By Fiona Reynolds (@Fireynolds), CEO, PRI
For decades a significant portion of the global financial system has operated under the assumption that less for workers means more for executives and investors. However, the economic fallout from the COVID-19 pandemic has exposed the inequalities inbuilt in the system and the issues arising from this entrenched global dynamic. The current system which deprioritises workers and other stakeholders in favour of shareholders is no longer proving viable anywhere in the world.
As existing inequalities continue to be amplified by the pandemic, it’s clear that we’re facing more than a health and economic crisis; we’re also facing a social crisis to which we must urgently respond. The time has come for our financial system to adopt a more human-centric approach.
This social crisis is global, occurring in developed and developing economies alike, however it’s not being evenly felt. While the virus may not discriminate, our systems certainly do and the most vulnerable social groups are being disproportionately impacted. The economic consequences of COVID-19 could see an increase in global poverty by up to half a billion.
Vulnerable groups are being put at increased risk though their precarious work situations. They are, for example, workers in the ‘gig economy’ on zero-hour contracts with limited access to sick leave, health insurance and unemployment benefits. Overnight many are finding themselves let go with no notice, severance or access to a governmental social safety net.
What’s truly staggering is the scale of problem. As Sharan Burrow, General Secretary of the International Trade Union Confederation highlights, “60 percent of the global workforce are informal. They have no rights, no minimum wage, no rules of law and for them health and safety risks are just a myth.”
One of the places where this is particularly evident in is the United States, where the unemployment rates reached 14.7 percent at the end of April. Tens of millions of people have joined unemployment lines. In the richest country in the world, people are queuing for hours for food parcels. This is the worst jobless rate since the Great Depression, a figure only expected to rise, and which is even higher amongst minority groups.
Whilst COVID-19 has been the catalyst for this rise in unemployment, it doesn’t tell the whole story. The continued winding back of labour laws that protect workers and provide them basic rights along with the loss of employee representation, whether through unions or other collective bargaining mechanisms, has allowed companies to treat their workforce as disposable commodities.
Of course, not all businesses are bad and there are many examples of businesses which, together with the support of investors, are demonstrating best practices in putting people at the heart of their response. Airbandb, for example, laid off a significant portion of its workforce, but they aren’t leaving them empty handed. These former staff are receiving 14 weeks’ pay, a laptop, equity stakes, career advice and a year of health insurance. On the other hand, there are countless others—including major global corporations—disregarding workers’ rights.
Amazon workers, particularly in America, have been speaking out about concerns for their safety and rights all while their CEO inches toward becoming the world’s first trillionaire. This highlights broader issues in the US regarding how companies address workers’ calls for better treatment on the job, from paid leave and fair wages to whistle-blower protections and health and safety concerns. It also underscores important policy issues around a lack of independent board oversight and disclosure on human capital management.
The silver lining amidst all this human tragedy is the opportunity it presents us to create change. With the shortcomings of our societies so clearly on display, we can leverage tail winds to begin to address them. Critically, we can now do so with the understanding that good human capital management practices are not only the right thing to do, but also the hallmark of sustainable and resilient businesses.
As we look to recover from the COVID-19 crisis and governments globally provide billions in relief packages, we must ensure that this funding is deeply wedded to not only improving climate outcomes, but is also underpinned by the UN Guiding Principles on Business and Human Rights to ensure social outcomes are also prioritised. ‘Building back better’ will be the ultimate test of the Business Roundtable’s mission to realign businesses and economies to prioritise all stakeholders.
The science points to more pandemics to come and significant challenges from climate change. We must come together now as businesses, investors, governments and civil society to renew our social contract, futureproof our workforce and put people at the heart of our response.
Without healthy people and a healthy planet, there cannot be a healthy economy. We must learn this lesson.
This was first published on Thomson Reuters Foundation News