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Stakeholder Capitalism Gets a Report Card. It’s Not Good.

Marc Benioff, chief executive of the technology giant Salesforce, presents himself as an evangelist for stakeholder capitalism: the idea that companies must elevate the interests of workers, the environment and local communities alongside shareholders.

He has written books and opinion pieces arguing that profits are not sufficient; companies must do good. He attends the World Economic Forum in Davos, Switzerland, a hotbed for such thinking. And his company was among the 181 members of the Business Roundtable, a club of C.E.O.s, that last year promised to broaden its traditional obsession with the bottom line to include societal concerns.

In late August, as Salesforce celebrated more than $5 billion in quarterly sales, Mr. Benioff proclaimed validation. “This is a victory for stakeholder capitalism,” he said in a television interview. The next day, in the midst of the pandemic, Salesforce informed 1,000 employees that their jobs were no longer needed.

The coronavirus, its attendant economic devastation and the ongoing movement against racial injustice have collectively posed the first test of the lofty words proclaiming a kinder form of capitalism. The results have fallen short of the promise, according to a study released Tuesday and obtained in advance by The New York Times.

The Business Roundtable’s statement of a purpose of a corporation, released last year, was touted by prominent executives as a landmark in the evolution of corporate governance. But its signatories have done no better than other companies in protecting jobs, labor rights and workplace safety during the pandemic, while failing to distinguish themselves in pursuit of racial and gender equality, according to the study.

Financed by the Ford Foundation, the study is the work of KKS Advisors, a consultancy that counsels companies on environmental policy, and The Test of Corporate Purpose, a group of researchers convened to assess how corporations have responded to the pandemic and the movement against racial injustice. Its advisory board includes a professor of management at the University of Oxford, and senior executives from financial firms including Morgan Stanley and Liberty Mutual.

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Credit…Matt Edge for The New York Times

“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 study enhances doubts that corporations can be depended upon to moderate their quest for profits to pursue solutions to challenges like climate change, racial injustice and economic inequality. Skeptics argue that a single stakeholder will always retain primacy: the shareholder.

The Business Roundtable presents its mission statement as a reflection of the belief that C.E.O.s face extraordinary pressures to protect workers, the environment and community interests or suffer punishment in the marketplace.

“It was not a demotion of the long-term shareholders, because, in our view, the interests of all the stakeholders align in the long-run success of the enterprise,” said the president of the Business Roundtable, Joshua Bolten. “But it is a rejection of short-term shareholder interests.”

Companies can trigger immediate gains in their stock prices by cutting costs through layoffs or slashing benefits. “But in the long term that’s not going to serve the enterprise well if you haven’t properly taken care of all of your other stakeholders,” Mr. Bolten added. “You cannot take care of any one of them without taking care of them all.”

Yet the recent history of American capitalism is the story of wages stagnating for ordinary workers even as shareholders reap extraordinary gains. The divide has proved especially stark during the pandemic: Shareholders suffered initial plunges in asset values but then recovered; tens of millions of wage-earners remain jobless, massing at food banks.

Mr. Bolten said that picture masks how Business Roundtable members have aided employees during the pandemic, providing help with child care and flexibility to work from home, while boosting philanthropic efforts.

“I think they have done exceptionally well,” he said.

The new study says otherwise. Researchers explored the workings of 800 companies — those whose shares are included in the S&P 500 and the FTSEurofirst 300, an index of European stocks — and narrowed the survey to 619 for which they were able to amass at least three years of data.

They mined trade publications, news reports and other industry sources to determine the degree to which companies were operating in accordance with the Sustainability Accounting Standards Board, a nonprofit that promotes corporate standards on social and environmental issues. They examined how the companies performed between June and July on a range of indicators relevant to the pandemic, such as workplace safety, and to racial inclusivity, including the diversity of governing boards.

The report notes that very few companies that signed the Business Roundtable statement submitted it to their governing boards for approval, a fact cited in a law review article as evidence that the pledge is an exercise in public relations.

