It breaks or it passes!
It is said that wars reveal the best or the worst in soldiers, depending on their training, their beliefs and their leaders. Confronted with unexpected situations, extraordinary pressures, increasing casualties, shortages, some find within themselves the resources to stay on an ethical course, others go « to war as to war » and choose to circumvent their principles to achieve objectives.
All things considered, leaders immersed in the Covid crisis face a similar dilemma. Hundreds of thousands of companies, large, small or tiny, with millions of jobs at stake, find themselves on the razor’s edge. To withstand the first shock, and then the shocks that will follow in the coming months as the real economic consequences of containment emerge, they will make decisions on which not only their immediate survival but their future depends.
This is the time to make a clear distinction between toughness and robustness. When order books are empty, in the face of urgency, it is tempting to lay off employees, leave suppliers exposed, postpone investments. Purging will look like a solution, but it risks mutilating the company’s vital forces, sometimes irreversibly.
Robustness, on the other hand, is a mixture of determination and flexibility that reflects a vision. It does not rule out strong measures and cost reductions, but with respect for an incompressible, sanctuarized core to guarantee the long-term viability of the company by protecting the resources needed for strategic investments. In 2020, the responsibility is to react to crises quickly, agibly, but without compromising on a number of clear and permanent priorities.
In short, it breaks or it passes.
The company still needs governance and regulations aligned with this ambition. It still needs fund managers who apply the advice they give to themselves. With compensation systems for managers and funds that reflect the image of sustainable value creation aligned with the needs of the planet.
Being a responsible capitalist does not mean giving lessons to managers who manage their company on a daily basis under enormous constraints and without visibility. It is a matter of organizing in advance the collective (shareholders, investors, stakeholders and managers) who will be able, when the day comes, to make robust decisions instead of rushing into the purge. Responsibility is above all a matter of preparation.
Responsible capitalism is not a contest of virtue either. It is the instrument that Europe needs to modernize its social market economy. It is a battle of wits to develop an alternative model and the dynamic indicators that will make it possible to integrate responsibility into performance. It is not a technical battle but a political battle, in the highest sense of the word.
This is a terrible crisis and there will be breakage. But for the companies that will come through, a new era will open up, the era of proof. Responsibility is not an option for good weather, it is the guarantee of getting through bad weather.
Stéphane Marchand, Executive Director at Institut du Capitalisme Responsable