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Apr 06, 2020

Focus on stakeholder value amid Covid-19 uncertainty, investor group says

Protecting workforce and preserving financial prudence are top of mind for investors

A group of 251 long-term investors representing more than $6.4 tn in assets under management has urged issuers impacted by Covid-19 to introduce measures that contribute to maintaining economic health and minimizing downside risk as the pandemic continues to spread around the world. 

In an open letter from the Interfaith Center on Corporate Responsibility (ICCR), the signatories – led by Domini Impact Investments, the New York State Comptroller and ICCR – urge companies to protect their long-term value ‘tied to the welfare of their stakeholders, employees, suppliers, customers and the communities in which they operate.’

The investor group recommends the following: 
•    Making emergency paid leave available to all employees – including temporary, part-time and subcontracted workers – is a measure that will enable the workforce to practice social distancing and self-isolation

•    Prioritizing the health and safety of the workers and the public to maintain business reputation, consumer confidence and the social license to operate. Specific measures that can be implemented include rotating shifts, remote work, enhanced protections, training or cleaning, adopting the occupational safety and health guidance and closing locations, if necessary

•    Retaining employees so that normal operations can be resumed quickly when the crisis has passed. The group also expresses concerns regarding the rising unemployment rate which, it adds, will contribute to an economic crisis

•    Maintaining supplier and customer relationships as much as possible by ensuring timely and prompt payments to suppliers and working with customers facing financial challenges will help to stabilize the economy and mitigate strain on supply chains amid Covid-19 disruptions

•    Demonstrating fiscal prudence. ‘During this period of market stress, we expect the highest level of ethical financial management and responsibility,’ writes the group in the statement. ‘As responsible investors, we recognize this may include companies’ suspending share buybacks and showing support for the predicaments of their constituencies by limiting executive and senior management compensation for the duration of this crisis.’

ICCR’s statement coincides with a number of large corporations – including IBM, Royal Dutch Shell and Boeing – announcing suspensions of share buybacks. 

As a follow-up to the ICCR statement, on April 1 the investor group sent a letter to CEOs of 14 large pharmaceutical companies, encouraging them to adopt a collaborative approach to combating Covid-19.