Mr. Bolten said board passage was not required, because member companies have already embraced the statement’s principles. “It did not arise from nowhere,” he said. “The statement has to be viewed as both capturing an evolution and expressing an aspiration.”

The new report singles out Wells Fargo for rejecting a shareholder proposal that sought to implement the Business Roundtable pledge by exploring the possibility of converting the bank’s legal structure into a benefit corporation, which would allow it to subordinate shareholder interests to other concerns.

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Credit…Zack Wittman for The New York Times

A Wells Fargo spokeswoman said the bank has responded to the economic shock by turning branches into food banks and deferring loan payments.

The report trains special attention on Amazon. Though its founder and C.E.O., Jeff Bezos, signed the Business Roundtable statement, Amazon has emerged as a conspicuous example of a company that has profited from the pandemic — selling more than $164 billion worth of goods this year — while drawing accusations that it has failed to protect workers.

In March, Christian Smalls, an employee at an Amazon warehouse in New York, was fired after leading a walkout, protesting what he said was the company’s failure to provide protective equipment even as several workers became ill.

Amazon said he was fired for violating a quarantine policy. Mr. Smalls said he was placed on quarantine only after demanding that the company provide paid sick leave to others.

In a written statement, Amazon dismissed the study as “flawed research” that relied on “the meaningless measure of ‘sentiment about company actions’ and fails to evaluate the actual response — which in the case of Amazon was proactive, swift and effective.”

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The company said it has invested more than $800 million on safety improvements, outfitting workers with masks, hand sanitizers and other protective gear, while preventing the spread of the virus at its facilities.

The study does not assess the extent to which signatories of the Business Roundtable statement have continued to pay dividends to shareholders while laying off workers. But some did just that.

Arne M. Sorenson, president and C.E.O. of Marriott International, the world’s largest hotel chain, is co-chairman of a Business Roundtable task force assembled to address Covid-19. In March, he announced that he was furloughing tens of thousands of employees, asserting that his hand had been forced by the swift deterioration of the business. Less than two weeks later, Marriott paid out $160 million in dividends to shareholders.

Marriott lands in the bottom half of companies in its response to the pandemic and demands for racial inclusivity, according to the study.

A Marriott spokeswoman, Connie Kim, noted that Marriott suspended further dividend payments.

The report highlights examples of Business Roundtable signatories that have performed better than most, including Baxter International Inc., an Illinois-based manufacturer of medical devices; SAP, a German software firm; and Willis Towers Watson PLC, a British insurance company. All three have made progress on racial inclusivity, the study finds.

The report praises BlackRock, the world’s largest asset management company, for taking early action to alleviate the threat of Covid-19. The company donated $50 million for emergency services, including the delivery of vital medical equipment to hospitals. It notes the leading role played by BlackRock chief executive Laurence Fink in steering investments toward companies that limit climate change.

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Credit…Doug Mills/The New York Times

No one has embraced the tenets of stakeholder capitalism more fervently than Mr. Benioff.

From its founding in 1999, Salesforce — which makes software used by companies to track interactions with their customers — has donated 1 percent of its equity, 1 percent of its products and 1 percent of its employees’ time to a range of philanthropic undertakings.

Salesforce workers volunteer at homeless shelters and nonprofits that aid refugees. A company foundation has directed hundreds of millions of dollars to local schools and hospitals.

During the worst of the pandemic in the United States, Mr. Benioff tapped contacts in China to procure more than 50 million pieces of protective gear.

“There are very few examples of companies doing this at scale,” Mr. Benioff said in a telephone interview.

With more than 54,000 employees worldwide, Salesforce has provided Mr. Benioff a huge platform to advance the tenets of stakeholder capitalism. Overall, the company has performed far better than most in responding to the pandemic and the drive for racial justice, the study finds.

Its principles are not undermined, Mr. Benioff says, by his company’s decision to phase out 1,000 workers the day after celebrating a tremendous earnings report, and shortly after the expiration of a widely touted 90-day pledge to avoid layoffs.

