- Many companies have stepped up in the wake of the novel coronavirus pandemic, increasing worker benefits, donating to nonprofits, and helping to ensure supply chains of critical commodities.
- But that's not enough, said Andrew Kassoy, managing partner and cofounder of B Lab, the nonprofit that administers B Corp certifications to to businesses that meet high social, environmental, and legal standards.
- The novel coronavirus shows that "companies need to be governed in a different way," said Kassoy, who's calling for broader fiduciary rules for companies and investors.
- This article is part of Business Insider's ongoing series on Better Capitalism.
- Visit Business Insider's homepage for more stories.
The novel coronavirus has sent shockwaves through the US economy, the healthcare system, and individual households dealing with unemployment, job insecurity, and fear.
In the midst of this, many companies have stepped up to offer more worker benefits, made massive donations of supplies, and donated millions of dollars to nonprofits.
But that's not enough, said Andrew Kassoy, CEO and cofounder of B Lab, which administers B Corp ratings to for-profit companies that meet high social and environmental, public transparency, and legal standards. B Corp is championed by companies including clothing company Patagonia and food company Danone.
"There's a lot of great stories and I don't want to discount any of that," Kassoy told Business Insider. "I think lots of the things that you've seen about companies saying they're going to provide sick leave to workers who have stayed on the job but then get sick — that is awesome. It's also not systemic."
While it might get some workers through several weeks of being sick, it's not addressing underlying problems in the economy that need to be fixed, according to the CEO. These problems include the lack of secure jobs in the gig economy and the prevalence of low wages.
In 2018, 8.5% of Americans, or 27.5 million, did not have health insurance at any point during the year, according to the US Census Bureau. Nearly three in 10 US adults have no emergency savings, according to Bankrate's 2019 Financial Security Index.
"It's not addressing that underlying idea that companies need to be governed in a different way. Like they actually need to have a broader set of fiduciary duties if we want business to play a more positive role in society," Kassoy said.
B Lab is part of a growing the movement for "stakeholder capitalism," the belief that companies should be accountable to not only their shareholders, but to their workers and communities in which they do business.
According Kassoy, the US government could expand its definition of fiduciary duty to encourage businesses to operate less on short-term profit and on long-term sustainability.
"If companies in the first place had a set of governance responsibilities to their stakeholders, not just their shareholders, like to their workers and their communities where they do business, then it might reduce the number of those specific policy issues that need to be addressed by the government," he said.
Kassoy believes there is bipartisan support for expanding the scope of a company, and investors' fiduciary responsibilities. Shareholder primacy, according to the managing partner, encourages companies to take measures such as outsourcing jobs or deny worker benefits to keep costs low.
"I think [government leaders] recognize that shareholder primacy is a source code error in business that causes it to do lots of these things, that then, in a moment of crisis, makes them have no resilience," he said.
The novel coronavirus pandemic, according to Kassoy, is a chance to rethink the way companies are governed.
"We saw some people recognize this during the financial crisis the last time around," he said. "And I think, you know, this, this puts it in maybe different, but also more stark terms, how not resilient the economy is, and how much differently business and the capital markets could behave."
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