Corporate Responsibility During a Pandemic
In a December 16 front page story, the Washington Post revealed that 27 of the largest companies in the country, many which maintained or even increased their profits during this year, laid off some employees. The article asked, and I was quoted as saying, that companies do have an ethical obligation, if they can afford it, to help in times of national emergency such as the 2020 pandemic by not laying off their employees. I posted my quote on LinkedIn, and it was viewed by more than 112,000 people, about 1,000 of whom commented. The comments, as you might predict, were split between those who believe companies have an ethical obligation beyond their shareholders and those defending a sole focus on shareholder profits.
Keeping workers employed has been a priority during the pandemic. The two massive relief bills have sought to shore up the finances of individual Americans, in substantial measure by enabling companies to keep workers on the payroll. The initial round of loans to employers, called the Payroll Protection Program (PPP), dispensed more than $500 billion to more than 5 million employers and were forgivable if the funds were used to keep employees on payroll during an 8- or 24-week period. Additional subsidies for particular industries included grants of $75 billion for airline companies, also aimed at sustaining employment.
This focus of relief efforts reflects very badly on those companies that were profitable yet still laid people off. The behavior of some public companies, law and other professional firms, and highly endowed universities were questioned, as they sought multimillion dollar loans under the PPP program. Given criticism of such applications, some firms returned their loans and others never applied. Nonetheless, some executives argued they were obligated to apply for free money because their shareholders came first.
I have been thinking about ethical principles or norms that might guide companies in this and the next economic and health crisis. The purpose of these moral standards is to reduce the impact of the pandemic and related unemployment has on real people. I would suggest the following and would welcome your comment!
In times of national economic emergency, a company which is still profitable should not lay off employees.
In times of national economic emergency, even a company which is not profitable, but can finance the continuing salaries for its employees by borrowing, should not lay off employees.
In times of national economic emergency, an organization that can finance its own continued survival and salaries of its employees, should not take limited government aid which would otherwise not be available to organizations in worse financial shape.
In times of national economic emergency, a company should make its resources and capabilities available to national and local government, for example for the production of personal protective equipment (PPE) or to pursue the development of vaccines or other critical remedies.
In times of national economic emergency, a company should contribute to local relief efforts such as food and housing assistance and school programs, to help individuals survive the emergency.
Let me quickly acknowledge that many firms and nonprofit organizations did exactly what these ethical norms and principles suggest. Many organizations did not apply for PPP funds; many companies announced and have followed through on commitments to retain all their employees until the pandemic ends. In many cases also, companies contributed cash much beyond normal giving levels to relief efforts. And many companies sought to produce hand sanitizer, masks, and other PPE desperately needed. In some cases, these were very difficult decisions. Companies did not know how long the crisis would continue nor the impact it might have on their profitability.