick leave benefit in response to the pandemic.
- Customer Accommodations – BRT signatories were 1.8 times more likely than peers to disclose providing accommodations to their customers during the pandemic.
- Charitable Giving during COVID-19 – BRT signatories were 1.5 times more likely than their non-signatory peers to have disclosed donating cash towards COVID-19 pandemic relief.
We also looked at how the BRT companies responded to four critical issues regarding advancing racial equity in the workplace. Once again, their performance was, on a relative basis, superior to peers:
- Supplier Diversity – BRT signatories were 2.4 times more likely than their non-signatory peers to disclose a supplier diversity policy.
- Local School Funding – BRT signatories w 1.7 times more likely than their non-signatory peers to disclose funding local education programs and initiatives.
- EEO Policy (Diversity and Opportunity Policy) – BRT signatories were 1.2 times more likely than their non-signatory peers to disclose a diversity and opportunity policy. Nearly 100% of BRT companies publicly disclose their diversity and opportunity policy.
- Diversity and Opportunity Targets – BRT signatories were 3.3 times more likely than their non-signatory peers to disclose measurable targets or objectives for hiring, workforce composition, promotion, or retention to increase diversity and equal opportunity.
Different approaches to measurement naturally produce different results and help drive progress overall. For example, the sentiment analysis on which TCP’s study partly depends – supplied by TruValue Labs, a pioneer in the ESG space – can be an important piece of the overall picture in our view and is a welcome innovation in an ESG data industry not renowned for creativity.
Our approach takes a different tack, and looks at what companies are disclosing as well as myriad other sources of public information on their relative performance. It’s a painstaking process. This year we’re tracking 928 companies across 19 issues, five stakeholders, and 336 unique data points, and we have been closely tracking corporate responses to COVID-19 and racial equity issues throughout the spring and summer. We estimate our team has spent over 15,000 hours gathering and analyzing granular data; combing through proxy statements, CSR reports, internal communications, and press releases; reaching out to and engaging corporations; and factoring in publicly-reported controversies.
Our COVID-specific analysis, recorded in the JUST COVID-19 Corporate Response Tracker, covers over 80 types of corporate action including paid sick leave policies (with details about policy type, eligibility, weeks of leave, and barriers to access); health and safety precautions for workers and customers, including provision of free PPE to workers; and whether companies had expanded emergency grants for workers, offered bonuses, offered temporary or permanent wage increases (and how much), or increased the pay rate for overtime work, among other details about the financial assistance provided.
The point is that measuring corporate stakeholder performance is complicated, and without standardized and disclosed metrics, along with a common understanding of what precisely is being measured and why it’s being measured, real progress will remain elusive.
Operating from a common framework is one way we get there. We celebrate the World Economic Forum’s International Business Council report on ESG metrics, also released Tuesday, as an important milestone on the journey towards shared measurement standards.
And we vow to continue our own efforts to bring greater overall transparency and accountability to the corporate stakeholder performance world in order to put stakeholder capitalism itself onto a practical, solid foundation.