Salesforce is continuing to hire in other parts of its business, he said. Some of the affected employees will be rehired in other areas, while those who depart will leave with severance.

“We have to be able to grow and make change, or we cannot achieve our goals, which is to become a larger, much more successful company for our customers, our shareholders and also, yes, our stakeholders,” Mr. Benioff said.

He described the objectives of the Business Roundtable statement as a long-term project.

“I’ve seen from my own viewpoint a systemic change in how C.E.O.s behave over the last 20 years,” he said. “I never said it’s a revolution, but I said it’s an improvement.”

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Leading Foundations Pledge to Give More, Hoping to Upend Philanthropy

The week after the U.S. economy shut down in March, Darren Walker, the president of the Ford Foundation, fielded a stream of phone calls from the heads of dozens of organizations that Ford supports. Many were panicked. One was in tears.

“There was a sense of desperation and panic from these usually self-assured leaders,” Mr. Walker said. “There’s never been such an existential challenge to the future of the nonprofit sector.”

In 2019, the Ford Foundation handed out $520 million in grants. Mr. Walker quickly realized that was not going to be anywhere near enough in this crisis-engulfed year.

His solution: Borrow money, spend it quickly and inspire others to follow Ford’s lead.

The Ford Foundation plans to announce on Thursday that it will borrow $1 billion so that it can substantially increase the amount of money it distributes. To raise the money, the foundation — one of the country’s most well-known and oldest charitable organizations — is preparing to issue a combination of 30- and 50-year bonds, a financial maneuver common among governments and companies but extremely rare among nonprofit groups.

Four other leading charitable foundations will pledge on Thursday that they will join with Ford and increase their giving by at least $725 million.

The decision by the five influential foundations — major sponsors of social justice organizations, museums and the arts and environmental causes — could shatter the charitable world’s deeply entrenched tradition of fiscal restraint during periods of economic hardship. That conservatism has provoked anger that foundations, which benefit from generous federal tax breaks, are hoarding billions of dollars during a national emergency, more interested in safeguarding their endowments than in helping those in need.

The Ford Foundation, which has a $13.7 billion endowment, plans to distribute the newly raised money over the next two years, effectively increasing the percentage of its endowment that it pays out annually to about 10 percent from nearly 6 percent.

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Credit…Patrick T. Fallon/Bloomberg

The four other foundations are among America’s most storied: the John D. and Catherine T. MacArthur Foundation; the W.K. Kellogg Foundation; the Andrew W. Mellon Foundation; and the Doris Duke Charitable Foundation. The MacArthur and Doris Duke foundations plan to issue bonds. Mellon and Kellogg are still working out their financing plans.

Major charitable foundations traditionally spend a little more than 5 percent of their assets in a given year — the minimum required under federal law for the tax-exempt organizations. The less they distribute, the larger their endowments grow and the higher their odds of surviving in perpetuity.

The Ford-led plan provides a workaround. By using borrowed money, foundations would go into debt but wouldn’t erode their endowments. Foundations have issued bonds in the past to finance projects like building new headquarters, but bankers said it was virtually unheard-of for them to borrow money that they planned to distribute.

“For most foundations, the idea of taking on debt is outside of normative thinking,” Mr. Walker wrote in a letter last month to Ford’s board. “Covid-19 has created unprecedented challenges that require foundations to consider ideas — even radical ones that would have never been considered in the past.”

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Credit…Bryce Vickmark for The New York Times

“This is unprecedented for us, but these are unprecedented times,” said John Palfrey, president of the MacArthur Foundation, which will start with a $125 million bond offering and then assess whether more is needed.

With 300 years of experience between them and fortunes forged in insurance and tobacco, automobiles and banking, the five foundations carry the cachet of America’s unofficial aristocracy. They are closely watched trend setters in the philanthropic community.

There are more than 100,000 private foundations in the United States, and they are together sitting on endowments worth nearly $1 trillion, according to Candid, a group that tracks nonprofit groups and foundations. Some — including the Bill and Melinda Gates Foundation — already pay out a substantial chunk of their endowments every year. But many more hover near the legal floor, on average distributing roughly 7 percent of their funds annually.

