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The new face of stakeholder capitalism during COVID-19 Pandemic

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by Jyoti Prasad Mukhopadhyay and Praveen Bhagawan

An important takeaway from the last annual meeting of the World Economic Forum held in Davos early this year was “stakeholder capitalism”. The basic premise of “stakeholder capitalism” is to promote well-being of all stakeholders-customers, employees, suppliers, local communities, and shareholders- in the pursuit of making profit by companies. However, when the global leaders including state heads and who’s who of the corporates met in January 2020 to identify the pathways to achieve shared prosperity through stakeholder capitalism, they could hardly fathom its growing importance in the near future. With the onset of COVID-19 pandemic across the globe since March 2020 and consequent sufferings of humankind, stakeholder capitalism has become all the more important today. According to International Labour Organization’s (ILO), nearly 1.6 billion workers (i.e., 50% of workforce across the globe) engaged in informal sector might have lost their jobs due to this pandemic. Coming to India, despite the nationwide lockdown the number of Corona positive cases is sharply rising in India without showing any apparent tendency for the curve to get flattened soon. The pandemic has affected Indian economy quite adversely.

India Inc’s response augurs well for the future

Against this backdrop there is an urgent need for India Inc to join hands with the government to fight the COVID-19 pandemic. In order to encourage companies to participate in this battle against Coronavirus, the Union Government has already declared that contributions made to Prime Minister’s Citizen Assistance and Relief in Emergency Situations (Read PM CARES Fund) will also be considered as CSR expenditure. This new policy introduced by the government has been welcomed by India Inc. Many Indian firms, both public and private, have contributed generously to the PM-CARES fund.

Needs of the hour

Health experts have predicted a surge in Corona positive cases in coming weeks in several states (for e.g. Andhra Pradesh, West Bengal, etc.) in India. If that turns out to be true, then there will be increased demand for medical facilities in those states. To fill the gap, corporates can come forward wherever possible with arrangements for makeshift medical centers or hospitals and can make those available for use by the public under strict supervision. This would ease the burden on government health machinery to some extent. Also, companies can go one step further by providing timely support in terms of quality quarantine facility, hand sanitizers, masks, personal protective equipment (PPE) etc. to doctors and frontline health workers. Indian firms can also launch suitable COVID-19 related health awareness and hygiene campaigns to bolster state efforts to fight against the pandemic.

Coming to education, many schools and colleges have started delivering lectures online. However, digital divide remains a hard reality wherein a section of the population still lacks access to uninterrupted broadband internet facility; many students are unable to attend online classes which goes against the principle of equal opportunity for all and can result in a learning crisis. Again, corporates even within their limited capacity can step in to help these poor students. Makeshift classrooms with internet and projection facilities can be set up locally. To maintain physical distancing, only needy students can be allowed to attend online lectures, access video lessons, worksheets, etc. This would ensure that students from economically weaker sections are not deprived of education during lockdown. Companies can also seek support from local NGOs to identify the students who dropped out of school due to the pandemic and help them reenroll when the schools reopen.

A recent survey across 12 states has found that nearly 50% of surveyed households did cut down their meals during lockdown. Another blow comes from the closure of schools which otherwise provide mid-day meals to the students. Eating less has serious implications for nutritional outcomes. Corporates with the help of NGO and civil society organizations can reach out to these families to help them secure a square meal every day. Lastly, India is facing an unavoidable trade-off between life and livelihood. Lockdown for about three months has been in effect to contain the spread of the COVID-19 outbreak. Many of those who lost their jobs due to lockdown are youth. Indian companies can invest their CSR funds to upskill these unemployed folks so that they can take up an income generating activity. At this juncture, one can also ask: does spending on social causes benefit firms? It is pertinent to note here that in a related empirical research using firm-level data we find evidence of positive impact of mandatory CSR expenditure (as per Companies Act 2013) on firm value. Therefore, these corporate social initiatives if implemented properly can pave the way for “Atmanirbhar” Bharat post COVID-19 pandemic.                    

Jyoti Prasad Mukhopadhyay and Praveen Bhagawan are Assistant Professors, IFMR Graduate School of Business, Krea University. These are the authors’ personal views.  

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