Fortune: The Coronavirus Crisis Has Accelerated The Shift To Stakeholder Capitalism

If there is any positive consequence resulting from the COVID-19 pandemic, it’s the acceleration of the shift to stakeholder capitalism away from companies’ singular emphasis on shareholders.

Ever since Nobel Prize-winning economist Milton Friedman declared in 1970 that the social responsibility of business is to increase its profits, a debate has raged between advocates of shareholder primacy and stakeholder capitalism.

Four decades later, Michael Porter and Mark Kramer provided the vehicle for integrating stakeholders in their 2011 Harvard Business Review article, “Creating Shared Value.” By addressing societal needs, they wrote, companies could expand their markets in ways that benefit society and shareholders simultaneously while creating value for their customers, employees, their communities, and ultimately, their investors.

Recognizing the obligations companies have to all stakeholders, in 2019, the Business Roundtable, composed of America’s leading companies, rewrote its purpose statement around meeting the needs of all stakeholders, dropping its prior purpose of shareholder primacy.

Now the economic harm caused by the pandemic has shifted the pendulum further toward the multi-stakeholder model, as the importance of employees and customers are brought into sharper focus.

The crisis is causing companies to find creative new ways to address societal needs through their mainstream businesses. CEOs are rapidly adapting to the new normal that will define the future economy, giving top priority to the safety and wellbeing of employees and customers. While 2020 profitability is taking a back seat to health concerns, companies are shoring up their balance sheets to weather the storm and compete for the long term.

To thrive competitively and financially in 2021 and beyond, CEOs are adopting creative strategies with new business models to meet their customers’ rapidly changing needs, as the pandemic enables them to accelerate years of changes into the next few months. Nowhere is this more apparent than in digital transformation as the primary way companies engage with customers and operate their businesses. Those on the leading edge of digital—like AmazonWalmart, and Microsoft—are thriving, while companies that lagged—like J.C. Penney, Sears, and J. Crew—struggle to survive.

Here’s how the COVID-19 pandemic is impacting each stakeholder group:


The coronavirus crisis has reinforced the importance of employees working on the frontlines of health care, retail, food, and medical equipment and delivery services—many of whom are risking their lives. Employee safety has become paramount and the gating factor to reopening workplaces. In March, Walmart recognized the importance of frontline workers in combating COVID-19 when it announced over $365 million in bonuses for full-time and part-time hourly employees. Shortly thereafter, Target announced $300 million in special payments to its workers.

As companies restart, they will be restructuring their organizations to reduce middle managers, travel budgets, and consultants, while simultaneously upgrading training, compensation, and benefits for frontline employees. As routine jobs are automated, there will be fewer but better trained workers. Meanwhile, many employees working from home are finding they can be more productive working on their own schedules and avoiding long commutes.


When companies reopen, will they be greeted by customers ready to purchase their products and services? The devastating impact of unemployment, furloughs, and pay cuts has reinforced the need for savings, cash reserves, and reduced discretionary spending. Instead of buying new homes and automobiles, many consumers are opting to keep their vehicles longer and live in rental apartments. Health and safety concerns further accelerate the shift to shopping online, at store pickup, and home delivery of everything from groceries to personal computers.

By the time a COVID-19 vaccine is widely available, these new habits will become routine consumer behavior—and unlikely to revert. Companies that meet these new demands in an efficient, safe manner will be the winners. Service concepts will change as well, with service delivered remotely using electronic tools and teleservice. CEO Corie Barry has reengineered Best Buy’s online and in-store experience with private appointments and curbside pickups, for instance.


Supply chain shortages of critical parts during the pandemic have hampered manufacturing of critical products like masks and pharmaceuticals, largely due to long supply lines for raw materials from India and China for raw materials. These problems will cause companies to rebalance supply chains in multiple geographies, even at higher costs, and establish preferred supplier agreements rather than choosing only the lowest cost suppliers.


The COVID-19 pandemic has restored the importance of one’s local community, but also has stripped employees of in-person communities at work. In response, many companies are engaging employees through online activities, such as virtual happy hours. Other forms of community have also come to the forefront. Target shared its SAFE Retail Toolkit, a playbook for reopening, to help other retailers open safely—fostering a sense of community among employers. Amazon recently announced plans to invest more than $4 billion in its COVID-19 response, which included improving the safety of its workers and serving its customers more effectively.


Companies that adapt rapidly to the new normal will be the winners in the marketplace, enabling them to create greater value for investors. Paradoxically, the greatest shareholder value creators are not those that obsess over maximizing shareholder value. Rather, they are companies that focus on long-term strategies to create superior value for their customers with highly motivated, well-compensated employees.

The COVID-19 pandemic has caused CEOs to recognize that stakeholder capitalism is the only way to create sustainable shareholder value, adapt their business models to meet customers’ emerging needs, inspire employees, partner with suppliers, and build communities.

Bill George is senior fellow at Harvard Business School and former chair and CEO of Medtronic. He is the author of Discover Your True North.