Philanthropy Rises and Falls With the Stock Market

The assets of private foundations generally rise and fall with the stock market. The share of their assets that they give away fluctuates as well but has risen in general.




Total assets of private foundations

Their total giving

$900

billion

800

700

600

500

Giving as a share of assets

7.6%

7.3%

6.7%

7.0%

8.0%

6.9%

6.1%

6.1%

6.9%

5.4%

’00

’02

’04

’06

’08

’10

’12

’14

’16

’18

3,000

S&P 500

2,500

2,000

1,500

500

’00

’02

’04

’06

’08

’10

’12

’14

’16

’18

$900

billion

Total assets of private foundations

800

Their total giving

700

600

500

400

300

200

Giving as a share of assets

100

7.6%

7.3%

6.7%

7.0%

8.0%

6.9%

6.1%

6.1%

6.9%

5.4%

4.8%

’98

’00

’02

’04

’06

’08

’10

’12

’14

’16

’18

3,000

S&P 500

2,500

2,000

1,500

1,000

500

’98

’00

’02

’04

’06

’08

’10

’12

’14

’16

’18


Sources: Candid (foundation data); Refinitiv (S&P 500)

By Karl Russell

An increasingly vocal network of charitable figures, lawmakers and others wants to pry that piggy bank open. The Patriotic Millionaires — a group of about 200 wealthy individuals, including the Disney heiress Abigail Disney, that pushes for higher taxes on the rich — and the left-leaning Institute for Policy Studies have been pressing Congress to force foundations to double their required payout to 10 percent of their assets for the next three years.

That would generate about $200 billion in additional payouts, the Institute for Policy Studies estimated.

“I’ve been appalled for years how many foundations treat the 5 percent federal floor as a ceiling and refuse to spend a penny more than they are required to,” said Scott Wallace of the Wallace Global Fund, whose family foundation plans to give away one-fifth of its $120 million endowment this year.

“If in our hour of greatest need, America’s greatest crisis in generations, philanthropies are planning to spend less, then they need a big kick in the butt,” added Mr. Wallace, a grandson of the progressive Henry A. Wallace, who was President Franklin D. Roosevelt’s vice president from 1941 to 1945. “Only Congress can deliver that kick.”

Mr. Walker said he had approached six more leading foundations about joining Ford but was rebuffed. Some were adamant they would not increase their spending rates. A few said they might, but weren’t ready to make a public pledge.

The reluctance to spend big in a crisis reflects in part foundations’ desire to preserve their endowments in perpetuity. Because those endowments tend to be invested, the amount they distribute typically declines during recessions and stock market downturns — precisely when their money is needed most.

The Carnegie Corporation was among those that declined to pledge to spend more. The Rockefeller Brothers Fund was another. Stephen Heintz, its president, said its spending would go up this year but that its board had not yet decided by how much.

Larry Kramer, president of the William and Flora Hewlett Foundation, said in March that the $9.7 billion foundation would not increase its spending because doing so “would require selling devalued assets from an already diminished endowment, thus locking in losses permanently, to the certain detriment of future grantees and the communities they will serve.”

Since then, financial markets have almost entirely rebounded from their March lows. Vidya Krishnamurthy, a spokeswoman for the foundation, said it was “reassessing how best to meet immediate and future needs of our grantees, amid the current crises and changing market conditions.”

  • Frequently Asked Questions and Advice

    Updated June 5, 2020

    • Does asymptomatic transmission of Covid-19 happen?

      So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

    • How does blood type influence coronavirus?

      A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

    • How many people have lost their jobs due to coronavirus in the U.S.?

      The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.

    • Will protests set off a second viral wave of coronavirus?

      Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.

    • How do we start exercising again without hurting ourselves after months of lockdown?

      Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.

    • My state is reopening. Is it safe to go out?

      States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • Should I wear a mask?

      The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.